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Tapping Into People Power
By Mark W. Sheffert
August 2001

Have you ever heard a company president say, "If it wasn’t for those darn employees and customers, my job would be pretty easy?" Or the CEO say, "Our people are our greatest asset," yet doesn’t make any investments in training, communications,
competitive compensation and benefits or pleasant facilities? And, of course, how many times have you heard a CFO say, "Our largest cost is people?"

Well, based on my almost 30 years of business experience, I’ve learned the greatest opportunities and greatest problems in an organization walk around on two feet. Despite what executives like the ones I’ve quoted above believe, it’s not the assets like property, plant, equipment, furniture, or computers that will make the difference
between a company winning or losing in the marketplace. Rather, it’s a company’s people who make the difference; people have the power to build, stagnate or destroy the value of a business.

Winning organizations are good at motivating people and at getting them to be productively engaged in their jobs; they unleash the power of their people. And, they know their people can stretch beyond the skill sets of their jobs to help the overall organization in planning, process and implementation . . . in fact, they love to be asked.

Let me share a case study of a family-owned technology company that made the transformation into a company that tapped into its people power. The father is a classic inventor-turned-entrepreneur who founded the company and ran it along with the help of his sons. The company grew over many years into the market leader in their niche market. Being in the technology industry, they believed technology was the answer to improved productivity. They invested heavily over the years into the latest and greatest information systems and manufacturing technologies. This company had the slickest Enterprise Resource Planning (ERP) system you’ve ever seen.

Yet, their financial performance was not stable --- achieving earnings one year, not the next, then barely scraping by the next. Revenues grew initially, but then started to level off and decline. The company just sputtered along until they had three quarters in a row of growing unprofitability. Because revenues were down, accounts receivables were declining. Working capital was eroding rapidly. They became out of compliance with
the bank covenants on their credit agreement. Their flow of cash was quickly running down to a trickle, so it was becoming harder to pay the bills. Accounts payables were stretched out to 60-90 days; they were basically depending upon trade credit to finance their corporate losses.

They knew they had to do something different, but didn’t know what it was. After a quick assessment, my firm determined that the major problem wasn’t their products, their market, or their operating systems. It wasn’t the skill sets of their people. It was as simple, yet as complex, as this: an adversarial relationship that management
had with their employees was compounded by a dysfunctional organizational structure. Because of problems in the company’s leadership and lack of management experience, the future of the company was in peril.

For example, family members had been elevated to management positions because of their last name, not necessarily due to their skills or ability. The board of directors was comprised of family members and several others who were chosen not because of ability but because of their relationship with the family. As you can imagine, this had created friction among the other employees.

Strategic decisions were either not made, not communicated, or simply demanded willy-nilly by the father. There was no formal business plan, no integrated planning system, no defined and measurable goals. The board of directors, management, and employees were not in sync with respect to the company’s direction, strategy, allocation of resources, or deadlines. Communication throughout the company was poor. As a result, employees did not have a clear understanding of what they were expected to do, and they had a mounting lack of confidence in the board’s and management’s ability to provide leadership during a growing crisis.

After some "two-by" logic, the board and management opened their eyes to these problems and they knew they had no choice but to change their organization’s behavior. They had to change from a family-driven company into a professionally managed company that relied on their people, not their technology, to create profit and value.

First, we took some actions to take care of their immediate financial problems and stabilize the company. Then we shook up the board and executive team to bring in management experience and decrease dependence on the family. It was very difficult, but family members were kept only if they had the skills, training and experience needed.

Then, the new management team developed a formal strategic and business plan that focused on significant growth and profitability. After settling on their strategic vision, they wrote goals that could be measured, putting deadlines on every action and deciding who was responsible for what. Next, they made very conscious efforts at communicating the plan to all employees. They wanted every employee to know their role in the plan and how their job fit into the big picture.

They also made extraordinary efforts to strengthen work relationships within their company to improve teamwork, communication, and productivity. It was unfamiliar territory, but they learned to give feedback to employees a lot more often than once a year in a tortured performance review session. And, they set up crossdepartmental and "skip-level" reviews to get feedback from employees.

And guess what happened? The employees regained their trust and confidence in management, communication lines were opened, and financial performance improved. These changes were not easy and didn’t happen overnight. But the company learned the hard way that it isn’t only technology or equipment or operational systems that build a company’s value --- they are necessary, but that’s not what drives it --- it’s all in the
power of the people.

People make success. It’s the people developing a marketing plan; people creating the products; people doing the buying and selling. People power is what business is all about. And it is the winning organization that takes the time and makes the investments to make sure its people are motivated to perform productively.

Winning organizations invest in environments that emphasize communication, training, benefits, competitive compensation packages including non-compensatory rewards, and pleasant facilities. Today, more than ever, employees have a choice. They will choose to work at a business that offers the most pleasant work environment, rewarding career paths, and a corporate culture of open communication, trust, and respect.

Do you read between the lines? It’s not as simple as paying people well for a hard day’s work. A fair salary is important, but isn’t the most important component of job satisfaction. People also want to know what’s expected of them, to be trained to do their jobs if needed, to get regular informal feedback on their progress, and to be given rewards for doing their jobs well. If a company becomes proficient at all these things, they can tap into its maximum amount of people power ... and their people shall rejoice!

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