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Use performance management to give your employees purpose, and watch what happens next

April 9, 2015/in Coaching, Feedback, Goal setting, Performance Management/by Jon Windust

Imagine joining Netflix before anyone knew what it was. You received a job description before starting. On day 1 your boss gets you started on your key responsibilities. Whether your role is to sign movie licensing deals, develop their software or provide customer service, as often happens for a large majority of people, your sense of engagement will likely start strong and then wane in the months following the honeymoon period.

But now imagine what would happen if before you even started, you knew the purpose for Netflix and how you fit in. You knew they wanted to create the worlds most popular movie and TV streaming service. They wanted to give people access to the shows they loved on-demand, a completely new idea.

The people you worked with continually talked about this picture of the future. How much more engaging and motivating would it be? You’d have a purpose beyond your end of week pay packet. As Hubspot’s culture code puts it: “paychecks matter but purpose matters more.”

Individual performance (and subsequently overall business performance) dramatically improves when employees know why they are doing their job. It’s further enhanced when people know how their job impacts or contributes to the goals of the business overall.

The key benefits of a sense of purpose

Maintain a sense of purpose at all levels in your organisation – linking everyone’s job to the bigger picture – and your business will reap the rewards:

Significantly higher engagement – which lowers absenteeism and turnover and increases productivity
A faster business – with everyone pulling in the same direction you can achieve your goals more quickly
A more innovative business – having a clear direction promotes more creativity

Well-executed performance management clearly defines the link between an employee’s job and the objectives of the business – day in, day out. Here’s how:

1. Clearly articulate company goals to everyone

Sharing your company’s goals is the starting point for both purpose-driven employees and great performance management.

Creating a sense of purpose at an individual level starts with the leadership team asking “why do we do what we do?” – then clearly communicating the answer to the business. In his 2010 TED talk, Simon Sinek makes a terrifically powerful appeal to leaders (it’s worth watching):

“It’s those who start with “why” that have the ability to inspire those around them.”

Transparent company goals that are communicated clearly and often lay the foundations for a workforce driven by a shared purpose. They are also the bedrock for effective performance management.

At its core, great performance management ensures that employees are aligned with the business as it moves forward. It has the power to ensure the right people are in the right roles, doing the right tasks and developing their skills in line with business needs.

Of course, in order to do this job effectively, performance management relies on every employee understanding the fundamental goals of the business.

2. Align employee goals with business goals

Give your employees purpose by clearly explaining exactly how their job affects the success of the business. A crucial step in the implementation of a great performance management system is giving goals this context.

The SMART approach is a best-practice method for setting goals (specific, measurable, attainable, relevant and time-bound). The ‘R for relevant’ is the key here – make sure all goals are clearly relevant to the business’s purpose.

For example, using the idea in our introduction, if you were setting a goal for a HR executive, an aligned and purposeful objective would be to “Contribute to successful commencement of services in Australia by establishing a leadership team by January 2015 with proven past successes building operations from the ground up”

At Netflix, giving employees context is ingrained behaviour. The Netflix culture code captures this by saying: “High performance people will do better work if they understand the context.”

But it’s not just Netflix that says so – research backs up the statement strongly. If you’re interested to read more on this, I can suggest two papers from the Center of Advanced Human Resource Studies: ‘Seeing Clearly’ from this collection of white papers and ‘Employee line of sight to the organisation’s strategic objectives – what it is, how it can be enhanced and what it makes happen’.

3. Use performance management to maintain a sense of purpose when things change

Business objectives, and subsequently business strategies, can change in a heartbeat – especially in fast-moving, innovative organisations, or those facing fierce competition, regulatory upheaval and so on. Change can mean that job roles quickly become misaligned with the new direction of the business. To keep your employees on the right track and adding value despite shifting sands, ongoing feedback and coaching is crucial.

The effect of coaching on purpose and engagement hasn’t gone unnoticed at Wells Fargo. A top executive announced last year that he expects bank managers to spend two thirds of their time coaching their staff.

Ongoing feedback and coaching are key elements of best-practice performance management. Providing plenty of contact time between employees and their managers/mentors, regular feedback means new strategies can be quickly implemented on the ground.

Done well, every coaching and feedback session will leave your employees feeling that achieving their individual goals are directly connected to the success of the business.

In conclusion

A sense of purpose lies at the very heart of driving employee engagement and better business performance.

Great results happen when every employee is connected to purpose, every day. Best-practice performance management makes this straightforward.

With clear goals, feedback and coaching, your employees will have a direct and tangible connection to the success of your organisation.

Jon Windust is the CEO at Cognology – Talent management software for the future of work. Over 250 Australian businesses use Cognology to power cutting-edge talent strategy. You can follow Jon on Twitter or LinkedIn.

Does talent management drive share price performance?

February 2, 2015/in Talent Management/by Jon Windust

Why investors should care about talent management

Here at Cognology we love data that supports the importance of great people management. Today we’ve got some particularly interesting data from Glassdoor that all managers (and investors) should pay close attention to.
We’ve dug into Glassdoor data to understand the impact of employee happiness and satisfaction on share price performance.

If you’re not familiar with Glassdoor

Glassdoor is a website where employees and former employees anonymously review companies and their management. The data and reviews are then made publically available.
Here we’re using Commonwealth Bank as an example:

As you can see, it’s gives a quick feel for what it’s really like to work at the company on a number of measures.

But deeper than just employee happiness, Glassdoor is also a pretty good indicator of management capability. As we showed in our recent piece on Management Capability, Glassdoor ratings sit broadly in line with the Australian Institute of Management’s capability index.

What do these ratings say about Australia’s largest companies?

At an aggregate level, every company gets a rating out of five stars. We collected these Glassdoor ratings for the ASX100. You can see the results below:

Note that we’re only including companies with reviews on Glassdoor (which is why there’s 68 companies listed here instead of 100). Due to size or industry, some companies don’t have enough ratings to show data.

As you can see above, most companies tend to cluster somewhere between a rating of 3 and 4.

What’s particularly interesting here are the seven Australian companies that have scored ratings of 4 and above. As you can see from the chart, it’s quite rare to achieve a rating at this level. For comparison, some of the international companies with ratings above 4 include:

What has this got to do with share price performance?

One of the big questions about Glassdoor is always “does the rating really mean anything?”. Anonymous reviews sound awfully like they could be gamed by a company that wanted a quick ratings boost. Or just as easily destroyed by a particularly bitter ex-employee.

So, in aggregate, do these ratings actually tell us anything meaningful about the companies listed?

Perhaps the most impartial way to look at overall corporate performance is the share price. There’s a lot of nuances that share market misses – but there’s no disagreement that it’s a very clear public indicator of performance that all stakeholders care about.

So how does aggregate share price performance look when we chart against Glassdoor ratings:

It’s clear that the past 12 months has seen outperformance by those companies with a glassdoor rating of 4 or above. Just to highlight, these companies with employee reviews averaging above 4 are:

CSR
Fortescue Metals
Toll Holdings
Wesfarmers
Seek
Ramsay Health
Orora

Whilst it’s easy to make the argument that employee engagement and management capability is causing share price outperformance, let’s not get too carried away and start the “Glassdoor ratings >4 hedge fund” (although we did very briefly consider it before publishing this article).

To be very clear, I’ve always believed that there’s a relationship between great talent management and company value. But before we say this is definitive proof of the huge value of talent management, there’s more research required. Do companies that are achieving stronger share-price growth just have happier employees? It is possible that the causation works in the other direction?

In any case, it’s fascinating data that requires more attention and thought. It’s safe to say you should expect more questions from investor relations about your talent management strategy in the near future.

Please note: Clearly, this isn’t investment advice. And for the sake of full disclosure, nobody involved in the publication of this article holds shares in any of the outperformers referenced.

We asked seven workplace experts for their number one tip in dealing with an underperforming employee

November 3, 2014/in Coaching, Performance Management/by Jon Windust

Who are Australia’s most valuable employees?

October 27, 2014/in Workforce Data/by Jon Windust

Who are Australia’s most valuable employees? from Jon Windust

I love thinking about the future of work. And recently there’s been a lot of discussion that the future of work means bigger companies employing less people. It’s hard to draw any other conclusion when you look at deals like the Facebook acquisition of WhatsApp, a US$19 billion dollar acquisition with just 55 employees. I’ll save you pulling out the calculator – Facebook are paying an incredible $350m or so per employee!

I wanted to understand the Australian perspective on whether we’re seeing the start of a major disconnect between employees and firm value. To do this we’ve spent some time running the numbers on the ASX 100. And the results might surprise you!

The average Australian employee is worth just over $1m

I’m just looking at the ASX 100 here. But that’s a pretty good representative sample, given that these 100 largest companies in Australia employ between them about 1.4m people.
At an aggregate level, these 100 companies are worth just over 1.4 trillion dollars (yes, with a T!). So at an individual level, that means that the market values each Australian employee at just over $1m ($1,002,617 to be exact).

Roughly that means that a company worth $100m will on average have about 100 employees. A company worth $10b will have about 10,000 employees (and so on).

Before you go asking your boss for a pay rise, it’s worth considering that this average masks some big differences. So of course I put together a top 10. And my vox-pop around the office shows that pretty much no one can guess which large Australian company has the most valuable employees.

I’ll save the suspense. Australia’s most valuable employees work at Transurban – the tollway giant that operates some of Australia’s most important highways.

Australia’s most valuable employees (market cap per employee)

A single employee at Transurban is worth nearly A$32 million dollars. The startling fact here is that depending on which day you look at the exchange rate, that’s more per employee than Facebook! (Their average employee value is a measly US$28 million). It’s also significantly more than Apple, Google, Amazon and Microsoft.

The rest of the Australian top 10 comprises APA Group (pipelines), Seek, Sydney Airport, Dexus (property), Duet (infrastructure), GPT (property), ASX (the stock exchange), Oil Search, Beach Petroleum and Woodside Petroleum.

Surprisingly, Seek is the only technology company to make the top 10. In Australia, it’s not technology, but tollways that win out in this list.

The big earners in the US work in the cloud. Here in Australia the big money is still in the ground.

On a sector-by-sector basis, it’s not surprising that the most valuable employees sit in property and infrastructure. Long term monopoly contracts and regulation mean that there’s simply less employees required to generate earnings. But what’s startling is just how significant the difference is between industries, with property and infrastructure employees worth nearly 3x more than the next most valuable sector.

Average market capitalization per employee (by sector):

The difference between Australia’s most valuable and least valuable employees is HUGE!

The great thing about the stock market is it doesn’t mess about with niceties. Between Australia’s most valuable employees (Transurban) and least valuable employees (Downer) there’s a difference of 367 times!

As well as this astoundingly large multiple, what’s interesting here is that the bottom 10 companies in this list are all subject to market and technological disruption. We’ve got a collection of steel makers (Bluescope and Arrium), retailers (JBHifi and Myer), logistics companies (Qantas and Toll) and engineering firms (ALS, Leighton, Worley and Downer).

The bottom 10

What does this all mean?

There’s a large number of conclusions that you can draw out of this data. And I’m sure others will have insights to share in the comments. But let me start with a couple:

Given the dominance of infrastructure players in the top 10, do Australia’s most valuable companies rely on regulation, rather than innovation?
Where are the technology companies? There’s a lot of talk get’s thrown around in the press about how Australian investors just don’t understand and value technology. This research provides some hard evidence in support of this claim.
Many people have predicted that the future of work means larger companies employing fewer people. On the basis of this data I think we can say that the future of work will also be more and more unequal (with the gap between the most and least valuable continuing to increase).

I’m also looking forward to tracking these stats over time to see if the average Australian employee is getting more or less valuable. We’ll update this on a semi-regular basis to keep track.

There’s so many other insights to be had here, so make sure you stay tuned to the Cognology blog over coming weeks as we look in more depth at key industries and companies. But I’d also love to hear from you. What does this data tell you about the Australian workforce and the future of work?

About the data

These numbers are based on Google Finance data as at late September 2014. This was supplemented with WGEA data where necessary (some companies are quite tricky about hiding how many employees they have).