Profits and people: two sides of the same coin
As we kick off a new year, it’s a perfect time as business leaders to look back at how our organizations performed in all areas, not just financial.
Harvard Business Review released their 2017 list of the Best Performing CEOs in the World. The list is a who’s who of business leaders and Fortune 500 companies across every industry featuring executives like LVMH’s Bernard Arnault, Texas Instruments’ Richard Templeton, and Comcast’s Brian Roberts, to name a few.
While HBR’s list looks at these leaders mostly from a financial perspective, in today’s competitive business environment revenue, earnings, and stock prices are only a portion of what CEOs should be measured on. Looking at the leaders on this list, I thought it would be interesting to cross reference the 47 U.S.-based companies with Forbes’ list of America’s Best Employers and Fortune’s 100 Best Places to Work to see how these companies faired when it comes to culture.
Culture may seem like a secondary – some say fluffy – measurement of a CEO’s success, but when your two biggest resources as a company are your people and your finances, culture and the employee experience are pivotal for businesses to succeed. In fact, a recent study found that culture and a positive employee experience directly impacts six key performance indicators – revenue, earnings, productivity, retention, customer experience, and absenteeism – watched closely by organizations to grow a healthy, sustainable business. It makes sense then that executives should be measured on the work environment they create and foster, rather than solely on the ROI they give investors.
Looking at the 2017 Fortune list, 12 HBR companies are featured – including Capital One, AFLAC, Regeneron Pharmaceuticals, and Accenture. In addition, ten of these companies have been recognized by Fortune for multiple years. Adobe, a company well-known for its technology rather than its culture, is one of these multi-year winners which has seen firsthand how culture and the employee experience have positive business outcomes.
The company moved up 27 spots in the past year alone and a big reason for that jump is Donna Morris, their Executive Vice President of Customer and Employee Experience, who leads the charge in shifting Adobe’s approach to culture. One of the many initiatives she pushed through was overhauling the company’s process of a yearly performance review to continuous “Check Ins” used to create open two-way communication. In their first year of using this approach, their stock price increased from $30 to over $80 a share. While some might not see the connection between employees and performance, Adobe has always seen their people as their core asset, and that focus is part of the reason the company has seen such rapid growth.
Forbes list of America’s Best Employers is where we see the greatest overlap with HBR. More than 50% of the U.S.-based HBR companies are recognized by Forbes and when you look a little closer, a trend starts to emerge. Companies that are deemed financially successful in terms of revenue, earnings and stock prices are also some of the best employers. With low workplace morale becoming the norm and Gallup reporting that 70% of employees show up to work completely disengaged, how are these companies turning employee performance into company productivity?
For starters, their leadership understands there is a direct correlation between people and profits. In fact, according to recent market figures, for every 1% increase in employee engagement, companies can expect to see an additional 0.6% growth in sales for their organization. That means, for a $5 billion company, improving engagement by 1% would be worth $20 million in annual operating income. These numbers prove in bottom-line dollars and cents that culture and the employee experience positively impact a company’s performance and leaders who understand the influence employees have on their organization as a whole are able to shift their perspective of human capital from a cost to a benefit.
As we kick off a new year, it’s a perfect time as business leaders to look back at how our organizations performed in all areas, not just financial. While you might not track culture on your P&L, look at your revenue, earnings, productivity, retention, customer experience and absenteeism KPIs and see where improving the employee experience can directly impact the business for the better.
All these areas are closely tied to culture and the employee experience; therefore, your P&L can reveal a lot about the health of your organization. If you want your business to remain competitive in the year ahead, culture and the employee experience must take a more prominent role in your company planning for long-term prosperity and success. Now is the time to refocus and see your employees for the benefits and opportunities they bring your business.