Speaking to over 100 business leaders at a recent conference, I asked those who agreed with the following statement to stand up: ‘The single biggest influence over the performance of a business is the aggregate performance of its people’. To my surprise not a single bum remained on its seat.
While I had them on their feet I presented a supplemental challenge: “Sit down, unless you can say that every member of your management team and staff clearly understands the company vision, its raison d’être and what their individual part is in the company realising that vision.” Just six remained standing – the true masters of the universe. These were the few that understood that life as a business leader is a whole lot easier and more rewarding to shareholders when you create a culture where everyone in the business is ‘on side’ and bought into the company vision.
When an investor takes a stake in a company, entrepreneurs and management want to get some ‘added value’ from that investor – they are looking for ‘smart’ money. Most investors can bring a degree of experience, but few realise just how much performance can be unlocked if the management team is clear about vision and strategy, and knows exactly what part they are playing in the tactical execution plan. Contribution to management performance can outweigh value brought from knowledge like industry experience and contacts.
Most people work in the second quartile of their performance potential and could realistically obtain at least a third more performance from their team by adopting a different leadership style which is clearer about the company vision, values and messaging. A lot of employees put on a work persona Monday to Friday to conform to the behaviours they believe are ‘corporate and professional’. In fact, adopting a persona means natural talent is suppressed. With between 40 and 70 per cent of the company’s outgoings going to employee payroll, imagine the impact on corporate profitability if this discretionary effort and talent could be put into day-to-day employee activities. Budgets for research and product development can be huge – often 15 per cent – and in small companies significantly higher. Sadly, great R&D is so often squandered at the point where the rubber hits the road through mediocre people performance where the culture is not properly aligned with the needs of the business.
The biggest arbiter of business performance is the performance of people. Knowing how to unlock that asset through culture and development is the ‘smart’ in smart money for the enlightened investor and those organisations looking to investors for a valid contribution to make.