Recent research from the Metrus Institute suggests that most organizations are not getting anywhere near maximum return on their human capital investments. How can this be? For many organizations, people are the most expensive asset—one that walks out the door every night.
Let’s look at the facts.
The Institute has shown that there are three factors that predict over 80% of key business results, such as customer satisfaction, retention of top performers, quality, and financial performance. The three factors: Alignment of employees with the business goals and values—everyone rowing in the same direction; Capabilities to meet customer expectations, including employee knowledge and skills; and the Engagement of the workforce. One large utility, for example, has documented that units with low ACE scores often miss over 40% of their performance targets compared to less than 5% for high scoring units.
Now for the disappointing news. Fewer than 20% of over 6,000 units studied in over 2,000 organizations have high scores on all three ACE factors, some pitifully low on all three.
But there is a silver lining here. Organizations, such as Jack in the Box restaurants, have shown that they can convert ‘red’ units—those with low alignment, capabilities and engagement—into higher performing units in as little as six months. And, organizations such as PJM Enterprises, a regional energy management company, have moved their entire organization to triple ‘green’—high on all three factors in three years, yielding top notch business results.
How do they do it? An obvious tactic is changing managers—a major driver of the return on talent dollars invested. But a large majority of units were improved by identifying which of the three areas—Alignment, Capabilities, or Engagement—was most pressing and then tackling one or two issues in that area that were driving scores down. For example, in some cases it was improving Alignment by more clearly communicating the strategy or creating more aligned performance metrics. In other cases, Capabilities was improved by enhancing teamwork or person-job fit. In the area of Engagement, lack of recognition, unfair treatment or poor communication are frequently gaps that with appropriate training or coaching, can be remedied rather quickly.
The impact can be enormous. In the case of Jack in the Box, for example, we found that ‘green’ units—those performing with high ACE—delivered 37% higher profit than those in the ‘red.’
To discover how well your organization leverages its talent, ask:
- Alignment—is everyone rowing in the same direction--synchronously across functional units—in a way that is consistent with your goals and brand?
- Capabilities—do your people have the competencies, information and resources to meet customer expectations?
- Engagement—are your employees satisfied, committed and active advocates for the organization?
Do you have measures in place to know the answers? As the Institute discovered, you and many managers may be surprised to find the hidden pockets of unleveraged talent that are holding your organization back from peak performance.
William A. Schiemann is CEO and founder of Metrus Institute, the learning and research division of Metrus Group. Dr. Schiemann and his firm are known for their pioneering work in the creation of the People Equity (ACE) talent optimization framework, strategic performance metrics and scorecards, and for strategic employee surveys that drive high performance. In addition, he is the author of Hidden Drivers of Success: Leveraging Employee Insights for Strategic Advantage (co-authored by Jerry H. Seibert and Brian S. Morgan, SHRM 2013), The ACE Advantage, (SHRM 2012), Reinventing Talent Management (Wiley, SHRM 2009) and Bullseye! Hitting Your Strategic Targets Through High-Impact Measurement (Free Press 1999). He has written dozens of articles for business publications and is a frequent global speaker for both public and private forums.