About Purpose is about your purpose.
Aim: Identify and articulate your purpose.
Arm: Shape yourself around your purpose.
Act: Achieve your purpose.
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Assignment: Book Report
Bob Ryan, About Purpose, Inc. ©2001
don't know about you, but when I was in school, I dreaded book reports. Not because I didn't like to read. I did. No, it was because I hated to try to put all those words into just a few. Here I am, some 40 odd years later, doing a book report! But I'm psyched. I really had fun with this one. I hope that, like me, you read this and get so excited about the prospect of setting your business apart from the competition, that you'll just have to step out of your daily grind and begin working on your business and not just in your business.
The Human Equation, Putting People First by Jeffrey Pfeffer, Harvard Business School Press, 1998
Pfeffer has succeeded in his goal to get me to challenge wrong views that I hold. And I admit it, I hold a lot of the views that he describes as "conventional wisdom." I hold views about profits and productivity as they related to labor costs. I hold views about unions and their effect on quality, innovation and productivity. I hold views on compensation plans and their effect on individual and company performance. The good news is, that some of the views that I hold go against conventional wisdom and I've had the wisdom (dumb luck?) to be consulting with people about them. The bad news is that I have bought into some of the conventional wisdom which Pfeffer has proven to be just plain wrong.
This is a book full of evidence. The Human Equation sets out to debunk commonly held myths in business about the relation of people to profits. It advocates strongly what Pfeffer calls High Performance or High Commitment Management Practices. Studies show that substantial gains - 40% or more - can be obtained by implementing High Performance Management Practices. The idea is that people work harder and smarter, applying wisdom and energy to organizational performance while saving money and increasing quality and productivity.
It requires a serious commitment, because, like most systems, we can't get by with just a "lick and a promise." We must commit ourselves to the Full Monty.
From extensive studies, Pfeffer identifies the following seven dimensions characterizing the systems that produce profits through High Performance Management Practices:
- Employment security
- Selective hiring of new personnel
- Self-managed work teams and decentralization of decision making
- High compensations contingent on organizational performance
- Extensive training
- Reduced status distinctions across all levels of personnel
- Extensive sharing of financial and performance information throughout the organization
One by one, he goes through the list, empirically supporting his findings. He challenges us to check the alignment of our business strategies with our management practices. The result will almost certainly be a realization that what we say we want to accomplish is being thwarted by what we do with our people. "Some problems occur so often that they are almost generic. One is the link between training practices and required skills and behaviors....Another notorious example is...compensation and incentive schemes [which] bear little or no connection to the critical skills and behaviors identified as critical for success."
So, why don't we change? The book cites numerous reasons - lack of courage to buck the conventional wisdom; pressure to "make the numbers" and excessive focus on measuring costs; a tendency to overvalue what we have helped produce, which makes delegation and change difficult; and a popularization of "mean" or "tough" management.
Let's look at some of the main stumbling blocks to implementing High Performance Management Systems.
Downsizing, Layoffs, and Outsourcing are all being used more and more in what is called the "new employment contract." "No longer do firms, particularly in the United States, offer the prospect of long-term employment in return for good performance and effort....Meanwhile, the implication emerges that since the organization won't look out for your interests anymore, you should look after them yourself." Pfeffer cites study after study that downsizing and layoffs result in exactly the opposite effect that they are meant to accomplish. Costs increase. Productivity decreases. Quality decreases. Customer service and morale suffer. Avoid downsizing. There are good, solid, common-sense steps to take to avoid downsizing while still accomplishing the goals of weathering the tough times.
Compensation systems often tend to be used as the magic bullet that will catapult an organization into higher sales, increased productivity, or improved profits. Pfeffer proves three shocking statements:
- Pay rates are much less important than most managers think, and even lower labor costs may not be the basis for competitive success.
Individual merit pay and even piecework...have numerous problems, and the research evidence suggests that they are frequently ineffective. - Believing that pay and the associated measurement systems used to implement pay will solve all productivity problems is almost certainly a prescription for ruin.
- Compensations systems are much better based on team and organizational gains. Moving to a group-based system enhances performance and solves a number of problems inherent in merit pay and piecework systems.
Pay is important. But the studies show that intrinsic rewards are not only more powerful, but help create the High Commitment Management Practices that are proven to dramatically improve organizational performance. "Profit sharing, stock ownership, gain-sharing, and group bonuses seem more consistently to produce positive results than do individually-based incentive systems."
Unions are often identified as one of the main stumbling blocks to making deep and lasting changes in the human element of an organization. Again, the evidence is strongly to the contrary. In fact, studies show economic gains from cooperation with unions, advantages to keeping a union even when it is weak and about to fold, and beneficial outcomes to encouraging unions where none exist. Organizations need to develop cooperative and positive relationships with unions for a number of reasons. In this global economy, we'll run into unions more often than in the U.S. As the economic climate in the U.S. changes, unionization is likely to increase. If we're serious about putting people first, we must work constructively with workers' representatives. But even more importantly, many unions actively advocate and negotiate for implementation of High Performance Management Practices.
Conclusion: Having debunked the myths of conventional wisdom, and having cleared up some of the misunderstanding about the apparent stumbling blocks to implementing High Performance Management Systems, what's stopping you? The advantages are clear. First, putting the practices of HPMS into place means that your company has something that's difficult to imitate - a distinctive competitive edge. Second, the practices are positively related to sustained profitability through innovation, flexibility, customer service, productivity, cost reduction and learning and skill development.
The perspective with which you view your people is the key to implementing a High Performance Commitment System. With the right perspective, leaders can determine how best to change their organizations and be successful. With the wrong perspective, no action you take will be successful in the long term.
Call to action: If this article has moved you as the book moved me, make a decision today. Decide to take the steps to transform your organization into a High Performance Management System. We at About Purpose are ready and prepared to help you. E-mail us.