Friday, February 8, 2013

Committed to the job?

Last November Gower publishing commissioned me to write a follow up to "Third Generation Leadership and the Locus of Control". Although Third Generation Leadership had only been released in September 2012, the interest in it was sufficient for them to want a "how to" book that showed Third Generation Leadership in action. For the last few months I've been totally engrossed in the new book because I had an end of January deadline if it was to be released this year. I've now sent it to them!

Third Generation Leadership is all about harnessing the energies of people so that they become engaged with their leaders and committed to helping their organisation achieve desired results. I chose to centre the new work around an Australian manufacturing operation of around 350 people (mixture of full-time, part-time, and casual) that, when I first became involved, had a turnover of around $55 million for earnings before interest and tax (EBIT) of $1 million and was considering moving its operations off shore in order to remain viable. Two years later, while remaining in Australia and without reducing staff levels or impacting negatively on any entitlements, the company had a turnover of around $70 million for an EBIT of around $11 million. The change had come about by harnessing everyone's energies and creating an environment where people wanted to help the company succeed - they had become engaged with their leaders (and each other) and committed to their company.

While I was working on the book it was sad to see a number of well-known Australian companies continuing a different approach - the traditional one of getting rid of staff in order to improve profitability. Most of the companies that I have observed taking this route are companies that have spoken frequently of the need for employee engagement and commitment. There's a bit of a disconnect here! It started me wondering about whether engagement and commitment really exists across organisations and, if it does, where in the organisation is one most likely to find engagement and commitment and, related to this, to what are most people really committed in the workplace. In answering these questions it seems to me that there are several myths that need to be addressed.

Myth 1 - High pay brings engagement and commitment:
There is a simplistic view that providing very high remuneration packages to CEO's and executives will bring about the level of engagement and commitment necessary to achieve high profitability - those receiving this money will demonstrate high productivity and ensure the success of the company. This is supported by a 2011 study from the University of South Carolina which found a positive correlation between executive remuneration and organisational performance as measured by return on equity. ( ) However another study - done in Australia - considered return on equity, share price change, and change in earnings per share. This study concluded that there was no positive link between high executive pay and company performance - in fact they concluded that ultimately high executive pay levels actually coincides with a lower bottom line. ($FILE/Buck+stops+here.pdf)     

If very high levels of remuneration really do provide high levels of engagement, commitment, productivity and success then why do we find resistance to increasing the remuneration of those at the lower echelons of organisations? If it works for those at the top, why don't the same principles apply for everyone else? After all, without the people at the lower echelons there would be nothing for those at the top - and vice versa - there is a symbiotic relationship between organisational levels. The truth is that high remuneration eventually becomes an end in itself - a status symbol - and that indicates commitment to oneself - not to one's organisation and its long term viability.

Myth 2 -  "Strong" leadership will engender commitment:
There was a time when we didn't talk of 'leadership" as such. Until relatively recently we recognised command and control for what it was and accepted that one's place in the hierarchy determined what say one had in how an organisation was run - we called it "command" and/or "management" and it worked very well. Today we seem to speak almost exclusively of "leadership" yet, in many cases, we are not talking about inspiring people to move forward nor to creating an environment in which everyone can be successful - instead we are really still talking about command and control. Those who exercise this are regaled as "strong" leaders despite the fact that such an approach almost always degenerates into power and control games such as we see daily in politics, business, sport, religion, domestic relations, etc.

The truth is that "strong" leadership discourages true engagement and commitment. "Strong" leadership brings about a situation in which people obey or conform primarily out of fear. In such environments creativity and innovation drop because no-one wants to "rock the boat" - and certainly no-one is prepared to tell the boss that he or she is wrong - even when this is patently obvious.

The organisation that moved from $1million to $11million EBIT in 2 years used a different approach. There the Board and executive worked with their people and that transformed everything.

What has been your experience?

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