The well-being of employees has become a top priority, both in corporate America and for ESG advocates. Regulators are considering rules that would require corporations to disclose just how much they are investing in their employees. As companies began to shift their policies to benefit their employees, investors need to discern whether those policies are encouraging competitiveness and not complacency, contends an opinion piece in MarketWatch.
When a company is doing well, it’s natural for employees to seek higher compensation and other benefits. But employees may also have a tendency to rest on their laurels, and managers need to find the balance between rewarding their employees for their hard work without tipping into complacency. That balance can be tricky to find, and there are many stories of companies that failed in their quest: Borders Books, Kodak, and Arthur Anderson are a few examples named in the article.
While ruthless rivalries can destroy businesses, healthy competition could encourage productivity in innovation and better customer service—things that more and more investors are demanding from the companies they invest in. That external pressure can be important to a company’s growth, but barring that a company will need to produce its own internal pressure by offering incentives, rewards and other forms of healthy in-house competition in order to achieve a collective goal that every employee can benefit from.
Companies also need to give their workers regular feedback, using core ratios or key performance indicators (KPIs), in order to prevent employees from lapsing into comfortable patterns that stymie innovation. And companies such as Berkshire Hathaway, Constellation Software, and Amphenol have found success in a decentralized approach, either by distributing most responsibilities deep into the organization or by keeping certain functions centralized, the article details.
But autonomy is also a powerful motivator, and the article advises that companies strive to maintain a balance between control, and giving their employees enough autonomy to stay motivated. Too much control will suffocate staff; not enough will be chaos. Suggestions are likely a better way to accomplish this than laying down a definitive mandate, using a “communicate to influence” method instead of a “command-and-control” approach—something the article terms “intelligent autonomy.”
As for investors, they should be taking into consideration the culture at a company before they invest in it, looking particularly at whether a company has done a good job in striking this balance. While finding that balance has always been important for a successful company to stay on top, it will now become even more vital as the world shifts more and more attention to the well-being of the workforce.