SUSTAINING EMPLOYEE ENGAGEMENT IN A VUCA WORLD
The business world as we have it today is a rapidly evolving and highly unpredictable landscape. Companies today are operating in a Volatile, Uncertain, Complex and Ambiguous world, also known as the VUCA environment.
The “V” in the VUCA acronym stands for VOLATILITY. This is the nature, speed, volume, and magnitude of change that is not in a predictable pattern (Sullivan, 2012). Volatility is turbulence, a phenomenon that is occurring more frequently than in the past. The BCG study found that half of the most turbulent financial quarters during the past 30 years have occurred since 2002. The study also concluded that financial turbulence has increased in intensity and persists longer than in the past. (Sullivan, 2012 October 22). Other drivers of turbulence in business today include digitization, connectivity, trade liberalization, global competition, and business model innovation (Reeves & Love, 2012).
The “U” being UNCERTAINTY, or the lack of predictability in issues and events (Kinsinger & Walch, 2012). These volatile times make it difficult for leaders to use past issues and events as predictors of future outcomes, making forecasting extremely difficult and decision-making challenging (Sullivan, 2012 January 16).
COMPLEXITY as noted by HR thought leader John Sullivan (2012), has to do with numerous and difficult-to-understand causes and mitigating factors (both inside and outside the organization) involved in a problem. This layer of complexity, added to the turbulence of change and the absence of past predictors, adds to the difficulty of decision making. It also leads to confusion, which can cause ambiguity, the last letter in the acronym.
AMBIGUITY on the other hand, is the lack of clarity about the meaning of an event (Caron, 2009), or, as Sullivan writes, the “causes and the ‘who, what, where, how, and why’ behind the things that are happening (that) are unclear and hard to ascertain.” (2012). Col. Eric G. Kail defines ambiguity in the VUCA model as the “inability to accurately conceptualize threats and opportunities before they become lethal.” (Kail, 2010). A symptom of organizational ambiguity, according to Kail, is the frustration that results when compartmentalized accomplishments fail to add up to a comprehensive or enduring success.
The reality is that the environment described above is the one in which businesses around the globe operate today. Studies have shown that organizations rely heavily on their workforce to stay competitive because they determine if the organization sail through, or sink. In a recent Gallup study, it was noted that disengaged employees erode an organization’s bottom line and contribute to more than $300billion in productivity losses in the United States.
In view of the above, it has become obvious that beyond better products and services, strategies, technology or perhaps even better cost structure, the one thing that creates sustainable competitive advantage, is the workforce. They are the driving force behind the ROI.
Over the years, researches have shown that employees who are engaged significantly outperform employees that are not. In a VUCA environment where there is a fight to gain significant competitive edge, having engaged employees is the ultimate goal but how can that be achieved in a Volatile, Uncertain, Complex and Ambiguous environment? This article attempts to provide handy solutions to this scary environmental phenomenon with a view to sustaining employee engagement.
Employee Engagement & VUCA
Employee engagement can be seen as the emotional commitment employees feel towards their organization and the actions they take to ensure the organizations’ success; engaged employees demonstrate care, dedication, enthusiasm, accountability and are result oriented.
Dramatic changes in the global economy over the years have had significant implications for commitment and reciprocity between employers and employees and thus have impacted employee engagement. For example, the economic recession as we have it today has prompted a number of organizations to restructure. At some companies, restructuring has meant reduction in staff strength and in layers of management. Although restructuring may help organizations cut /optimize costs, these changes have broken the traditional psychological employment “contract” and its expectations of reciprocity. Employees have realized that they can no longer count on working for a single employer long enough to retire. And with reduced expectations of reciprocity, workers have felt less commitment towards their employers. Many organizations have broken both formal and psychological employment agreements and are struggling to craft effective strategies for reviving employees’ commitment in order to revitalize their engagement.
In the world of work, employees and employers have traditionally made a tacit agreement; such as secure jobs and fair compensation for commitment. When an entity or individual to whom someone has made a commitment fails to come through with the expected exchange, the commitment is eroded. The VUCA environment demands that organizations invest in their human resource practices in order to be able to compete favourably. But just like other investments, there is a growing need to consider potential return i.e. a cost benefit analysis on employee engagement practices. Hence HR Professionals must have undisputable facts to convince management on the benefits of investing in these practices.
Below are insights into some practices that may need to be realigned to match the demands of the VUCA environment:
The VUCA Environment and Talent Acquisition
VUCA brings about a constantly changing set of required employee skill sets and job duties hence creating a huge gap between the needed and the available skill sets. Candidates who are versatile and can handle multiple responsibilities and job functions are in high demand but sadly so are scarce in number. Over the years, there have been significant shifts in the quantity vis-à-vis the quality of applications received as well as offer acceptance rates.
Contingent labour is gradually becoming a vital part of the workforce in order to be able to meet the ever changing demands of the operating environment i.e. sudden upturns, downturns, and new skills needed. In the light of this, fluid job descriptions and hiring standards are necessary for continually evolving job roles that reflect the continually changing work environment.
Taking into consideration the new world of work and the ongoing “war for talent”, HR professionals need to take a leaf from marketing professionals in selling their jobs in order to attract the right people. The message an organization conveys while seeking to attract job applicants can influence future employees’ engagement and commitment. Job advertisements should highlight the roles’ attractive features such as growth opportunities, flexible work hours or learning and development opportunities.
Also it is time to consider how you might best seek candidates from inside your organization. When you recruit existing employees for desirable jobs, you enhance their commitment. If you recruit from outside when qualified internal candidates are available, you may unconsciously suggest to current employees that your organization is not willing to reciprocate their commitment. Existing staff may then begin questioning their own commitment to your firm.
The VUCA Environment and Learning & Development
In a bid to cut costs, most organizations cut down on the investment in learning and development initiatives, but at what cost? It is imperative for HR professionals to build a continuous learning culture in a VUCA environment because skills quickly become obsolete. It bestows on all HR professionals to put on their creative thinking cap and come up with cost effective or low cost learning and development solutions that will address perceived gaps and still deliver value to the organization.
It is imperative that even in an economic downturn; training should be continued and should be positioned as an investment rather than a cost because that is what it actually is. To get the most from your training investments, you might want to leverage digital technology and the Internet to deliver self-paced and individualized trainings to employees. Another initiative can be to engage an organization’s most experienced employees; proactive knowledge sharing sessions can be institutionalized so that the expertise of the more experienced personnel can be tapped into. This could be achieved by creating knowledge repositories that can be stored in databases accessible to all employees.
On-the-job training, job assignments, coaching, and mentoring are some cost effective learning interventions that will still be relevant in the VUCA world and in keeping employees engaged. To develop employees that will adapt to the VUCA environment, HR professionals must focus on programs that will develop agility, adaptability, innovation, collaboration, communication, openness to change, and higher-order critical thinking skills.
The VUCA Environment and Total Rewards
In a VUCA environment, Compensation & Benefits budgets are being streamlined in a bid to cut costs yet HR professionals are saddled with the responsibility of ensuring that employees are motivated, engaged and retained. Equipped with a limited budget, how do HR professionals effectively reward, retain and motivate employees towards achieving set goals? According to the findings from KPMG 2015 remuneration survey, the largest component of pay to employees still remains fixed pay (Basic salary, all allowances and all monetized benefits).
Compensation consists of financial elements (pay and benefits) but may also include non-financial elements or perks, such as on-site day care, employee assistance programs, subsidized meals etc. The most effective compensation plans support the organization’s strategic objectives gives is competitive edge. How? It helps attract talent, motivate them to perform to their maximum potential and retain them for the long term. Incentive pay (Piecework, annual bonuses, merit raises and sales commissions), also known as pay-for-performance, can directly influence employees’ productivity (and thus their engagement) as well as their commitment to an organization. Incentive pay can also be tied to team or work group performance, and to organization-wide results through profit sharing, gain-sharing, and employee stock ownership plans. The caveat with incentive plans, of course, is that you must first define and measure performance and then decide which aspects of performance you will tie to pay. The challenge in using incentive plans is to reward the “how” as well as the “what”
In a VUCA environment, in order to compete favourably, it is time for HR professionals to think outside the box in designing their organization’s total rewards structure. Traditionally, focus has always been on monetary benefits and using a “one size fits all” approach for compensation & benefits. It is time to move away from a cash dominated structure to innovative customizable benefit packages that align total rewards programmes with employee engagement and the organizational objectives.
The VUCA Environment and Performance Management
In a VUCA environment, every organization is in a race to win, hence performance management is key. With the current business climate, where there are so many elements impacting the performance of businesses negatively, how do you objectively assess the performance of the employees who have made significant inputs on their jobs but have no control over the other factors?
It becomes imperative for HR professionals to go back to the drawing board and design a performance management system that not only recognizes and rewards outputs but also great efforts; the “what” is as important as “the how”. A well designed performance management system has the organizational objectives cascaded down all levels in all job functions. An effective performance management system also identifies employees who are not meeting expectations. Failing to address performance issues can erode other employees’ engagement and commitment, as the organization may be seen to be tolerating poor performers. If feedback, coaching and remedial training are of little avail, the person may be moved to a different position within the company where he or she can make a more valuable contribution, or let go if there is no good match in the organization.
Performance management is critical to the success of any organization and quite sensitive, hence the need to eliminate as much subjectivity as possible and is seen to be fair. The right performance management practices can enhance employee engagement and commitment even during uncertainties.
The time for wishing that a more stable business environment will return is over. Instead, we need to face the reality that the VUCA environment is the new business environment which is full of rapid, volatile, complex and hard-to-predict changes. A VUCA world presents a lot of dilemmas: how to balance risk and creativity; how to mobilize without losing control and how to reduce unproductive complexity without oversimplifying the risks.
Engaged employees can help an organization achieve its mission, execute its strategy and generate favourable business results. Therefore, in a Volatile, Uncertain, Complex and Ambiguous (VUCA) business environment, HR practices should be geared towards strengthening employee engagement so as to be able to gain and sustain competitive edge.
Creativity, Collaboration, Adaptability, Proactivity and Agility are some of the essential skills needed to survive and succeed in a VUCA environment. Being stuck in the old way of doing things in a rapidly evolving environment spells doom for any business and any professional as well.
HR professionals should be able to simulate possible future business occurrences and think through how to deal with it. This is a proactive approach to formulating relevant strategies that will mitigate such risks before they occur.
In a nutshell, HR professionals in keeping their employees engaged in a VUCA environment should do the following:
- develop a framework for hiring, training, and retaining employees who are agile and those who have the capability of acting effectively in unforeseen and unpredicted situations;
- ensure that learning and development creates the capability to prepare employees to identify and effectively handle previously unknown problems. E.g. Scenario trainings and simulations;
- develop policies that recognize and reward innovation in order to promote creative thinking;
- develop learning systems that will increase the speed of individual and organizational learning;
- develop processes that encourage internal mobility and growth opportunities;
- design an effective performance management system that recognizes and rewards great efforts and results;
- develop continually evolving job descriptions and hiring standards that reflect the continually changing work environment;
- explore outsourcing for non-critical functions;
- develop talent management processes and programs that provide continuous competitive advantage;
- design a customizable and individualized total rewards structure;
- develop the capability for rapid hiring for sudden needs through poaching, within pre-identified talent pools and by building professional communities; and
- develop the courage and capability to quickly release surplus and inappropriately skilled workers.
Article Credit: Rachael Anyadibe, ACIPM