High-performing organizations require discretionary effort by employees who are both engaged and enabled.

1. Hitting the Getting more bang
ground running for your buck
Page 2 Page 4
View Point
Issue 3 June 2010 Performing in uncertain times
Getting Engagement is the commitment employees
feel towards their organization – their
willingness to recommend it to friends and
family, their pride in working for it, their
intention to remain part of it, and, critically,
engaged
their willingness to go above and beyond
the call of duty in its service.
Engagement + Enablement
= Performance
But engagement alone is not enough to drive
individual and organizational performance.
Employees also need to be ‘enabled’ to channel
High-performing organizations require discretionary their efforts productively. This means they need
the right tools to do their job – information,
effort by employees who are both engaged and enabled. technology, equipment, finance and other
support – and the freedom to focus on their
responsibilities without being distracted by
procedural restrictions and non-essential tasks.
“
Organizations are emerging from recession It requires strong leadership, management
into a tougher, more cost-conscious and accountability, strong performance
performance-oriented world. It is clear that management, ongoing measurement, employees also need
a return to ‘business as usual’ is unlikely. excellent communication and, last but not to be ‘enabled’ to
”
Indeed, the new mantra is ‘do more with least, clear alignment between individual channel their efforts
less’. Firms are lean, and, if not exactly mean, targets and rewards with business objectives.
concentrating their effort and investment productively
on those activities that will deliver the It’s a challenge, but it can be done,
greatest returns. as some of Hay Group’s recent research shows.
Three of our landmark studies – The World’s
At a time when both financial and human Most Admired Companies (in conjunction
resources are at a premium, the discretionary with Fortune magazine), Best Companies for
effort of employees will be the most vital Leadership (with Bloomberg Businessweek) and
component in creating high-performing The changing face of reward – provide valuable
organizations. And in order to ‘go the extra insights and lessons for firms wanting to create
mile’ employees need to be both ‘engaged’ their own high-performance cultures. In the
and ‘enabled’. See panel. rest of this ViewPoint we examine some of the
different levers to create better engagement,
As we highlight in this issue of ViewPoint as exemplified by some of the world’s
engagement alone will not drive leading organizations.
performance; enablement is also critical.
Embedding both into organizational
cultures is no easy feat.

2. 2 ViewPoint I Issue 3 I Performing in uncertain times
Contents World’s Most Admired Companies
2 Hitting the 6 The DNA of
ground running successful leadership Building blocks
Employees at the best
companies are now more
What essential building
blocks do leaders need to be
to engagement
motivated and loyal than ever. successful in the future?
96 per cent of the WMACs
4 Getting more bang 8 Achieving more say their work conditions
for your buck with less enable their employees to
In uncertain times, reward ROI How Strategic Performance be as productive as possible
is under the spotlight. Management can make
(compared to 84 per cent
the difference.
of their peers).
96 per cent rate their
organization as effectively
organized and structured
Engagement:
the business case
Hitting the (85 per cent of peers).
92 per cent say they work
innovatively, using new
technologies or creative
Nearly 70 per cent of the World’s
Most Admired Companies
(WMACs) say they are
emerging from recession with
ground running approaches to improve
internal effectiveness
(73 per cent of peers).
their employees feeling more 88 per cent have an
loyal than before, compared to explicit employer brand
just 50 per cent of their peers. The world’s top firms are poised to take advantage of economic (67 per cent of peers).
The right kind of leadership transparent communication is key, employee engagement to bottom-
94 per cent say engagement
recovery, thanks to employees who are more motivated and loyal and communication especially in adverse conditions. line outcomes, compared to just 94 per cent have a specific
58 per cent of their peers. definition of employee
The WMACs say that providing
creates competitive advantage,
compared to 82 per cent of
than ever before. How have they done it? clear leadership and direction is an
“When things go badly economically,
you have to communicate more, “We have identified the levers of
engagement (79 per cent
of peers).
their peers. important part of their engagement not less. When executives climb employee engagement that increase
As they emerge from the recession share five practices in common: Holding managers strategies. If employees are to into the bunker, it creates serious productivity here at our company,
the world’s top firms are reporting ongoing measurement, the right execute effectively on organizational morale problems throughout given our challenges, strategies
94 per cent report reduced accountable
that their employees are more leadership, manager accountability, directions, they need to understand the organization.” and culture.”
staff turnover (67 per cent Employee engagement is the practical implications of what
motivated than ever before, good communications and linking not viewed as HR’s exclusive Clearly, for the WMACs, employee
of peers). they are being asked to do. They
making them well positioned to engagement to business objectives. responsibility in WMACs, Linking engagement to motivation – and their ability to
also need to be motivated by
Did you
take advantage of the recovery. where line manager responsibility business objectives translate it into action – is a critical
And the reason, according to Ongoing measuring seeing how what they do fits into
85 per cent cite fewer – at 86 per cent – is higher than If employee engagement initiatives sustaining force in tough economic
the bigger picture, and having a
know?
performance issues Hay Group’s most recent research and monitoring in peer companies (76 per cent). are seen primarily as a way of conditions. Organizations that
with Fortune magazine into the sense of purpose – the feeling that
(72 per cent of peers). “What gets measured gets If organizations don’t make clear increasing employee satisfaction, follow the lead of the WMACs and
World’s Most Admired Companies they are making a difference or
managed,” as the saying goes, the role line managers need to they will have little impact. Instead, put people first, in bad as well as
(WMACs), is their focus on employee contributing to something larger
and the research shows that play in engagement programs, people have to understand that good times, will be rewarded with
84 per cent see better engagement and enablement. than themselves – is a critical factor
WMACs use engagement surveys managers may believe they are more motivated employees the kind of loyal and motivated
customer relationships in engagement.
The WMACs are experiencing more frequently and more too busy with their day-to-day drive higher levels of business employees who can drive
(72 per cent of peers). effectively than their peers. Organizations also need to performance. Seventy-one per cent
greater levels of loyalty coming out responsibilities to play an active sustained performance.
Ninety-eight per cent of WMACs demonstrate firm leadership and of WMACs say they successfully link
of the recession than when they role. There is a danger that
conduct surveys, compared that they are capable of executing
The WMACs are just half as went into it, and they report far managers can see engagement
with 81 per cent of their peers, on strategic objectives. Here clear,
likely to have had layoffs and fewer redundancies, hiring freezes as an add-on activity, rather than
hiring and pay freezes than and pay freezes than their peers while 27 per cent conduct surveys something that helps them
more than once a year, compared achieve their core business
Survey findings
their peers during the past during the past two years. What’s
two years. more, they are finding it easier to to 14 per cent of their peers. objectives. This is not conducive
hire people, and are experiencing WMACs’ employee surveys also to fostering engagement among
lower levels of frustration from seem to be more effective in their teams.
Nearly 75 per cent are finding generating action and change In 2009 a Hay Group cross-industry analysis The business case is even stronger than
employees. They expect such “The managers who do the best Employees who aren’t enabled
it easier to hire people than than those of their peers: they are of over 400 companies found that while that. Employee performance is 10 per cent
results to translate into better at engaging their teams are having become frustrated, however
they were two years ago more likely to act on the results organizations in the top quartile on higher in companies in the top quartile
customer service and shareholder the least number of employee engaged they are. This amounts
(57 per cent of peers). to improve performance in areas engagement demonstrate revenue growth on engagement than those in the bottom
value than other firms are likely retention problems.” to a squandering of vital energy,
such as customer satisfaction, 2.5 times that of organizations in the bottom quartile, employee retention is 40 per cent
to enjoy. especially in a challenging
for example. quartile, companies in the top quartile on higher and customer satisfaction is 71 per
44 per cent report lower But engagement is hard to get both engagement and enablement achieve cent higher. The corresponding figures economic environment,
levels of employee frustration right, so how do they do it? The “We keep our eye on engagement revenue growth 4.5 times greater than those for organizations that have both high and could easily turn into
than two years ago (31 per research showed that the WMACs – assessing it, acting on the results, in the bottom quartile. engagement and high enablement are active – and dangerous –
cent of peers). being mindful.” 50 per cent, 54 per cent and 89 per cent. disengagement.

3. 4 ViewPoint I Issue 3 I Performing in uncertain times
The changing face of reward The changing face of reward continued
“
The
research
Getting more bang their current priority is to
grow profits,
for your buck
”
so their metrics largely
remain financial
As companies move towards recovery, Hay Group research shows
that return on investment in reward is under the spotlight.
Show and tell
So employers are starting to put far Fortune into The World’s Most
Meet the
However good the rewards
employees receive, they won’t more effort into communicating Admired Companies shows that
appreciate them unless employers around benefits, including through the best companies weave reward
communicate their value.
The survey showed that many
the provision of total reward
statements, and into segmenting
program messages into the fabric of
the organization, ensuring that core author
their communications – and, messages are clearly communicated
organizations recognize that most indeed, the benefits they provide – and reinforced frequently, using
employees don’t understand the by employee group. total reward statements and
For its The changing face full value of their packages: they engaging line managers early
of reward research, Hay Group look at base pay, and sometimes And communication is important
and often.
surveyed 236 organizations incentives, but rarely at pensions at a broader level too. The new
across all sectors in 29 and other benefits. What’s more, trends in reward strategies can only
countries in Europe, Asia and different groups of employees succeed if leaders and managers
the Americas. It conducted value different elements of reward clearly communicate the rationale
face-to-face interviews differently: Generation Y will place behind them and the contextual
primarily among HR a different value on a pension than organizational strategy informing
professionals, two-thirds of someone approaching retirement, them. Hay Group’s research with
them directors. The research for example.
was designed to gauge how
reward policies and practices
have changed as a result of the Top six pay-for-
global economic downturn. Reward the right behaviors performance actions
All this begs the question of the kind of performance organizations 1 Introduce differentiated
As ever, reward is a key factor One of the key trends to emerge restructuring and often for are using variable pay not purely as are trying to drive. It was the emphasis on financial performance reward structures where
in driving performance. But as from Hay Group’s The changing limited or no incremental increase a cash flow tool, but also to support that caused the recession in the first place, and all Hay Group’s recent available rewards increasingly
businesses wrestle with the twin face of reward research is the in compensation. their performance management research indicates a growing recognition by firms that performance go to the top performers and
imperatives of containing costs as shift organizations are making strategy. In these organizations has to be long-term and sustainable, and driven, therefore, not just high potentials – those critical
But companies aren’t keeping
well as driving up performance, from a culture of ‘entitlement’, the challenge is to develop an by shareholder returns, but by returns to all stakeholders, not least to the survival of the business.
these top performers engaged
their challenge is to coax more from ‘paternalism’ and ‘comfort’, to one appropriate balance between society as a whole.
purely through monetary rewards. 2 Build line management skills
their employees without the help of
a generous compensation strategy.
of ‘performance’, and they are
doing it through a much closer
Employers understand the vital role
short- and long-term incentives
based on the nature of the role,
But while companies aspire to having what Hay Group terms in setting goals, coaching Nick Boulter
that elements such as clear career ‘responsible reward’ programs that drive this long-term sustainable performance and recognizing
alignment of individual targets with many organizations increasing Managing director,
Reward accounts for up to 70 per paths, global mobility and targeted performance, their current priority is to grow profits, so their metrics and rewarding performance.
and corporate metrics. the opportunities for long-term reward services, Hay Group
cent of most companies’ costs, development programs play in remain largely financial. While this is, to some extent, understandable,
so being able to manage reward attraction, motivation and retention,
incentive awards. it is at odds with the wider performance goals adopted by Fortune’s 3 Clarify definitions of
Differentiate reward performance.
costs better can help to boost and, as a result, they are increasingly While employers are paying Most Admired Companies, who augment financial targets with measures
In practical terms this is leading to
profits. Indeed, whereas reward taking a ‘total reward’ approach. unprecedented attention to the around long-term thinking, teamwork and building human capital 4 Balance individual and
a greater differentiation of reward
used to be the sole preserve of link between pay and individual and customer loyalty. enterprise targets for bonuses.
based on individual performance, The research also revealed a shift
compensation and benefits experts, and the limited budget that is and corporate performance within But in the short-term, whatever goals companies set, they need
it has become a top management
towards more variable pay. This is
their own particular organization, 5 Align individual targets to
available is being put behind partly cost driven – organizations to ensure that their reward strategies recognize employees’ behavior overall strategy.
issue. The CEO and board are now top performers, high-potential they are still using benchmarking and values as well as their contribution to the bottom line. They are
with higher proportions of variable
closely involved in order to ensure employees and those with scarce pay often have the flexibility to
to keep a close eye on the reward likely to find that taking this more holistic approach to target 6 Make greater use of multiple
they are getting as good a return skills – people regarded as most strategies of their competitors and setting will in itself motivate employees to deliver rewards, mixing short- and
survive difficult times without
on their investment as possible, vital to the company’s future on general market trends. Clearly, enhanced performance. long-term incentives with the
shedding jobs.
by using reward to drive the kind success. Since the recession, they still see competitive pay as motivational stimulus of
of performance they need. Yet variable pay is also a critical a critical driver of their reward better career development and
organizations are doubly reliant on
lever for motivating performance strategies, particularly for their varied and interesting work.
such people, many of whom have
and engaging employees in the key talent.
taken on wider roles as a result of
organization’s goals. The best firms

4. 6 ViewPoint I Issue 3 I Performing in uncertain times
Best Companies for Leadership Best Companies for Leadership continued
Elements of successful leadership. Businesses keen to emulate the success of this year’s
The DNA top 20 leaders may learn from six elements of successful leadership that Hay Group has
distilled from its research.
of successful 1 Create purpose-driven leadership. As well as focusing on their own (i) The large, complex, global organizations such as General Electric,
success over the past year, leading organizations have also been WalMart, Coca-Cola and IBM, excel at managing a pool of successors
investing significant time and resources in building partnerships with for mission-critical roles.
others to address major global challenges. Procter and Gamble’s new
(i i) The more modern, learning-oriented, fun organizations, such
vision is to “touch more lives more completely in more parts of the world,”
as Southwest Airlines, zappos.com and Ikea, don’t punish failure,
and one of the first questions CEO Bob McDonald asks when he talks
they encourage people to have fun and talk about emotions.
leadership
to his leaders is: “What are you doing in your leadership outside the
company?” Similarly, ‘community empathy’ is an important value (i ii) Collaborative and innovation organizations – 3M, Procter and Gamble
in Infosys, where all individuals, whether formal or informal leaders, and ABB, for example – accomplish work through self-organizing project
are asked what they can contribute to society and are encouraged to teams and expect individuals to come up with solutions to problems
see their work within a larger, more meaningful, context. on their own.
2 Win hearts andleaders In flatter, increasingly complex authority over
organizations,
minds.
often lack direct control and
matrix-type 5 execution doesn’t thinking skills. IfFocusing on the rightstrategy, essential
Develop strategic
help you much.
you have the wrong
goals is
great
The essential building blocks leaders will need to be successful in the future are revealed in people they need to help them drive performance. In order to win to driving up performance.
hearts and minds they need to be inspirational, and feel comfortable
Hay Group and Bloomberg Businessweek’s recent Best Companies for Leadership study. dealing with ambiguity.
But leaders need to think strategically and tactically at the same time.
They need to be agile learners, with the ability to shed old mindsets and
It is no coincidence that the Top 20 Best Companies are more matrixed look further afield for insights on how to tackle new and unforeseen
and cross-functional than the rest. Therefore the issues leaders address challenges, quickly.
Aware that major, unpredictable often cut across organizational silos, which encourages them to think in One of the best ways to develop strategic thinking is to give aspiring
a more enterprise-wide way, fosters joint problem solving and
Meet the
and high-impact events will be leaders challenging opportunities as early in their careers as possible.
a regular feature of the future helps prevent ‘turf wars’. Procter and Gamble, for example, hires people with the potential to move
author
economic landscape, they have up at least two levels in the organization and gives them the experience
identified the key attributes leaders to help them develop. For their high-potential leaders they identify
will need to be successful in the 3 promoting leaders from within the organization is both more cost
Treat talent as a strategic corporate asset. Research shows that ‘destination roles’ that they could move into in five to seven years’ time.
new world, and the kind of cultures
needed to nurture them. In essence, effective and more successful than hiring from the outside, and the
those qualities and cultures are ones Top 20 have been at pains to build bench strength for critical roles.
that help to both engage people This not only increases the candidate pool for leadership positions, 6 Teach your leadersoftothe best waysLeaders need to develop is to teach it to
to learn and one
be teachers.
to learn something new
their capacity
and enable them to perform. but also provides growth opportunities for individuals and makes
them feel valued. others. Coaching and mentoring are, therefore, key elements in fostering
As well as prizing strategic successful leadership.
Between 2008 and 2010 ABB increased the number of leadership
thinking over the ability to execute, Southwest Airlines uses ‘embedded coaches’, who usually come from one
development initiatives by 88 per cent, despite an across-the-board
the Best Companies are also looking part of the business and act like personal trainers in another. And last year,
cut in costs of 30 per cent. Some 90 per cent of these opportunities
resolutely to the future rather than despite the meltdown in the financial services industry, 152 senior leaders
were taken up, indicating the appetite for development from
being preoccupied with the past, functioned as teachers at the Goldman Sachs University. The bank believes
individuals despite the difficult economic environment.
and favor inspirational leadership that part of leadership responsibility is to help grow the next generation.
above technical competence.
Significantly, even during the tough Significantly, the best-in-class companies had a higher proportion of
women in senior leadership roles. Women tend to use a coaching style
times they continued to nurture
their leadership talent, which
4 Use your culture to drive and sustain development. The best-in-class
organizations place the same emphasis on behaviors and cultures more than men, so are arguably better able to develop the skills of others.
Mary Fontaine helped drive engagement as as they do on results, and are passionate about creating cultures The leadership practices of the Top 20 Best Companies for Leadership
Managing director, well as positioning them to take that support and sustain leadership. There is no one ‘culture’ feed through to the bottom line. In terms of shareholder return,
leadership and talent, advantage of the upturn. that guarantees leadership success: what is important is that an they significantly outperformed the S&P 500 index, both in the short and
Hay Group organization has a culture and that it is aligned with the overall longer term – suggesting that the kind of leadership that fosters employee
Another major trend to emerge
strategy. However, some culture ‘patterns’ emerged from the Top 20 engagement and enablement helps drive performance even during
from this year’s research is a keen
Best Companies. Here are some examples of how different cultures the most difficult times.
recognition of the broader societal
determine leadership development in particular organizations. >>
role that organizations and their
leaders have to play in helping to
address major global environmental
and social challenges. The additional
sense of purpose employees feel by Did you know?
being able to ‘do good’ at the same
time as ‘doing well’ at work helps to This year Hay Group teamed up with Bloomberg Businessweek to find out what the Best Companies for Leadership are doing
foster the all-important engagement differently from their peers in order to drive performance during unprecedentedly challenging times. The research covered 1800
and ‘enablement’ that drive participants from over 1100 large, medium and small organizations across the world. For the first time this year, the research
high-performance cultures. was extended from heads of talent management to all employees.

5. 8 ViewPoint I Issue 3 I Performing in uncertain times
Strategic Performance Management
Achieving more with less
Organizations are emerging from the recession leaner and more focused on
returns than ever. With less money and fewer staff, they are having to ‘do more
Creating
with less’ and strategic performance management is a vital tool to help them do it. a strategic
Performance management is the tool most companies And despite big investment to train managers in
performance
have traditionally used to achieve the apparently the processes, procedures and behaviors needed to management
contradictory objective of driving up performance while implement effective performance management systems,
containing costs. But despite the array of highly complex employees complain that their performance systems are model
and sophisticated performance management systems too complicated, too technical and not transparent about
and instruments, senior leaders tell us that performance how individual performance helps deliver corporate goals. 1 What are the key levers in
management isn’t delivering what they hoped. It eats What is missing is the ‘performance model’ – essentially a my business model to drive
up management time, and doesn’t necessarily motivate set of guiding principles for the entire set of performance organizational performance?
employees to focus their efforts more productively. management beliefs, systems and processes for the business
as a whole. This model, which needs to be tailored – 2 When looking at strategic
Why is this? Our analysis points to a disconnect between targets what key metrics
there is no ‘one-size-fits-all’ solution – allows companies
strategy and goals at a company level, and the way these should I apply in the
to develop a more strategic approach to performance
are translated into targets at a team or individual level. measuring systems?
management. It’s constructed around an organization’s
response to a set of questions. See panel right. 3 Who is in charge of making
Lost in translation
One of the reasons for the disconnect is that the culture Strategic performance management is about more than it happen? What is the
of the organization often works against the successful just setting targets or enhancing leaders’ ability to provide accountability of line
implementation of performance management processes. feedback. It is about aligning company strategy to team management?
Senior management frequently underestimates the and individual goals and rewards, and ensuring the whole 4 How is our culture affecting
importance of culture as either a barrier to or enabler organization is pulling together in the right direction. our ability to use our
of a high performing organization – and when they do performance management
recognize it, most CEOs delegate it to the HR Connecting the hard to the soft system effectively?
department to resolve. Strategic performance management makes the
connection between the ‘hard’ – the business goals 5 Does our performance model
What’s more, the performance management system and strategy – and the ‘soft’ – employee motivation reflect the unique ways our
itself is often either too generic to be motivating, or and culture – of performance management. Employees business creates value?
too complex to be understood. For example, managers
often find it difficult to translate the huge amount of
want to do the right thing, particularly when it comes 6 What is my reward philosophy
to customers. But they can only do so if they know what around differentiating between
data produced by the corporate ‘balanced scorecard’ the right things are, receive regular feedback about their
into individual actions that produce the desired business performance levels?
work, understand how their jobs help deliver the business
results. They also dislike giving feedback that might strategy, understand the behavior expected of them and 7 How do I reward the
demoralize hard-working employees – or, even worse, feel that their targets, incentives and rewards are aligned performance of my best
cause them to leave. to the organization. people in terms of career
Infrequent communication generally between managers opportunities?
Only through successfully connecting people,
and employees – there is no ‘culture of dialogue’ – strategy and culture will CEOs increase employee 8 How do I deal with low
exacerbates the situation. As a result, reward decisions motivation, engagement and productivity. This, in turn, performance – not just how
are based on complex processes to translate performance will significantly improve their chances of achieving their I give feedback, but how I
into reward strategies that deliver the wrong results. business objectives, and help drive the efficiency and address the root causes of
effectiveness that their organizations need to help poor performance?
them weather tough market conditions.
“ this model needs
to be tailored
– there is no ‘one-size-
”
fits-all’, solution
©2010 Hay Group. All rights reserved