Every two or three months I run short surveys with leaders around the world; the project is called the Leadership Pulse. Over the month of July I examined business drivers in this survey. This is a topic I have studied in some depth since 1996 when I first began examining what leaders think drives performance of their firms and then what really does impact long-term and short-term financial outcomes.
The business drivers are various sources of capital that affect organizational performance. In all, during this most recent survey I asked members to rate 20 different items. A total of 579 senior leaders responded to this leadership pulse survey. Based on the overall average for the overall sample, the top five business driversthe sources of capital that respondents say have been most important in driving their firm’s performance during the last nine monthswere:
- 1: Brand and reputation
- 2: Quality of our offering
- 3: Quality of client relationships
- 4: Level of customer service
- 5: Skills and knowledge of our employees
At the bottom of the list were:
- 16: Internal technology solutions
- 17: Cost of our product
- 18: Ability to manage cash flow
- 19: Ability to manage profitability
- 20: Internal HR strategy (how we hire, develop and reward employees)
(To obtain the full ranking list, you can go to www.energizeengage.com and download the early insights report.)
So, what does the ranking data tell us overall? The top drivers are sources of capital that take years to develop; they are not focused on short-term decisions (layoffs, managing costs, etc.). Brand, relationships, skills of employees, and service levels are not magically changed in the short term. At the same time, the lowest ranking items seem to focus on tactical issues such as managing cash flow and technology.
At the bottom of the list is internal HR strategy (the way your organization selects, develops and rewards employees). In an environment where employees are being laid off, not given salary increases, and being told to work more hours, I’m not surprised that HR strategy sank to the bottom of the list. However, note that skills and knowledge of employees (which is a function of real HR strategy) is in the top five. The “people” story is actually a lot more complicated as is the effect of the technology driver.
So, what about technology, you ask? I’m sure you noticed that internal technology was in the bottom five. Although technology ranks low in this overall list, you will be pleased to know that more rigorous analysis changes the story for technology. In fact, in a regression analysis predicting firm performance, the internal technology driver is one of only four items that positively affect performance. The other drivers are brand and reputation, ability to manage profitability and company culture.
What is happening is firms building for long-term strength but also efficiency are the ones winning in this recession. The variables negatively effecting firm performance were cost of the product and level of customer service. That may seem counter-intuitive, and in fact, those results did take me a minute or so to process. But think about the times we are living in today: if you compete by lowering prices and increasing customer service, you are probably not creating much of a value proposition. It means you are asking employees to do more for less money, and although this may work in the short term, it most likely does not create long-term value.
I have a lot more data to analyze and now I am looking at industry differenceswhat’s happening in small vs. large firms and examining comments to get a better sense of what the numbers mean. I don’t want to ruin the ending to the story by sharing too much in this article, but the findings of this study will be compared to other studies I’ve done since 1996. One thing I will say is that what leaders think drives success is not what often does.
Theresa Wellbourne, is the founder, president and CEO of eePulse and a research professor with the Center for Effective Organizations, Marshall School of Business, University of Southern California. If you wish to participate her ongoing leadership work, which is available to you at no cost, please go to www.leadershippulse.com.Join the leadership pulse social network at www.energizeengage.com.