“There’s no avoiding it. The eternal search for sustainable competitive advantage is leading us straight into the squishy softness of culture and character. Many business people won’t like it. They won’t be comfortable talking with colleagues about trust, honesty, purpose, values, and other topics out of the self-help section of the bookstore. They will have to face the fact that they will likely be eaten alive by competitors who confront these issues with relish.” — Geoffrey Colvin, “The Changing Art of Becoming Unbeatable,” Fortune Magazine
All organizations have access to more-or-less the same resources. They draw from the same pool of people in their markets or geographic areas. And they can all learn about the latest tools and techniques.
Yet not all organizations perform equally. In fact, there is a huge gap between high-and low-performing organizations. What accounts for this? Quite simply, it’s people. As the venerable Peter Drucker points out, “Of all the decisions a manager makes, none are as important as the decisions about people, because they determine the performance capacity of the organization.”
In his book, Inspirational Leadership, Lance Secretan reports on the role of leaders in the healthcare system:
One hospital had significantly better results (61 predicted but 41 observed deaths) while another had significantly worse results (58% more deaths than predicted). Technically, there was very little difference between the hospitals being studied. The significant variable proved to be the quality of leadership. What the researchers found in particular was the better performing hospitals achieved superior interpersonal dynamics among the intensive care unit staff. When leaders served their [staff] well, the medical staff was able to serve their patients better. The researchers reported that “the degree of coordination of intensive care significantly influenced its effectiveness.”
And when it comes to people, the big difference is leadership.
“People are our most important resource.” This management clichй dates back to the beginning of the modern organization. Yet all too often it’s perceived as a tired old phrase with a high “snicker factor” in many organizations. Eyes roll as the boss dutifully mouths these words.
Meanwhile, investments in assets such as physical buildings, equipment, technology, products, and strategy development vastly outstrip investments in people. Little care is given to hiring and orienting the right people. Training is often an afterthought, given little strategic consideration and even less management planning and follow-through. Performance appraisals are bureaucratic “check off the boxes” exercises that cause more angst than development. Promotions are based more on technical or management factors than on proven people-leadership abilities. Teams exist in name only. Opinions and input from frontline people are rarely sought and often discounted. Processes and systems enslave rather than enable servers or producers.
For such an “important resource,” people are assigned remarkably low priority in many organizations. The folly of this choice is recognized not only by the proponents of soft skills and values, but is also supported by solid statistical studies and surveys.
“A Wharton [School of the University of Pennsylvania] study found that ‘capital investments may be a strategic necessity to stay even with the competition,’ but the investments in workers yielded far greater returns. Says Patrick Harker, one of the study’s authors: ‘Machines can’t give you a competitive advantage. It’s all about people.'”
A survey of the world’s most admired companies echoed this viewpoint in theFortune Magazine article, “What Makes a Company Great”. According to the piece: “An MIT global auto industry study found that a major reason Toyota’s productivity is far ahead of Nissan, is because Nissan poured money into robots and computers while Toyota focused on people and processes. Toyota then used automation to support its people and processes.
A major international company studied their worker compensation claims and attitude surveys and found that where supervisors and managers are perceived to be more caring about people’s injuries and compensation, claims were much lower.
In the most admired companies, the key priorities were teamwork, customer focus, fair treatment of employees, initiative, and innovation. In average companies, the top priorities were minimizing risk, respecting the chain of command, supporting the boss, and making budget.