The Idea in Brief
Managing the tension between performance and people is at the heart of every leader’s job. Focus single-mindedly on delivering profits, and you disenchant your workforce, destroying your capacity to drive needed strategic change. Concentrate solely on employees, and you slide into complacency, eroding your competitive vitality.
Exceptional leaders refuse to choose between profits and people, say Eisenstat and coauthors. They take five actions to promote both:
- Earning employees’, investors’, and other stakeholders’ trust
- Engaging directly with employees
- Maintaining focus and consistency of purpose
- Building collective leadership power
- Fostering shared purpose
By applying these practices, the CEO of diesel engine maker Cummins turned the recession-stricken company around. He launched a global program to rearticulate Cummins’s mission and reaffirm its values. Then the company taught employees skills needed for a new strategy. Sales doubled. Stock price increased by one-third. And employees’ commitment to the new strategy soared.
The Idea in Practice
Eisenstat and coauthors recommend these five practices for promoting profits and people in your company:
Earn Trust. Be open in sharing information with and receiving feedback from all stakeholders—from directors to front-line employees. You’ll foster a sense of shared reality and trust that enables you to build alignment around a new direction. Example:
Royal Mail Group’s chairman Allan Leighton doesn’t spare employees painful news (“We’re laying off 30,000”). Owing to his consistent candor, people believe him when he communicates positive news (“The new strategy is working”).
Engage with Employees. Display authentic concern for employees, and communicate directly with them. Example:
Leighton personally visits most of Britain’s 1,600 delivery offices and routinely talks with mail carriers on their rounds. His “Ask Allan” e-mail account gets 200 messages a day; each receives acknowledgment immediately and a full response within seven days.
Maintain Focus and Consistency of Purpose. Spearhead only a few major change initiatives at a time. Once you’ve selected these areas of focus, communicate relentlessly about them.
Build Collective Leadership Power. Balance playing a strong personal role in focusing your company’s agenda with building collective leadership capacity. For example, assemble a core team of leaders whose strengths complement your weaker areas.
Develop Shared Purpose. Forge an emotionally resonant shared purpose for the company that includes these elements:
- Building a better world. A strong social mission strengthens your firm’s brand and unleashes your people’s commitment and energy.
- Delivering performance to be proud of. People feel most fulfilled working for organizations recognized as high performers. To deliver exceptional results, establish a full set of performance indicators—not just financial performance—required to build a great firm.
Example:
At IKEA, all leaders—from the CEO to the front lines—receive upward feedback about whether they’re living up to the company’s values and management principles.
- Providing personal and professional growth opportunities. People get excited by opportunities to advance their skills, not by cost reductions or capital efficiency.
Example:
Every year at Standard Chartered Bank, each operating unit conducts a strategic people review, checking the health and diversity of its talent pipeline and updating succession plans for key positions. And the CEO personally monitors the company’s senior executives, regularly contacting them to see how they’re settling into a new position or whether they feel they need new challenges.
Managing the tension between performance and people is at the heart of the CEO’s job. Firms are at once economic organizations whose survival and prosperity depends on the delivery of superior value in an unforgiving global marketplace and social institutions that profoundly shape the lives of their employees. Too many leaders view their organizations primarily through one lens or the other. For many CEOs under fierce pressure from capital markets, the focus is entirely on the shareholder, with a single-mindedness that can lead to employee disenchantment and loss of capacity to deliver long-term value. For others, who perhaps have a commanding market share or are operating in protected markets, concern for the firm’s people, culture, and heritage can all too easily slide into complacency, inward focus, and loss of competitive vitality.
