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What comes first: employees, customers or profit?

Fortunately most experienced executives know that profit is a by-product of getting lots of other things right.

Most won’t pursue profits no matter the cost as that would mean both employees and customers are expendable. Cutting one or both might deliver profits in the short term but it’s not a good recipe for achieving sustainable high performance.

So what about employees and customers? Who comes first? This is a fundamental question not only for HR executives but for the CEO and the entire executive team. Their collective view will impact the way strategy is implemented and key decisions that need to be taken.

Most executives think customers come first and employees second. This is a real concern as that view leads to poor implementation of strategy and poor decision-making. It’s the role of HR to understand this issue and build a compelling narrative to explain why employees come first and customers second. HR executives should go as far as debating this with their CEO and executive team and getting them all on the same page too.

Research we have conducted involving over 1,000 employee and customer surveys shows that organisations that achieve profitable growth start by investing in their employees. Providing employees with clear direction and expectations and empowering them to do their jobs well leads to greater employee engagement and retention.

Insync’s Profitable Growth Cycle, as it’s known, continues with engaged employees leading to stronger customer relationships, which creates greater customer loyalty and advocacy. Add to the mix an increase in productivity and innovation based on input from both engaged employees and engaged customers and you start creating a virtuous cycle of profitable growth.

HR executives should help their CEOs and executive teams understand that their employees won’t look after the organisation’s customers until the organisation looks after its employees.

It is important that the fundamental principles of our Profitable Growth Cycle are thoroughly debated and then agreed upon so they can be used to guide the organisation’s strategic and business plans, initiatives and all key decisions.

HR has a critical role in driving this cycle and keeping the flywheel spinning. Supporting employees is not about a few short-term quick fixes. It’s about building certain habits deeply into the culture and DNA of the fabric of the organisation.

In some further research conducted by Insync involving the views of over 100,000 employees from around 200 organisations, we’ve found that seven habits that most differentiate high performing organisations from low performing organisations were revealed.

The seven business habits are:

  1. Live an inspiring vision
  2. Communicate clear strategies and goals
  3. Develop your people
  4. Go out of your way to recognise people
  5. Genuinely care for your people
  6. Listen and adapt to your customers’ needs
  7. Continually improve your systems

CEOs who simply put profits first will fail when it comes to the first business habit. This habit is the single biggest differentiator of high and low performance organisations. To simply have a vision of making more money for the shareholders won’t inspire employees to work harder and to put in extra discretionary effort. Most employees, and in particular younger employees, seek something with far more purpose and meaning.

Habit two sounds simple but our research showed that 76 per cent of the employees of low performance organisations said they couldn’t easily refer to a list of their organisation’s main goals. The figure was better, but still 46%, for high performance organisations.

This makes it very hard for an employee to understand if their efforts are assisting their organisation achieve its objectives if they don’t know what those objectives are.

The book explains that HR has a role in habits one and two but habits three, four and five are very much their domain.

While many CEOs and executives say that their people are their greatest asset, it is HR’s role to ensure that reality matches those words. They must ensure that business habits three, four and five become a way of life for the CEO and executive team as only then will those habits have a chance of being cascaded down through the entire organisation.

But beware. The seven habits are not a smorgasbord where you choose the ones you like. They are all inter-related and indispensable to achieving high performance. Poor implementation of one will undermine the implementation of others. Deeply embedding all these habits will have many side benefits including making your organisation a better place to work, improving employee engagement and retention, customer loyalty and advocacy, productivity, innovation, organisational resilience and change capability. All of these factors are also inter-related and build on each other to increase your organisation’s performance even further.

Nicholas S. Barnett is a director, business leader and strategist. He is also the author of the new book, 7 Business Habits That Drive High Performance.

This article appeared in The Age and Sydney Morning Herald on 7 December 2014.

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