Research in the new field of people performance management indicates that employee satisfaction truly does impact corporate earnings. It's time for businesses to rethink what that means for their management of production and distribution.
The relentless pressure to cut costs by boosting operating efficiency leads management teams almost invariably to view people as a fixed cost to be minimized. The more labor they can remove from the price of a product or service, the more competitive the product or service will be in the marketplace. This idea has prevailed for a century, but today's increasingly competitive global marketplace is leading companies to reconsider it.
To understand why a shift of perspective is necessary, one must only look at how the world is changing. Don Schultz, professor emeritus at the Medill School of Journalism at Northwestern University, summed up the global landscape like this last November: "Everything is being commoditized; price is the only game in town. ... Supply-chain and price competition are zero-sum games. Most products and services are instantly replicable." Managers in businesses of all shapes and sizes are wondering how to develop a long-term competitive advantage when other organizations can always find a way to knock off their products or services and sell them more cheaply.
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