The challenge of building sustainable organisations with human factors

Sustainable Organizations

The Challenge of Building Sustainable Organisations: A Human Factor

With many of the world's governments galvanized in their writing, legislating into law and enforcing compliance standards for environmental sustainability, human sustainability is quickly going by the wayside. With more focus on sustainability and eco-friendly processes, from supply chain practices of reverse logistics to new product development including Design for Environment (Dfe) compliance, the most critical asset of all, humans, are being neglected. Exacerbating this trend is the global recession and the tendency to lay people off first and analyze where reductions through process efficiency and intelligently paring down unprofitable product lines can contribute second. This is all leading to a mindset of employees, despite having all the knowledge of their companies, being more expendable than unprofitable product lines or highly inefficient processes for production or supply chain management. The lack of trust employees have of their employers is at an all-time high as a result. While worker and company productivity is increasing, the grim reality of this is that the employees remaining after sequential lay-offs are doing double or even triple the amount of work. Sales-per-employee and revenue-per-employee can't help but go up. Getting more work out of fewer employees however has shown to be detrimental to their health, and over the long-term, loyalty and trust to their companies. Organizations built to take into account human sustainability have shown steady and profitable increases in growth and less churn or turnover of employees. They also are unleashing the creativity and task ownership of their employees which cannot be forced, it must be earned. For creativity and task ownership to be unleashed, leaders and managers need to be transformational in their leadership styles (Boyatzis, 2008).

It would be a far better decision on the part of organizations downsizing their staffs to increase profitability if highly transactional managers were let go, especially those that undermine trust by not managing to goals but only to compliance. The real issue of building sustainable organizations from a human factor perspective has more to do with leaders being more transformational, less transactional in the approach to managing and leading employees. There is an abundance of research that shows when leaders are more transformational they gain greater productivity, less absenteeism and lack of commitment (Boyatzis, 2008) (Guthrie, Datta, 2008) (Kirrane, 1990) (Som, 2003). Ironically changing the leadership mindset and skills in an organization may lead to greater levels productivity and performance, which is precisely what the draconian, short-sighted layoffs and restructuring that put employees last attempt to attain. The intent of this analysis is to explore how a change in leadership mindset can actually lead to greater levels of performance, accomplishing significant gains in productivity. The bottom line is that trust has eroded so rapidly due to human factors sustainability being ignored that when organizations do need to hire experts to grow their business, no one trusts them anymore. The lack of focus on human sustainability may have short-term rewards and make transactional leadership easy to enforce, yet in the long run companies are more hurt than helped by this strategy (Greenberg, 1991). They lose credibility, trust and the ability to attract excellent talent needed to grow their businesses (Cascio, 1993).

Why Human Factors Sustainability Matters to Organizational Performance

The paradox of sustainability initiatives facing organizations today is daunting. Strict government regulations globally are defining the carbon footprint organizations can have, the percentage of their products that are recycled through reverse logistics, and their approach to new product designs using the DfE guidelines as defined in the high tech industry all are extremely important to companies today. The human factors of sustainability however are seen as a resource that can be discarded, shifted, and not managed to nearly the level of detail and focus as environmental sustainability. There are many factors contributing to this disconnect, with the most prevalent being fines, duties on imported products, or in extreme cases, lack of approval to operate in a given nation. The WEEE and RoHS initiatives in Europe are at this level of enforcement today. There is no comparable set of compliance initiatives and laws in place for continually improving human sustainability however. Apart from the labor laws that guarantee safe working conditions and a minimum wage, employees are "at will" employees, meaning they can be fired any time. It is increasingly rare to see organizational cultures that embrace employee welfare as intensely as they do environmental sustainability. The global recession has only acted to further push down human sustainability as a priority. In many industries particularly hard hit by the recession including high tech component manufacturing, the concept of the employee as a multifaceted human being is completely gone. This is a further catalyst forcing human sustainability to the lower set of priorities organizations deal with daily to survive and grow. This is precisely why so many organizations are cutting back on 401K matching funds, healthcare benefits, reducing insurance payments, and putting more expenses on employees over time. In addition many employees are asked to work more overtime than ever to make up for workers let go during the last three years of the recession.

Ironically if organizations took as much time and effort to re-engineer and streamline their employee-based processes and human factors as they did their business processes, there would be less of a need to cut benefits and lay people off. Making more efficient use of employees and respecting the human factors of sustainability would make the draconian measures unnecessary. Organizations' don't' seem to realize that they are playing with the trust of employees today to attain short-terms gains, and the lack of focus on these factors over time will lessen their credibility and trust with the public, suppliers, their distribution channels and investors. They are ignored the fact that human factors of sustainability has the greatest impact on corporate performance.

The path to making human factors sustainability a higher priority and therefore more effective in gaining higher employee productivity begins with a change in leadership mindset. Transformational leadership is critical for engineering this change. It has been shown through empirically-based studies that transformational leaders have the ability to reorder and redefine the completive performance of employees by seeking to align their strengths to the unmet needs of the organizations they work for (Rank, Nelson, Allen, Xu, 2009). Transformational leaders have also consistently shown the ability to turn around economically troubled organizations by enabling greater creativity, task ownership and productivity from subordinates (Boyatzis, 2008). A transformational leader is by definition developmental and seeks out strategies for managing subordinates that motivate them to learn on their own as well, in effect becoming self-effacing in their continual pursuit to improve themselves ((Boyatzis, 2008). Transformational leadership has as a foundation the continual learning and absorption of new concepts and ideas that can further strengthen their organizations, yielding significantly greater productivity as a result (Boyatzis, 2008).

Transformational leadership has as its catalyst a specific level of emotional intelligence (EI) as well. Dr. Boyatzis (2008) a noted authority on EI has shown through is series and years of study how critical this attribute is in leaders if they hope to attain the most difficult and challenging goals in their organizations. The more diverse the skill sets, department support, and effort involved in attaining a challenging corporate-wide objective, the more critical are transformational leadership and EI skill sets. Organizations that are achieving best practices in human sustainability focus on these attributes in their leaders and invest in creating leadership training programs to bring these traits out in their senior management. Over time this has the effect of elevating the priority of human sustainability, thereby getting more effective results from employees in the process.

Additional characteristics of leaders that promote human sustainability through transformational leadership include accountability, authenticity, transparency and trust (Boyatzis, 2008). The attributes of transformational leadership, EI and the trust attained with employees as a result is not "soft" or unquantifiable. It is in fact measurable as evidenced by reduction in absenteeism, reductions in healthcare costs, and greater levels of collaboration attained and complex problems solve and goals attained.

Achieving Human Factors Sustainability with Transformational Leadership

There are studies which provide a litany of the factors that support the passage of laws to force compliance to social sustainability to the levels of environmental sustainability (Pfeffer, 2010). The study of the tremendous costs to employees from a mental and physical standpoint continues to be quantified across dozens of case studies (Pfeffer, 2010) with the solution proposed of having legislation passed assigning fines for not complying to human sustainability initiatives. It is highly likely businesses globally would rebel from this legislation and would do all they could to stop it.

There have also been studies that suggest how environmental sustainability and human sustainability can be accomplished simultaneously (Hahn, Figge, Pinkse, Preuss, 2010). To make this happen globally the answer is not more legislation and fines for businesses. What needs to happen is a renewed focus on process performance gains by combining efforts at environmental and human sustainability, all unified through transformational leadership strategies. This latter approach, showing the financial benefits of attaining both sustainability initiatives, is far more valuable to the organization in the long run and also protects the company's most important asset, its people and the knowledge they have.

Further study of the litany of pains and costs driven by a lack of human sustainability does little to bring valuable solutions to bear on this critical problem. Instead there needs to be more of a focus on how apply transformational leadership skill sets to the parallel progress of environmental sustainability and human sustainability at the same time. The need to quantify this dual compliance strategy has been attempted and shown promising results, with the combined effects of each generating cost savings from more effective product development and recycling strategies (Hahn, Figge, Pinkse, Preuss, 2010). The payback in terms of reducing turn-over, medical costs, and increasing morale and trust that leads to higher performance are significant, and needing further research as well (Hahn, Figge, Pinkse, Preuss, 2010).

The path to accomplishing human sustainability globally has to be more focused on the economic benefits to first and less on legislating them into compliance. The reliance on transformational leadership is critically important in this regard. The following are the essential components of transformational leadership and how a focus on this aspect of changing leadership is more important that legislating compliance. The organizations who don't see the value of human sustainability in the least will forced to pay attention to them as their competitors over time gain greater competitive advantage as a result.

To attain human sustainability in organizations each of these four attributes of transformational leadership must be present, and the effects quantified and published in scorecards over time. Managers and leaders will be much more motivated to focus on these four areas if their performance is widely known by their peers and superiors.

The first of these four dimensions of transformational leadership is idealized influence, which measures the level of trust a leader is capable of attaining over time. Studies indicate that the leadership qualities including the ability to create trust, grow and keep credibility, and being accountable and transparent with peers, subordinates and superiors is critical. The human factors of sustainability are much more accomplishable in company cultures that have this attribute.

The second of the four transformational leadership attributes is inspirational motivation, which seeks to reward employees for accomplishing exceptional difficult tasks both on their own and in collaboration with others quickly. How this factor relates to human factors sustainability is that sets in motivation employees' motivation to continually learning on their own about techniques and approaches to doing their job. This is often called self-efficacy, and studies indicate that when organizations seek greater productivity from workers, giving them the necessary training and tools significantly improves morale over time. This second attribute also underscores how critical it is for companies to shift away from draconian cost cutting and the knee-jerk reduction of cutting costs and instead focusing on creating organizational cultures where motivation is not forced through fear but from the desire of employees to excel in their specific roles. This is a huge shift in perspective yet one that attains human sustainability while also creating greater trust over time.

Intellectual stimulation is the third attribute of transformational leadership. Rather than just focusing on the lack of intellectual stimulation as has been done in studies in the past that point to burn-out (Pfeffer, 2010), it is far more effective to concentrate on changing how leaders manage. This is especially the case in the areas of intellectual stimulation. To the extent any leader can nurture and guide employees to see an intersection of their personal interest and their jobs, significant gains in productivity, self-efficacy and job ownership occur over time (Hahn, Figge, Pinkse, Preuss, 2010).