In a landmark report funded by the Australian Department of Education, Employment and Workplace Relations, a research team from the University of New South Wales, Australian School of Business, provides insights into the leadership, culture and management practices that higher performing workplaces deploy and benefit from.
Summary findings revealed that high performing organisations ranked higher than low performing organisations on the following indicators: productivity-profitability, employee satisfaction, leadership capabilities, fairness, customer experience and job flexibility. High impact management practices as well as the culture and values of high performing workplaces are also reported.
The High Performing Workplace Index
Organisational performance was assessed using 18 performance measures in six categories. Five of these categories assessed the performance of the organisations’ intangible assets. One category assessed the organisations’ financial and productivity performance.
The 18 performance measures were used to calculate the High Performing Workplace (HPW) Index, which identifies the higher and lower performing organisations in the sample.
Using the HPW Index, the researchers studied the differences in leadership, management practices and culture between high performing vs., low performing organisations. Over 5600 Australian employees (senior executives, middle management, frontline management and non-managerial employees; CFOs, HRMs, CIOs) (78 Australian organisations) participated.
The analyses that follow below detail the results and performance differences between the two groups of organisations.
HPWs are more Productive than LPWs
The study finds that HPWs have 12% higher TFP than LPWs, when ranked in terms of their intangible asset performance. This means that HPWs are more efficient at converting input (e.g. the cost of assets, such as human capital) into outputs (such as revenue charged for services provided). For every $1 dollar of investment made, HPWs generate 12 cents more in revenue than LPWs.
The Financial Differences between HPWs and LPWs, when ranked in terms of their intangible asset performance, are significant. For example:
- LPWs have an average profit margin ratio4of 5.44% whilst HPWs have an average profit margin of 15.63%
- In other words, the profit margins of HPWs are nearly three times higher than LPWs
- HPWs are better at achieving their stated financial targets than LPWs by 34% HPWs also outperform LPWs on their Innovation Performance
- HPWs have higher levels of innovation outputs than LPWs across all four innovation categories
HPWs offer better Employee Experiences for their staff and managers and benefit from:
- Lower levels of employee turnover (23.3%)
- Higher levels of job satisfaction (22.7%) and employee commitment (23.2%) Employees in HPWs are more involved with their organisation, exert extra effort in their jobs, and are more likely to tell their friends that their organisation is a great place to work
- Lower levels of anxiety, worry, fear, depression and feelings of inadequacy; 1 in every 4 respondents (25%) in LPWs feels depressed about their workplace versus 1 in every 7 (15%) in HPWs
- Higher levels of positive emotions, such as feeling valued, proud, cheerful, optimistic and loved; 68% of respondents in HPWs feel proud about their workplace and 64% feel valued, versus 43% and 47% respectively in LPWs
HPWs have higher levels of Fairness than LPWs:
- Fairness, in regards to the distribution of rewards (relative to a person’s efforts, contributions and responsibilities), is 30.3% higher in HPWs than in LPWs
- Fairness, in regards to the fair implementation of company procedures and policies by managers, is 12% higher in HPWs than in LPWs
Supervisors and managers in HPWs outperform those in LPWs on their Leadership capabilities. Leaders in HPWs:
- Spend more time and effort managing their people than leaders in LPWs (29.3% higher)
- Have clear values and ‘practice what they preach’ (25.7% higher)
- Give employees opportunities to lead work assignments and activities (22.9% higher)
- Encourage employee development and learning (21.1% higher)
- Welcome criticism and feedback as learning opportunities (20.4% higher)
- Give increased recognition and acknowledgement to employees (19% higher)
- Foster involvement and cooperation amongst employees (18% higher)
- Have a clear vision and goals for the future (17.9% higher)
- Are innovative and encourage employees to think about problems in new ways (16.5% higher)
Customer Experiences are better in HPWs than LPWs:
- HPWs exert more effort trying to understand customer needs than LPWs (19.4% higher). HPWs are curious to learn new things from customers and invest additional time and resources to this effect
- HPWs are better at acting on suggestions and feedback received from customers (17.1% higher)
- HPWs do whatever it takes to create value for customers, for example by investing more resources in responding to customer needs and by exerting more effort to better service customers (18.4% higher)
- HPWs are better at achieving their customer satisfaction goals than LPWs (24.8% higher)
What Management Practices do HPWs Deploy and Benefit From?
The study also sought to identify the management practices that HPWs deploy and benefit from. This was done by correlating management practices (from across accounting, human resources management, information and communication technology, etc.) with the HPW Index. Some key findings as to the prevailing management practices of HPWs include:
- Higher levels of responsiveness to changes in stakeholder and customer networks.
- Higher levels of employee participation in decision-making processes.
- Higher levels of behavioral and skills flexibility in employees
- Effective use and quality of information, communication and technology (ICT)
- Excellence in attracting and retaining high quality people
Culture and Values in High Performing Workplaces
The cultural archetypes of the participating organisations were assessed. The results show that HPWs exhibit more than one culture type. Indeed, three out of four cultures have a positive and significant correlation with the HPW Index. These are the results, people and change-oriented cultures.
This suggests that HPWs are characterised by a set of values and shared beliefs where people welcome and seek to introduce change and innovation, where leaders care for their employees and foster collaboration, and where there is an ambition to deliver results and a focus on achieving goals. Interestingly, a control culture has a negative and significant association with the HPW Index.
For a copy of the full report – click here