Thursday, March 30, 2006

For CEO's and CFO's - Workforce Performance Improvement Tools

Workforce Performance Improvement -
the challenge for CEO's and CFO's
Since the beginnings of modern business, CEO's have complained that tools for predicting and improving the bottom-line performance of their workforces did not exist. For many years they were right. (But no longer - see below.)

The reason for the lack of tools lies in the myopic and narrow focus the human capital (HR) industry has had on the individual as unit of measure. And the past as predictor of future performance.

However, work outside the HR industry has generated both research and tools:
for CEO's to use as instruments of improvement;
for CFO's to measure and predict by.

Research and Articles
Research on 100 companies by McKinsey and London School of Economics (LSE) has recently been published that shows the powerful impact changing the Operating Dynamic of the workforce has on profits and performance. (The Operating Dynamic is an attribute of the company - not the individual.)

The study showed that improving the operating dynamic by 20% is the (total factor productivity) equivalent of increasing the workforce by 25%. Other startling findings also.

Every ambitious CEO should know about this. And every CFO, whose role is that of diagnostician and forecaster.

The research is summarized at Companies Increase Financial Returns by 40%. (A link to the full McKinsey / LSE paper is provided there.)

Two articles on using the Operating Dynamic (the organization as unit of measure) as both a predictive (CFO) and a transformative (CEO) tool can be accessed below. These were based on empirical observation of more than 200 organizations over twenty years - independent of McKinsey/LSE study. The first paper appeared in Corporate Finance Review, the second in American Banker.

Action Step
CEO's and CFO's who are interested in triggering a significant (10%+) surge in bottom-line performance, and are not afraid to look at the operating dynamic of their companies, should contact Tom FitzGerald at There is, of course, no obligation; we know this is not for everyone.


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