In order to put together the results and understand which of the index categories predicts outcomes of interest, we ran regressions predicting employee energy and overall financial performance of the firm. 

What predicts leader energy?

The questions related to the strategic direction index are the only ones significantly predicting employee energy. That is interesting in that questions / indices more directly related to employees (employee focus, leadership) are not predictive. Although this may seem counter intuitive, it is consistent with a lot of our interview and company-specific work. The definition for employee energy we use as our guide for measurement is “the ability to do work,” which is from physics. The energy measure focuses on how close employees are to their ideal (most productive) energy level (like taking your body pulse when you assess where you are in comparison to your target heart rate). The measure used for the regression analysis is the absolute value of the gap score (current or working energy minus optimal energy). Large gaps are negative; as the gap increases, productivity decreases (note that we have done studies showing this relationship predicting sales, retention, customer satisfaction and other performance-related outcomes).

Our company and leadership pulse data have shown for some time that most leaders are scoring below where they are at their best on energy, and the reason is due to constant interruptions and not having time to focus on what is really the most important task at their jobs. In fact, in many cases they don’t know what the most important work is; thus, it’s not surprising that the data tell us that employees who think their strategic planning process is working have better personal energy at work. Perhaps they are better at directing their energy to drive higher firm performance because they have a clearer line of site between their work and outcomes via their strategy. 

What predicts financial performance?

The key metric here is focused on the financial model – whether the firm is managing profits, costs and cash flow effectively. We looked at another measure of firm performance, total revenue, and two things were predictive – both the financial model index and strategic direction.

Culture may be done eating strategy

In 2006 the saying “culture eats strategy for breakfast” was attributed to Peter Drucker by Mark Fields (who served as the CEO of Ford). Later, a book titled “Culture Eats Strategy for Lunch” was published (in 2013). Perhaps culture has been munching and eating a bit too long, and it’s time for strategy and core business levers like managing cash and profitability.

Even though our data show that the questions related to strategy are not rated at the top of any lists, they do seem to be important in predicting individual and firm-level outcomes. Taken with the significant differences in scores between C-suite executives and respondents in the level below the Clevel participants, it appears to be a good time to take stock and clearly understand the attention being given to various business drivers and whether there is synergy in what’s needed for high performance today.

Perhaps when the economy is strong and unemployment is low, change is faster and new competitors can quickly disrupt a market, the role of strategy is more critical than it was in the past. Also, with such competitive environments, one might ask if culture / engagement and other related items are really creating a competitive advantage. Consider that most companies are doing the same thing when it comes to engagement (using the same vendors, the same survey questions, identical interventions, etc.). They are not creating competitive advantage but basically copying the competition. Thus, today, perhaps strategy eats culture because culture is not very different from company to company.

Understanding business driver disconnects    

Members of the  Leadership Pulse receive their own data in addition to the benchmarking information. This kind of study is important because it allows the leaders to use the results to engage their teams in high quality dialogue. Consider the C-suite vs. the next level of leaders. In many ways, it doesn’t matter who is right and who is less correct. What really matters is that the leadership team gets on the same page. Why? Decisions about what gets funded, which projects are allocated resources (e.g. not just money but people, equipment, etc.), are made based on what the decision makers think is important. If the C-suite does not have enough information to understand why their direct reports think what they are investing in is not making a difference (or at least a positive one) in their firms, then chances of success of those same initiatives go down because the people reporting to the C-level executives are the ones tasked with implementation. Also, if certain business drivers are working and the next level of executives is unaware,  they could be focusing on the wrong driver creating opportunity cost and perhaps even financial losses.