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People Performance Management Seminar Brings "The Big Picture" into View

• Introduction 
• Teach Employees to Exceed Customer Expectations 
• Research Shows the Link Between Engagement and Performance 
• Make Your Company a "Great Place to Work" 
• AstraZeneca Relies on Managers to Boost People Performance 
• Nordson: "People Performance Management Is Organic to Our Organization"

Introduction 

The goal of the seminar presented by the Forum for People Performance Management and Measurement held during the New York Incentive, Rewards & Recognition Conference & Expo ("The Brands Show") on May 30, 2007, was to trace the common link between employees, customer satisfaction, and profitability. Titled "The Big Picture: Maximizing Brand Performance Through People," the seminar included authors, researchers, experts, and representatives of top-performing companies like Nordson Corp. and AstraZeneca who shared their understanding of how people-focused management leading to employee engagement links directly to customer loyalty and retention and ultimately to company profitability.

The Forum is affiliated with the department of Integrated Marketing Communications at the Medill School at Northwestern University. Among those sharing their research and experience at the program were Kirk Kazanjian, author of Exceeding Customer Expectations; Patrick Kulesa, global research director for ISR; Amy Lyman, chairperson of the Great Places to Work Institute; Penny Stoker, vice president of human resources at AstraZeneca; and Derrick Johnson, director of corporate communications for Nordson Corp.

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Teach Employees to Exceed Customer Expectations 

Kirk Kazanjian, the author of Exceeding Customer Expectations, a best-selling book on how to maximize profitability by creating happy customers with the help of an empowered and motivated workforce, led things off. Kazanjian's investigations into top-performing companies, including Enterprise Car Rental, has convinced him that "good customer service can provide a company with a clear competitive edge" and that taking care of customers and employees both will add to a company's bottom line.

Enterprise, he said, is a good example of a company that empowers its employees to go out of their way to be helpful to customers to the degree that they will even pick customers up when they need to rent a car.

The only way companies are going to be able to exceed customer expectations, however, is to understand what those expectations are, and to learn that, companies will have to survey their customers. Kazanjian suggested that companies should be surveying customers to see how many or what percentage are:

1. Dissatisfied
2. Somewhat dissatisfied
3. Somewhat satisfied
4. Satisfied
5. Completely satisfied

Questions that ask for this type of 1 through 5 response are easy for customers to understand and respond to, Kazanjian said, because it is like assigning grades in school.

When a company can determine how its customers are distributed among these categories it will know which of its customers are at risk, and what percentage of its customers are likely to be advocates.

Customers who fall into categories 1, 2, and 3, Kazanjian said, "are so dissatisfied that they won't come back or are looking for a reason to leave." Those are your at-risk customers.

Customers in category 4 are good, but they are not entirely connected to your company. Customers who fall into category number 5, however, "are three times as likely as other customers to do business with you again and to actively refer customers," Kazanjian said.

By increasing the percentage of customers that fall into the number 5 category, Kazanjian suggested, companies can boost their profitability for the following reasons:

• You will have greater loyalty and retention among these customers. Your company will become a preferred vendor for this group.
  
  
• You will see a greater referral business as this group of customers begins to refer friends and business acquaintances. Unsatisfied customers, on the other hand, are more likely to pass along negative comments about your company to friends and acquaintances.
  
  
• You will find that there is less price sensitivity with satisfied customers than with less-than-satisfied customers.
  
  
• You will have a competitive edge and a customer-focused marketing proposition that you can exploit. Just don't use it before you know you are ready, Kazanjian warns.
  
  
• You will find that as you increase your percentage of completely satisfied customers you will also enjoy increased profitability and a better bottom line.

But becoming a company that not only satisfies customers but goes beyond customer expectations is not easy, Kazanjian said. It requires a commitment from the top down, and it requires middle-level managers to be willing to become "change agents" within their organizations. It requires companies and managers alike to ask of everything they do: "Will this benefit our customers and employees?"

It might also require more of an investment in human capital for some companies. Companies will have to work harder to hire the right people and to train them in the appropriate customer-focused behaviors (i.e., making sure that they know to address customers by name, they acknowledge wait times, they thank customers for their business, etc.). It will also involve "holding everyone accountable," said Kazanjian, and offering financial rewards and incentives to employees based on customer satisfaction.

An effective incentive reward structure is one of the keys to implementing customer-focused behavior, Kazanjian suggested, and some of the things that companies should do to ensure that their reward structure is effective would include:

• Basing bonuses/rewards at least partly on customer service scores.
  
  
• Making it clear to employees what the bonus is based on.
  
  
• Providing regular feedback to employees on individual and overall scores.
  
  
• Giving employees autonomy to take care of customers.
  
  
• Not changing the rules relative to rewards in mid-stream.

Kazanjian reported that at Enterprise, for instance, 40 percent of all company profits go back to employees in a distribution that is based largely on customer satisfaction survey results. A survey of customers goes out two days after a customer's rental experience by by phone call asking customers to:

• Rate their experience with Enterprise on the 1-5 scale discussed above.
  
  
• It also asks, "Would you rent again?" again on a 1-5 scale.
  
  
• If either of these responses is negative, the survey asks, "What went wrong?" And the local manager has to call the customer and follow up and act on these responses, Kazanjian said.

Enterprise uses the scores to determine how rewards and bonuses are to be distributed by location. It also encourages employee effort by tying customer satisfaction scores to promotions – you don't get promoted unless your score is higher than the company average, Kazanjian said.

Kazanjian concluded by saying that an effective customer focus can give smaller companies a competitive edge against larger competitors, but he repeats his warning that "you shouldn't advertise your service edge until you know you can live up to it." He also added that you should be constantly reminding employees of your customer service mission.

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Research Shows the Link Between Engagement and Performance 

ISR conducts employee surveys for some of the world's leading companies, and Patrick Kulesa, global research director for ISR, discussed how companies with engaged employees showed nearly a 20 percent increase in operating income over time, while those with low engagement showed corresponding declines of up to 33 percent.

The research, Kulesa said, suggests that there are clear linkages between employee opinions and engagement. If employees have a more positive opinion of their workplace they will be more engaged in their work. Human capital measurement also has an impact on performance. Kulesa added that some 46% of companies make an effort to measure the value of human capital and its impact on business, taking measures of things like headcount, employee opinions/engagement, productivity, training, hours, etc.

Kulesa added that it's important for companies to be clear about what they mean by employee engagement, and said that ISR has a "Think, feel, act" notion of engagement. And the "act" part of that formula is what's important from a motivational aspect – this refers to the things that an employee will do to help the company and to help customers.

Overall, he said, ISR research suggests that higher levels of employee engagement equal better performance for the company as a whole, that companies with more engaged people perform better financially, and that there is even a correlation between stock prices and employee opinions.

Kulesa added that when you look more closely at the factors that positively affect employee opinions, communications, competitiveness, and leadership turn out to be more important than traditional performance-oriented factors like teamwork, supervision, etc.

Kulesa's best advice for increasing engagement and improving performance includes:

• Exchanging best practices with other organizations where possible.
  
  
• Setting specific targets for improvement in terms of employee opinions and satisfaction.
  
  
• Starting small by initiating pilot programs to target key issues
  
  
• Segmenting employees by their level of engagement as a way to learn what contributes to their opinions and satisfaction levels.

There are barriers to progress in the employee engagement arena, Kulesa said. To overcome these barriers, enlightened managers will have to:

• Build a business case for changing corporate attitudes toward engagement.
  
  
• Be ready to educate other managers and executives who lack understanding about the connection between engagement and performance.
  
  
• Begin to building benchmarks and metrics related to engagement.
  
  
• Link those metrics to performance.

Kulesa closed by repeating the old business adage seems also to apply to employee engagement: "What gets measured gets managed."

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Make Your Company a "Great Place to Work" 

Amy Lymon, the chairperson of the Great Place to Work Institute, which helps to select the companies included in Fortune magazine's annual "100 Best Places to Work For," presented some of her organization's research showing the link between people-focused management and stock price performance.

Specifically, Lymon said, some of the characteristics of a great place to work include:

• Employees believe their company and their workplace are great.
  
  
• There is an inclusive environment and a free exchange of ideas among all levels of employees.
  
  
• There are higher levels of trust than in other organizations.
  
  
• There is a great deal of collaboration and idea sharing in the company.

Overall, Lymon said, characteristics like trust, pride, and enjoyment contributed to a workplace that is characterized by cooperation and community.

Trust is key, and Lymon added that trust exists in an organization when organizational leaders are credible, competent, and have integrity. Other factors contributing to trust include:

• People are treated with respect. They know they will be supported.
  
  
• Employees are involved in decision-making, and the company is generally caring.
  
  
• Rewards and recognition are distributed in a fair manner. There is a perception of equity and fairness in pay and recognition among employees at all levels.

Cooperation, on the other hand, is measured by people's willingness to help out their coworkers and the confidence that they can count on others when in need.

Commitment, finally, is demonstrated by a positive anticipation of coming to work to achieve common goals.

Lymon added that the Great Place to Work Institute also puts together a "Best Company to Work For" list for small and medium-sized companies, and indicated that more than 500 companies go through the application process each year. Those that succeed in making it to the list, she said, benefit in a number of ways. They find that their voluntary staff turnover decreases, absenteeism goes down, and being a "great place to work" is a great recruitment/retention tool as well as being a tool for building employee morale and enhancing performance.

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AstraZeneca Relies on Managers to Boost People Performance 

While the ISR research studies reported earlier in the seminar by Patrick Kulesa show in general terms that highly-engaged employees contribute to higher operating margins and profits, Penny Stoker, vice president of human resources of AstraZeneca, could talk about how her company has undertaken a people performance management (PPM) journey of its own.

AstraZeneca is one of the top 10 pharmaceutical companies in the world, with $26.5-billion in global revenues and brands like Nexium, Seroquel, Crestor, and Symbicort. Stoker says that she believes that the company has achieved that success because its employees are engaged and committed to the goal of "making healthcare more meaningful to patients."

Stoker explained her company's baseline research, which has shown a strong correlation between employee engagement, customer satisfaction and top-line sales. She also noted that this finding emphasizes the importance of the manager's role, and said that with attention to these details, AstraZeneca expects to reap increased focus of resources, increased financial outcomes, substantial increase in employee engagement indices, improvement in corporate reputation and improved innovation.

"As a company we demonstrate support for the individual, and we try to get employees involved," Stoker said. Specifically, the company looks for ways to connect employees to its core vision.

According to Stoker, AstraZeneca uses use "a balanced scorecard approach that is built on people." What that means is:

• The company does extensive research into customer needs and into employee performance.
  
  
• AstraZeneca tries to anchor its performance programs in people.
  
  
• It looks carefully at understanding the role of management and leadership in the organization.
  
  
• The company fervently believes that there is a strong connection between engagement and customer satisfaction.
  
  
• It conducts regular, comprehensive employee surveys.
  
  
• The company seeks and encourages innovation.

Among the key metrics that the company emphasizes and supports, Stoker said, are things like:

• Optimizing performance
  
  
• Teamwork
  
  
• Accountable leadership
  
  
• Talent management

Stoker added that the role of the manager is very important in terms of achieving these metrics, in communicating company values, and in particular in communication to employees what their role is in contributing toward and achieving company goals and objectives.

Specifically, managers are critical to the engagement of employees because they are responsible for the alignment of messages as they cascade through the corporation, making sure that corporate communication about goals and direction are translated into language and behavior that employees can understand – as well as understand how their work fits into the bigger picture.

"People don't leave companies, they leave managers," Stoker said. And AstraZeneca does everything that it can to help managers set expectations, to communicate messages clearly and accurately, to coach for performance, and to align messages down to the individual level.

In the end, however, it is the employees who will carry the mission forward, and managers are also responsible for holding employees accountable for such things as:

• What they should do. What their job responsibilities are.
  
  
• Understanding their role in the organization.
  
  
• Working to make the organization better.
  
  
• Being positive and productive builders of organizational culture.

"Most people will know us through our employees," Stoker said. "And that's one of the key reasons to keep employees engaged and involved."

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Nordson: "People Performance Management Is Organic to Our Organization"  

Nordson Corp., of Westlake, OH, a B-to-B manufacturer of adhesives, coatings, and applications equipment, has revenues of $892 million worldwide and has 3,900 employees in 30 countries. And Derrick Johnson, director of corporate communications for Nordson, believes that People Performance Management is one of the keys to its corporate performance.

Leadership at Nordson, in particular, is committed to People Performance Management (PPM) and see a clear link between PPM and individual performance as well as on corporate performance. It also believes that improving the quality of people management will improve corporate performance. Johnson also said that the Nordson's acceptance and application of PPM has grown naturally over time and has become organic in nature to the organization.

As evidence, Johnson described how the principles of PPM are integrated into the strategic goals of the organization to:

• Be a successful high-performance organization.
  
  
• Provide interesting work/career development for employees.
  
  
• Demonstrate effective global leadership in all areas.
  
  
• Provide for a positive work/life balance for employees.
  
  
• Demonstrate an employee-sensitive and customer-focused corporate culture, values, and expectations.

A number of recent acquisitions made by Nordson renewed the companies commitment to this strategy through the challenge of integrating these new acquisitions into Nordson's PPM culture, Johnson said. Specifically, the company found it needed to be clear and concise about the culture, expectations, and how we manage in bringing these new acquisitions and people on board. It also emphasized the interesting work and career opportunities that the company offered and its practice of giving people authority to make decisions on their own.

Further evidence of Nordson's PPM success, Johnson said, is the fact that employees have an average tenure of 18 years. The focus on people performance management, he suggested, not only makes Nordson a great place to work, but it makes it a great place to stay.

Keys to Nordson's PPM success, Johnson said, are the commitment of corporate leadership to creating a vision of "what could be" for the company and for individual employees, open communication, and trust. The compensation and recognition system in that employees must feel that they are paid fairly.

At least a part of Nordson's success can be attributed to the expectations that the company has for its leadership in terms of:

• Personal integrity.
  
  
• Showing visible support for fellow leaders.
  
  
• Adherence to and support of company values and policies, including customer focus.
  
  
• Identifying and developing future leaders of the organization.

In addition, Nordson's efforts to help employee's achieve a satisfactory work/life balance is another factor in its success, and in achieving its high levels of employee engagement. For instance, the company offers employees flex-time arrangements, significant paid time off, and it has a "Time 'n Talent" program that encourages employees to volunteer in their communities and matching gifts for employee donations. In fact, Nordson employees provided some 6,500 volunteer hours to their communities through this program in 2006, Johnson said.

Johnson concluded by saying that Nordon's strategy "comes out of commitment to the customer." He added that the way to make this commitment work is to make PPM a high priority and a part of the organizational culture, to set high goals for employees and for leadership, and to make regular, open, and enthusiastic communication to employees a part of the strategic process.

Click here to download a copy of the presentation.

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