New Year Trends
Hello everyone. The mood for 2011 certainly appears to be that Australia is well placed to move forward in business and that we have more abilities relative to most other economies in absorbing any external shocks coming out of world markets and economies in the coming year. For many, 2010 was a period of recovery and consolidation from the GFC in 2009, and a general conservatism dominated thinking as businesses found their feet again.
If 2011 turns out to be as prosperous and opportunistic as some pundits are predicting then leadership skills will be a key ingredient in the businesses that are able to take advantage of this emerging window of opportunity. A recent study on the effects that leaders had on their organisations throughout the GFC era was interesting.
The GFC era produced a degree of stress end insecurity in employees which was highlighted in staff surveys, and measured in the rising number of unpaid hours worked by employees based on the perception they needed to do so in order to keep their jobs, as well as the decrease in numbers of voluntary staff turnover.
Another finding was the correlation between an organisational leaders interpersonal fairness and own self-sacrifice and the effect on employees resiliency to stress. The studies found those leaders who had an effective emotional intelligence aspect to their personality, were able to offer an Attentive Managerial Leadership (AML) model to their employees. The employees trust and security levels remained high despite the economic conditions, whilst measures for overstrain and fatigue remained low.
Leaders who did not possess a strong emotional intelligence quotient (EQ), tended to operate from a Demand-Control form of leadership model which accelerated employee levels of stress, overstrain and illness/fatigue, whilst generating a corresponding decrease in trust and security levels about their future and the future viability of the business. This study also found that organisational leadership affected the mental health of its employees either in a positive or a negative direction.
Previous studies have shown that where economic activity has dampened or restricted the normal levels of staff turnover, then when conditions turn for the better this can correct and accelerate. Others studies have shown that the staff who suffered under perceived insensitive or hypocritical leadership were twice as likely to change employment in the following 12 months than those who had better workplace leadership during the same period.
Australia is generally recognised as approaching a period of staff or human resources scarcity. There are a number of factors which distort the allocation of human resources within an economy and Australia may be facing a year of a “perfect storm” of internal organisational dynamics which will create turnover, plus an external economy that will make keeping and replacing staff a problematic issue this year.
The economic cost of replacing lost staff can become a risk to the organisation if it loses its “corporate memory”, skills, and experience of key staff. Retaining your best staff is a strategic priority for any best practice organisation. Leadership can play a key part in the ability to retain or lose its key staff. Leadership matters, and this is why Corporate Energetics will devote a section of each monthly newsletter to “Leadership Matters”. We will focus on the key ingredients, skills, factors and aspects of leadership that must be embodied for business success.
Leadership Matters – The Respect of Staff and Customers
Traditional management theory placed little importance on the concept that a leader and their organisation had to earn and keep respect facing outwards (to its customers and markets), and inwardly (to its shareholders, suppliers and employees ). Respect was often positioned as a soft intangible value or outcome that was not on the dashboard of a leader’s bottom line variables to concern themselves about.
The globalisation trends of business and the opening up of online sales channels has made both employees and customers better able to move on, when their experience of a business does not match their expectations or the staff or leaders offends them. Consider the recent furore regarding Solomon Lew and Gerry Harvey of Harvey Norman in voicing their demands that online retail purchases into Australia be subject to some form of GST or sales tax.
Both these leaders are highly experienced and successful retailers who are at the top of their game. Yet both have faced a notable backlash from the public who perceive their campaign smacks of self interest and is not geared to protect local jobs as claimed. It has generated a backlash of significant proportions and damaged their perceived image, and caused them to lose respect in the eyes of the shopping public. The public has lost part of their trust in the genuine concerns voiced by these leaders. Business sales may be impacted over time as a result.
Times and customers have changed. A recent Gallup poll in America revealed how the top 1000 businesses and prominent living Americans now rate the respect of others as the most important measure of success in life. Respect was also rated as one of the top 4 business outcomes required by the business and its leaders if it wanted to be a market leader.
Consider that internally both employees and suppliers agree to work with an organisation based on trust. In most cases both new employees and suppliers do not know what sort of organisation they are engaging with when they join up. They may know of reputation and read the website but they do not know how the company functions, nor how the leaders and the other employees conduct themselves. They engage based on a mix of expectations which include mutual trust and respect.
International studies have shown that after eliminating one-off factors such as illness or family reasons, then a breakdown in the trust between the employee-employer relationship, or a breakdown in respect of the company or its leaders, was the second most common reason for an employee leaving an employer. Trust and respect are interdependent concepts and each reflects the state of the other.
Disgruntled employees noted the lack of alignment between the words and deeds of the organisation and its leaders created the largest basis of the erosion of trust between themselves. Many felt compromised in “living a lie” where they felt they had to sell or portray their company and its products in a light that they knew was false. This created a clash with their internal value system, and cynicism which led to a lack of respect and trust. It became easy to leave from this outcome.
Likewise with customers, studies have shown the significant advantage a company enjoys when its customers have trust and respect for it. Studies repeatedly show that a loyal customer will resist competitor’s overtures and marketing even when they have a better product, cheaper price, or other differentiating factors. The quality of your relationship with your customer is largely based on their perception that they can trust you and if they respect the product, service and the staff offering that to them. This creates loyalty and a resiliency against the “churning” or turnover of those same customers.
Business commentators believe that 2011 will be a significant year of growth but also a movement of markets, resources, and employees. An organisation that promotes and embodies trust and respect in its leaders and across the business will be better able to ride out whatever turbulence arises this year, and then focus on those emerging windows of opportunity. I hope this year brings you closer to your goals!
For more information of cultivating the values and growing the culture of trust and respect in your organisation, contact us to discuss your needs. For more information on our Corporate Consulting, Executive Coaching, Emotional Intelligence, and Employee Assistance programmes then contact me directly on 040 7577793.
Director, Corporate Energetics