Why Build a Perform Culture?
Introduction
While the macro economic influences, the marketplace dynamics and increased competition may constantly change and have an effect on most service sector business models, the one common factor that has not changed is that service businesses success has and will be dependent upon the daily performance of the workforce.
To compete in today’s complex service markets, not only is it required to be effective at workforce management, we must focus on consistent re-engineering of business processes, outsourcing functions, and consistently upgrading the skills and capabilities or our company’s workforce.
Additionally cost and pricing pressures have directed us to engage in workforce’s that illustrate more variable pay cost structures, have incentive compensation concepts tied to financial outcomes, which are aligned with the business objectives..
“In 2015 and beyond, wealth will be exclusively created by businesses models that are unique, are the most productive and economically efficient, promote and excel at CHANGE management, that invest and manage their people, while illustrating process and systems excellence.”
Since 2013, we have been researching the attributes and practices that contribute to High Performance Workforces (HPW), including their cultural attributes. At Tablero recently conducted 2 recent studies and surveys on this important aspect of service businesses. This informational and guidance document shares with you some of high level outcomes of those studies, married with Tablero’s observations as a result of our 14+ years of advising and investing in emerging labor intensive service businesses.
While small business CEO Entrepreneurs routinely acknowledge that their businesses needs to be more productive, there still exists a substantial gap between the performance required versus what is delivered. In fact, small businesses lag far behind their larger company counterparts in the adoption of “High Performance Workforce” practices. Additionally research in 2014 illustrates that less than 50% of small businesses have implemented HPW attributes and programs.
Of the SMB businesses that have adopted High Performance Workforce programs, their needs included:
A desire for increased labor productivity and lower labor costs to keep up with competition.
Their workforces are “graying”, they complain of a shortage of highly skilled talent;
Their SG&A costs to revenue productivity are not illustrating scalability, therefore labor costs are increasing at a faster rate then revenue is being generated.
Essentially all businesses need to be able to answer the question: How do we effectively deploy, utilize and maximize the productivity of our Human Capital resources?
Workforce Management, Role Clarity and Employee Engagement of the workforce is an ongoing challenge and this barrier to success as reported by more than 60% of small business executives.
From a macro economic perspective as we approach “full employment” in the near-term, the competition for talent will increase, therefore employee retention will become more challenging. This coupled with increasing cost structures, while developing the ability to Change; all will determine the difference between under-performance and market leaders.
Therefore it is Tablero’s perspective that only those firms that create an effective “Perform Culture” will become market leaders and will generate institutional worthy wealth.
What is clear to Tablero is; it is up to us as CEO Entrepreneurs to invest and develop our “Employer Value Proposition” such that we gain a competitive advantage in recruiting, in that the top talent will trend will be to opt into larger companies that have a history of practices and programs to motivate and retain key performances.
The following findings of our recent studies and surveys provide the details of adoption, benefits thereof, and utilization of HPW practices.
For those companies that reported excellent financial and marketplace performance and successful HPW programs:
98% report that Employees Are Actively Involved in Decision Making.
9 out of 10 outsource at least two functions with the majority of outsourcing includes: marketing, IT, payroll, and other project oriented initiatives.
3 out of 4 utilize Incentive Variable Compensation as a significant portion of the workforce total compensation package.
3 out of 4 use Flextime and Flexible Scheduling: that match work to lifestyle considerations
3 out of 4 have developed and utilized “Informal Leader Programs” to accelerate change and drive performance.
74% report that the CEO is an advocate of HPW programs
For those companies that do not have a HPW programs, and do not illustrate Perform Culture attributes. The following results feedback was most prevalent.
Only 1 in 3 small businesses reported having established regular scheduled performance reporting rhythms (i.e. accountability management programs).
Only 40% utilize either industry or competitive benchmarking as a venue to monitoring performance/productivity improvement or performance
Less than half track simple Human Capital metrics like duration of open job to fulfillment, turnover rates, employee engagement scores etc.
Contrary to popular belief, creating a high performance workforce start with process excellence.