Advance guide for controlling the performance of employees!
The most common denominator, in poorly performing organisation, is the tolerance of poor performance and poor behaviour. The impact of tolerating poor performance and poor behaviour goes well beyond the employee in question. In Jack Welch’s book, “Winning”, he describes the 20:70:10 rule.
Twenty percent of employees will be high performers and should be rewarded. Ten percent of employees will be poor performers and should be asked to move on. The remaining seventy percent will be good performers and should be given every encouragement to become high performers.
Tolerating poor performance and poor behaviour blurs the distinction between, poor, good and high performance. The subjective norm becomes, “Performance does not matter”. It becomes impossible to move a significant number of people out of good and into high performance.
The tranche of poor performers grows beyond ten percent. Difficult employees, who deliver poor performance or have poor behaviour, are diverse. Now we are making a classification of them and describing about the appropriate actions to take.
The Role of Inside Sales and Customer Service Personnel:
What role does Inside Sales/Customer Service (IS/CS) play in today’s sales process? How does the company leverage the existing relationships between IS/CS and the customer? The answer to this question plays a key role for upper quartile performers. Upper quartile performers understand the important role played by the inside sales person, customer service and counter personnel.
“A Player” field sales reps, are not threatened by the fact that the majority of inbound calls are handled by IS/CS personnel because the majority of these calls represent a sales opportunity for the company. Customers’ who call in, do so for the main purpose of fulfilling a need which often leads to the placement of an order.
Customers are very dependent upon inside sales personnel for information, suggestions about products, substitution products, application help and expertise, new product information, new services, delivery information and promotional opportunities for cost savings.
Inside sales and customer service personnel have more customer contact than anyone else in the organization. IS/CS people take more than 80% of all orders placed. This means that the IS/CS are in a better position to influence buying behaviour than the field sales person.
Progressive managers truly understand what that means in regard to market share growth. They know that the consistent use of suggestive selling techniques, up selling and promotions can have a dramatic impact on average order size and increase share of spend in each account.
IS/CS personnel traditionally build relationship equity, and many customers would give up their contact with field sales before giving up their relationship with inside sales and customer service personnel.
This is the frontline in the battle for success. Customers have not only come to expect it, they demand it. It can become a competitive edge, the differentiator for your business compared to the competition. It’s about the commitment the company has made to customer demands for world-class service.
(1) Equal and Critical to the Success Formula:
This demand for world-class service makes IS/CS just as important, if not more important, than the outside sales force in driving growth and creating success. Many companies, however, do not fully understand the critical role IS/CS plays in the success formula for increased sales, market share growth and profitability.
The reason for this lack of understanding is primarily due to the lack of adequate measurement systems to determine the full scope of work and specific roles of the IS/CS service group.
This lack of adequate measurement systems leaves department managers in the dark when trying to determine departmental activity, direct contributions to success and individual productivity.
These matrices are necessary to properly design productivity tactics and compensation plans, making sure to consider the group’s contribution to the success of the organization as well as their short and long-term impacts on customer relationships.
Many companies have not upgraded phone systems to determine the number of inbound calls taken daily by sales people, in addition to measuring call abandonment, average time per call, transfers, voice mail and other metrics important to creating an effective IS/CS support strategy.
However, even at those firms that lack these essential metrics, demands are often placed on IS/CS to utilize suggestive selling and up selling techniques on inbound calls. Additionally, many companies assign outbound call responsibility to IS/CS and some even create quotas for these calls.
On an additional note regarding phone systems, some executives were sold on the idea that voice mail could improve IS/CS productivity and address the issue of peak time inbound call burden. Failure to consider the customers’ perspective can be a critical mistake. Voice mail cannot enter orders or answer questions. In other words, customers’ needs are not handled efficiently at their convenience.
It does, however, give the customer some options. Those options include: waiting for the return call, faxing the order or request, or calling a competitor who is better organized and more efficient. Voice mail cuts the customer off and inhibits building relationship equity. It just can’t provide analysis and solutions to even the tiniest problem.
(2) Let’s Get Real:
The reality that exists in most companies today is that IS/CS personnel are extremely busy just handling inbound calls. Some IS/CS personnel may handle up to 100 calls per day and the related task that each call may entail.
With the volume of traffic exceeding reasonable expectations regarding their ability to build on relationship equity, most IS/CS personnel are motivated to end each call as quickly as possible to get off the phone and take the next call in the queue. The time they spend with each call is more than just taking orders.
These calls may include requests for literature, quotes, expediting, logging and entering claims and complaints, checking inventory, and even fielding calls from outside sales personnel.
And on top of the demands that these calls place upon these people, we expect them to take the time to create and maintain relationship equity with the customer, apply suggestive selling techniques, up sell and create a pleasant experience for the customer.
Some IS/CS personnel are better than most at using different selling techniques and creating customer relationship equity. It requires specific skills that depend upon product knowledge, probing communication skills, effective listening, and training in both suggestive selling techniques and offering the customer options.
However, even the best IS/CS people will stop these practices when the inbound burden becomes too great because they can’t take the time to leverage their relationship equity by talking with the customer, exploring options and identifying needs and interests. They go into an expeditious call turnover mode just to keep up with the inbound traffic.
(3) If we are Lost, How can we be Found?
There is no magic answer if you don’t have the process and measurements in place to develop an IS/CS initiative that is in alignment with your company strategy. That does not mean you give up.
There are alternatives if you are willing to put forth an effort and make an investment. Start slow and minimize your exposure by creating a pilot project. Select one or two of your best IS/CS people to test a systematic approach to increase productivity. Hire a replacement for your IS/CS people that are in the pilot project.
This is your investment. This creates adequate staff to handle all inbound traffic. They will handle the entire overflow to allow the pilot personnel to utilize their skill sets to increase sales with suggestive selling techniques and even proactive outbound follow-up calls. That means that the pilot personnel must receive extensive training that includes the items listed below. Management must also understand that call length will increase dramatically.
(i) Up selling techniques;
(ii) Suggestive selling techniques;
(iii) Outcall training;
(iv) Product training;
(v) Communication and questioning skills; and
(vi) Needs satisfaction selling that includes –
(a) Features and benefits training;
(b) Value propositioning and value added selling;
(c) Promotional selling;
(d) New product and new source introductory selling; and
(e) Service and warranty selling.
The results of your pilot project may be surprising. You may conclude that IS/CS can generate opportunistic sales that will increase your share of customer expenditures. Growth and increased market share may also improve based on the contribution made by IS/CS. Customers respond well to recommendations and suggestions. Given the time needed, IS/CS can provide the kind of information that many customers need to know about your products and services.
However, make no mistake about it, your success will depend on changing management’s existing mindset regarding the support necessary to allow for this type of proactive selling. IS/CS cannot affect change on their own as it must be driven and supported by management.
Appropriate staffing is a key component to handling inbound calls at a level of adequacy to allow for time to employ proactive selling techniques. Having competent, aggressive and talented people is also an essential ingredient.
Matrices are also a necessary ingredient because you can’t manage it if you can’t measure it. Adequate measurement systems will help identify individual performance and productivity in order to recognize contributions toward success and offer appropriate financial reward. You must evaluate what exists within the IS/CS department and how they function, not only in the normal course of business, but especially during peak times of inbound call frequency.
Management must determine if the mindset in IS/CS has gravitated to getting off the phone as quickly as possible. (Some uninformed distributors actually have inbound call quotas.) A study is needed to determine if time is available to allow for selling on inbound calls based on staffing levels and other demands.
A technology audit may be necessary to determine what kind of support is built into the existing system in regard to selling prompts for associate parts and other product line suggestions.
(4) Conquering the Counter Conundrum:
Counter sales personnel face many of the same issues that IS/CS people face. In fact, the counter sales life becomes one of juggling several balls in the air at the same time and becoming skilled at multi-tasking.
Dealing with “will call,” customers at the counter, inbound phone calls and whining salesmen creates quite a challenge for the professional counter person. More importantly, this counter conundrum puts customer retention and value at risk.
Again, there is no magic formula to conquer this conundrum and answer the tough questions.
These questions include:
(i) How do you effectively staff the counter?
(ii) How should incoming calls be handled?
(iii) Should a prioritization policy be developed?
(iv) Should the ‘will call’ counter be separate?
(v) Should inbound calls from sales people be handled by someone else?
The sales evolution on the customer side of the equation has changed customer awareness, which has led to different service output demands (SODS). These demands now focus on immediate response, cost savings opportunities and an expectation that distributor knowledge and support of their business initiatives go beyond the traditional business model.
Counter distractions such as donuts, coffee or popcorn are just not enough to overcome sub-par service standards at peak times. Nothing short of service excellence is acceptable today to retain customers and create competitive advantage.
Creating appropriate solutions to conquer the counter conundrum must be based on branch operational metrics. The starting point is to evaluate this branch data. Increasing counter staff may seem like the obvious solution, but it may do nothing more than increase costs without solving the problem. Through the analysis of these metrics, you must diagnose the real disease and treat it, not the symptoms.
Branch data analysis must include determining the pattern of peak times during the day and week for counter sales, incoming calls, will-call and other specific counter responsibilities. Sales transactions and line item order entry information by counter sales people are relevant to the diagnosis.
Faxes, e-mails, sales and profit trends, inactive and active account trends, average call time, call on hold time; call abandonment and the voice mail connection are all part of the situational analysis.
This analytical diagnosis should help you determine peak activity patterns and sales growth trends by segment, such as will call, phone orders and walk-in trade. Staffing levels and scheduling may then be matched more appropriately according to these patterns.
This analysis should also help you determine overtime needs, whether new account development is successful and what your track record is on customer retention.
Keeping track of transaction errors and when they occur will also help in conquering the counter conundrum. Don’t lose focus on those specific patterns that have the biggest impact on direct customer service.
These include – the average waiting time at the counter during peak periods, average on-hold time for call-in customers and the percentage of call abandonment. Very specifically, what are the sales trends telling you?
Lastly, don’t rely on matrices alone. Talk to your counter pros. You may find out that a large percentage of their time is utilized on activities that don’t directly impact customer service and increased sales, such as those activities directed by field sales requesting prices, availability, order status, expediting or other requests that take up time.
Once your analytical diagnosis is complete, you should have a clearer picture of the issues that hinder the ability of your counter pros to maintain world-class service and continuous sales growth. This should lead to a well thought out strategic initiative to address the critical constraints.
Possible solutions may include the following:
(i) Call forwarding to other branches or other personnel during peak periods;
(ii) An inbound prioritization schedule;
(iii) A separate procedure for handling will call, fax and e-mail orders and field sales requests;
(iv) Separating the will call from counter sales;
(v) Training, which can always have an impact on critical constraints; and
(vi) Improved technology solutions to support field sales and other customer demands.
Customers must always come first. This must become a culture, not just a slogan. World-class service must become a core competency if you are going to create competitive advantage and differentiate yourself from the competition.
Evaluate cross-functional activities, reporting relationships and tear down any potential silos you uncover. The goal is to leverage the IS/CS sales opportunity and to provide the field sales force with the kind of sales support essential for overall company growth.
Conquering these conundrums is possible, but it takes hard work, analytical diagnosis and a commitment by executive management to address critical constraints and create the systems and processes that make world-class service one of the company’s core competencies.
Job Characteristics Model:
According to the job characteristic model, the five core job dimensions listed create three critical psychological states, which in turn influence the personal and work outcomes shown. The model also acknowledges that these relationships are strongest among those individuals highest in growth need strength.
The five critical job dimensions are as follows:
1. Skill Variety:
Skill variety is the extent to which a job requires using several different skills and talents that an employee has. For example – a restaurant manager with high skill variety will perform many different tasks (e.g., maintaining sales records, handling customer complaints, scheduling staff, supervising repair work, and the like).
2. Task Identity:
Task identity is the degree to which a job requires doing a whole task from beginning to end. For example, tailors will have high task identity if they do everything associated with making an entire suit (e.g., measuring the client, selecting the fabric, cutting and sewing it, and altering it to fit).
3. Task Significance:
Task significance is the amount of impact a job is believed to have on others. For example – medical researchers working on a cure for a deadly disease surely recognize the importance of their work to the world at large. Even more modest contributions to the company can be recognized as being significant to the extent that employee understand the role of their jobs in the overall mission of the organization.
4. Autonomy:
Autonomy is the extent to which employees have the freedom and discretion to plan, schedule, and carry out their jobs as desired. For example – in 1991 a team of Procter & Gamble employees was put in-charge of making all the arrangements necessary for the building of a new $5 million facility for making concentrated Downy.
5. Feedback:
Feedback is the extent to which the job allows people to have information about the effectiveness of their performance. For example – telemarketing representatives regularly receive information about how many calls they make per day and the monetary values of the sales made.
The job characteristic model specifies that these various job dimensions have important effects on various critical psychological states. Specifically, skill variety, task identity, and task significance jointly contribute to a task’s experienced meaningfulness.
A task is considered to be meaningful insofar as it is experienced as being highly important, valuable, and worthwhile. Jobs that provide a great deal of autonomy are said to make people feel personally responsible and accountable for their work.
When they are free to decide what to do and how to do it, they feel more responsible for the results, whether good or bad. Finally, effective feedback is said to give employees knowledge of the results of their work.
When a job is designed to provide people with information about the effects of their actions, they are better able to develop an understanding of how effectively they have performed—and, such knowledge improves their effectiveness.
The job characteristics model specifies that the three critical psychological states affect various personal and work outcomes — namely – people’s feelings of motivation; the quality of work performed; and satisfaction with work, absenteeism, and turnover.
The higher the experienced meaningfulness of work, responsibility for the work performed, and knowledge of results, the more positive the personal and work benefits will be. When they perform jobs that incorporate high levels of the five core job dimensions, people should feel highly motivated, perform high-quality work, be highly satisfied with their jobs, be absent infrequently, and be unlikely to resign from their jobs.
We should also note that the model is theorized to be especially effective in describing the behavior of individuals who are high in growth need strength—that is, people who have a high need for personal growth and development.
People not particularly interested in improving themselves on the job, are not expected to experience the theorized psychological reactions to the core job dimensions, nor consequently, to enjoy the beneficial personal and work outcomes predicted by the model. By introducing this variable, the job characteristic model recognizes the important limitation of job enrichment – not everyone wants and benefits from enriched jobs.
The Control Issues:
Controlling is directly related to planning. The controlling process ensures that plans are being implemented properly. In the functions of management cycle – planning, organizing, directing, and controlling – planning moves forward into all the other functions, and controlling reaches back.
Controlling is the final link in the functional chain of management activities and brings the functions of management cycle full circle. Control is the process through which standards for performance of people and processes are set, communicated, and applied.
Effective control systems use mechanisms to monitor activities and take corrective action, if necessary. The supervisor observes what happens and compares that with what was supposed to happen. He or she must correct below-standard conditions and bring results up to expectations.
Effective control systems allow supervisors to know how well implementation is going. Control facilitates delegating activities to employees. Since supervisors are ultimately held accountable for their employees’ performance, timely feedback on employee activity is necessary.
Control Process:
The control process is a continuous flow between measuring, comparing and action.
There are four steps in the control process:
(i) Establishing performance standards;
(ii) Measuring actual performance;
(iii) Comparing measured performance against established standards; and
(iv) Taking corrective action.
Step 1 – Establish Performance Standards:
Standards are created when objectives are set during the planning process. A standard is any guideline established as the basis for measurement. It is a precise, explicit statement of expected results from a product, service, machine, individual, or organizational unit.
It is usually expressed numerically and is set for quality, quantity, and time. Tolerance is permissible deviation from the standard. What is expected? How much deviation can be tolerated?
(a) Time controls relate to deadlines and time constraints. Material controls relate to inventory and material-yield controls.
Equipment controls are built into the machinery, imposed on the operator to protect the equipment or the process. Cost controls help ensure cost standards are met. Employee performance controls focus on actions and behaviours of individuals and groups of employees. Examples include absences, tardiness, accidents, quality and quantity of work, budgets control cost or expense related standards. They identify quantity of materials used and units to be produced.
(b) Financial controls facilitate achieving the organization’s profit motive. One method of financial controls is budgets. Budgets allocate resources to important activities and provide supervisors with quantitative standards against which to compare resource consumption. They become control tools by pointing out deviations between the standard and actual consumption.
(c) Operations control methods assess how efficiently and effectively an organization’s transformation processes create goods and services. Methods of transformation controls include Total Quality Management (TQM) statistical process control and the inventory management control. Statistical process control is the use of statistical methods and procedures to determine whether production operations are being performed correctly, to detect any deviations, and to find and eliminate their causes.
A control chart displays the results of measurements over time and provides a visual means of determining whether a specific process is staying within predefined limits. As long as the process variables fall within the acceptable range, the system is in control. Measurements outside the limits are unacceptable or out of control. Improvements in quality eliminate common causes of variation by adjusting the system or redesigning the system.
(d) Inventory is a large cost for many organizations. The appropriate amount to order and how often to order impact the firm’s bottom line. The economic order quantity model (EOQ) is a mathematical model for deriving the optimal purchase quantity.
The EOQ model seeks to minimize total carrying and ordering costs by balancing purchase costs, ordering costs, carrying costs and stock-out costs. In order to compute the economic order quantity, the supervisor needs the following information – forecasted demand during a period, cost of placing the order, that value of the purchase price, and the carrying cost for maintaining the total inventory,
(e) The just-in-time (JIT) system is the delivery of finished goods just in time to be sold, subassemblies just in time to be assembled into finished goods, parts just in time to go into subassemblies, and purchased materials just in time to be transformed into parts.
Communication, coordination, and cooperation are required from supervisors and employees to deliver the smallest possible quantities at the latest possible date at all stages of the transformation process in order to minimize inventory costs.
Step 2 – Measure Actual Performance:
Supervisors collect data to measure actual performance to determine variation from standard. Written data might include time cards, production tallies, inspection reports, and sales tickets. Personal observation, statistical reports, oral reports and written reports can be used to measure performance.
Management by walking around, or observation of employees working, provides unfiltered information, extensive coverage, and the ability to read between the lines. While providing insight, this method might be misinterpreted by employees as mistrust. Oral reports allow for fast and extensive feedback.
Computers give supervisors direct access to real time, unaltered data, and information. On line systems enable supervisors to identify problems as they occur. Database programs allow supervisors to query, spend less time gathering facts, and be less dependent on other people. Supervisors have access to information at their fingertips. Employees can supply progress reports through the use of networks and electronic mail.
Statistical reports are easy to visualize and effective at demonstrating relationships. Written reports provide comprehensive feedback that can be easily filed and referenced. Computers are important tools for measuring performance. In fact, many operating processes depend on automatic or computer-driven control systems. Impersonal measurements can count, time, and record employee performance.
Step 3 – Compare Measured Performance against Established Standards:
Comparing results with standards determines variation. Some variation can be expected in all activities and the range of variation – the acceptable variance – has to be established. Management by exception lets operations continue as long as they fall within the prescribed control limits. Deviations or differences that exceed this range would alert the supervisor to a problem.
Step 4 – Take Corrective Action:
The supervisor must find the cause of deviation from standard. Then, he or she takes action to remove or minimize the cause. If the source of variation in work performance is from a deficit in activity, in such a case a supervisor can take immediate corrective action and get performance back on track.
Also, the supervisors can opt to take basic corrective action, which would determine how and why performance has deviated and correct the cause of the deviation. Immediate corrective action is more efficient; however basic corrective action is the more effective. An example of the control process is a thermostat.
(i) Standard – The room thermostat is set at 68 degrees.
(ii) Measurement – The temperature is measured.
(iii) Corrective Action – If the room is too cold, the heat comes in. If the room is too hot, the heat goes out.
Controls are most effective when they are applied at key places. Supervisors can implement controls before the process begins (feed-forward), during the process (concurrent), or after it ceases (feedback).
(i) Feed-forward controls focus on operations before they begin. Their goal is to prevent anticipated problems. An example of feed-forward control is scheduled maintenance on automobiles and machinery. Regular maintenance feeds forward to prevent problems. Other examples include safety systems, training programs, and budgets.
(ii) Concurrent controls apply to processes as they are happening. Concurrent controls enacted while work is being performed include any type of steering or guiding mechanism such as direct supervision, automated systems (such as computers programmed to inform the user when they have issued the wrong command), and organizational quality programs.
(iii) Feedback controls focus on the results of operations. They guide future planning, inputs, and process designs. Examples of feedback controls include timely (weekly, monthly, quarterly, annual) reports so that almost instantaneous adjustments can be made.
Characteristics of Effective Controls:
Control systems must be designed properly to be effective. When control standards are inflexible or unrealistic, employees cannot focus on the organization’s goals. Control systems must prevent, not cause, the problems they were designed to detect.
Performance variance can also be the result of an unrealistic standard. The natural response for employees whose performance falls short is to blame the standard or the supervisor. If the standard is appropriate, then it is up to the supervisor to stand his or her ground and take the necessary corrective action.
An example of effective controls is the dashboard on a car. There are many things that can go wrong with a car. Only the most critical items to the car’s operation are focused on the dashboard (oil level, engine heat, fuel gauge, etc.). Variations in these items are most likely to inflict the most damage to the car.
The critical items on the dashboard are easily understood and used by drivers. They point out a problem and specify a solution. They are accurate and timely. They call the driver’s attention to variations in time to prevent serious damage. Yet, there is not so much information on the dashboard that the driver is overwhelmed.
Managing People’s Performance:
Competing in ever globalising markets, organisations need to improve both the quality of their products and services and their productivity in producing and supplying them. This applies to both — the private and public sectors. Performance Management Systems need to be implemented or reviewed to help drive the required improvements in quality and productivity. Many managers and supervisors shirk their duty to manage the performance of their subordinates to the detriment of both employee and organisation performance.
They do so out of a feeling of discomfort about assessing another human being’s performance and that often comes from a lack of skill. They deprive their subordinates of the opportunity to understand what is expected of them and to develop the behaviour skills and knowledge required to achieve what is expected.
In its simplest form, performance management requires the supervisor to think and determine what the Key Result Areas (KRAs) are for a particular role, set standards of performance for similar roles and targets of performance for individuals. Once that hard work is done, measuring and discussing performance in most cases is simple. Performance management only gets hard when there are no standards or targets of agreed KRAs. Care needs to be taken in framing KRAs.
Many supervisors do not think clearly enough about this step. A supervisor needs to ask “Given the objectives of the organisation, what are the few key results we need from this role which will drive us to our objectives?” The trick in developing a good KRA is to be specific and to articulate a result. A KRA should contain no verbs as the KRA is not about an action. It should not contain words, which describe a direction or measurement.
If words such as “develop”, “reduce”, “improve” appear in a KRA, then the manager has not understood the purpose of a KRA and their approach to performance management is already compromised. Consider a marketing role.
Market share is an unlikely KRA as a team including marketing, sales and logistics roles is likely to be responsible for market share. A marketing role, however, can have responsibility for brand awareness or advertising spend or reach and frequency of advertising. These are appropriate KRAs.
Identifying KRAs helps individuals clarify their roles and prioritise their activities aligning them with the organisation’s strategic plan. It is mandatory that all KRAs can be measured numerically. If it can’t be physically measured, either invest in the ability to measure it or change the KRA to something which can be measured.
For similar roles in a large organisation e.g., a sales team, standards of performance for each KRA need to be agreed with the team. A sale KRA may be the ratio of successful sales visits over the total number of sales visits. The standard of performance for all sales people may be one in ten. This is the standard below which no sales person would be expected to perform.
Individuals in the team, however, may have different competence based on skills and knowledge gained from further years of experience or a behavioural trait which makes it easy for customers to build a rapport with them. A new sales person would not be expected to have the same sales success as a sales person with five years’ experience. One might expect the experienced sales person to achieve a success rate of one in eight. This then becomes that sales person’s personal target.
Setting agreed KRAs and standards of performance for like roles and targets for individuals is a simple process which gives clarity to the roles of individuals and their personal performance requirement in a team. Having set KRAs, standards and targets, it is relatively easy then to have a regular conversation about performance.
Conversations about performance can and should take many forms including a formal process review and coaching sessions. However, studies show that the performance review itself is often the weakest link in performance management.
Supervisors tend to perform reviews which only emphasise results and this is insufficient to improve performance. Best practice performance management systems also include a review of competence, the behaviour skills and knowledge required to achieve a result. Supervisors need to be trained to perform reviews and have their ability tested.
Coaching sessions are a powerful addition to a performance management system. Coaches need not be the supervisor as not all people have good coaching skills. Having an experienced mentor coach developing people in how to do things is an age old practice that continues to reap rewards for positions from CEO to new recruit.
Implementing the simplest form of performance management described above will improve productivity. To be certain that they are extracting the maximum productivity they can, those organisations who have a performance management system should review the objectivity of their system and the skills of their supervisors in performing reviews and coaching their subordinates.
Managing People for Profits:
In the hard-nosed world of managing organisations, people-management is often seen as the soft side of management. Whilst considered as positively contributing to performance indicators measuring customer and employee satisfaction, people management is not seen as directly improving the bottom line.
People management, however, contributes directly to the bottom line. Managers who pay insufficient attention to their processes for people management are missing an opportunity to make a substantial difference to their profits.
A ten-year study published by Dennis Kravetz in 1996, correlated people management practices with profit performance measures. It revealed that a minimum of one hundred percent improvement in the profit performance measures correlated with high scores of people management practices.
The study covered over two hundred organisations, one hundred and fifty of which were Fortune 500 companies and measured five key indicators of profitability and correlated them with companies with high people management practice scores versus low people management practice scores.
The detailed results of the key indicators were 16.1% versus 7.4% for sales growth; 18.2% versus 4.4% for profit growth; 6.4% versus 3.3% for profit margin; 16.7% versus 4.7% for growth in earnings per share and 19% versus 8.8% for total returns.
In the companies studied, the increase in profits equated to an average of US $67 million. Companies that improved their scores added US $294 million in profits per company, a gain of 60% over three years. Companies which experienced no change added an initial US $78 million, a gain of 16%. For the eight companies which showed a decline in scores there was a reduction in profit by US $16 million, a decline of 3%.
The practices which predicted company financial success fell into the categories of management style, company culture and goals, organisation structure, communications practices, quality and customer satisfaction, recognition and reward practices, employee development practices, section/promotion practices and job design.
The learning from this study is obviously immense for any organisation seeking to make profit from the sales of products and services. However, it is also pertinent to public and not for profit organisations.
For those focused on delivering bottom line results, the implications are that developing the means to improve employee competence and change organisational culture is as important as developing new products and services in the quest for increased profits.
For those focused on human resource development, the implications are that their work is as much responsible for driving profitability as are the sales people who sell the products. Unfortunately too many human resource departments treat their role as a cross between a policy think tank and information system administrators.
A risk apparent in many organisations is that human resource departments tend forget the strategic imperative of developing human resources to meet the goals of the organisation whilst they concentrate on the development and implementation of computer systems.
Training needs analysis should first identify the gap between what exists and what is wanted. Analysis revolves around knowledge skills and behaviour. The analysis should reveal what employees currently know vs. what they need to know, what employees currently do vs. what they need to do and what employees currently believe vs. what they need to believe.
In identifying the gap, organisations need to understand what they are trying to achieve with the development of their people. Organisations need to review whether they have problems or are expecting an impending change or can use their strengths to take advantage of opportunities, any of which might be facilitated by training or other human resource development activities.
The list of activities will include, but not be limited to, training, coaching, placements in external or sister organisations, cross functional project team membership and career development plans. Usually, the list of activities will be too long for the organisation to implement. Thus, prioritisation of the activities against the company’s goals is required.
The review process measures the importance of people improving the effectiveness of doing their jobs. If changing the effectiveness of people doing their jobs is unlikely to contribute to the goals, the implication is not to fix what is not broken.
The corollary, of course, is that the priority activities are those directly associated with or supporting people to do jobs more effectively consequently assisting the organisation to reach its goals.
Proper training needs analysis is a key deliverable of a human resource department and is directly correlated with profitability. Unfortunately, it is a skill less practised in favour of “big” developments of policies and systems.
In a world of increasing technology use, human resource departments need to remember their strategic role developing people to match the requirements for the organisation to reach its goals.
Managing Change – Motivating People:
Motivating people is a myth. People cannot be motivated by others. They are motivated from their within. Leaders can, however, set up an environment in which people are able to motivate themselves.
To set up an environment that enables employees to be motivated, leaders need to understand what the motivational needs of individuals and groups are. Determining the “what’s in it for me” for individual employees and workgroups, i.e., consistent with goals and strategies, of the organisation is the key to improving motivation for individuals and groups of employees.
A base for understanding what motivates human beings is found in the theories by Maslow and Herzberg.
Maslow’s theory is that people are motivated by a hierarchy of needs: that hierarchy being physiological needs, safety needs, belonging needs, esteem needs and self-actualisation needs.
Physiological needs are the very basic needs such as air, water, food, sleep, shelter, etc. Safety needs have to do with personal safety and security including job security. Belongingness is the desire to belong to groups – clubs, work groups, religious groups, family, gangs, etc.
There are two types of esteem needs—first is self-esteem which results from competence or mastery of a task and second, there’s the attention and recognition that comes from others. The need for self-actualization is “the desire to become everything that one is capable of becoming.”
Maslow’s theory postulates that humans are motivated by the needs above the minimum set of needs which are fulfilled. People who have fulfilled a particular set of needs, are not likely to be motivated by an environment which fulfills needs at lower levels. Conversely, people are also unlikely to be motivated by an environment which fulfills needs at a much higher level when their lower level needs have not been fulfilled.
For example, people who are struggling to cope with the basic physiological needs of sufficient water, food and shelter are unlikely to be motivated by self-actualisation, characterised by seeking knowledge and “inner peace”. Similarly, people who have a safe home, a secure family and a healthy ego fuelled by the accumulation of material goods, are not going to be motivated by the provision of financial rewards.
Herzberg’s theory is about the hygiene factors needed to stop employees from being demotivated and the factors which, if the hygiene factors are taken care of, will provide an environment to motivate people.
The hygiene factors included in the job environment encompass the company, its policies and its administration, the kind of supervision which people receive while on the job, working conditions interpersonal relations, salary, status and security. These factors do not lead to higher levels of motivation but without them there is dissatisfaction.
Herzberg’s motivation theory involves what people actually do on the job. The motivators are achievement, recognition, growth or advancement and interest in the job.
When applying these theories, leaders must understand some of the personal circumstances of the individuals and groups to develop the environment that allows individuals and groups to motivate themselves and provide an overall approach that reinforces the desired motivation.
Understanding what employees consider to be the basic physiological needs, is a starting point. Do employees consider the basic needs to be a roof over their head and food for their family or a house they own and a car? Is it different from one workgroup to another? Be careful, the definition of these needs will change over time for individuals and groups and they will not necessarily match your own definition.
In my own experience, the removal of a bonus for not hitting targets de-motivated staff well beyond that which might be expected. In 20:20 hindsight the bonus had, over the years, become a means by which the employees provided their basic needs of a home. It had become part of their mortgage payments.
For employees whose basic needs are fulfilled, it may be necessary to understand whether delegation of responsibility and authority will cater to their self-esteem needs. For example, giving them projects for which they are accountable and have the resources and competence to complete.
Care has to be taken with processes and policies. Processes and policies which are in contradiction of people’s motivators, will depress motivation. A study of Herzberg dis-satisfiers reveals that administration and policy has the highest impact on motivation being a dis-satisfier on 36% of occasions. However, processes and policies which motivate individuals, may not be aligned to an organisation’s strategy and objectives.
Further, a robust performance management system that recognises and rewards people in a way that fits their motivators is necessary for developing an environment that allows individuals and groups to motivate themselves.
Developing an environment that improves employee’s motivation is hard work. There is no one size fits all solution, as motivation is driven by “what’s in it for me”.
Dealing with Conflicts and Stress:
Conflict is a clash of interests, values, actions, views or directions. Conflict refers to the existence of that clash. Conflict is initiated the instant clash occurs. Generally, there are diverse interests and contrary views behind a conflict, which are revealed when people look at a problem from their viewpoint alone.
Conflict is an outcome of organizational intricacies, interactions and disagreements. It can be settled by identifying and neutralizing the etiological factors. Once conflict is concluded it can provoke a positive change in the organization.
When we recognize the potential for conflict, we implicitly indicate that there is already a conflict of direction, even though it may not have yet manifested itself as a clash. Confliction is the process of setting up, promoting, encouraging or designing conflict.
It is a willful process and refers to the real effort put into generating and instituting conflict. De-confliction is the annihilation of conflict. It does not refer to negotiation or bargaining, or even to resolution of conflict – it is the effort required to eliminate the conflict.
Why Conflicts Arise?
In most organizations, conflicts increase as employees assert their demands for an increased share in organizational rewards, such as position, acknowledgment, appreciation, monetary benefits and independence. Even management faces conflicts with many forces from outside the organization, such as government, unions and other coercive groups which may impose restrictions on managerial activities.
Conflicts emanate from more than one source, and so their true origin may be hard to identify.
Important initiators of conflict situations include:
(i) People disagree. People disagree for a number of reasons —
(a) They see things differently because of differences in understanding and viewpoint. Most of these differences are usually not important. Personality differences or clashes in emotional needs may cause conflicts. Conflicts arise when two groups or individuals interacting in the same situation see the situation differently because of different sets of settings, information pertaining to the universe, awareness, background, disposition, reason or outlook. In a particular mood, individuals think and perceive in a certain manner. For example, the half-full glass of one individual can be half-empty to another. Obviously, both individuals convey the same thing, but they do so differently owing to contrasting perceptions and dispositions.
(b) People have different styles, principles, values, beliefs and slogans which determine their choices and objectives. When choices contradict, people want different things and that can create conflict situations. For example – a risk-taking manager would be in conflict with a risk-minimizing supervisor who believes in firm control and a well-kept routine.
(c) People have different ideological and philosophical outlooks, as in the case of different political parties. Their concepts, objectives and ways of reacting to various situations are different. This often creates conflicts among them.
(d) Conflict situations can arise because people have different status. When people at higher levels in the organization feel indignant about suggestions for change put forward from their subordinates or associates, it provokes conflict. By tolerating and allowing such suggestions, potential conflict can be prevented.
(e) People have different thinking styles, which encourage them to disagree, leading to conflict situations. Certain thinking styles may be useful for certain purposes, but ineffectual or even perilous in other situations.
(f) People are supposed to disagree under particular circumstances, such as in sports. Here conflict is necessary, and even pleasurable.
(ii) People are concerned with fear, force, fairness or funds —
(a) Fear relates to imaginary concern about something which might happen in the future. One may fear setbacks, disgrace, reprisal or hindrances, which can lead to conflict situations.
(b) Force is a necessary ingredient of any conflict situation. Force may be ethical or emotional. It could be withdrawal of cooperation or approval. These forces are instrumental in generating, strengthening and terminating conflicts.
(c) Fairness refers to an individual’s sense of what is right and what is not right, a fundamental factor learnt in early childhood. This sense of fairness determines the moral values of an individual. People have different moral values and accordingly appreciate a situation in different ways, creating conflict situations.
(d) Funds or costs can cause conflict, but can also force a conclusion through acceptable to the conflicting parties. The cost of being in conflict may be measurable (in money terms) or immeasurable, being expressed in terms of human lives, suffering, diversion of skilled labour, neglect or loss of morale and self-esteem.
Conditions Creating Conflict Situations:
According to Kirchoff and Adams, there are four distinct conflict conditions, i.e. – high stress environments, ambiguous roles and responsibilities, multiple boss situations, and prevalence of advanced technology.
Filley identified eight main conditions which could initiate conflict situations in an organization.
These are:
(i) Ambiguous jurisdiction, which occurs when two individuals have responsibilities which are interdependent but whose work boundaries and role definitions are not clearly specified.
(ii) Goal incompatibility and conflict of interest refer to accomplishment of different but mutually conflicting goals by two individuals working together in an organization. Obstructions in accomplishing goals and lack of clarity on how to do a job may initiate conflicts. Barriers to goal accomplishment arise when goal attainment by an individual or group is seen as preventing another party achieving their goal.
(iii) Communication barriers, as difficulties in communicating can cause misunderstanding, which can then create conflict situations.
(iv) Dependence on one party by another group or individual.
(v) Differentiation in organization, where, within an organization, sub-units are made responsible for different, specialized tasks. This creates separation and introduces differentiation. Conflict situations could arise when actions of sub-units are not properly coordinated and integrated.
(vi) Association of the parties and specialization. When individuals specialized in different areas work in a group, they may disagree amongst themselves because they have different goals, views and methodologies owing to their various backgrounds, training and experiences.
(vii) Behaviour regulation – Organizations have to have firm regulations for individual behaviour to ensure protection and safety. Individuals may perceive these regulations differently, which can cause conflict and negatively affect output,
(viii) Unresolved prior conflicts which remain unsettled over time create anxiety and stress, which can further intensify existing conflicts. A manager’s most important function is to avoid potential harmful results of conflict by regulating and directing it into areas beneficial for the organization.
Conflict is a dynamic process. In any organization a modest amount of conflict can be useful in increasing organizational effectiveness.
Tosi, Rizzo and Carroll consider the stages involved in the conflict process, from inception to end, as sequential in nature, namely:
(i) The conflict situation,
(ii) Awareness of the situation,
(iii) Realization,
(iv) Manifestation of conflict,
(v) Resolution or suppression of conflict, and
(vi) After-effects of a conflict situation.
Conflict situations should be either resolved or used beneficially. Conflicts can have positive or negative effects for the organization, depending upon the environment created by the manager as she or he manages and regulates the conflict situation.
Positive Effects of Conflicts:
Some of the positive effects of conflict situations are:
(i) Diffusion of More Serious Conflicts:
Games can be used to moderate the attitudes of people by providing a competitive situation which can liberate tension in the conflicting parties, as well as having some entertainment value. In organizations where members participate in decision making, disputes are usually minor and not acute as the closeness of members moderates belligerent and assertive behaviour into minor disagreements, which minimizes the likelihood of major fights.
(ii) Stimulation of a Search for New Facts or Resolutions:
When two parties who respect each other face a conflict situation, the conflict resolution process may help in clarifying the facts and stimulating a search for mutually acceptable solutions.
(iii) Increase in Group Cohesion and Performance:
When two or more parties are in conflict, the performance and cohesion of each party is likely to improve. In a conflict situation, an opponent’s position is evaluated negatively, and group allegiance is strongly reinforced, leading to increased group effort and cohesion.
(iv) Assessment of Power or Ability:
In a conflict situation, the relative ability or power of the parties involved can be identified and measured.
Negative Effects of Conflicts:
Destructive effects of conflicts include:
(i) Impediments to smooth working,
(ii) Diminishing output,
(iii) Obstructions in the decision making process, and
(iv) Formation of competing affiliations within the organization.
The overall result of such negative effects is to reduce employees’ commitment to organizational goals and organizational efficiency.
Elements of a Conflict:
Organizational conflicts usually involve three elements, which have to be appropriately matched through necessary organizational arrangements in order to resolve the conflict.
(i) Power is the capacities and means that people have at their disposal to get work done. Power includes budgetary discretion, personal influence, information, time, space, staff size and dependence on others. If used efficiently, power creates an atmosphere of cooperation, but can generate conflicts when misused, withheld or amassed.
(ii) Organizational demands are the people’s expectations regarding a person’s job performance. Usually such expectations are high, and making them rather unrealistic.
When these expectations are not fulfilled, people feel disheartened, angry, let down or cheated. Consequently, conflict situations can arise.
Worth refers to a person’s self-esteem – People want to prove their worth in the organization. Superiors control employees’ pay, performance rating, performance and appraisal, etc. How much of these are received by a person reflects their worth. An individual may also feel loss of worth if some basic needs are not fulfilled. Generally, conflicts arise from mismatches between power, organizational demands and feelings of personal worth.
Theory of Conflict Management:
Conflict is defined as disagreement between individuals. It can vary from a mild disagreement to a win-or-lose, emotion-packed, confrontation. There are two theories of conflict management.
(i) The traditional theory is based on the assumption that conflicts are bad, are caused by trouble-makers, and should be subdued.
(ii) Contemporary theory recognizes that conflicts between human beings are unavoidable. They emerge as a natural result of change and can be beneficial to the organization, if managed efficiently. Current theory considers innovation as a mechanism for bringing together various ideas and viewpoints into a new and different fusion. An atmosphere of tension, and hence conflict, is thus essential in any organization committed to developing or working with new ideas.
People may appreciate the same situation in different ways, and so respond differently. It is, therefore, necessary to understand the response styles of the people involved so as to manage conflicts properly.
According to Turner and Weed, responses can be classified as follows:
(i) Addressers are the people who are willing to take initiatives and risk to resolve conflicts by getting their opponents to agree with them on some issues.
Addressers can either be first-steppers or confronters:
(a) First-steppers are those who believe that some trust has to be established to settle conflicts. They offer to make a gesture of affability, agreeableness or sympathy with the other person’s views in exchange for a similar response.
(b) Confronters think that things are so bad that they have nothing to lose by a confrontation. They might be confronting because they have authority and a safe position, which reduces their vulnerability to any loss.
(ii) Concealers take no risk and so say nothing. They conceal their views and feelings.
Concealers can be of three kinds:
(a) Feeling-swallowers swallow their feelings – They smile even if the situation is causing them pain and distress. They behave thus because they consider the approval of other people important and feel that it would be dangerous to affront them by revealing their true feelings.
(b) Subject-changers find the real issue too difficult to handle – They change the topic by finding something on which there can be some agreement with the conflicting party. This response style usually does not solve the problem. Instead, it can create problems for the people who use this and for the organization in which such people are working.
(c) Avoiders often go out of their way to avoid conflicts.
(iii) Attackers cannot keep their feelings to themselves – They are angry for one or another reason, even though it may not be anyone’s fault. They express their feelings by attacking whatever they can even, though that may not be the cause of their distress.
Attackers may be up-front or behind-the-back:
(a) Up-front attackers are the angry people who attack openly, they make work more pleasant for the person who is the target, since their attack usually generates sympathy, support and agreement for the target.
(b) Behind-the-back attackers are difficult to handle because the target person is not sure of the source of any criticism, nor even always sure that there is criticism.
Conflicts are inescapable in an organization. However, conflicts can be used as motivators for healthy change. In today’s environment, several factors create competition; they may be differing departmental objectives, individual objectives, and competition for use of resources or differing viewpoints. These have to be integrated and exploited efficiently to achieve organizational objectives.
A manager should be able to see emerging conflicts and take appropriate pre-emptive action. The manager should understand the causes creating conflict, the outcome of conflict, and various methods by which conflict can be managed in the organization. With this understanding, the manager should evolve an approach for resolving conflicts before their disruptive repercussions have an impact on productivity and creativity. Therefore, a manager should possess special skills to react to conflict situations, and should create an open climate for communication between conflicting parties.
Ways to Resolve Conflict:
When two groups or individuals face a conflict situation, they can react in four ways.
They can:
(i) Fight, which is not a beneficial, sound or gratifying approach to dealing with a conflict situation, as it involves ‘tactics, strategies, offensive and defensive positions, losing and winning grounds, and exposure of weak points.’ Fighting as a way of resolving a conflict can only be useful in courtroom situations, where winning and losing becomes a by-product of the judicial process.
(ii) Negotiate, towards a settlement with the other party. Negotiations take place within the prevailing situation and do not involve problem solving or designing. Third-party roles are very important in bringing the conflicting parties together on some common ground for negotiations.
(iii) Problem solve, which involves identifying and removing the cause of the conflict so as to make the situation normal again. However, this may not be easy. It is also possible that the situation may not become normal even after removing the identified cause, because of its influence on the situation.
(iv) Design, which is an attempt towards creativity in making the conflict situation normal. It considers conflicts as situations rather than problems. Designing is not confined to what is already there, but attempts to reach what might be created given a proper understanding of the views and situations of the conflicting parties. The proposed idea should be appropriate and acceptable to the parties in conflict. A third party participates actively in the design process rather than being just an umpire.
Conflict-Resolution Behaviour:
Depending on their intentions in a given situation, the behaviour of conflicting parties can range from full cooperation to complete confrontation. Two intentions determining the type of conflict-handling behaviour are assertion and cooperation: assertion refers to an attempt to confront the other party; and cooperation refers to an attempt to find an agreeable solution.
Depending upon the degree of each intention involved, there can be five types of conflict handling behaviour.
They are:
(i) Competition is a win-or-lose style of handling conflicts. It is asserting one’s one viewpoint at the potential expense of another. Competing or forcing has high concern for personal goals and low concern for relationships. It is appropriate in dealing with conflicts which have no disagreements. It is also useful when unpopular but necessary decisions are to be made.
(ii) Collaboration aims at finding some solution that can satisfy the conflicting parties. It is based on a willingness to accept as valid the interests of the other party whilst protecting one’s own interests. Disagreement is addressed openly and alternatives are discussed to arrive at the best solution. This method, therefore, involves high cooperation and low confrontation. Collaboration is applicable when both parties desire to solve the problem and are willing to work together toward a mutually acceptable solution. Collaboration is the best method of handling conflicts, as it strives to satisfy the needs of both parties. It is integrative and has high concern for personal goals as well as relationship.
(iii) Compromise is a common way of dealing with conflicts, particularly when the conflicting parties have relatively equal power and mutually independent goals. It is based on the belief that a middle route should be found to resolve the conflict situation, with concern for personal goals as well as relationships. In the process of compromise, there are gains and losses for each conflicting party.
(iv) Avoidance is based on the belief that conflict is evil, unwanted or boorish. It should be delayed or ignored. Avoidance strategy has low cooperation and low confrontation. It is useful either when conflicts are insignificant or when the other party is unyielding because of rigid attitudes. By avoiding direct confrontation, parties in conflict get time to cool down,
(v) Accommodation involves high cooperation and low confrontation. It plays down differences and stresses commonalities. Accommodating can be a good strategy when one party accepts that it is wrong and has a lot to lose and little to gain. Consequently, they are willing to accommodate the wishes of the other party.
Strategies for Managing Conflicts:
Tosi, Rizzo, and Carroll suggested four ways of managing conflicts, namely through:
(i) Styles:
Conflict handling behaviour styles (such as competition, collaboration, compromise, avoidance or accommodation) may be suitably encouraged, depending upon the situation.
(ii) Improving Organizational Practices:
After identifying the reason for the conflict situation, suitable organizational practices can be used to resolve conflicts, including:
(a) Establishing superordinate goals,
(b) Reducing vagueness,
(c) Minimizing authority and domain-related disputes,
(d) Improving policies, procedures and rules,
(e) Re-apportioning existing resources or adding new,
(f) Altering communications,
(g) Movement of personnel, and
(h) Changing reward systems.
(iii) Special Roles and Structure:
A manager has to —
(a) Initiate structural changes needed, including re-location or merging of specialized units,
(b) Shoulder liaison functions, and
(c) Act as an integrator to resolve conflicts.
A person with problem-solving skills and respected by the conflicting parties can be designated to de-fuse conflicts.
(iv) Confrontation Techniques:
Confrontation techniques aim at finding a mutually acceptable and enduring solution through collaboration and compromise. It is done with the hope that conflicting parties are ready to face each other amicably, and entails intercession, bargaining, negotiation, mediation, attribution and application of the integrative decision method, which is a collaborative style based on the premise that there is a solution which can be accepted by both parties. It involves a process of defining the problem, searching for alternatives and their evaluation, and deciding by consensus.
Conflicts in Research Organizations:
Conflict in a research organization, and for that matter in any other organization, may be between individuals, intra-group or inter-group, with conflict due to:
(i) Research and organizational goals,
(ii) Research and administrative personnel,
(iii) Individual researchers,
(iv) Scientists and management, and
(v) Researchers and client groups.
Such conflicts may arise for many reasons:
(i) Within a research group, differences arise over project priorities, the sequence of activities and tasks.
(ii) Administrative procedures and practices, which delay procurement of the necessary inputs and supplies required for research activities. Such conflicts get intensified because of the contradictory nature of personnel, dispersion of authority, deficient communication, and varying perceptions.
(iii) Technical opinions, performance norms and related issues lead to disagreements. The more the uncertainty in any task, the greater is the need for further information. If information is withheld or controlled by one of the parties in an interacting group, suspicion is created and conflict generated.
(iv) A very common cause of conflict in research organizations is competition between interacting groups over use of limited resources available for scientific work. Allocation of limited resources often generates conflict since one group is likely to feel that it is not receiving a fair share of organizational resources in comparison with other groups. Conflicts also arise over composition and staffing of research teams, particularly when personnel from other areas are to be included.
Sometimes conflicts can arise over competing claims for use of land for experiments.
(v) Cost estimates from support areas regarding work, breakdown, use of structures, etc., can create conflict situations.
(vi) A lengthy research process, where intermediate outputs of research are difficult to measure, conflicts over anticipations regarding performance are not uncommon. Disagreements over the timing, sequence and scheduling of project-related tasks and overall management of research are usual in research organizations.
(vii) Disagreements over inter-personal issues caused by personality differences, particularly when interacting groups are highly inter-dependent, can lead to conflict situations. When one group fails to fulfill the expectations of the other group, or acts improperly, a conflict situation may arise.
(viii) Past record of conflicts between the interacting groups, such as departmental rivalries.