What does it take to truly build something? Plans? Yes, plans are important. Materials and People? People are the most important factor when building anything. Before you can start to look at plans and gather materials, your people must be motivated to do the job. Today the downturn in the economy is deeply impacting the morale of employees, potentially crippling workforce performance when companies need it the most.

SuccessFactors Research recently surveyed 227 companies in the UK and Ireland and found that 60% of the respondents listed staff morale as the number one effect of the crashing economy, followed closely by goal alignment and achievement, which was selected by 31% of the respondents. What does this mean for business? I am sure you have noticed the title of this blog, Carrying Rocks or Building a Castle. People who are not aligned with their organization are merely carrying rocks, doing work without building the castle. Companies simply cannot afford to let their people do unproductive work, whether in a good or bad economy. Workers with low morale who are not engaged may never pick up the rock at all.

The cost of an unmotivated workforce is quite substantial. SuccessFactors Research has always maintained that a company’s ability to execute is based on three factors: motivation, talent, and organizational ability (tools, etc.) In fact, we consider these three factors to be multiplicative, so low motivation, or low engagement, directly and negatively impacts the other two factors across the company. Companies can tackle both challenges highlighted in our survey, low morale and goal alignment, with an effective goal management strategy.

Having a direct line of sight between one’s individual contribution and the company’s goals is one major driver of engagement. Goal management can help provide that line of sight, linking and cascading goals so that the worker always has a context for his or her actions.

When optimizing the workforce, potentially laying off staff, and adjusting to the changing business environment, you can’t afford to let low morale effect your organisation’s ability to execute. Ensure that goals are clearly set and managed effectively, and build strong teams committed to building the castle.

Is the rising cost of people threatening your business? The War for Talent has put a crunch on the people supply, driving up the price of talent. In fact people now account for about 70% of operating cost, depending on the industry – and this number is rising! People are the fuel for execution, but managers don’t have to lose sleep over this shortage. They just need to realize that people really are assets, and while they might cost a bit, they have the potential to learn, grow and ultimately contribute more.

It would be great if business could just turn on the tap and have access to great people all the time, but that is just not the environment we are in today. The answer to this problem is pretty clear – develop the resources that you have. The people already in your company probably have a lot of untapped potential. Look around the office, is everyone really engaged and motivated? There are a lot of ways to get more from your people, grow their skills and competencies, align their goals – but it all starts with energy.

If your people are having an energy crisis, you need to deal with it. Without motivation, it won’t matter if people have the best skill set in the industry. Fortunately, manager’s have a lot of tools to increase energy and engagement. The Conference Board did a comprehensive study on engagement and found 8 factors other than pay that motivate and energize people: Personal development opportunities, clear path for advancement, line-of-site between individual contribution and company performance, trust and integrity, nature of the job, pride about the company and relationship with one’s manager. We talk about engagement in detail in our paper Drive Top and Bottom Line Results with People Performance.

It’s okay to have a capitalist view of people performance. Supply and demand are just as important in the realm of talent as they are in the commodities market. In fact, we will be hosting a webinar on August 13^th with best-selling author and venture capitalist, Rich Moran. Erik and Rich will discuss what makes a great hire and how to keep them. The cost of capital is on the rise and we now live in a world where it’s not about hiring across the street. It is paramount to have the right people in the right place to make sure your company is capital efficient.

Not long ago SuccessFactors Research and thought leader Amy Lyman hosted the webinar The Business Benefits of Being a Great Place to Work. People who love their jobs work harder and do better. It follows then that creating a “great place to work” should be a top priority for all businesses. Of course, this is easier said than done, or is it? If managers focus on transparency, honesty, diversity and fairness they are on their way to creating a great place to work. Every business is different, so making the leap from a good place to work to a great place to work will involve different factors for each workplace. Ms. Lyman discusses these factors and how they help businesses excel in the webinar she did with us.

Every year the Great Place to Work Institute’s 100 Best Companies to Work for survey is published in Fortune magazine. In fact, SuccessFactors has twice been ranked highly in the small business category. How do we do it? Well, we are very transparent about what drives our success, and have a blog dedicated to employees telling their success stories here at SuccessFactors – the HappyFactors blog.

The response to our joint webinar with Ms. Lyman was electric, and she received many follow up questions from our guests after the conclusion of the webinar. She was kind enough to answer these questions in detail, which are now available for download – SuccessFactors Research Webinar Extra: Amy Lyman . She tackles some tough questions like, how do you start to build trust when employees have lost their trust in upper management, and can you recommend some processes to uncover what’s working in a company in terms of building a strong culture?

Ms. Lyman will be joining us again August 19^th for a webinar focusing on Europe and EMEA. Just as the challenges are different for every business, they are different in various geographies as well. Check our events page for the registration link, which should be available shortly.

It’s an old adage that you have to try and fail before you succeed, in fact entrepreneurs practically live by this code. But what about established organizations? A lot of businesses don’t feel this way, even though they should. The sooner an employee fails, the sooner the individual can move onto to the next task, and the sooner the company can act.

People can learn from failure – there is an upside to chances taken, but if a person knows they will fail, the sooner they do it the better. Take the case of a sales rep constantly dragging on with an opportunity that never will materialize – better to get to fail and move on, to free up time for other accounts.

When it comes to managing employees not only does it take some investment to get people fully productive as we’ve researched with Dr. Hallowell at PDI, but there is also a significant cost to keeping disengaged employees. Necessary separation is important to manage.

“I feel so good–I’m almost happy” – Al Bundy. It’s not just about the bottom line, people should work where they can be engaged in their jobs. One company, Zappos, really gets it. After the first week of work, they offer their new hires 1000 dollars to quit. They figure, if a person takes the money, he or she isn’t really engaged and didn’t belong there in the first place. This is what understanding human capital is all about, finding ways to maximize those factors, like engagement, that really impact performance over the course of an individual’s career.

Today, new hires have an average tenure of about 3.5 years, which is not a lot of time to get them up to the plate and hitting home runs. Don’t worry if your rookies make some mistakes – each mistake can provide valuable insight into setting the right course for your new hire, and accelerate successes . Opportunity is born from failure. Entrepreneurs get it. Zappos gets it. So could you.

Recently Saugatuck Technologies released a study showing that SaaS (Software-as-a-Service) Human Capital Management software contributes at least 2-3% to top line growth – definitely good news for companies seeking more green. An article in this week’s San Francisco Chronicle made me start to think about another kind of green – the environment. Human capital management is key to driving a number of environmental initiatives. Paperless reviews save paper. Working from home reduces gas-guzzling commutes and slows the need to build new office space, and as the San Francisco Chronicle points out, employees love working from home. As an important part of the individual value proposition to the employee, working from home helps keep your employees engaged.

But, successfully promoting a paperless office and shifting people from the office to the home, requires systems that support these activities. Goal alignment, ensuring that people are working on the right things for the right reasons, is very important. People need to feel like part of the team, even if they aren’t physically present. Traction, not action is the mantra for successful execution. Goal alignment ensures that people are moving in the right direction downfield to score, and not just gaining yardage. In fact, if your players are moving in the wrong direction, they are moving farther away from the goal. Goal alignment helps ensure that this doesn’t happen. It is not a substitute for supervision from a manager, but keeps the team working toward the overall company strategy.

Human Capital Management is a critical to earning green, and going green, enabling people to work from home, in global teams, anywhere, anytime. How green is your organization?

I’m happy to post this guest blog by Doug Klein President of Sirota Survey Intelligence and one of SF Research’s Thought Leader partners. Doug will present findings from resent research on this topic with us in a webinar next week. Join us then to learn more.
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Well, not really. What employees truly want is the amount of work they have to do to match the expectations they had when they took the job. During the on-boarding process and throughout the early years, every employee continuously re-evaluates the “deal” between themselves and the company. When the “deal” is still fair, employees are satisfied (even enthusiastic), when the “deal” sours, they become highly attuned to dissatisfiers.

Part of most employees’ “deal” is to feel valued. This has a personal and performance component. They want to certainly be treated fairly and with all the common courtesies (like management not ignoring them, not being treated as a second class citizen, etc.) as well as having their current and future development needs met (so they can achieve their own personal work-related goals – whatever they may be).

Employees who are bored (reporting “too little work”) are often doing work for which they are ill-suited, or have jobs that are poorly designed. As a result, they have by far lower job satisfaction, sense of accomplishment, and pride in their employers compared to all other workers. All in all, they feel less valued.

Feeling overworked – a condition that could lead to job burnout – is far more prevalent than feeling bored and spikes during 2-5 years with the company. Employees who complain about being overworked often feel they are not receiving adequate support from co-workers. In addition, they contend that the quality of their work suffers (because of this inefficiency), resulting in greater stress and tension, and their feeling that they have sacrificed their personal lives for their jobs.

The complaints of both overworked and bored employees should be taken seriously, yet being bored has far more serious consequences for an organization than being overworked. Complaints about being overworked can be an indication of poor quality or work processes, and it can be difficult in certain circumstances to retain employees who feel they are overworked and out-of-balance with their work-life. But bored employees have an even greater negative impact on an entire organization, lowering morale and productivity, and draining resources.

One mechanism of action at play, as previously indicated, is employee perceptions of the “deal-delivered.” Work-life balance is almost an afterthought to people who feel their employers are meeting their end of the “deal” by being fair, providing interesting and meaningful work, and recognition or rewards for a job well-done. Work-life balance becomes a real issue when employees feel that their employers aren’t holding up to their part of the partnership.

However, when employee don’t feel valued (like when they feel bored) or feel overworked (because the company is being inefficient or cheap vs. dealing with an unexpected – or expected – rise in demand) issues like work-life balance, commuting, etc. become highlighted in their minds and become true dissatifiers.

I was preparing for a presentation about change management and how HCM technology drives results that I plan to deliver at an HCM conference when I saw this video. I must say that Sam Zell really nails it when addressing the staff at Chicago Tribune. This 6 minute video clip is so telling, inspiring and indeed entertaining.

Sense of urgency, attention, and understanding the reason for change are of course the ingredients required to help change something. It doesn’t hurt if you know where you’re going either to funnel the change in the wanted direction. I think Sam nailed it. Win or lose – that’s the game.

While the world is experiencing a war for talent, each region has its own, unique talent related challenges. Indeed there are local talent management phenomena, as Jason Averbook from Knowledge Infusion and I discussed in his recent blog.

In some European countries a lot of businesses carry a huge cost for people on sick leave. This cost in most European countries is a shared responsibility between each company and some kind of government funded insurance system (most employers must pay this insurance anyway – in many places it is mandatory).

How much of a burden is this for organizations? There are many consequences when employees overuse sick leave:

• Need to carry extra staff to cover for the absence levels
• Cover the absences with temporary staff that is both costly and not always fully productive in wider-scoped roles
• Lose business – which might be the worst of all alternatives since it will hit both the top and bottom line

Let’s look at this example from a financial service company in Holland:

The employer is legally responsible for paying 70% of the normal salary, after 2 sick days for a full 2 years. In a majority of industry sectors, this is legally raised to 100% through deals with unions. Our research indicates that the sick leave in Holland is about 6% (Sweden, Norway and the UK between 4-6%, France 3%, Italy, Ireland & Germany about 1.5%)

For a global financial service company with about 2 Billion Euros of labor cost and 35K employees there is an average cost per employee of 57K Euros. With 6% absent for sick leave that would mean that 2100 employees are absent at a cost of 120M Euro per year. If that sick leave could be reduced to 5% this company would have 350 more people working while directly saving 20M Euro. This example though showing significant cost savings is only looking at the direct cost of this absence, and not at the more strategic impact of lost business opportunities, or the individual human costs. Though there are arguments for fixing systematic problems caused by over generous sick pay, there is really nothing organizations can do about it in the short term… or is there?

To find the answer I turned to one of SuccessFactors Research Thought Leaders Ken Scarlett who has been researching this, and the conversation left us with some very real solutions.

Aggregately speaking, the higher the Engagement level (as measured by an engagement index) the lower the sick leave rates, and there is no better way to predict the likelihood of abusing sick leave than by the responses to the questions “Do you look forward to coming to work?” and/or “Do you feel you work is important to others?” Ken’s research shows that the group who answered negatively to those questions has the highest propensity to max out/abuse sick leave. With the specific questions above, you can actually create a highly accurate forecast within 10% margin of error.

In any country and any industry your job as a leader is to increase the likelihood that your people answer the question “Do you look forward to coming to work?” positively.

Imagine you are on the football field – What if 15% of your performance is dependent on the play you select, and 85% of your performance is dependent on your ability to make the play? Where would you invest most of your time, training your team to pass, catch, run, and block, or picking out the right play?

By and large, studies have found execution is the clear driver of company value and financial performance. How much? Well, about 15% of company’s performance is attributable to strategy – the remaining 85% is attributable to execution, as found by Becker and Huselid’s “ High performance Work Systems and Firm Performance.” Joyce, Nohria, Roberson found a similar ratio in “What really works.”

That’s right – Execution of the strategy is 6 times more important than the strategy itself!

How do you execute on a strategy? In a word: People. At the end of the day, it is the employee who makes things happen, who gets results – not machines, strategies, vendor relationships or what have you. People are your real differentiator and now typically make up 70% of a company’s cost (and growing). This is doubly true in today’s knowledge-focused economy. We see today that about 80% of a company’s valuation cannot be explained by the balance sheet, which shows the growing importance of intangibles and people performance to future cash flow. The value of a company is no longer in its factories, IT systems, or physical assets – it is created by the company’s people.

Your company is in fact already on the field, fighting for customers, revenues, and a competitive position. Instead of “picking out the best play”, focus on what will most help you move downfield toward your goals: people performance, 85% of your success depends on it. Goal alignment, individual accountability, and engagement equal strong execution. Build up these strengths and capabilities of your company to help ensure you can make the big plays. So yes, people performance does matter, because their ability to execute is the key factor in creating value and driving results for your company.

Max’s Note: As part of our quest to post more and more often, I’m proud to present this guest post by Sammi Nuttall.

According to a new survey completed by Korn/Ferry International, nearly 73% of executive level employees believed that they could outperform their manager. Surprisingly, 42% of those surveyed also believed that their boss was doing an “excellent” or “above average” job.

That’s an interesting contradiction.

One interpretation is that employees, even at the top levels, are not leveraging all they have to offer their employers – and as a result are feeling somewhat less than challenged. This puts the onus on managers and strategic HR groups to understand who their high potentials are and to discover and cultivate their strengths. It’s only by developing employees that their full potential can be released, and if you can do that – the sky’s the limit.