Monthly Archives: January 2018
Traditional well-being analyzes using average values and correlations are over-simplified and can be harmful for organization performance development.
Cambridge professors Fleetwood and Hesketh argue that employee surveys with statistical analyzes are measurements without proper theoretical foundation. I have come to the same conclusion. The fundamental mistake comes from the fact that human performance is not so simple phenomenon that it could be analyzed by statistical methods. Employee survey analyzes using mean and average values or correlations are over-simplified and can be harmful for organization performance development. In this article I will explain why.
I will compare staff survey results by two different analyzing methods – one is traditional statistical average value and the other is new QWL method that uses motivation theory. In this study the employee survey questions are suitable for both analyzing methods. This means that inquiry is the same but results are analyzed differently. Inquiry has questions related to
– Physical and Emotional safety (PE)
– Collaboration and Identity (CI)
– Objectives and Creativity (OC)
These self-esteem factors affect to performance in different phenomenon. The performance outcome is the combination of all of these factors – but not average value. We have developed so called Quality of Working Life index (QWL) which is scientifically approved method for analyzing human performance at organization context. The performance index follows approved motivation theories (e.g. Herzberg) that have explanatory power. Quality of working life effect on business performance is not linear; it looks more like exponential curve. The principle of QWL is shown at the figure 1.
In simplified case study, let us assume that all self-esteem factors increase hand in hand. At the point where all self-esteem factors are 75% the QWL index is 61.8%, describing the performance level according to the motivation theory. Average value 75% indicates that the situation is relatively good and there is not so much development potential. However, QWL index (61.8%) indicates that there is still great possibilities to improve.
Figure 1. QWL index where all self-esteem factors are 75%.
The difference between statistical average well-being and QWL index can be visualized when drawing both methods at the same diagram. Average well-being form straight line from 0 to 100%. QWL-index increases curving gradually and speeding up when survey measurements exceed 57 (x-axel value). The biggest variation in the values are at 57 when the QWL-index is only 41% (and average 57%), thus average calculation gives almost 30% higher value. Monetary mistake is at for example business service provider branch approximately 40 000 €/FTE, thus at 100 persons company 4 M€.
Figure 2. Average inquiry results and QWL method analyze at the same diagram.
Considering that the employee performance is production parameter, the mistake is huge at business competitiveness. Therefore it seems that average value hides the business improvement potential. When QWL analyze is done the company would find out the productivity improvement potential. QWL improvement will increase effective working time for making revenue. More revenue with the same fixed costs raise the profit with good efficiency. Thus, it seems that measuring human performance by statistical average is not only fundamentally wrong but also harmful for business.
To illustrate the problem we will study the case company with real data. The company is business services provider with 980 employees with 158 M€ revenue and 18 M€ EBITDA. Company’s wellbeing inquiry shows average value 78.7%.
Case 1. Strategy: improving well-being concentrating on problems indicated by traditional survey analytics (fig. 3)
According to the figure 3 the Company’s average well-being is improved to the level 80.7%. Self-esteem factor PE is improved and other remains the same. The company concentrate on improving the well-being at the self-esteem areas of physical and emotional safety which represent the lowest values at the survey. QWL-index improves from 67.0% to 69.1% thus 3.1% improvement at the performance. Company will gain 2.1 M€, meaning 2 159 € EBITDA increase per Full-Time-Equivalent.
Figure 3. Case 1 strategy for improving wellbeing.
Case 2. Strategy: Improving QWL index with the most effective management practices (fig.4).
Company’s average well-being is improved to the level 80.7%, thus the average is the same as at case 1. Self-esteem values at the beginning and end are shown at the figure 4. HR-Management strategy is to improve the self-esteem factors that gives the best value at QWL index. Management decides to concentrate on improving staff motivation and empowerment, thus the Objectives and Creativity. QWL-index improves from 67.0% to 71.6%, meaning 6.9% improvement. Company will gain 4.3 M€ EBITDA, corresponding 4 422€ increase per Full-Time-Equivalent.
Figure 4. Case 2 strategy for improving QWL index with the most effective management practices.
At case 1 the HR-management strategy is good in reducing absence because Physical and Emotional safety are connected to the absence. Therefore the strategy is good if absence is high and causing problems at customer must-be quality and increased overtime work. However at the business value was not as good as at case 2. Improving Objectives and Creativity will boost the performance, but only if other self-esteem factors are not reducing simultaneously. At case 2 the absence is not likely to reduce. The benefits of this strategy is at improving business value. Fostering staff motivation and innovativeness creates possibilities to develop new services and products that generate more revenue and gain satisfied customers.
For creating competitive advantage there should be understanding on how human capital is developed. Human performance consists qualitative factors and therefore well-being connection to performance with statistical analyze seems to be oversimplified and fundamentally wrong. Instead of statistical science, there should be used motivation theory in analyzing well-being meaning to human performance.
Best management practices have tendencies to improve staff well-being. Depending on the situation and team manager skills, some management practices are more effective than others are. Each management practice require scarce working time, thus it is important to do effective development activities. Using traditional statistical method there is risk to prioritize wrong actions. Example illustrates how organization improvement profit is doubled by utilizing motivation theory.
The statistical inquiry analyze seems to hide the business development potential. For strategic decision-making, it is important that essential business related information is right. At knowledge-based business, the staff quality of working life is the most important production parameter. Staff human performance should be measured and analyzed using motivation theory, not statistical science.
In addition, QWL index should be measured much shorter intervals than yearly. Nowadays pulse type inquiries with real-time QWL analytics are possible, which allows situation sensitive performance management and continuous improvement. New research with practical case studies indicate that there are significant possibilities to make more profit through effective organization development.