The Best Talent Wants a Vibrant, Challenging Workplace

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Employee Engagement
Employee Engagement
Book Excerpt: Employee engagement is about more than creating a "nice place to work."

"The true driver of an organization's success is, has always been, and will always be its ability to attract, retain, and develop great talent," write Scott Lochridge and Jennifer Rosenzweig in Enlightenment Incorporated: Creating Companies Our Kids Would Be Proud to Work For. "At the end of the day, a company is only as good, successful, resilient, and adaptive as its people."

In this excerpt from Enlightenment Incorporated, Lochridge and Rosenzweig explain how enlightened companies create a workplace that is so compelling the best talent will be practically lining up to work there:

The Attributes of an Enlightened Company

The world of work is evolving, and change is coming from all directions. Circumstances in society, starting with shifts in demographics but growing into a heightened sense of human possibility, are prompting large-scale change. Individuals are realizing there's much more opportunity than they ever imagined to do work that has personal value and real meaning. In the middle of this are corporations, some of which recognize the opportunity that these changes present. By breaking with past norms, organizations can reform themselves into visionary, nimble organizations that reflect these new values in society.

At the heart of the change is the need to rethink, literally and figuratively, the relationship that the organization has with its employees. As we've already pointed out, the implicit contract has already evolved. Employees are no longer tied to companies with "golden handcuffs" because these chains are rapidly being severed. In their place is the need to form a mutually beneficial relationship, one in which the organization creates its own value offer to the employee and provides opportunities that a free agent would be challenged to build on her own. It's about creating a business frame that makes work so compelling that people are beating down your doors to get in.

How a company treats its employees, particularly its best people, and how people feel about the company they work for reflects the organization's overall approach to talent engagement. When we use the phrase talent engagement, we're talking about all the decisions and actions an organization takes to create a healthy, vibrant, productive work environment. Some companies place a high priority on talent engagement, but many more do not. There are a number of reasons for this. First, talent engagement is squishy. It is perceived as a soft science. It is also hard to measure whether your efforts or investments are paying off. Because there are other ways to achieve the short-term financial targets required of most senior teams (sales growth, profitability, positive cash flow, and return on investment), it is one of the areas that can be easily ignored or dismissed in most strategic planning, budgeting, or restructuring exercises.

Second, very frequently our senior executives have succeeded in spite of the systems or processes that were in place when they rose through the ranks. We are always amazed when we hear the stories of the men and women who fought all odds to make it to the top. Not unlike the stories of people who climb out of incredibly disadvantaged circumstances to make something of their lives, business is filled with self-made men and women. Unfortunately, this path may have produced leaders who are getting the job done but may not have provided these leaders with the full complement of skills required to run an organization effectively. Like the rest of us, these people will tend to rely on the skills that got them there. Sometimes you see exceptional leaders with a true appreciation for finding, developing, and promoting great talent. But it is still rare to see a meaningful corporate commitment to talent development. Therefore, there have been few truly great role models for talent engagement and development.

Third, a chief executive may understand that getting and keeping great talent is one of the keys to success, but the simple truth is that the CEO just doesn't know what to do. So, without a full and deep understanding of the issue, she takes whatever action she feels will help, such as introducing training programs, launching employee incentive programs, enriching benefits packages, or instituting more events or initiatives that are intended to make work more "fun." While these actions aren't bad and can certainly help, when implemented without a good understanding of all of the issues facing the organization or as part of a longer-term, strategic commitment to a set of greater talent engagement objectives, these investments will have a half-life that isn't long enough to have a meaningful long-term impact.

Related to this may be the fact that the CEO has delegated this problem to human resources or to an outside consultant. While HR can play a hugely important role and getting qualified help is not a bad thing, a successful talent engagement culture can only happen if it is driven by the CEO-with strong support from the board, shareholders, and investors.

This is an issue that can't effectively be addressed within a quarter or, depending on how deep the problem is, even within a business cycle. The companies that are most vulnerable are those that find themselves in trouble, which means that the business is or will be going into crisis. As we all know, this situation can initiate a series of activities, some potentially shortsighted and draconian, to fix the problems as fast as possible. Unfortunately, a few reckless actions taken to protect the shareholders' investments in the short-term (cutting costs, saving cash, consolidating facilities) can actually kill the business. Without attention to what type of organization will exist at the end of the restructuring (rather at the end of the series of inevitable restructurings) and who will still be around to run the business, the company can end up as a "dead man walking." The company becomes a business that is going through the motions, slowly harvesting whatever value was created in the past until some other competitor figures out how to take advantage of the opportunity. In these scenarios, the life expectancy of a CEO is short-too short for a sustained investment in something so undefined as "talent engagement." Once you see a revolving door in the corner office, it is unrealistic to expect focus on longer-term initiatives like talent engagement. In fact, the only "talent engagement" action that you will see is the implementation of "retention packages," which are financial packages designed to keep the key talent for a specified period of time, which is usually defined in terms of months, not years. If you think that a typical retention package will have a meaningful impact on keeping some people at the job for more than a few months, you are fooling yourself.

We also know that the investor community can have a profound effect on this issue. There are clearly enlightened investors out there, investors who take long-term positions in companies because they believe in what the company is trying to do. They believe in the value that the business brings to its customers and markets, or they believe in the team. Whether or not an investor places social responsibility or corporate citizenship as a priority, a more important dimension is that the investment is predicated on an understanding and belief in the business itself, why the business exists, and how the business will add value to the world.

Then there are the transactional investors, the private equity firms and hedge funds that are merely trading commodities, whether it is soybeans, gold, oil futures, or shares in corporations. As opposed to the investors who believe that their investment will grow because the company is creating value and that value will be reflected in the share price over time, there is an entire class of investor that makes money by trying to outsmart other investors. For these investors, the inherent value of the underlying business is of far less interest than whether the share price is under- or over-valued by other investors. They are not betting on the company; they are betting on their own ability to outguess the other guy. They have created elaborate models to predict market value, as the goal is to look for arbitrage opportunities or flaws in the collective market assessment of an investment. Everyone is digging for any indication about how the stock is likely to be valued because share values are typically generated on the basis of multiples of revenue, earnings, or cash flow. All the digging and analyzing is to predict how these financial metrics are likely to move-typically over the next quarter or two. It is really not that different than betting on a horse race. You are trying to learn as much as possible about what the numbers will look like and then deciding to buy, sell, or hold.

Obviously, information about the company and its markets is key to this kind of decision-making. What better way to get information than to buy huge stakes in the company to get both access and control of the underlying security. At that point, the goal is to use that access and control to yes, you guessed it, outsmart or outguess the other guy. It is the "greater fool" theory in action. He who has the best information wins.

For these investors who take large, controlling stakes of the enterprise, underlying investments in people, infrastructure, or really anything related to the future are only interesting if they enhance the likelihood of the investor outsmarting the other guy when it is time to sell. Even though the "quants," those who do the sophisticated analysis of financial information, rely on esoteric algorithms and models based on chaos theory and quantum computing, it is really pretty simple. You buy the stock of a company with a cash flow and earnings of "X" and then do whatever you can to improve earnings and cash flow to "Y" (which needs to be higher than "X") in as short a period as possible. This will make the stock price and multiple go up, and therefore, the investor will have successfully executed the most basic principle of investing: buy low and sell high! It isn't rocket science.

For these investors, what is a good time frame for all of this to happen? As fast as humanly possible! If these investors could own these companies for thirty seconds and make a profit, they would. If done right, either because of astute investing or blind luck, this approach can be really effective for making money in the short-term. Unfortunately, the track records of most hedge funds, private equity funds, and active (as opposed to passive) money managers show that a huge majority of these folks don't outperform the market over a sustained period of time. While some do outperform the market in the short-term, it is usually due to a single investment or bet that really paid off, offsetting the other, poorer performing investments. It is why most wise financial counselors recommend buying investments with solid fundamentals, holding them over a long period of time, avoiding trying to time the market, and diversifying your portfolio depending on your personal financial goals. There is a lot of "don't try this at home" advice out there because you really shouldn't. Unfortunately, the Internet has enticed a lot of laypeople into day-trading. These are people who are trying to outguess the professional investors. Maybe they aren't so crazy because, as we have mentioned, most professional investment managers do not outperform the basic stock market indices. It doesn't mean they will make any money. It just means that they might outperform the pros who aren't making any money either. Unfortunately, all of the investors who are just "trading," professional or otherwise, can have a very significant negative impact on the long-term viability of the companies in which they invest. It is hard to make long-term, strategic investments when your owners don't really plan to be involved in three years. Recognize too that in order to keep management focused solely on the investor's goals, executive compensation packages have traditionally been designed to not just reward this behavior but to make the executive rich if he is successful. Even decent people will chase the golden ring to the exclusion of other priorities if it is attractive enough.

Finally, the major reason we don't see a lot of companies making a significant commitment to talent engagement is that most executives know instinctively that there are a great many important factors that can contribute to the company's ability to attract and retain great talent, and it is difficult to address them all. We believe that one of the reasons that the HR function often doesn't get as much respect as it may deserve in some companies is that, given their limited purview, they are not really expected to have much of an impact beyond providing the basic services.

In the following chapters, we will explore in greater detail each of the major elements that are critical for not only attracting and retaining great talent but for creating organizations where people love to come to work, where they grow and reach their potential, and where they can really make a difference by helping the company achieve its vision. You will immediately see that the list addresses a lot of very fundamental issues for any business trying to grow and prosper. Although it is a potentially daunting list, we have selected the issues that have the greatest impact on attracting and retaining great talent. As we dig deeper into each of these issues, we'll focus on why the issue is so important to engaging great talent and describe what role the issue should play in the overall talent engagement strategy. Remember, the operating hypothesis is that no company can achieve sustainable success without the ability to attract and retain great, high-impact people. Therefore, it should not be very surprising that the best talent is also focused on this broader list of issues, rather than on how much vacation they get or how good the dental plan is.

You should note that we have not included a number of other elements that are critical for a successful, thriving enterprise, such as being able to secure capital at a reasonable rate, designing and executing flawless operations, ensuring world-class customer service capabilities, enabling efficient and effective distribution, and articulating dynamic customer, product, and market strategies to guide the investment of resources, to name a few. These are all critical to running a successful business, but we won't discuss them here. Rather, we have focused on the issues that have the greatest impact on finding, keeping, and growing the best possible talent for your company:

  • A compelling vision and principles. Great talent wants to believe in what they are doing and know how their efforts contribute to the greater good. They also need the freedom and flexibility to demonstrate creativity and use unconventional approaches to solve problems and pursue opportunities.
  • Great leadership. Great talent performs best when they can place their faith and trust in great leaders.
  • A tailored approach to talent engagement. Great talent responds to personalized, tailored, and relevant development and management strategies and plans.
  • A dynamic network physiology. Great talent thrives in environments without rigid, inflexible hierarchies and command-and-control structures. They also work best when the right people are in the right roles, with the opportunity to apply the best of what they have to offer.
  • Focus on personal growth. Great talent never stands still and requires opportunities to improve themselves, not just intellectually or with new skills, but also socially, spiritually, and psychologically.
  • A spirit for innovation. Great talent wants an open system that supports new thinking and risk taking, knowing that everyone can benefit.
  • A culture of positive energy. Great talent is at their best when the environment encourages them to stretch and reach new heights. A vibrant culture also promotes an open and active dialogue.

Understand that getting all of this right all of the time is an extremely difficult, if not impossible, task for most organizations. Rather, these are issues that can be addressed individually, serially, or collectively in order to begin to improve your company's ability to attract and retain great people. Organizations are a lot like people. No two are the same. So your organization's issues will be unique and will need to be addressed in ways that make sense for your company. If you believe your organization has a problem or weakness, you will need to understand which of these issues are contributing to the problem and should be addressed first. Some are hard to address because they may require significant investments in infrastructure. Others are hard to address because the necessary degree of change is significant. Others may be hard to address because the inherent inertia of the current organization means that major cultural barriers will need to be addressed.

If you are starting a company or are in the early stages of growth and it looks like your organization might be one of the fortunate few that can grow to become a successful enterprise, it is never too early to begin to lay the foundations for effective talent engagement. After all, we are all human, and we all react in human ways, whether we work for a small, entrepreneurial entity or a large, established corporation.

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About the Authors: Scott Lochridge and Jennifer Rosenzweig are founding partners of Dragonfly Organization Resource Group.

Excerpted from Enlightenment Incorporated: Creating Companies Our Kids Would Be Proud to Work For. Copyright 2009 by Scott Lochridge and Jennifer Rosenzweig.

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