turning human capital upside down: a surprising new paradigm for engaging workers

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Turning Human Capital Upside DownA Surprising New Paradigm for Engaging Workers

Tom DavenportMay 28, 2014


Today’s agenda

Human capital – what is it? How human capital contributes to business success How to build it How to engage it The role of the manager Action items

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Human capital – what is it?


Question – Which picture doesn’t fit?

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http://upload.wikimedia.org/wikipedia/commons/6/62/Lion_in_captivity.JPG

http://upload.wikimedia.org/wikipedia/en/b/b7/Toyota's_first_forklift.JPG


People are investors, NOT assets

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It’s time for a new metaphor – employees are:

Human capital investors

What is the organization worth to the people?

Assets

CostsFactors of production

Buildings, machines people – no difference

What are people costing the organization?

What are people worth to the organization?

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What the employee invests:

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Knowledge

Skill

Talent

Human Capital


How human capital contributes to business performance


The multiplier effect

Human Capital Engagement Productivityx =Energy andEnablement+

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Sustaining engagement

Human Capital Engagement Productivityx =Energy andEnablement+

Sustainable Engagement

Belief in company goals and objectives

Emotional connection

Willingness to give extra effort

Freedom from obstacles

Available resources

Support to meet work challenges effectively

Well-being Social supports in the

work environment

Sense of enthusiasm and accomplishment

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The top drivers of sustainable engagement involve leadership (executive and local) and workplace factors

Leadership1

Stress, Balance and Workload2

Goals and Objectives3

Supervision4

Image5

Source: Towers Watson 2012 Global Workforce Study.11


Companies in the top quartile of sustainable engagement outperform others

0.1%

-16.2%

0.0%

-4.4%

4.5%

-20.6%

-1.2%

13.7%

2.9%

30.7%

7.2%

16.9% 19.1%

10.2%

-40%

-20%

0%

20%

40%

Earnings(EBIT)

Gross Profit Net Income Total Assets Earnings(EBIT)

CapitalExpenditures

Total Assets

High Sustainable Engagement Low Sustainable Engagement

1-Year Performance: Growth over Prior Year versus Sector Average

1-Year Performance: Growth over Prior Year

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Building human capital


Organizations broadly, and managers specifically, must focus on both short-term and long-term human capital growth and performance

Knowledge Skills Talent Behaviors

Setting Directions and Goals

PerformanceGrowthCareer “path”

Manager Direct Development

CoachingTeachingInformingMentoringModeling

Other Learning Sources

On-the-job trainingTargeted projectsLearning-rich jobsMobilityCommunities of practiceLearning constellation

Giving Feedback

Informal – Frequent conversations

Giving Feedback

Formal – performance management system

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The preferred method of learning is to be shown how to do things and then to practice them

Percentage of respondents

Source: Who Learns at Work? Employees’ Experiences of Workplace Learning. Chartered Institute of Personnel and Development, 2008.

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Which states yield insightful solutions – and which don’t?

Positive mood Mindful, objective

reflection Non-directional

conversation Intrinsic motivation

Anxiety Problem focus Directive answers Extrinsic pressure

vs.

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The process, from Mindfulness to Action

MindfulnessIncrease

AwarenessWhat are the facts of the situation – objective, not problem-focused?What unfolded – viewed without judgment?

ReflectionIdentify Issues

What is the real issue (vs. the symptom)?What are the root causes of the problem?

InsightIdentify Solutions

What solutions are most feasible?Are the solutions obvious, or is there a creative way to respond?

ActionPlan and

Take ActionWhat actions are required?How can action begin quickly?What support is needed?

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Manager’s coaching roleDon’t Do

Provide answers Ask open-ended questions

Focus on problems, emphasize corrective feedback

Concentrate on facts (Mindfulness) and solutions (Reflection, Insights)

Provide neutral and positive feedback (accentuate the positive)

Reframe where appropriate

Ignore anxiety Acknowledge concerns but encourage solution focus

Stop at the obvious solution Continue brainstorming for insightful, innovative answers

Emphasize the bonus that’s at stake Emphasize the intrinsic rewards from success

Own the solution Require associate to own the solution

Leave the next steps unstated Seek commitment, near-term action

“It is a pleasure to give advice, humiliating to need it, normal to ignore it.” Anonymous


Question: Name that statue

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http://upload.wikimedia.org/wikipedia/commons/c/c1/Falconet_-_Pygmalion_%26_Galatee_%281763%29.jpg


When managers convey belief in people’s ability to learn…they do

Pygmalion et Galatee

Sculpture by Étienne Maurice Falconet -1763

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http://upload.wikimedia.org/wikipedia/commons/c/c1/Falconet_-_Pygmalion_%26_Galatee_%281763%29.jpg


Engaging human capital investors


Financial and non-financial compensation – what works?

High

Moderate

Low

Rel

ativ

e im

pact

on

indi

vidu

al p

erfo

rman

ce

Type of reward

Financial PositiveFeedback

Recognition Financial +

PositiveFeedback

Positive Feedback

+Recognition

Financial +

Positive Feedback

+Recognition

Stajkovic, A. and Luthans, F., “A Meta-Analysis of the Effects of Organizational Behavior Modification on Task Performance, 1975 – 95,” The Academy of Management Journal, Vol. 40, No. 5 (Oct. 1997), pp. 1122-1149. 22


Case studiesCase 1Two groups of university students. One was paid for completing puzzles, the other wasn’t. Which group spent more time working on puzzles?

The Unpaid Group

Case 2Three groups of women interested in giving blood:

Group A – Asked to give voluntarily, no payment

Group B – Offered $7 to donate

Group C – Offered $7 to donate, with option to give the payment to a children’s cancer charity

Which group had the most donors? Which had the fewest?

52%

50%


Case studiesCase 4Of the many species tested by scientists, which one most consistently declines to work for its food?


Humans are contrafreeloaders – and nobody wants to be just part of the herd

Trudie

Cow # 4277,938 liters

7,680 liters

Source: Study by Catherine Douglas and Peter Rowlinson of Newcastle University

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The role of the manager


The Manager Redefined performance model

Authenticity and TrustAuthenticity and Trust

Developing People

Crafting Jobs

Delivering the Deal

Energizing Change

High-Performing Managers Excel in Five Categories:

Source: Manager Redefined: The Competitive Advantage in the Middle of Your Organization, Jossey-Bass, A Wiley Imprint, 2010.

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Manager performance typology

Delivering the Deal + Crafting

Jobs

Authenticity and Trust + Developing People

LowLow

High

High

Growth Environment

Performance Environment

Balanced Strengths

Strong on Energizing

ChangeStrongest managers help drive competitive advantage:Higher sustainable engagementGreater retentionBetter employee health

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Having great managers is associated with excellent results

Source: Towers Watson Global Workforce Study 2012 – Global Data Set.

Per

cent

Fav

orab

le

Sustainable Engagement I would prefer to remain

with my company even if a comparable job were available in another company

How would you describe your health: Very Good or Exceptional

Pointy-Haired Boss Good Boss Great Boss

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The manager must craft a job and a work environment that build and sustain employee engagement

Autonomy Energizing goals Development Rewards and

recognition

Job Resources

Job Challenges Range of

responsibility Workload Urgency

Hindrances Resource shortfalls

(including staffing) Role conflict and

overload Workplace risk Politics

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When they succeed, they create…

Job Challenges and Demands

Job Support and Control

HighLowLow

High

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…fulfilling jobs



HighLowLow

High

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When they fail, they create stress…

Headline on a tech blog:“First, Kill All the Managers.”

On a blog entitled “I Don’t Want to Be a Manager”: “Middle management has become a euphemism for meddling, ineffectual supervision and frustrating career coma.”

An article on Business Insider begins, “To many people, middle management is a punch line — the physical embodiment of bureaucracy.”

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…that increases the odds employees will suffer symptoms of physical ill health



HighLowLow

High

1.3

1 1.8

2.9

Source: de Jonge, J., Bosma, H., Peter, R and Siegrist, J. “Job Strain, Effort-Reward Imbalance and Employee Well-being: A Large-scale Cross-sectional Study.” � Social Science & Medicine, 50 (2000), 1317 – 1327.

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Odds of physical symptoms from demand-control imbalance


Knowledge

Manager

SkillsTalen

t

BehaviorsEnergy

Employee Contributes

Transactional Rewards

Relational

Rewards

Employer Reciprocates

Managers also play a key role in the reciprocal relationship between individual and organization

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When they succeed, they deliver a fair deal

Effort

Reward

HighLowLow

High

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When they fail, the result is another source of stress, again increasing the odds of physical ill health

Effort

Reward

HighLowLow

High

1 2.0

2.1 3.2

Source: de Jonge, J., Bosma, H., Peter, R and Siegrist, J. “Job Strain, Effort-Reward Imbalance and Employee Well-being: A Large-scale Cross-sectional Study.” � Social Science & Medicine, 50 (2000), 1317 – 1327.

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Hanging out at the corners



HighLow

Low

High

HighLow

High

Low

Effort

Reward

Exploita

tion

Fairness

Higher engagement, health, productivity

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Financial rewards are at the tail of the dog, not the nose

Job design balancing challenge

and support

Work that

matters

Autonomy – influence,

being heard

Developmentopportunity

Intrinsic rewards,effort-reward

balance

Financialrewards

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So what’s the problem?

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http://upload.wikimedia.org/wikipedia/commons/9/90/McLaughlin_Brubaker_Death_Spiral.jpg


Overstressed managers, frustrated

employees, higher

turnover, lower productivity

Many companies have allowed the manager’s job to become a death spiral

You’re our best producer, sowe’re promoting you to manager

But keep producing — after all, you’re the best

And we’re expanding your span of control,

to save money

We’re focusing your pay chiefly on your personal

production

Unfortunately, we can’t offer training for new

managers

And don’t forget to master manager self-service so you can reduce HR’s burden

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One more time — what’s the right metaphor?

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If employees are assets, we will:

If employees are investors, we will:


Questions?

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Contact information

Thomas O. DavenportSenior Consultant

345 California Street, Suite 2000San Francisco, CA 93104

T +1 415 733 4280

[email protected]

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