[2 min read]
The evidence is overwhelming that in business treating people well optimises financial performance. Maximising profitability and shareholder value, and showing kindness and respect for those you lead, are genuinely synergistic goals.
It is easy to think that maintaining a primary focus on caring for the well-being of employees is a distraction from the wholehearted pursuit of superior revenue and EBITDA. Or even that such soft niceties are an optional nice-to-have that risk allowing people to waste time and effort on non-value adding activities. After all, we are tempted to ask, if we are to achieve the highest possible levels of success surely it is axiomatic that every ounce of effort must be applied to that end?
The fallacy in such thinking is probably obvious to you and it is this:
Maximising an organisational population’s efforts towards goals depends on every individual within that population choosing to contribute their own personal maximum exertions.
Such discretionary effort cannot be demanded, exhorted or extorted from people with any hope of success. By definition discretionary effort is volunteered in response to an individual’s internal motivations.
The leadership task we are faced with then comes down to creating an atmosphere where colleagues choose to contribute optimal discretionary effort. Research has shown that people do that only when they feel a deep emotional engagement with their organisation, its leadership, and their immediate bosses. All we humans engage emotionally with other people when they fill us with positive emotions. Psychologists call this resonance. Equally we withdraw from people that give us negative emotions, or dissonance.
Discretionary effort, it turns out, responds strongly to the emotions leaders engender in their followers. Enlightened values create resonance, that releases extra discretionary effort that is otherwise unavailable, which in turn leads to superior revenue and EBITDA.
In fact it is relatively straightforward to engage the efforts of intermediate leaders towards ambitious profit targets. However, history teaches us it’s more challenging to engineer a culture where those managers, and their reports in turn, pursue financial growth in the people-valuing way required to maintain engagement and discretionary effort amongst colleagues.
Manifesting such values consistently and resiliently under pressure can require widespread positive changes in mindset and behaviour. Despite many corporate leader’s experience that change is elusive, patchy and short-lived, psychology has moved on spectacularly in recent years and our ability to create lasting positive change has been transformed. Through new approaches it is now possible to simultaneously achieve enlightened human values, resilient engagement, and stretching EBITDA goals.
You may also be interested in my article on Engagement: How to increase profits by increasing engagement in 6 steps.