16th October 2019
Smart Organisations Realise People Performance Drives Financial Performance
Just as Financial Performance identifies how well a company generates revenues, manages its assets, liabilities, and the financial interests of its stakeholders, People Performance identifies how well a company leverages and maximises the investment it makes in people.
Using key markers in a financial statement e.g. balance sheet, income statement, and statement of cash flows, Financial Performance provides a picture of a firm’s overall financial health over a given period and is helpful in comparing firms across an industry.
While People Performance precedes and underpins Financial Performance, rarely does an organisation’s People Performance carry the same urgency or gravitas in C-Suite or Boardroom discussion. Even though it is people as individuals and in teams that leverage organisational capabilities to drive revenue, identify new products, services, markets, increase process efficiency, find new customers and keep existing customers engaged.
There are organisations raising the profile of People Performance and, more importantly, ensuring their organisations lead the field in this critical area by their focus on activities like:
- Knowing the external market and the capabilities required to compete in the future.
- Building high performing individuals and teams in a planned and systematic way.
- Undertaking continual assessments of their talent to ensure their best performers stack up against the best in the market.
- Ensuring the organisation is attractive to the best external talent in the market.
In these organisations the Board and Exec put as much pressure on the CHRO to deliver on the People Performance agenda as they do the CFO on delivering outstanding Financial Performance.
Organisations with a holistic People Performance agenda are exploring challenges like:
- Reducing the ongoing succession risk around critical roles and top performers.
- Showing tangible progress in the development of organisational capability and people capability.
- Creating a culture around sustained performance.
- Simultaneously building high performing teams and inspiring individual creativity.
- Questioning how the great majority of employees are ‘performing to expectations’ yet the organisation is not keeping up with the competition.
- Recognising that while their leaders are smart people, too many lack the ability to set clear expectations, hold people to account and are uncomfortable giving truthful feedback.
We all know from experience that when there is a ‘Red Flag’ on an aspect of Financial Performance the organisation swings into gear to understand why it is occurring and more importantly what can be done to remediate the issue and fix the root cause.
So, what does it take to raise a ‘red flag’ on People Performance in your organisation? Is it:
- You are not beating the market and/or your competition.
- You realise you are sub-par in key areas of value creation such as your product offering, your customer engagement, your operating efficiency and the like.
- The turnover of high performers or of people in critical roles is higher than the organisation’s average rate of turnover.
- You don’t have a plan to recruit against future performance standards, or worse, you have no idea what capabilities the organisation will need in five years’ time.
- You can’t say if your people are performing better or are more capable than your competitor’s people.
- You are not self-sustaining in people; you recruit from outside of your organisation for more than 20% of your senior roles.
- You spend more money on recruiter fees than you do on developing the capability of your current employees.
- You don’t make direct appointments from a succession plan because you’re not sure your ‘Ready Now’ talent is in fact ready now.
- Your approach to people performance is a one-dimensional, annual process focussed individual performance and allocating rewards.
Just like Financial Performance, an integrated People Performance agenda needs to be aligned to the business strategy. It should function as a structured, holistic process and be measured in a robust way. The ultimate measure of People Performance is ‘beating the market and beating the competition’ however the People Performance agenda must stand up for scrutiny in its own right.
How robust is your People Performance agenda? Want to have a conversation about where you are at and maybe a whiteboard session on where you are going? Get in touch, even if we don’t end up working together having a thinking partner to test your ideas is always time well spent.