Staff are often in the firing line during a recession but, explains Martyn Newman, it pays to invest in them if you want to recession proof your business.

When capital is scarce and companies are struggling with rapid change, how do they find competitive advantage and go from good to great? How do you incentivise staff and ensure they are creatively engaged? How do you stop your best talent from being poached or taking money and leaving for other reasons? And, what can leaders do to attract, retain and mobilise talent to sustain the profitability of the business?

According to findings from a number of recent reports from the Harvard Business School Press and global labour market consultants Accenture, Randstad and Hudson, developing leadership skills and managing human capital is the urgent priority for businesses who want to remain competitive.
Accenture, for example, found more than two-thirds of executives were deeply worried about the threat of not being able to recruit and retain the best talent.

Talent, I love that word. Recession or not, people - their talent, creativity and intellectual capital - are all there really is in business. No wonder a survey of more than 850 top executives from the US, UK, Italy, France, Germany, Spain, Japan and China found worries about talent management were growing - 67% put it second only to competition as a key threat.

Nearly half of the British executives surveyed were worried about the effect of low employee morale with almost a third pointing to instability at the top as a major concern and 40% of the UK sample were also concerned or ‘very concerned’ about their ability to maintain a corporate culture.

It would appear that in the current business context we’re dealing with a new balance sheet – financial and intellectual capital is simply not enough. The key to maintaining a productive corporate culture is to focus on a new kind of currency - emotional capital.

Emotional capital in your business is made up of three core elements: external, internal and intrapersonal emotional capital.
The first element, external emotional capital, is the value of the feelings and perceptions held by the customer and the external stakeholder towards your business. The only way to create real profit is to attract the emotional rather than the rational customer by appealing to his or her feelings and imagination. Customers want to buy from organisations they like and who are like them. This creates brand value and goodwill and results in repeat sales through customer loyalty, lifetime relationships and referrals. In other words, the brand is more than a name or a logo; it creates trust and recognition and is a promise and an emotional contract with each customer.

The second core element, internal emotional capital, is the value of the emotional commitments held in the hearts of the people within your business. It can be described as the feelings, beliefs and values held by everyone working in the business. As a leader, you know that external customer relationships are important. But your interactions with internal customers?- your people -?are just as vital. Every relationship that your business has with everyone it touches is an asset and an investment. To build emotional wealth you must treat your people as investors because that is what they are?-intellectual and emotional investors. Every day they bring their heads and hearts to work. If they don’t, you won’t be in business very long. Internally, emotional capital is seen in the value of the energy and enthusiasm that people bring to work to create products and solve problems.

The third element that makes up emotional capital?-?intra-personal emotional capital - is the level of positive, focused energy that you invest at work and in your personal life. As a leader, you will inspire or demoralise others firstly by how effectively you manage your own emotional energy and, secondly, by how well you mobilise, focus and renew the collective energy of the people you lead.

Frankly, your primary role as a leader is to create emotional wealth for competitive advantage.

Relationships are Key Assets

What emerged strongly from these reports was the focus employees place on company relationships. Relationships represent a unique strategic resource. In today’s competitive environment they often signify the only real competitive advantage of many businesses.

These latest findings confirm earlier research by Gallup that found no single factor predicts the productivity of an employee more clearly than his or her relationship with a direct supervisor. More specifically, Gallup found that the key drivers of productivity for employees are feeling cared for by a supervisor or someone at work and receiving recognition or praise in the past seven days and regular encouragement of development.

No business, whatever its size, can function without collaborative relationships because they provide the context in which we do business. When that context is missing - when people don’t really know one another, or when relationships are distorted by mistrust or bad feelings - doing business becomes far more difficult. The key challenge for a leader is to engage hearts and minds, the emotions and intellects of their people to deliver superior service and business performance. Establishing, building and maintaining well-planned and-managed relationships are fundamental to the success of any business.

Get a Life

According to the Randstad report two-thirds of job seekers are not willing to compromise their idea of an acceptable work/life balance. As a result companies willing to tailor work arrangements to match the changing needs of employees are likely to have a happier, more satisfied workforce and, consequently, higher staff retention.

While it remains true that salary and standard benefits remain ‘must haves’ by one in two job seekers, benefits can feed into the number one priority for many staff - a work/life balance.

Keeping Talent Happy

What does that mean? The real drivers of performance are not sticks and carrots but values and vibes. The things that really matter to people are respect and trust, feeling valued and having the opportunity to contribute value.

At work, people are at their best when they have the opportunity to maximise their skills and interests. Gallup found that the most satisfied workers answered yes when asked: ‘Does your job allow you every day to do what you are truly best at?’ Work that creates opportunities for people to shine leads ultimately to increased productivity.

When leaders appeal to their employees’ strengths they engage the primary driver of human performance - values. People want to work for leaders who hold values in line with their own. These days people value a worthwhile mission and great working lifestyle as much as they do a cash incentive and the prospect of promotion. Leaders should make every effort to ensure staff can shine at what they do best. They should be given tasks that present creative challenges, have clear goals and provide them with a sense of control and positive self-expectancy.

Recession Proof your Business

The factors isolated by these reports as critical for attracting and retaining talent have long been identified as those associated with emotional intelligence. Successful leaders in the new economy are those with advanced social and emotional skills. In essence, they are emotional capitalists.

The leaders I’m talking about here are called upon to build an emotional enterprise not just a rational one. They do this by creating external emotional capital so that people buy into the brand and organisation. They also create internal emotional capital by treating employees as intellectual and emotional investors. Furthermore, they pay attention to building and managing their reserves of emotional energy by which they continually renew and inspire others to focus on what really matters.

We recently surveyed a group of elite business and community leaders from Australia using the Emotional Capital Inventory™ – the first psychometrically reliable tool specifically designed to measure emotional intelligence and leadership ability. The leaders represented a broad range of corporate, government and non-profit organisations in Australia and were identified as exemplary leaders in their field by a panel of fellows. Each member had a track record of experience and achievement in their field and a minimum of 10 years experience.

The leaders scored higher than average on every scale of emotional intelligence - with the highest scores on: self-awareness (including the ability to recognise how their emotions impact on their opinions, attitudes and judgments); optimism (as a strategy for dealing with difficulties and sensing opportunities); relationship skills (the knack of establishing and maintaining mutually satisfying relationships characterised by positive expectations); and empathy (being able to grasp the emotional dimension of a business situation and create resonant connections with others).

These leadership skills add real value to the balance sheet. Leaders high in emotional capital create value and influence through their capacity to identify with the emotional experience and aspirations of their staff and build shared identities with them. Accordingly, they are able to: establish trust; understand people’s need to belong to a group; create and communicate compelling visions; develop blueprints for action; and lead through their ability to motivate people to act together in concert. In short, emotional capitalists represent leaders with an advanced capacity to incentivise staff by engaging with their prime motivators - emotion.

In tough times there is a great need for organisations to focus on building real wealth in the business - high quality workplace relationships and passionate cultures. In other words, build emotional capital.

Martyn Newman, PhD., DPsych., is author of Emotional Capitalists – The New Leaders (John Wiley) and co-author of the Emotional Capital Inventory™ – a psychometrically reliable tool designed to measure emotional intelligence and leadership ability. www.emotionalcapitalists.com

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