After the critical Christmas period in which, according to the British Retail Consortium, there was zero retail sales growth, January has produced a particularly interesting crop of company results. Shareholders and executives at Tesco, Asda/Wal-Mart and Morrisons can continue toasting the new year on the back of impressive sales figures, while those at Austin Reed and Sainsbury will be far gloomier, and job cuts have already been announced at Boots and WH Smith.
So what explains these major differences? Sure, the ’grocers’ generally seem to have gained at the expense of the traditional high street specialists. But then how to explain that Dixons and Next had a pretty strong quarter?
The Chartered Institute of Personnel and Development has been researching variations in company performance for almost a decade, most recently in a three-year study that included major companies such as Tesco, Selfridges and Nationwide.
Our conclusion is that the single most important explanation is neither the business nor marketing strategies, nor the level of capital investment, quality control or IT systems. No, to a large extent it’s down to the people, the way in which they’re managed and developed and the culture that they create.
So aside from recruiting Asda’s or Tesco’s employees, what should the lower-performing companies be doing differently?
An important finding is that there is no single technique or bag of human resource tricks that will be universally successful. Even within the four Tesco stores studied, there were significant variations in operating performance.
But four common themes do emerge. First, your organisation needs a clear direction and purpose, beyond the bland mission statement or generic financial returns goal. Be it mutuality at Nationwide or saving lives at Bath hospital, this ‘big idea’ appears essential in motivating and uniting people behind the company strategy.
Second, the high performers invariably employ some form of balanced performance scorecard.
Selfridges, for example, aims to be the place where people want to shop, invest and work and it measures and regularly reports on key measures for each of these stakeholder groups. Scorecards help to align individual and team goals with the aims of the organisation and to simplify and prioritise among the myriad performance requirements in any big organisation.
Third, there needs to be a broad and integrated ‘bundle’ of HR practices, tailored to suit the organisation. The professional ‘communities’ at software company AIT wouldn’t fit in the less rarefied atmosphere of the car line at Jaguar. Yet production there is organised into self-managed teams, with 95% of employees proud to work for the company and committed to its quality standards.
Strong team working, extensive employee communications and good training and career opportunities seem to be the commonest components in the performance-driving HR mix.
Finally leadership emerges as a key requirement, not only at the top of the organisation but particularly on the ‘front line’. Those much maligned middle managers and supervisors set the context in which the powerful people/business performance relationships really happen, or all too frequently don’t. As an employee in one company told our researchers: “We agree with the values they preach at us and our customers, but they don’t achieve them in practice”.
The high performing companies assess and develop their managers’ skills, support them and ensure this ‘say/do’ gap does not occur.
At Tesco, 88% of the staff felt loyal and shared the company’s values. “I believe in the company” said one employee, “they treat staff well, although they expect a great deal from you”. A section manager there described his role as “mobilising our team with a goal, motivating my people”. Double figure sales growth is the result.
One company in our research study was so impressed by the power of the findings that it changed the management team in a location that was not managing its people in a way to generate high performance.
Now that’s what I call action research.