“More competitive times mean that we need to have narrow levels of tolerance between good, acceptable and lower performance. We are thinking more critically about how we differentiate, how we incentivize, how we reward top performers and how we identify areas where people who are good can improve further” Phil Cox, CEO, International Power (“Managing People in a Changing World” PWC Saratoga)
Waiting for the world economy to grow and hoping your organisation might be able to succeed by 
riding the wave is a pipe dream. There are lots of hidden potential within your organisation – and its in your people. We are confident that “pound for pound investments made into your workforce will deliver greater cumulative growth potential than that offered by any other asset class including buildings, technology and machinery.”
What fuels human progress is an ability to learn from mistakes and in our opinion the essence of wisdom. The recent banking crisis showed how subtle interconnected relationships are in play. It showed that risk management within individual organisations was poorly aligned with an attention to risk across the industry leading to deep and far-reaching consequences for wider economies. People drive value in organisations and growing levels of disengagement mean disaster propagates and the growth of social media grows reputation & brand risk exposures. When shock hits it is more often than not attenuated rather than absorbed and that leads to eventual collapse.
Growing complexity means more dependency, vulnerability and collective destabilization. The last 50 years largely described in reductionist theories like selfish genes and self-interest are today being replaced by an age of “holism” with people starting to think under a collective purpose and respond to selective pressures. But to do so all parties involved need to benefit from outcomes and shared risk rewards mechanisms need to be made clear.
Research by the Office of National Statistics showed knowledge and skills of workers in the UK were worth some £17.12 trillion in 2010 and that total value fell by £130 billion and that people and their contribution to business is 2.5 times greater than the value of tangible assets like buildings, vehicles, plant and machinery. The research also showed that increasing labour productivity by just 1% would be worth around £2.5 trillion in monetary terms. This doesn’t mean employers should “get the whips out” but seek to create mutually viable “win-win” cultures – after all they only rent people for as long as they can afford to do so or the employee wants to stay.
Employee disengagement presents a huge opportunity loss for firms and the larger the organisation or reliance on intellectual capital – the more significant the numbers. If people or assets are too tightly constrained, they become overly conservative and risk aversive and this has crippling effects on innovation, creativity, customer and employee satisfaction. Businesses are looking to identify organic sources of leverage and Pareto’s 80-20 rule helps locate it with patterns like 80% of a company’s profits or complaints come from 20% of its customers; 80% of a company’s profits come from 20% of staff time; 80% of a company’s sales come from 20% of its products or sales staff; and 80 percent of all end users generally use only 20 percent of a software application’s features. Knowing who those 20% of people who generate 80% of value is mobilising to sustain tangible returns.
CEB (Corporate Advisory Board) research in 2010 suggested that some 25% of high performers were planning on leaving their employer within the year. Considering a B2B sales operations where 80% of profits probably comes from 20% of customers and probably developed through some 20% of the sales force – losing star performers can come at a big loss. Netflix’s CEO reported that star performing creative workers were “ten times better than the average and one adequate employee cost less than two adequate ones” rings with similar loss implications.
According to PWC’s 12th Annual Global CEO Survey, conducted as the financial crisis unfolded late in 2008, 26% of CEOs suggested they expected head count reductions over the following 12 months. A year later, closer to half of respondents said they actually cut jobs and at least 80% of CEOs in each region of the world initiated cost reductions. Companies in North America and Western Europe took the most drastic actions, with 69% of US companies and 63% of UK companies reducing head count. In the latest survey, CEOs said they would change a number of people management practices and processes as a result of the economic crisis. A majority of companies (79%) are intending to increase their focus and investment on how to manage people through change, which includes redefining employee roles in the organisation. The same number (79%) want to change their strategy for managing talent. And 68% will increase their investment in leadership and talent development as a result of the crisis. In the US, less prescriptive rules will lead to more flexibility in adjusting workforce differentials. 97% of CEOs believed that the access to and retention of key talent is critically important to sustaining growth over the long term.
According to Gallup’s 2013 study “State of The Global Workplace” research projections suggest only 13% employees globally are likely to be actively engaged, find satisfaction in their work and focused on creating value for their employer. In the UK 17% of employees are engaged, 57% are not engaged and 26% are actively disengaged. The research also shows that companies with engaged employees realise improvements of up to 240% in business results. Gallup estimate, that in the U.S. active disengagement costs US$450 billion to $550 billion each year; and in the United Kingdom where estimates are that 26% actively disengaged totaling between £52 billion and £70 billion each year.
In a 2012 global survey of CEOs and CFOs by the Economist Intelligence Unit, 53% said that insufficient talent within their organization could harm them financially over the next year. 67% of respondents at organizations with more than 1,500 employees expressed financial concerns. And according to Deloitte’s 2012 report Talent Edge 2020 some 83% of HR and business executives believe that talent programs need to be improved. According to IDC MarketScape report for Integrated Talent Management 2013 Vendor Analysis European – organizations are working towards standardising HR processes rather than to improve business metrics. IDC believes that in coming years, talent management focus in Europe will change from process standardization to new success criteria that will relate directly to business outcomes. This change of focus will involve line-of-business functions to a higher degree in talent management and change dynamics in the market and vendors with greater business acumen and domain expertise will be preferred.