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As the global economic recovery gains momentum, growth expectations are becoming difficult to avoid. A recent survey of CFOs at midsize companies finds that more than 90 percent expect growth in 2011 and 41 percent expect double-digit growth. With recruiters facing an enormous volume of résumés due to current labor market conditions, however, the right candidates to support that growth are increasingly difficult to find. In fact, according to Corporate Executive Board research, the percentage of new hires rated above average fell 17 percent in 2010, with 83 percent of recruiters reporting that not even half the applications they receive are from people actually qualified for the positions. With expectations for financial performance on the rise and recruitment efforts yielding mixed results, companies will need to lean more heavily on their existing employees to drive growth.
Meanwhile, employees are disengaged and discretionary effort is at an all-time low (57 percent) following the massive organizational changes that occurred during the recent downturn. To make matters worse, the renewed job market is presenting exciting opportunities to employees that companies cannot afford to ignore. Of the various ways that organizations can address these challenges, investing in manager development represents one of the most immediate opportunities to drive improvement. Research conducted by CEB suggests that effective managers can have an enormous impact on a company's bottom line. They can increase the retention level of direct reports by 40 percent and performance levels by 25 percent. Thus it is no surprise that 60 percent of the 250-plus heads of HR at midsize companies recently surveyed by CEB's HR Leadership Council see improving managers' capabilities at developing direct reports as their highest priority in 2011.
While managers spend on average 21 percent of their time developing direct reports, only 42 percent of the managers are effective at employee development. Additionally, restructuring and layoffs during the economic downturn have left managers with much greater spans of control—61 percent greater, on average. With aggressive top-line growth targets, these overstretched managers are expected to do more with less, leaving even less time to develop their employees. As evidenced in CEB's 2010 research, this de-prioritization of employee development is a key driver in the erosion of productivity that totals nearly 12 percent of potential employee output.
But there is still hope: CEB research has also shown that the effectiveness of employee development depends more on the nature of the activities than on time spent. CEB has identified the top 15 activities managers should use to maximize the impact of their development efforts on employee performance. The challenge for organizations is to prioritize their manager training investments and realize positive, measurable returns. Successful organizations are succeeding through focused education efforts, which includes deploying comprehensive training solutions designed to increase manager effectiveness across the board.
Through best-practice research and ongoing conversations with senior HR executives, CEB recommends that companies take the following steps to enable managers to drive employee development effectively:
1. Demonstrate that people development matters. Improving managers' capabilities is necessary but not sufficient to drive performance outcomes. Managers must understand how employees' development goals fit into broader organizational needs and strategy as well as into the employees' own personal and business objectives. Show managers how team development translates to business outcomes, and change the conversation from "development for people results" to "development for business results."
2. Integrate learning into day-to-day work. Although managers' day-to-day interactions with their direct reports boost manager effectiveness at developing employees up to 40 percent, the majority of managers are ineffective at these interactions. To embed learning objectives effectively into employees' day-to-day work, teach managers to:
A. Prioritize employee development activities: Teach managers not only to provide employees with discrete on-the-job learning experiences, but also to stretch employees over time and help them reflect on their experiences to ensure learning is captured.
B. Improve development execution: If managers are not using documented individual development plans with the employees, help them make a shift from telling employees what to do to helping employees plan how they can apply what they have learned.
3. Hold managers accountable for the quality of development, not simply compliance. Compliance-based accountability focuses erroneously on the time spent on employee development. To motivate managers to improve and be better coaches, track the quality of development and emphasize effectiveness over activity completion. Progressive organizations even create positive pressure from senior leaders and key stakeholders by publishing a list of managers rated most effective at people development by their teams—driving behavior changes through peer competition and recognition.
By following the steps detailed above, organizations can help their managers drive significant gains in employee performance and productivity—and ultimately support continued business growth.
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