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How leaders create engaged performance and how to measure it“Capturing value in human resources 2008”conference, Stockholm, 21-22 October 2008 Georg Vielmetter

Draft presentation including explanatory material, 03 October 2008

2© 2008 Hay Group. All Rights Reserved

Engage employees and maximize performance

Question: Who is the “loser” in this picture?

It’s a story about

- motives- values- competencies- leadership

behavior- engaging

climate- performance


On the agenda

1. About Hay Group

2. Why work climate is a strategic issue / some facts

3. How leaders motivate employees’ performance

4. IBM case study: How good leaders create a high performing climate

5. What does high performing, engaging climate mean?

Hay Group


Hay Group

Established in

1943 in Philadelphia

88 offices in

47 countries

More than

2,500professionals

10,000customers worldwide


Hay Group: turning your strategies into reality

We turn your strategies into reality. We specialize in motivating people, implementing change, and improving corporate culture

We are global, stateless, private, and wholly owned by 125 senior employees

We are an expertise driven firm. All our work is supported by proven methodologies and global knowledge databases applied in all our offices in a unified way

We have over 60 years of specific, track driven evidence that people drive long-term competitive advantage


Hay Group: our expertise areas

Our areas of expertise include, among others

Strategy implementation and cultural transformation

Organizational effectiveness, role clarity, and work design

Compensation, benefits, and performance management

Executive remuneration and corporate governance

Leadership transformation

Managerial and executive assessment, selection, and development

Talent and succession management

Employee surveys

Leadership diagnostics

Merger and acquisitions

Diversity management

Why do some leaders have a much better bottom-line performance than others?Why do some organizations grow sustainable and profitable, and others don’t?Why can some organizations attract, retain, and motivate talent, and others can’t?

Why work climate is a strategic issue / some facts


Market value is predominantly tied tointangible assets, i.e. human and organizational capital

Source: Standard & Poor’s

19752005

0%

20%

40%

60%

80%

100%En

ergy

Mat

eria

ls

Indu

strie

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nsum

er D

iscr

etio

nary

Cons

umer

Sta

ples

Heal

th C

are

Fina

ncia

lsTe

leco

m. S

ervi

ces IT

Ultil

ities

According to Standard and Poor’s, more than 60% of the market value of a firm isnowadays tied to intangible assets

Intangible assets = a class of assets encompassing relational, organizational, structural, and human capital


Human capital gets more and more critical

Sweden has the highest rate of absenteeism and early retirement in Europe

Norway has a gap of approximately 25% for people going in to higher management positions

Finland has one of the most rapidly aging populations in Europe; by 2030, Finland is projected to have 26% of its population over 65

Europe faces a “demographic shock”

In the US, 50-75 % of current senior management will be eligible for retirement by 2010, in Europe it’s only marginally better

97% of organizations report significant leadership gaps – more than 40% say they are “acute”

Expansion into new markets and globalization put pressure on leaders and demands new and complex leadership skills


Climate has direct impact on businessresults through human capital

Small changes in climate have substantial impact on important business indices:

A 10% improvement in climate yields a 7.9% increase in net operating income

Multinational petrochemical company

A 12% improvement in climate yields a 5.9% increase in salesMultinational FMCG company

A 10% improvement in climate yields a 2.4% decrease in people turnover

Various organizations


% of agreement or strong agreement, 101 leading Nordic companies participating

FinlandWorld’s Most Admired CompaniesSweden

Norway

Nordic companies could do much better in creating a climate of engaged performance

Some results of the 2007 Hay Group Fortune Nordic survey, benchmark: most admired companies

85

67

81

89

73

82

50

46

31

62

54

58

39

43

36

36

36

61

29

20

27

31

22

39

0 10 20 30 40 50 60 70 80 90 100

13. Leaders work collaboratively across organizational lines to solve business problems

14. Leaders coach employees and provide them with performance feedback on an ongoing basis

15. Leaders follow through consistently to ensure that people do the things they commit to doing

16. Leaders surround themselves with people who will challenge them on their thinking

17. Leaders devote a significant amount of time to hiring and developing talent

18. We have effective mechanisms for identifying leadership talent within the company on a global basis

How leaders motivate employees’ performance


Source: (1) McClelland Center of Research and Innovation, Boston, MA

Engaging employees and maximizingperformance depends on leaders’ competencies

The 4 circle model of effective

leaders and organizations, as

developed by Prof. David McClelland

Organizational climate

Job requirements

Leadershipstyles

Leaders’competencies

Bottom-line performance

30%(1)

direct impact

Leadershipeffectiveness

Job / personmatch

50-70%(1)

directimpact


SKILLSKNOWLEDGEEXPERIENCE

I cannot

I don’t know how

It’s not importantor appropriate to me

It’s not ‘me’

I don’t enjoy it

I can

I know how

It’s important to me

It is ‘me’

I enjoy it

SELF IMAGE

VALUES

MOTIVES

Motives, values, and self image are basic

Competency: any characteristic of a person that differentiates levels of performance in a given job, role, organization or culture.


The three social motives and values

“In the ‘50s, a great Harvard psychologist, David McClelland, showed that human beings operate with three motives…

achievement – personal performance…

affiliation – the desire for close, warm relationships…

power – the desire to influence and work through others.”

Thomas Stewart, Editor, Harvard Business Review


The ability to adapt leadership styles

Based on a clearly defined role, the best leaders objectively analyze their roles and choose styles most appropriate for the people they lead and the situations they face.

IndividualCompetencies

LeadershipStyle

The Role

OrganizationalClimate


The psychology of individual performance

Those individual characteristics, including motives, help determine how we behave as leaders, the styles we tend to use, and ultimately, how effective we are.

Understanding these drivers, including those less obvious ones such as our motives, helps us select leadership styles that are more appropriate and effective rather than those to which we naturally are drawn.


SkillsSelf-Image

ValuesMotives

LeadershipStyle

The Role



The value of understanding leadership styles

50-70% of a climate is created by the leader and the styles he or she uses.

Leadership styles are those patterns of behavior leaders use to manage employees. They are:

Directive

Visionary

Affiliative

Participative

Pacesetting

Coaching


LeadershipStyle

The Role



Effective leaders must create the right climate

Organizational Climate is a perception of how it feels to work in a particular environment.

It measures aspects that directly impact employees’ abilities to do their jobs.

Our research shows that Climate can directly impact performance up to 30%.


LeadershipStyle

The Role


IBM case study: How good leaders create a high performing climate


Achievement motive: out of balance

“These days, McClelland’s work is carried on by the research arm of Hay Group in Boston. Their studies of executives show that in the last decade, the achievement motive has gone out of whack, growing way out ofproportion to the others.

We as a society and our leaders especially, need to rediscover a healthy balance among our desires to influence, to belong and to achieve.”

Thomas Stewart, Editor, Harvard Business Review


The research: rising achievement scores

Analysis of our databases revealed that the achievement motive was on the rise, particularly at higher levels in the organization

Achievement

Affiliation

Power

1988 2005


Our research with IBM: High performing climate versus de-motivating climate

IBM MD’s who created high performing climates show a big variety of different leadership behaviors

IBM MD’s who created de-motivating climates relied primarily on personal heroics

26

80

76

71

48

71

Directive

Visionary

Affiliative

Participative

Pacesetting

Coaching

45

40

41

46

75

40

High Performing Climates Demotivating Climates

Lead

ersh

ip S

tyle

s


A question of balance

While everyone at IBM had a high achievement motive, MD’s who created high performing climates had more balanced profiles

63

43

42

Achievement

Affiliation

Power

65

23

29

High Performing Climates Demotivating Climates

Mot

ives


Impact on the bottom line

Managers who created de-motivating climates (over-achievement) generated slightly more revenue for their accounts, but no more profit.

However, the managers who created high performing and energizing climates (balanced motive profile) contributed an additional $711 million in profit in only one year.

What does high performing, engaging climate mean?


Climate dimensions


Flexibility

The feelings employees have about constraints in the workplace

The degree to which they feel there are no unnecessary rules, procedures, policies, and practices that interfere with task accomplishment

The feeling that new ideas are easy to get accepted

Sub-dimensions:

Bureaucracy minimized

Innovation


Flexibility

What do you see?

Leader takes actions to minimize bureaucracy

Policies, procedures and practices are efficient and add value

People don’t feel that they have to fight against unreasonable constraints

It is easy to get new ideas considered

People are allowed and encouraged to experiment with new ideas


Responsibility

The feeling that employees have a lot of authority delegated to them

The degree to which they can run their jobs without having to check everything with their boss

The degree to which they feel fully accountable for the outcome

Sub-dimensions:

Autonomy

Risk Taking


Responsibility

What do you see?

Leader doesn’t expect to check everything

People are encouraged to take calculated risks

People are encouraged to take initiative

People are held accountable for their work – success or failure

Important work is delegated


Standards

The emphasis that employees feel management puts on improving performance and doing one’s best

The degree to which people feel that challenging but attainable goals are set for both the organization and its employees

The extent to which mediocrity is not tolerated

Sub-dimensions:

Improvement

Excellence


Standards

What do you see?

Performance is strongly emphasized

Emphasis is placed on improving performance and doing one’s best

Individuals participate in goal setting

Goals are set high and are seen as stretch and achievable

Individuals get feedback on how they are doing relative to their goals

Mediocrity is not tolerated


Rewards

The degree to which employees feel that they are being recognized and rewarded for good work

The degree to which recognition is directly and differentially related to levels of performance

The degree to which people know where they stand in terms of their performance

Sub-dimensions:

Performance

Recognition


Rewards

What do you see?Rewards outweigh punishmentsRewards are directly tied to performanceRecognition is offered and is seen as valuableGood and great performance leads to increased opportunities for individual growthPeople know what the organization values in their contribution and what they would like to see more of


Clarity

The feeling that all employees know what is expected of them

The degree to which employees understand how those expectations relate to the larger goals and objectives of the organization

Sub-dimensions:

Mission & direction

Organization & role expectation


Clarity

What do you see?Individuals understand how they personally can contribute to the vision and mission

Goals, policies and lines of authority are clear

Individuals have a clear idea of what is expected of them

Individuals understand others’ goals and how they link to their own

Work gets done in an orderly and timely fashion


Team Commitment

The feeling that people are proud to belong to the organization, and …

Will provide extra effort when needed, and …

Trust that everyone is working toward a common objective

Sub-dimensions:

Dedication

Pride

Co-operation

Congeniality


Team Commitment

What do you see?People cooperate to get work done

Conflicts are resolved effectively

Groups coordinate their efforts

People take pride in their work and the work of the group; they are proud to be a part of a high-performing organization

People are dedicated and will go the extra mile to get work done

People are loyal to the organization

People trust that others in the organization are workingtoward a common objective


Warning signs

Flexibility • Rigid or arbitrary administration of policies and procedures• Innovation processes are blocked or not enough supported• Lack of decisiveness

Responsibility • Excessive micro-management• Managers delegate tasks and activities rather than

accountability for results• Discretionary judgement is discouraged or punished

Standards • Goals that are unrealistic or not challenging (or both)• Poor match between expectations and capability• Organization consistently misses its goals


Warning signs

Rewards • Untimely performance feedback that lacks specificity• More criticism as praise, insufficient recognition• Rewards that do not sufficiently differentiate levels of

performance• Lack of personal development opportunities

Team-Commitment

• Frictional losses by co-operation• Employees who are not fully invested in each others success• Not enough respect, pride and loyalty

Clarity • Employees are not clear about vision and strategy• Employees do not know what their managers expected

from them• Frequently changing priorities or reversed decisions


Hay Group’s research on engaged performance

The Hay Group benchmark database summarizes the climate data of 26.051 leaders in 437 organizations based on the input of 117.254 individual employees.

We did research in order to understand what climate leaders produce and what distinguishes outstanding, average, and poor teams.


Question: How many managers do not pro-duce a climate supporting high performance?

51% of managers produce a de-motivating climate

0

5

10

15

20

25

30

35

0 1 2 3 4 5 6

Number of significant gaps in climate

Perc

ento

f man

ager

s


Question: In which climate dimension do wefind the biggest gap between actual and target climate?

Tip: It’s the most important dimension !

55

4454

6267

61

0

10

20

30

40

50

60

70

80

90

100

F lex ibility R espons ibility Standards R ew ards C larity T eam C om m itm ent

Perc

ent o

f Man

ager

s

2 out of 3 managers don’t deliver the clarity needed

to engage and motivate their people


Question: Do outstanding teams have big climate gaps?

Perc

entil

e G

ap

FlexibilityResponsibility

StandardsRewards Team

Commitment

Clarity Total

80

70

60

50

40

30

20

10

0

Outstanding

Organizational Climate


Question: What makes the biggestdifference between outstanding and typical teams?

Perc

entil

e G

ap



Commitment

Clarity Total

80

70

60

50

40

30

20

10

0

Typical

Outstanding



Question: Are poor teams any good in terms of creating a positive climate?

Perc

entil

e G

ap



Commitment

Clarity Total

80

70

60

50

40

30

20

10

0

Poor

Typical

Outstanding



Engaging people and creating a high performance climate - a strategic issue!

Leaders have the biggest direct impact on climate

Even small improvements in organizational climate can lead to substantial improvements in results

Living the values, having a balanced motive profile, and delivering clarityto people stimulates people’s enthusiasm and leads to engaged performance

This high performance climate has a direct impact on the bottom-line

→ People perform better, they are ready to take on challenges

→ Leaders reduce absenteeism and people turn over

→ Leaders have a people strategy to cope with the demographic shock and with business challenges, like globalization and heavy growth

Back to the start:Why do some leaders have a much better bottom line performance than others?Why do some organizations grow sustainable and profitable, and others don’t?Why can some organizations attract, retain, and motivate talent, and others can’t?Because:Some leaders produce a high performance climate, using a broad repertoire of leadership styles based on a balanced motive profile.Some organizations focus on developing their leaders in terms of competences and leadership behavior.Talent needs an energizing, high performance climate.

How leaders create engaged performance and how to …drber.com/d/2e447fc78e55460a9ca3ffc8ff3cb01a/files/Georg Vielmetter... · How leaders create engaged performance and how to measure

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