Leading people
As a business owner or leader, you should develop strategies to bring out the best in your employees, develop talent and retain good people.
Governance
Selecting the right governance structure for directing and controlling your business is of the utmost importance for long-term sustainability. Corporate governance essentially deals with company structures and processes for the direction and control of its business and the relationships among the company’s owners, management, board of directors and other stakeholders.
Governance through processes and structures supports communication between employees and helps them define who they are as a group and what they want to achieve. In order to be effective, all governance bodies and structures need to have a clear definition of their roles and duties and the powers they have in exercising their function.
Your business can implement many different means of governance, including:
• formal meetings of governing bodies
• processes for developing the company’s strategy and business plans
• setting targets and monitoring performance
• employment policy
• business missions
• conduct rules and conflict resolution policies
• the use of external consultants to manage and address business issues.
The following template can guide you in developing your corporate governance structure for your business.
For additional information, review the corporate governance matrix developed by the International Finance Corporation of the World Bank Group.
• Businesses operating in more dynamic environments, facing intense and continuous changes in the market or continuous requests for new products and services from customers, are more likely to have a formal governance structure (such as a formalised board of directors or a supervisory board and a management board) and a succession plan.
Make sure your governance can deliver:
— respect for employees’ views and ideas
— trust in the business owner and the company’s directors and officers working in the best interests of the business
— internal controls to ensure the integrity and reliability of all processes in the company
— comfort in terms of the next generation seeing a future pathway and being well equipped to transition into and through the business
— confidence of the current generation in the next generation’s ability to grow and protect the business capital for the future.
Management approach
Management styles vary from business to business and from person to person. The style you adopt will depend on your personality as well as the type of work and the amount of trust you have in your employees.
• Some managers adopt an autocratic leadership style in which individuals or teams pursuing business opportunities are expected to obtain approval from their supervisors before making decisions and the manager plays a major role. Others may apply a more democratic style where individuals or teams make decisions on their own without needing to always refer to their supervisors and employee initiatives and input play more major roles.
Your management approach will also vary depending on your employees, including the level of interest they show and how skilled they are.
• The Skill-Will matrix helps you determine what kind of management structure you should implement for each type of employee.
• Different employees will belong to different groups. You should personalise your approach to successfully manage their work.
Leadership skills
The success of your business relies on your good leadership and effective decision-making. As a business owner, you must lead together with your key employees and managers. Leaders – and their teams – need to be equipped with the necessary skills, capabilities and approaches to succeed. Leaders need to be agile enough to adopt leadership styles that appeal to and motivate diverse teams. Implementing effective leadership requires leaders equipped with balanced professional and personal (such as confidence and persuasion) skills.
Great leaders feel the pulse of the business and are in tune with the mood and energy of their teams. This enables them to set the direction and empower their people to deliver.
Building and managing trust among employees is one of the most important skills required in a leader. To create a powerful and successful team, a leader needs to engage, motivate and inspire employees. When necessary, they should coach them effectively. As a useful starting point, learn how to give and receive peer feedback, especially when you feel things are not working as expected.
Handling difficult conversations
Every leader encounters situations that require conversations delivering bad news, such as poor performance, redundancy or job reallocation. This type of conversation should be tackled immediately and in a well-structured way.
• Giving bad news is not pleasant for anyone concerned. Well-founded conversations will help your employees realise why certain steps are necessary.
• While addressing difficult issues, ensure that the message is delivered in a supportive manner and that the manner of delivery does not make the discussion more difficult.
• Try to determine where conversations may enter difficult territory and understand the concepts that help you navigate these successfully. You should aim to steer difficult conversations towards helpful outcomes, actions and results.
Explore tips on how to handle difficult conversations successfully.
Delegating
Delegating activities may be necessary to complete required activities on time and on budget. This means passing the responsibility of completing certain tasks or jobs to other employees. Be careful when deciding to which employees you will delegate which activities and ensure they are up to the task. Think about the depth and complexity of the task, the timeline and the employee’s competence and willingness.
Look into these considerations when delegating to help you manage the process.
Managing conflict
Conflict does not always have to be negative. Unpicking certain issues can lead to better solutions. The way you manage conflicts among your employees and key stakeholders can greatly impact your revenue, productivity and morale.
• Mismanagement of conflicts can lead to health- and performance-related consequences such as increased levels of stress and breakdowns in communication between key decision-makers, making it difficult for your business to adapt to and respond to economic and industry changes.
• Approach criticism in a neutral way. Responding in a fair and balanced manner instead of allowing a situation of conflict to develop gives employees the confidence to freely communicate issues that may be important.
Some employees may not be comfortable with direct confrontation. Therefore, you should set up anonymous complaint channels in your business, such as an anonymous complaint box or an anonymous hotline.
Make sure you have a structured and formal approach for managing conflicts to ensure that your business is always working towards a shared vision and set of goals.
Managing people through change
View change in the context of your business strategy and determine what needs to happen from a people perspective to change successfully and sustainably.
Your employees are especially vulnerable during periods of significant change – make sure they feel safe and included in the process.
• During periods of change, proactively engage with stakeholders to raise awareness of the situation, and keep communications timely and efficient. This will assist your business in effectively navigating new and developing challenges. Your messages should convey ability, humanity and integrity to ensure confidence and understanding regarding your organisations' actions and responses.
Build your principles regarding managing the change around following questions:
— How will you retain business engagement during the change?
— How will you make the change happen?
— How will you make the change stick?
— What will you measure?
— What will you communicate and how?
— Who are your stakeholders and how do you best engage with them?
— What changes will be made to employees’ roles and working conditions?
— Which groups are impacted most, including customers, and in what ways, such as responsibilities, roles or capabilities?
— How will you manage any leadership changes?
— How will you ensure successful leadership of any change?
Business changes
Changes in your business can be inevitable. They can include changes in:
• strategy
• structures, processes and systems
• departments and teams
• individual roles
• behaviours and culture.
The type of change and the reasons behind it will guide the way you plan to implement the change.
Change implementation plan
Make the change known by communicating the change early on and inviting people to contribute. Make the change real by translating the change from vision to reality for people and clarifying what the change means for them. Develop appropriate approaches for types of change, aligning your strategy and determining whether the business is ready to push the changes forward sustainably.
Managing employee performance
To help your employees grow, it is critical that you continuously track, manage and take an interest in their performance. This way you can extract the best out of your employees and guide them towards better levels of efficiency. Even the best employees will need your guidance from time to time.
• To manage employee performance:
1. define performance objectives
2. review and appraise performance
3. determine what adjustments need to be made
4. evaluate and review the performance management programme itself.
Defining performance objectives
Begin by setting your employees goals and discussing them personally. At the beginning of a performance review period, such as a financial year, clearly state what you expect of your employees and set measurable targets for them.
• Goals should reflect both your employees’ objectives and your business strategy. When setting goals, think about your role in achieving these outcomes. To be meaningful and achievable, make your goals SMART: Specific, Measurable, Action-oriented, Relevant and Time-bound.
• Include your employees in the process to understand their personal ambitions and objectives and to define achievable goals. Setting goals that are unachievable will only cause frustration to your team.
Once you have defined your employees’ goals, make sure they are written and, if possible, recorded electronically within your HR information system.
Performance review
Review performance regularly through providing informal and immediate feedback, including exchanging direct conversations or using feedback tools, and on an annual timeframe through structured conversations and review meetings with each of your employees.
Give positive developmental feedback to your employees. Regular feedback, provided in the immediate context and geared to enhance performance, has far more impact and allows people to develop throughout the year.
• Provide positive feedback by praising employees when they have done something good. This encourages them to continue performing well in the future.
• Providing developmental feedback should not be seen as a negative thing as this type of feedback helps you address issues you have recognised in your employees’ performance and guide them on how to do better.
• Learn more on how to give feedback.
Once a year you should have one-on-one meetings with your employees to discuss their performance. These discussions provide a valuable opportunity to focus on an employee’s career development, and you can give them focused guidelines that will boost their motivation and performance. Make sure you are ready for this process and are familiar with certain formalities that are expected of you.
• Collect information regarding your employees’ performance including feedback from more senior employees that have worked with them. Try to gather data such as how busy they are, what projects they have completed or any special contributions they have made.
• Develop a rating scale that will help you grade their performance. This could be a simple scale of one to five for each quality. Familiarise yourself with it.
• Review and assess employees’ performance and compare it with their peers. Having all employees designated as outstanding performers would not reflect reality. Try to assess them on a relative performance scale and distribute them accordingly. Most of your employees should belong to the average performance population, with comparatively few defined as outstanding or underperforming.
• Have focused conversations with your employees and adopt a coaching mindset. Discuss your observations on the employees’ key strengths and areas for development, such as technical knowledge, and summarise their performance, manage their reactions and expectations, then agree to an action plan. Share constructive performance feedback and highlight areas for improvement. Explain clearly what would be expected of them in order to achieve a higher performance rating.
• Remind them that the final confirmed performance rating will be discussed and approved later after you have conducted review interviews with all employees and discussed with their supervisors, if applicable. Explain that their performance is calibrated in relation to their peers.
Outcomes and rewards
The results of performance evaluations should directly affect the promotion and remuneration of your employees and, in some cases, their continued association with the business.
• Your performance reviews should result in actions based on achieved outcomes. You can reward or promote employees that have:
- clearly demonstrated the capabilities required for the next level
- shown adequate exposure in the current role with proven capability to deal with an increased complexity and variety of circumstances
- consistent high performance proven by past years’ performance ratings
- provided solid contributions to special programmes and internal projects
- demonstrated proven capabilities
- shown strong commitment and motivation
or met other qualification requirements for promotion.
Retaining employees
Your business must work to retain talent. Losing top talent means losing critical knowledge and skills. This may be detrimental to your business, and hidden costs linked to employee turnover can soar.
• Businesses often have difficulty retaining their most valuable employees. Employee retention strategies are interventions implemented to discourage employees from leaving their jobs. Businesses should want to encourage employees to work as best they can at the organisation, for the longest time possible.
• Successful employee retention gives businesses an advantage over the competition, not only in the form of lower costs of recruitment and retraining, but more importantly, because retaining experienced employees ensures that all their know-how stays within the business.
• Losing valuable employees can also have emotional repercussions on those who stay, directly decreasing productivity and efficiency through lower morale and motivation. The loss of one employee is often followed by others leaving too.
• Do not forget that losing an employee is also a financial loss as you are losing out on a valuable asset you have invested a lot in.
You can easily calculate employee turnover by using following formula:
• Employee turnover rate = (number of employees who left your business in a period ÷ average number of employees) * 100
• Whether an employee turnover rate is good or bad depends on different factors, such as the industry the business is in. Generally speaking, anything between 5% and 10% is considered a reasonable and natural turnover rate, but this benchmark varies by the industry, sector and region in which the business is operating, as well as its size, both in terms of the number of employees and the revenue it generates.
• Average number of employees = (number at the beginning of a period + number at the end of the period) ÷ 2
How can I retain my employees?
An engaged employee is less likely to leave an organisation than a disengaged one. Engaged employees are committed to their business, exhibit higher levels of performance and are overall more motivated to work and contribute to the success of your business.
• Employee engagement ensures that employees’ potentials are unlocked and will move a business closer towards reaching its objectives and vision. Employees working enthusiastically and at their best will help your business deliver efficient, high-quality services.
• Businesses with high levels of employee engagement have lower turnover rates and less employee retention issues than businesses that demonstrate lower levels of employee engagement.
Learn how to create and nurture a sense of community within your workforce. This will cause employees to become personally invested in your business, making them want to stay and grow with your business rather than move on, helping to lower the employee turnover rate.
By understanding what is driving or inhibiting employee engagement, your business will be able to treat the root cause of any issues and achieve positive and long term benefits, including:
• increased human capital
• a positive work environment
• employee activation
• increased innovation
• improved bottom-line results.
There are a wide range of drivers of employee engagement including:
• job satisfaction levels
• collaboration, development and future career opportunities
• personal initiatives and work-life balance
• salary and benefits
• leadership and people management
• work engagement, communication, feedback and recognition
• organisational commitment
• resources available at work.
Here are some effective employee retention strategies that involve little to no money.
Identifying key employees
It not always possible to retain every employee – some will retire, some you will let go and some will leave for reasons with which you cannot compete. It is therefore important to focus on retaining the key employees that hold the most value for your business.
• You should aim to retain high-performing employees you have identified during the performance review process, employees who perform critical business functions and those who possess specific skills that are essential to your business. Also, keep in mind that your business requires a balanced mix of different skills and knowledge to run smoothly.
Where highly-skilled employees are at risk of leaving, encourage them to stay by offering higher levels of reward. However, do not disregard employees who are happy to stay: they are also valuable and should be rewarded accordingly to keep them satisfied.
Compensation management
To retain your most valuable employees you should develop and implement robust, effective employee compensation and reward management systems. These should be clear, simple and linked to the performance review process.
It is important to define the focus of reward. One business may focus more on performance-related pay, rather than guaranteed pay, whereas another may focus on benefits and work-life initiatives. The reward focus should form part of your compensation management principles.
To define a set of compensation management principles:
• Analyse the market in which you are operating.
What reward systems are common or expected in your business sector?
• Assess your business’s performance.
How does it compare to peers in the industry?
Is it better or worse than last year?
• Adjust bonuses to reflect your business’s relative performance.
• Communicate the decision to employees.
You do not need to explain bonus decisions in detail as long as your employees understand the general principles behind their rewards.
When considering which businesses to use as comparators, factor in those:
— with similar or comparable function
— to which you may lose talent or from which you may attract talent
— operating within the same geographical spread or jurisdictions
— of similar size.
Bear in mind that a compensation management policy is aspirational and the extent of its delivery or actualisation is a function of what the business can support in practice.
Illustrative example of implementing a rewarding system
A small manufacturing business is faced with the challenge of retaining the right employees with specific production skills. The business has been performing steadily over the years, but has limited potential for significant organic growth and increase in revenue. It needs to keep key employees but is limited in what it can do regarding significant salary increases. The owner decided to introduce some payment in kind options to help retain employees:
— a bonus of a certain percentage share when total production and revenues show an increase of at least 20% compared to the previous year
— a Christmas bonus
— days off for specific family and personal dates and events, such as the employee’s birthday or the first day of or graduation from school for the employee's children
— an annual dinner event for employees and their families.
Flexible working options
Flexible working arrangements may help you retain and attract employees by allowing them to work in a way that better suits their unique situations and the personal responsibilities they have. Consider:
• parenting and caring responsibilities
• other family responsibilities
• efficiency and productivity gains
• sporting interests
• community or volunteer work
• offers of part-time work or less physically-demanding roles for employees approaching retirement
• study obligations
• returning from work following extended leave.
• Enabling future business and organisational flexibility has become a top priority. Flexible working options, such as remote working, have increasingly become viable options for ensuring business continuity.
• Greater remote options enable businesses to grow their talent base to meet growing demand, unconstrained by physical limitations such as location or office space.
Some other ways of flexible working may involve:
• the use of collaboration technology
• new ways of leading and managing to increase employee autonomy
• a shortened work week, such as four days instead of five
• working from home on an ad hoc basis or on scheduled days
• flexible hours on an ad hoc basis or on scheduled days
• working from another company office temporarily
• career breaks or sabbaticals
• purchasing additional leave
• unpaid leave
• part-time work
• job sharing.
Make sure your flexible working policy states that all your employees who are working flexibly are personally responsible for the success of their own flexible arrangements. They should communicate their arrangements openly and transparently with you and their team members and clients or customers as appropriate.
