I just finished reading a new i4cp research report The People-Profit Chain: A Model for Increasing Market Performance by up to 3x. The report documents extensive research on the people practices of high performing companies and measures the likelihood of high and low performing companies to implement each practice.
More importantly, ‘The People-Profit Chain’ maps the statistical correlation of each behavior to overall market performance and presents a cohesive strategy for improving market performance. I recommend it to any business leaders trying to connect the dots between people practices and market performance.
According to the research, the market performance of high performing organizations that evidence key behaviors is nearly 3x better than that of low performing organizations.
Not surprisingly, there’s no silver bullet. There are five ‘links’ in the people-profit chain: Market, Strategy, Culture, Leadership and Talent. Market performance is determined by how successfully companies are able to shape organizational behaviors in all of these areas.
The link with the highest correlation to market performance was ‘Market’, i.e., how well each person in the company understands and serves the needs of customers. One might assume from this that focusing on customers will drive the greatest improvement in market performance but of course it isn’t that simple. Unless your talent strategy connects the dots between customers and the business, announcing a strategic focus on customers is unlikely to drive higher levels of market performance.
If that sounds complicated because you have to shape behaviors across multiple areas of the business to achieve higher performance, here's the good news: Improvements in one area tends to facilitate improvement in other areas.
- Working with customers and capturing their ideas fosters business innovation.
- Business innovation leads to process improvement, improving organizational agility.
- As the business becomes more agile productivity also improves as employees become more effective.
- Workforce engagement improves as productivity improves.
- Highly engaged employees take better care of your customers.
But the really neat thing is that the reverse is also true because all of these are related:
- Taking care of customers creates a feeling of making a difference, which improves engagement.
- As people feel more engaged with the business, they work better and with more focus, improving productivity.
- As productivity increases, people have more time to spend on new ideas and ways of working, which in turn improves agility.
- As organizational agility improves, a climate of innovation is more likely to follow.
- Business innovation helps the company better serve its customers.
Interestingly, compensation plays a relatively minor role in driving performance compared to other factors such as leadership, culture and talent strategy. But although compensation didn’t receive an explicit call out in this report, it is nonetheless a key component of a company’s ‘people plan,' which connects the dots between people and the business strategy.
Bottom line: The People-Profit Chain combines hard evidence, best practices and practical advice about how to connect talent to the business. It's definitely worth a read.
Laura Schroeder is EMEA product marketing director at Workday, headquartered in Pleasanton, CA. She has nearly fifteen years of experience envisioning, designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from Cornell University. Her articles and interviews on HCM topics have been published in the US, Europe and Asia. She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing (well, kicking things) and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.