Monthly Archives: April 2015

The ROI of Human Economics

This is a continuation of (pssst….Don’t Tell Anyone) We’re PEOPLE! Human economics, the new Business Hip

I’ve proposed in The Greater Good that organizations have a huge, largely untapped influencer potential over the overall strength of our social fabric: not just standard of living but also quality of life (QoL). The potential for QoL impact stems from well-aligned entities that have a clear purpose, sense of community, values…all contributors to the spiritual well-being of their employees.

I’m not delusional enough to think the heavy hitters are jumping on my little band wagon, but significant validations have recently come into play, or they’ve been in the wings or some time.

Gallup and others have researched the economic impacts of higher levels of engagement. It’s well documented that focusing on the warm fuzzies of engagement is a solid bottom line-driven business strategy. And Michael Porter added his .02c worth, in the context of shared value:
“There are numerous ways in which addressing societal concerns can yield productivity benefits to a firm. Consider, for example, what happens when a firm invests in a wellness program. Society benefits because employee and their families become healthier, and the firm minimizes employee absences and lost productivity.”

Springing from Porter’s shared value, Triple Pundit’s core philosophy is that the economy, environment and society are inseparably related, and understanding all three is critical to short-term profit and long term sustainability.

Here are a few excerpts from Business and Society in the Coming Decades by WalMart execs Kathleen McLaughlin and Doug McMillon, published by McKinsey and Company in April 2015:
There are compelling reasons companies should seize the initiative to drive social and business benefits. First, in an interconnected world facing unprecedented environmental and social challenges, society will demand it…Second, adding these other forms of positive return and improving systems will make the business more sustainable in the long term….By collaborating with other members of their networks and pursuing initiatives that draw on their particular capabilities, they can make society stronger in ways that also fortify their business….Leading businesses are actively using their scale and their particular assets to accelerate progress on tough social and environmental issues.

Walmart has five “screens” that define their contribution to making society stronger. See the article for WalMart’s systemic initiatives aimed at making a global social and economic impact, with this caveat from the authors: “The commitment to address social and environmental issues should be a “whole company” undertaking, woven into day-to-day business activities; it’s not just a matter of corporate philanthropy.”

Capitalists…With Hearts!
Denis Pageau is the founder and driving force behind Citizens and Societies,  “…a professional association of citizens that is ideologically neutral (politically and religiously) whose primary objective to help citizens improve their civic and societal competencies.” In 2012 Denis published a study titled Capitalists With Hearts that illustrates the ROI of increasing disposable income for select groups.

His conclusion: “….giving money to the working poor would earn a hefty 400% return on investment (ROI).” Here’s a little of how Denis got there:
In the “2010 World Wealth Report” a mere 90K individuals (.001% of the world population),
each possessing at least 30M$, owns together 14 trillion dollars. They are called the Ultra
High Net Worth Individual or UHNWI. There are another 10M individuals (.143% of the population) who possess between 1 million and 30 million, for a total of 25 trillion dollars. They are called the High Net Worth Individual or HNWI. Together these two groups represent one fifteenth of one percent of the world population, but own more than 39 trillion dollars.
      Should these HNWI and UHNWI invest in people instead of business opportunities? Not
everybody of course, only those who work. And, of those workers, not all workers, but those who do not make enough money to consume much: the working poor.

Pageau uses a very realistic and achievable level of “people investment” to come to this conclusion:
At the end of the year, a total of 10 million WPF would have received collectively 250
billion dollars affecting directly 46M US citizens. If the Keynesian multiplier effect is true, with a Marginal Propensity to Save (MPS) of 10 and a Marginal Propensity to Consume (MPC) of 90, this injection of funds would be multiplied by 10. The total impact would come to 2.5 trillion dollars (on an investment of $250b)

For neophytes to hardcore economics, Denis provided a link for the Keynesian Multiplier Effect. As I plan on staying a plebe, I’ll trust Denis’ considerable analytic prowess…he’s a beast. Read Mr. Pageau’s Capitalists With Hearts!

Does this mean that die-hard wealth-hoarding capitalists will line up with their millions in hand, hell-bent on making a real economic and social difference? Except for some very noteworthy exceptions, it’s doubtful…just sayin’.

Back to the WalMart piece for a final word:
In the long term, a company’s business interests and the interests of society converge. Companies, communities, individuals, and governments: we are all interdependent. Every healthy, high-performing company has an obligation to use its strengths to help society, and each can do so in ways that enhance the viability of the business, too….Large-scale change does not happen overnight, but the stakes and potential benefits are immense.

All this certainly puts a new spin on our worn-out thinking on Corporate Social Responsibility, doesn’t it?

(pssst….Don’t Tell Anyone) We’re PEOPLE! Human Economics, the new Business Hip

A few points to ponder for starters:

  • The human dynamics of change are powerful and can be a deal-breaker whether a new continuous improvement initiative, strategic shift, organizational re-structuring, or even something simple as a new assignment;
  • The importance of a culture and values fit between employees and the company is clear. Yet, hiring and promotion decisions are typically based solely on competencies and achievements;
  • The Blue Zones longevity study, Gallup-Healthways wellbeing index, Engage For Success wellbeing / engagement report all provide increasingly clear evidence of a powerful correlation between whole-person wellbeing and not only increased levels of engagement but that people can live longer, more productive and more stress-free lives;
  • The new, enhanced well-being includes spiritual factors: sense of purpose, belonging, sense of community, values. Yet, focus remains nearly exclusively on eating your veggies and exercise;
  • The obsession over STEM (science, technology, engineering, math) in education, at the expense of instilling values, ethics, norms in young people means that the emotional development of young people in the education system is embarrassingly, dangerously short-changed.

But the evidence is overwhelming, experts are in violent agreement: we’re human beings! That realization may be causing a few ripples, but we need a tsunami. I’m going to lay out some “whats and whys”. Would love to see some “hows” from you experts out there.

From a recent HBR article by Dov Seidman From the Knowledge Economy to the Human Economy:
In the human economy, the most valuable workers will be hired hearts. The know-how and analytic skills that made them indispensable in the knowledge economy no longer give them an advantage over increasingly intelligent machines. But they will still bring to their work essential traits that can’t be and won’t be programmed into software, like creativity, passion, character, and collaborative spirit—their humanity, in other words. The ability to leverage these strengths will be the source of one organization’s superiority over another.

Seidman references findings from a global study by IBM in which over 1,000 CEOs participated, that executives are placing a high priority on hiring people who are “collaborative, communicative, creative, and flexible.” Another study finds “…a majority of executives insisting that “human insights must precede hard analytics.” (Only Human: The Emotional Logic of Business Decisions)

In The Effective Executive Peter Drucker made this observation:
Direct results always come first. In the care and feeding of an organization they play the role calories play in the nutrition of the human body. But any organization also needs a commitment to values and their constant reaffirmation, as a human body needs vitamins and minerals. There has to be something “this organization stands for,” or else it degenerates into disorganization, confusion, and paralysis.

McKinsey on Meaningful Work
The McKinsey Quarterly ran an interesting piece, Increasing the ‘Meaning Quotient’ of Work by Susie Cranston and Scott Keller January 2013. Note—the download link may require registration.

There are several quotients out there. IQ is, of course, intelligence quotient. Thanks to Daniel Goleman and others, just about as well-established is emotional quotient (EQ).
Intelligence quotient: derived from standardized tests designed to assess intelligence. IQ tests are designed to measure a person’s general ability to solve problems and understand concepts. This includes reasoning ability, problem-solving ability, seeing relationships between things and ability to store and retrieve information. Because IQ tests measure capability to understand not quantity of knowledge, IQ scores remain stable no matter what the person’s educational attainment level.
Emotional Intelligence: human qualities that are widely recognized as differentiating outstanding leaders from competent managers —self-awareness, self-management, empathy, social skills.

Along comes the New Kid, Meaning Quotient, a feeling that what’s happening really matters, that what’s being done has not been done before or that it will make a difference to others. The McKinsey article likens meaning to flow, championed by positive psychologist Mihàly Csìkszentmihàlyi’. (chicks-sent-me-highly, his own phonetic interpretation).

The article does a deep dive into what business leaders can do to create meaning. Meaning is an essential driver of higher workplace productivity: MQ was tapped by executives as the most essential to performance and results of the three quotients. This article is highly recommended reading.

IQ + EQ + MQ = Q cubed
The sum is greater than the parts, and one can be destructive without the others. And all three have attributes that contribute to an environment capable of supporting increased levels of engagement:

  • Intelligence Quotient: skills, tools, systems, capability to do the job, results / contribution;
  • Emotional Quotient: relationships, values, inner harmony / well-being, growth; satisfaction with the job and the work you do;
  • Meaning Quotient: alignment, connection to the top, hearing the calling of the work; immersion in the task at hand because it is challenging and to my liking (Mihaly’s “flow”).

IQ DESCRIPTION: ability to solve problems and understand concepts. Reasoning, critical thinking, problem-solving, perceiving relationships between things, storing and retrieving information.
IF IQ IS HIGH: Able to more easily acquire the right skills. Given the right tools and systems, should have the capability to do the job and deliver results.
Low IQ: inability to perform, incapable of understanding more complex task-intensive expectations.
Hi IQ, low MQ: higher order motivation of purpose is untapped. Capability is underutilized, skills are bottled up. Skating by, bored with the work. Personal agendas pursued by highly skilled manipulators when they don’t know or don’t care about the purpose.
Hi IQ, low EQ: survival instinct, reluctance or fear to perform, too paranoid to work with others. “Me first” because I’m better than you and I can’t trust you anyway.

EQ DESCRIPTION: the human qualities that differentiate outstanding leaders from competent managers, but also at the heart of healthy work relationships and environment. Self-awareness, self-management, empathy and social skills.
IF EQ IS HIGH trust and respect are both high. Constructive conflict, sense of humor, a general feeling of “we’re in this together,” and a corresponding ability to collaborate effectively.
Low EQ: office politics, bruised egos, avoidance of tough issues, bickering and fault-finding.
Hi EQ, low IQ: inactivity for fear of looking bad, being wrong. The person doesn’t feel capable, whether a personal or support issue. There is significant internal conflict and stress when a high EQ person struggles against these issues.
High EQ, low MQ: feeling frustrated, discouraged. Tendency to take the meaning disconnect personally. If there is a solid emotional connection the feeling is why the heck should I care this much? But I just can’t help myself, it’s the way I’m wired.

MQ DESCRIPTION: a feeling that what’s happening really matters, that what they’re doing will make a difference. Also reference Mihaly and flow: the work is challenging and has personal relevance.
IF MQ IS HIGH it can be a peak-performance experience: high stakes; excitement; challenge; feeling that work matters and it makes a difference at work and in the world. High commitment to achieving goals.
Low MQ: people put minimal effort into their work and don’t fully utilize their skills because they don’t see the point in doing more than getting by. “It’s just a job” that gives little more than a paycheck.
Hi MQ, low EQ: people see and buy into the big picture but may be ruthless in finding their place in it, or in the way goals are attained. For them, the end often justifies any means to get there.
Hi MQ. low IQ: while they hear the calling loud and clear they still need significant, specific guidance for things that need to be done. They may try harder but they simply lack the capacity to deliver results.

The McKinsey article ends with this:
Of the three Qs that characterize a workplace likely to generate flow and inspire peak performance, we frequently hear from business leaders that MQ is the hardest to get right. Given the size of the prize for injecting meaning into people’s work lives, taking the time to implement strategies of the kind described here is surely among the most important investments a leader can make.

Of all the human needs beyond basic survival needs the most powerful is purpose. We need to feel that what we do matters and that we are making an impact.

I have a vague memory from my higher education days, way too many years ago. It was the belief way back then that the New Millenium would be the age of humanity, of realization and attainment. That vision has so far been a delusion, but it may finally be coming to fruition. We must first divorce ourselves from our love affair with making stuff better—a transformation that requires heaping helpings of change management, especially for the human dynamic elements.

The Knowledge Economy is dead, long live the Human Economy. I can’t wait for the coronation.