Forbes recently ran in interesting article, A Cure For The Common Corporation by Dov Seidman. It reported on comprehensive research that examined how governance, culture and leadership influence behavior and impact performance.
It complied around 2 million observations by 36,000-plus employees in 18 countries, from the C-Suite to the junior ranks. The major findings are conclusive that trust and empowering employees has its rewards:
- 93% of employees within high-trust and truly values-based businesses achieve financial performance greater than competitors vs. 48% of those at strict top-down organizations.
- Employees in high trust organizations are 22 times more likely to take a beneficial risk and this enables 8 times the levels of innovation compared to the competition.
- 92% of employees of trust-based businesses based plan to be working for their company in a year, compared to 46% of those in strict top-down organizations.
- 99% of high-trust and values-based companies observe highly satisfied customers vs. 42% of top-down organizations.
- Finally, in high-trust companies, only 24% of employees observed misconduct or unethical behaviors, compared to 47% in low-trust focused organizations that ironically establish too much control to prevent these behaviors.
In the new, networked enterprise this trust is essential to realize the opportunities it provides. Hopefully data like this will speak to senior execs to reform their approach to management to keep up with the times.
Others have written on this theme. For example, Louise Altman, Partner, Intentional Communication offered us — Humanizing Workplace Relationships – People Aren’t Tasks. The tag line is the most significant concept. I recently re-watched an excellent video produced by the BBC in 1997, Intellectual capital: The New Wealth of Nations. It made the same point. The film portrayed the industrial revolution as a plague on people where workers were treated as mere extensions of machines.
Now the percentage of tangible assets in the corporations in the S&P 500 has shifted from 66% in 1982 to 16% in 1999 and likely continues to fall (see Juergen Daum, Intangible Assets and Value Creation). In its place is the rise of intangible assets as the creators of wealth. These are mostly the ideas in people’s minds. Yet, as Louise points out many organizations are still managing people as though the wealth was created by tangible assets, machines, and people are just servants of these machines.
According to another survey conducted by Deloitte executives rank tangibles like competitive compensation (62%) and financial performance (65%) as the top factors that influence culture. While employees have a different view and say intangibles such as regular and candid conversations (50%) and access to management (47%) rank higher than compensation (33%) and financial performance (24%)
The prevalence of these misguided concepts is consistent with what Dov Seidman reported on in Forbes. As his data support, wealth now comes from treating people as human assets and releasing their creativity to enable innovation and new wealth in organizations. Consistent with this premise, McKinsey found in 2010 that the lower the decision level was in the organization, the higher operating margin. As many studies are starting to conclude, top down authority is the enemy of profits.