Lots of books, and even more articles, attempt to explain how various companies have managed to soundly outperform their entrenched and powerful competitors—frequently catapulting themselves from an unknown to industry leader in short order. Typical examples include Microsoft, Dell, Facebook and the new Apple. Business leaders seem to have an unquenchable thirst for reading these publications as they hope to discover the source of the next great concept that will propel their company and career to unfathomable new heights.
The Really Simple Truth
The simple truth is that no strategy, process, product, patent, venue or financial resource can place and maintain a company in the leadership position. The Goliaths are routinely and soundly beaten by the Davids, despite a seemingly impossible resource advantage that may exceed 1 million to one. As a brief example of this phenomenon, consider the micro-sized Microsoft besting then world leader IBM in developing a viable PC operating system.
At their core, corporations are social institutions where people come together to work and achieve common goals. Each organization, regardless of size or mission, is a mirror image of its people. By themselves, the buildings, offices, machines, systems and processes do not make a difference. By their nature they are just inanimate things, incapable of becoming more except through human direction.
The really simple truth is that people make the crucial differences that determine winners and losers. The most valuable and variable asset in any company is its human capital, yet it is virtually the most ignored and underutilized.
Maximizing Human Capital
Almost as ubiquitous as the articles on business strategies are the exaltations given to employee empowerment as an elixir for an organization’s anemic performance.
Empowerment is a state of mind wherein the employees feel that they have a genuine stake in the business and accompanying degrees of freedom to take action in support of it. In spite of its trendy nature and real potential to enhance performance, organizations are not realizing sustainable performance gains from employee empowerment. If empowerment is so potent, why do these initiatives fail?
Perhaps the most likely explanation is that companies, not wanting to appear out of touch with in vogue concepts, preach empowerment without really understanding what is required. The result becomes predictable lip service and its equally predictable result. What is the missing ingredient to make empowerment truly effective?
Empowerment is the company’s offer to its employees. Involvement is the employees’ willing acceptance of, and belief in, the company’s offer of empowerment as well as their own ability to effectively put it to use. Involvement requires the heart, hands and mind of the employees, not just their lips. That means employees need to be adequately schooled in decision-making processes and in understanding the company’s vision, mission and strategies.
Involvement also can be thought of as the measure of the degree to which people actually use empowerment to advance the company’s objectives and strategies. Empowerment without involvement is simply unrealized potential.
Much to the chagrin of CEOs, who are focused on quarterly performance improvements, involvement is not an overnight achievement – nor a fortnight’s. It is a lengthy process of capital improvement. It involves building trust, confidence and capabilities in the corporation’s human capital. As with any capital improvement, there ought to be opportunity for a commensurate payback.
Evolvement is the end result of empowerment and involvement having been exercised and deployed long enough and well enough such that employees feel as responsible as the executive office for the company’s success or failure. In the process, employees begin to stretch their abilities to learn, to perform, to achieve and to determine their own future. Evolvement is the ultimate leap-forward return on human capital.
It is a process of employee evolution that results in decision-making becoming far less concentrated at the top of the organization. Decisions instead are made faster and more effectively when they are made at the lowest possible level closest to the issue – customer, employee, product or production line.
Evolve or Be Swept Aside
The more capable employees become in self-generating decisions and actions in pursuit of company goals, the more problem-solving power the organization has at its disposal. Similarly, the more tightly the power is focused on well-defined objectives, the more competitive the organization’s advantage becomes.
Under the right circumstances, the advantage can become so powerful that even resource-poor Davids can leapfrog the entrenched Goliaths with just the advantage of the human capital.
Microsoft and IBM are an excellent example of this phenomenon. Most business people are familiar with the concept of product life cycle with its stages of introduction, growth, maturity and decay. Virtually every business has some employees dedicated to managing this cycle with either “new” or “improved” products being introduced periodically to sustain revenue.
What few CEOs and their boards seem to appreciate is that a business, like a product, has a life cycle. The business itself is something that was designed and built to fit the needs of a particular niche. But how many CEOs have a department dedicated to improving the design of their business or creating a new one?
Certainly the life cycle of a business design is to be significantly longer than that of a product. The business design encompasses the products offered, the customers and markets served, sales and marketing methods, distribution systems, and even the vision and mission statements. The wide spectrum of design elements coupled with a life cycle that is typically measured in decades would make it implausible to create a department that could effectively manage the life cycle of a business.
Yet most executives are acutely aware of the finite nature of a business design. Since 1928, more than 66 percent of the Dow Industrial giants have been replaced as the companies merged, went out of business or grew too small. They failed to change their business design sufficiently to remain potent.
Companies whose business designs fail to remain relevant are those that fail to maximize the use of their human capital. When employees accept the company’s offer of authentic empowerment, and when they confidently shape and reshape not only their existing products and service offerings, but also their way of doing business, the people and the organization begin to evolve. That’s when change becomes embedded in a new corporate culture.
Evolved employees become the guardians of the enterprise and thereby their own future. If two heads are indeed better than one, imagine the benefit of 200 or even 2,000 heads thoroughly engaged in optimizing performance in the areas of the company that each knows best.