PGGM Martin van Rijn

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5. The value creation cycle

The value creation cycle

Raising employee value and cutting costs

Raising employee value and cutting costs at the same time? It sounds like a secret formula that turns copper into gold. But there is nothing magical about it. It’s a matter of conviction, alignment, leadership, connection, discipline and execution – and an endless faith in your employees. Then you can create employee value in economically difficult times and make the right choices for the future.

Every organisation is based on creating and exchanging value between employees, customers, the organisation and society. The more value an employee adds to a customer, the more satisfied this customer will be. This is translated in customer loyalty, ambassadorship and income. Income raises profit, which is invested in society and reinvested in employee value. That, in a nutshell, is the philosophy of the Value Profit Chain.

Value for employees and value from employees
The most sustainable and controllable way to start and maintain this chain is by steering on employee value which consists of two objectives: value for employees and value from employees. Value for employees is every effort an organisation puts in employees in order to raise employee satisfaction such as: salary, challenges, inspiring workplace, appreciation, openness, freedom, celebrations, and balance. Value from employees is the returning result from employees, like: customer loyalty, innovation and ideas, motivating colleagues, production, income, attracting great customers, attracting great employees, knowledge sharing and culture sharing. In other words: make sure your employee satisfaction is at a very high level in order to bring your customer satisfaction to a very high level too.

In times of financial crisis, is a Great Place to Work still a Great Place to Work?
Currently the whole western economy faces a financial crisis. The questions arises: a Great Place to Work seems to be fit for good times but does it ride out the difficult times too? The answer is yes. The fact is that Great Places to Work have very high employee satisfaction rates and therefore those organisations are excellently equipped to create sustainable value. Our organisation is such an organisation. &samhoud was the number 1 Great Place to Work in the Netherlands for three years in a row, from 2008 to 2010. That is unique. On top of that we became the number 1 Great Place to Work in Europe in 2010. The recognition for becoming number 1 Great Place to Work is the result of a very straight path we have walked for years marked by a clear vision, a clear strategy, a clear Business Transformation Model and a clear philosophy, the Value Profit Chain. Besides that, our people focus on personal leadership, execution, inspiration and discipline. We are highly interconnected.

Connecting long-term value and short term costs
In economically bad weather it’s important to focus on value for the long-term and on costs for the short-term. However, the trick is to keep these two ends connected. And that is a big advantage of Great Places to Work. They can build on the engagement of their employees to take severe measures and still maintain their high energy levels. One of the best ways to create value for your employees is by involving them in difficult issues. You involve them for instance by implementing reality games focused on costs -open the books and let them reflect on stocks, profits and costs as if they were leading the company. You might even go as far as offering them a share in your company. Will they invest money to create value and reduce costs in the short-term in exchange for profit in the long-term? Employees really appreciate an austere regime when they feel the responsibility of being involved. Other alternatives of creating value for employees in times of crisis are programs that  improve their health, like sports, or programs that buy them time. That way they invest in long times of leave.

Selecting your future workforce involves investing in the personal development of your employees now
It is a misunderstanding that personal development for your employees and yourself is a bad investment in economically hard times. You have to stay focused on creating value for your employees. In the previous paragraph I shared a few examples of personal development, albeit a bit different than you might expect. It’s all a matter of creativity and individual differentiation, but doesn’t that apply to good times as well?

The best form of personal development employees can use is creating their own Personal Vision. If they know why they exist, what they want to achieve, what they stand for and what they excel at, they can move a mountain. Besides, if their Personal Vision matches the company vision, they then use their power and strength to the max for your company. And if their Personal Vision doesn’t match the company vision you know that sooner or later they will put too much energy on things other than work. It’s a natural selection with respect to the individual whose success and happiness are at stake. In the end they will be better off in another environment. At the same time you need to monitor the quality of your core employee base. As an employer you have to keep on stretching their limits in order to maintain high quality A-players who fit into your company vision, your philosophy and your strategy.

A Personal Vision is a very fundamental form of personal development. But companies must go to a fundamental level when decisions are to be made about the current workforce and the future workforce. Currently many people are fired, but soon the war for talent will take off and every organisation will ask the same question: do we have the right people for the future and can we still attract them? My answer to that question is this: make sure you have a clear company vision for the long term, make sure you focus on employee value to keep the Value Profit Chain going and invest in Personal Visions for your employees. In other words: be a Great Place to Work!

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