What should you expect in terms of commercial outcomes from adopting the integrative approach of the ROUNDMAP™ strategic and executive framework?
4.1 - EXCEEDING EXPECTATIONS
Although the effects of the deployment of the ROUNDMAP™ methodology will depend on the specific circumstances, the authors of HumanSigma suggest that increased engagement, which is one of the objectives of ROUNDMAP, will produce results ‘that far exceed companies’ expectations’. Kotter & Heskett’s extensive research on the effects of culture on performance even showed a 765% net income improvement over a period of 11 years (~22% YoY-growth, between 1977-1988).
When Engaged Employees Meet Engaged Customers
These moments produce results that far exceed companies' expectations, according to the authors of Human Sigma
In every company, there are customers who outspend the others, sometimes enormously. They visit more often, resist competitive overtures, promote your brand to others, and forgive the occasional service hiccup. Gallup spent years researching how to replicate those customer relationships -- and found that customer engagement is the key to high profitability.
But then the researchers uncovered something puzzling. The data showed that when workgroups with engaged employees served engaged customers, the end result was something more than the sum of its parts. The equation of "engaged employees + engaged customers" produced results far exceeding what the researchers expected. So they dug deeper.
Using meta-analysis to analyze 1,979 business units in 10 different companies, they found that workgroups that score above the median on employee engagement and below the median on customer engagement are 1.7 times more financially effective than units that score below the median on both measures. Results were similar for workgroups that achieved the opposite results: above the median on customer engagement, below the median on employee engagement. But workgroups that scored above the median on both customer and employee engagement were, on average, 3.4 times more financially effective than the units ranking in the bottom half on both measures. They called the management approach developed to measure and manage the human systems in business "HumanSigma." (See graphic "The Impact of HumanSigma.")
It took a few more years to figure out how and why HumanSigma works and how to integrate the science into businesses. In their book Human Sigma: Managing the Employee-Customer Encounter, Gallup researchers John H. Fleming, Ph.D. and Jim Asplund explain HumanSigma and how companies can use it to get the most from their human systems.
In part one of this interview, the authors provide explicit insights for GMJ readers: what companies do to undermine HumanSigma; why people, not products, are the fulcrum of profitability; and why it's tempting to replace workers with machines -- and why you really, really shouldn't.
GMJ: How much of your thinking on HumanSigma is owed to Six Sigma?
Dr. Fleming: My answer to that is "some." Six Sigma offers some good conceptual ideas that help an organization improve itself by improving its processes. But remember that Six Sigma was developed in a manufacturing context, and the role people played in its equation was relatively small.
Once businesses had wrung all the improvements they could from improving their processes, they tried to apply Six Sigma to their human systems. And they failed, because people are hard to "fix." HumanSigma was developed as a response to the lack of effectiveness of Six Sigma methodology to increase productivity from people.
GMJ: Why are people so hard to fix?
Asplund: There are a couple of good reasons. If you buy a tractor or a furnace, you know what you're going to pay for it, how it'll depreciate, what the maintenance costs are likely to be, and roughly when it will quit working. If it pulls a load or melts steel at a given rate today, it'll perform the same or very close to it tomorrow.
But people don't work that way. They're unpredictable, both in ways that you might appreciate and ways that you don't. So because people -- employees and customers -- are much more unpredictable than machines, they can't be managed or directed in prescribed ways.
GMJ: You open the book by discussing "Terminator Management" as a failed way to cope with human unpredictability. Tell me what that is and why you think it's flawed.
Fleming: In the movies, the Terminator is programmed to accomplish a task, and he doesn't know how to do anything other than accomplish that task. He has no discretion, no learning capacity -- he just goes. What we call the "Terminator School of Management" deals with the difficulty of managing people by ignoring or squashing their humanity. We use it as a metaphor of how organizations squeeze human initiative and responsiveness from the service delivery system by scripting the range of behaviors that an employee is allowed to execute.
It's essentially a conventional way of thinking, the idea that "It would be great to get rid of all my employees; I'd be much happier if they were machines." But it's not effective in driving real organic growth and real change.
GMJ: How do you create real organic growth and change?
Fleming: When a company scripts employee behaviors, telling people exactly how to do the job rather than having them focus on the outcomes they should achieve if the job is done well, it creates automatons. It might reduce variability in how the job is done, but it also increases variability in the desired outcome. The result is service with no soul: bland, soulless, and undifferentiated.
The paradox here is that to achieve the desired outcome -- emotional engagement -- companies may actually need to increase the variability in the steps to create it. Executing bland, undifferentiated service will not create engaged customers, and it won't get you organic growth. Customers who buy more and shop more often create organic growth. Engaging them emotionally will create organic growth. Machines may execute tasks flawlessly, but they can't engage customers. And customers want more than transactions; they want relationships. Only people can build those.
GMJ: In your book, you said the employee-customer encounter is the new factory floor. What did you mean by that?
Fleming: If you contrast manufacturing environments with service economy environments, you need a new definition of value creation for a service economy. The definition that we landed on was that value is created when an employee and a customer come together and they interact.
That's different from manufacturing, where you create value by making a product that is ready to be sold. Creating value in a manufacturing context is fairly straightforward -- if you have a lot of broken products, you have problems; if you have no broken products, no poor-quality products, then your business can flourish.
In a service economy business, so much more is riding on the interactions that your employees have with your customers. You need a new set of tools to evaluate how well you're doing.
GMJ: Does HumanSigma apply to employees who don't interact directly with customers?
Asplund: Yes. Think of the guy on the loading dock; he may never talk to a customer. But if he drops a TV before he loads it on the truck or if he takes an extra three days to get it to the store, it affects customers regardless of whether he ever talks to them.
GMJ: You say in the book that companies should manage the employee and customer experience in tandem. But doesn't that require massive reorganization, all new integration of departments, different foci for leadership? How should you do it and why do you say it's worth doing?
Fleming: I'm not sure that bringing those two things together is all that radical a proposition. It doesn't happen very much today, but that doesn't mean it can't. HumanSigma has to be conceptualized and managed holistically. For example, one of the recommendations we make in the book is that if your company is not going to reorganize and create new human systems, the very least it can do is create a steering committee. That group should be responsible for HumanSigma initiatives and include representatives from all areas that are affected by them. Just getting your marketing and operations and human resources departments talking to one another and working together could create fundamental change.
GMJ: You used the word "soul" a lot in Human Sigma, and you emphasize the essential humanity of business. Why is humanity important in business? And how can companies control the emotional reactions of employees and customers?
Asplund: A company can't control people's emotional reactions -- but let me step back for a moment. The reason a company must understand the essential humanity of its customers and employees is because they are people first and customers and employees second. They're living, breathing, real people. Before a business can manage them effectively, it must understand how customers and employees think and how they react; it must understand their psychology and their emotional infrastructure.
Another thing to consider is that most companies treat people as rational in their decision making when they really are not. The vast majority of human decisions aren't made strictly through rational thought processes; they're made in many other ways, including intuitively. Habits and simple rules that developed in cultures thousands of years ago can predispose us to behave in certain ways. More of our reasoning is based on emotions than you would suppose.
Fleming: The employee-customer encounter is fundamentally emotional, and it must be measured and managed locally. We've found tremendous variation in performance and profitability from store to store or from workgroup to workgroup. But you won't see the variation at the business unit level, much less at the individual level, if you examine the operation too broadly. And we've found that telling employees to behave in exactly the same way with customers can actually increase variation.
GMJ: How? Doesn't outlining the procedural steps, essentially telling irrational humans exactly what to do, lead to better outcomes and higher profits?
Fleming: No. If you standardize everything, then everything becomes standard.
GMJ: Well, that's good, right? Standard is better than variation, isn't it?
Fleming: No. It just creates mediocrity. There's a paradox here that is important to recognize. What we're suggesting is that companies that have concentrated on creating consistency of execution have failed to create consistency in the outcomes that execution is intended to produce. Most are trying to control the process through which employees are delivering service by mandating the steps.
We flip that by telling companies to clearly define the outcomes, which include establishing emotional connections with customers. Companies should allow employees a much greater range of flexibility -- within clearly defined boundaries -- to achieve those outcomes and to establish and maintain connections with customers.
GMJ: Because customers aren't engaged by processes but by people.
Fleming: Exactly.
GMJ: But this seems very risky. Most companies are loath to give frontline staff that much responsibility.
Asplund: It's actually less risky than you might think, because your employees are doing it their way anyway, and they're not channeling their efforts effectively. They're people, and they're behaving like people. Trying to control their behavior just won't work.
Fleming: Instead, what you should do is understand their behavior and what makes them tick. Then try to use that understanding to manage them more effectively. Ultimately, that may mean you should exert less control over the execution to achieve more control over the outcome.
GMJ: But ceding control chips away at the power structure, and that's going to be hard for some executives to swallow.
Fleming: I think we're talking more about the control structure than the power structure. Terminator Management is really about a need for control. This approach sacrifices real service quality in favor of the illusion of control.
What we're advocating is for executives to let go of some of that control. You know, it's like the old adage: It's hard to reach for the future when you're holding on to the past. Sometimes you have to open your hands and let go of old ideas in order to grasp new ones.
-- Interviewed by Jennifer Robison
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New Research: How Employee Engagement Hits the Bottom Line
What would contribute most to your being both happier and more productive at work? How about feeling truly taken care of, appreciated, and trusted by your employer?
More than 100 studies have affirmed the connection between employee engagement and performance, but the Towers Watson 2012 Global Workforce Study — 32,000 employees across 30 countries — makes the most powerful, bottom line case yet for the connection between how we feel at work and how we perform.
This new study concludes that the traditional definition of engagement — the willingness to invest discretionary effort on the job — is no longer sufficient to fuel top performance in a world of relentlessly increasing demand. The problem is that “willing” doesn’t guarantee “able.”
What’s required now is something called “sustainable engagement.” The key factor, the study finds, is a work environment that more fully energizes employees by promoting their physical, emotional and social well-being. I’d add to that mental and spiritual well being — or more specifically, the added energy derived from the capacity for absorbed focus and a strong sense of purpose.
“Many employers are pursuing a variety of wellness efforts, typically focused on giving incentives or penalties to people who embrace healthy behaviors like exercise, good diet or effective management of a chronic illness,” the report concludes. “These are important, but to sustain energy, employers have to go beyond these core programs and embrace the notion of workplace energy on a far broader plane.”
When they do, the consequences are nothing short of staggering.
In a broader analysis of 50 global companies, Towers Watson found that companies with low engagement scores had an average operating margin just under 10 percent. Those with high traditional engagement had a slightly higher margin of 14 percent. Companies with the highest “sustainable engagement” scores had an average one-year operating margin of 27 percent.
Forty percent of employees with low engagement scores said they were likely to leave their employers over the next two years, compared to 24 percent of traditionally engaged employees, and just 18 percent of employees with the highest “sustainable engagement” scores.
So what is energy, exactly? In physics, it’s simply the capacity to do work. In other words “energy” and “capacity” are essentially interchangeable. In simple terms, energy is the fuel in our tanks — what’s required to bring our skill and talent to life. Without sufficient energy, skill is rendered irrelevant. You can’t run on empty and that’s increasingly what employees are being asked to do.
Feelings of overload and burnout are default emotions in today’s organizations. Nor is this likely to change soon. Higher demand and fewer resources are the new normal. Effectively addressing the issue of capacity — energizing the workplace — depends on the willingness of individuals, leaders and organizations to each take responsibility for their roles.
For organizations, the challenge is to shift from their traditional focus on getting more out of people, to investing in meeting people’s core needs so they’re freed, fueled, and inspired to bring more of themselves to work, more sustainably.
Specifically, Towers Watson concludes that organizations must create policies and practices that make it possible for employees to better manage their workload, live more balanced lives and exercise greater autonomy around how, when, and where they get their work done. Policies focused on flexibility and working remotely contribute to a more energized workplace, we’ve found, and so does setting organization-wide boundaries around the length of meetings and the hours during which people are expected to respond to email.
For leaders, the key is to begin thinking of themselves as Chief Energy Officers. Energy is contagious, for better and for worse, and disproportionately so for leaders — by virtue of their influence. “The manager is at the heart of what we might think of as a personal employee ecosystem,” the Towers Watson study concludes, “shaping individual experience … day in and day out.”
Among sustainably engaged employees, for example, 74 percent in the study believed senior leaders had a sincere interest in their well-being. Only 44 percent of traditionally engaged employees felt the same way, while only a miniscule 18 percent of disengaged employees felt their managers genuinely cared about their well-being. No single behavior more viscerally and reliably influences the quality of people’s energy than feeling valued and appreciated by their supervisor.
For individual employees, the challenge is to take a measure of responsibility for their experience, and not allow themselves to default into victim mode. It’s bracing to discover how two people can experience the same workplace, and even the same set of demands, in entirely different ways.
Employees willing to take more responsibility for how they manage and take care of themselves — regardless of the sort of organization and supervisor they work for — end up feeling better and performing better than those who see themselves as victims. The mantra we use is a variation on the Serenity Prayer: “Invest your energy in what you have the power to influence. Don’t invest energy in what you can’t influence, and have the wisdom to know the difference.”
A workplace that really works? It begins with employers and employees truly valuing and investing in one another.
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You may have noticed that these impressive growth numbers aren’t the result of better marketing, sales, or customer service, rather from a culture in which employees are given the opportunity, skills, systems, and trust to be able to commit themselves to offer customers the value they deserve and take full responsibility for it. We call this Customer Excellence.
4.2 - REACTIVE VERSUS PROACTIVE
Author Jan Bommerez is clear about it: if people are allowed to proactively assist customers to help them achieve their objectives, sooner rather than later, employee motivation, passion, pleasure, and trust will rise. However, if employees are only allowed to react to problems, stress will take over and employee motivation, passion, pleasure, and trust will tumble ─ increasing sick leave and employee turnover. The trick is to manage each process from a perspective of a desired future, instead of from a distressed state of problem-solving.
4.3 - SYNERGY IN A COMPLEX SYSTEM
Organizations are complex systems in that they are able to solve things as a whole, that none of its parts is capable of doing by itself. This is called synergy. Swiss mathematician and sociologist Dirk Helbing and his group found that the dynamics of a flock of birds, which can be seen as a typical complex system, can be described using merely three rules:
- ALIGNMENT ─ Each bird aligns its flight with the average flight direction of the local flock (the part of the flock close to it).
- COHESION ─ Each bird moves towards the average position of the local flock.
- SEPARATION ─ Each bird tries to avoid local over-crowding and predators.
The behavior of a flock is part of its strategy: to protect each individual from predators. Within organizations, large groups of individuals are bound to show similar behavior, however, when members are unaware of the mission or don’t understand their part in it, they will become disconnected. You might have heard of the expression ‘Birds of a feather flock together’: people with similar backgrounds will herd into smaller groups ─ creating organizational silos ─ to protect each other while some may even perceive other ‘flocks’ as predators. It isn’t hard to see that those disconnected and unaligned organizations will have a hard time achieving their mission.
"Building a visionary company requires one percent vision and 99 percent alignment."
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