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Does Good Leadership Increase Profit?

Good leadership creates happy employees, who create happy customers and, ultimately, happy shareholders.

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Over more than 30 years, international research firm, Gallup, has conducted research involving more than 17 million employees on the degree to which they are emotionally committed to their company’s goals.

Among the findings:

  • Engaged employees are more productive, more profitable and more customer-focused.
  • Actively disengaged employees erode an organisation’s bottom line, to the tune of more than $300 billion annually in the
    US alone.
  • Companies that actively engage employees in their operations have almost four times the EPS growth rate, compared with organisations in the same industry with lower engagement.

Related: Why Leaders who Trust, Grow Better Businesses

The Operating Principles

“I’ve done plenty of research on the different ways organisations are run, and how you engage people in contributing to their success,” says Bill Pasmore, senior vice president at the Centre for Creative Leadership.

“I’ve found that leaders who make choices to operate in a more participatory way – who operate on principles of high engagement, versus bureaucracies that treat people as if they were cogs in a machine – see a 30% improvement in performance.”

The Best 10 and the Worst 10

In their 2009 report How Extraordinary Leaders Double Profits, Jack Zenger, Joe Folkman and Scott Edinger cite a study they conducted for a Fortune 500 commercial bank. After a lengthy assessment, they divided the bank’s leaders into the best 10% and the worst 10%, finding that:

  • More than 50% of employees who thought about quitting reported to leaders in the bottom 10%. Slightly more than 15% who thought about quitting reported to the top 10%.
  • The worst leaders’ departments experienced average annual net losses of $1,2 million, while those of the best leaders netted profit of nearly $4,5 million.
  • About 37% of employees led by the bottom 10% said they were satisfied with their pay. Nearly 60% who said they were satisfied with their pay were led by the top 10%.

The happier employees weren’t necessarily being paid more by leaders in the top 10%, the authors said: “They are often living proof of the old saying, ‘You can’t pay me enough to work for that person.’”

Creating prosperity

Good leadership has an undeniable business value, confirms Tasha Eurich, a psychologist, Fortune 500 executive coach and author of the 2013 book Bankable Leadership: Happy People, Bottom-Line Results, and the Power to Deliver Both.

“Good leaders create prosperity, and it’s not defined just by money, but by the emotional health of their employees. Good leaders treat employees as humans and appreciate them by creating an environment people want to be in,” Eurich says. “Good leadership creates happy employees, who create happy customers and, ultimately, happy shareholders.”

Related: 8 Questions Business Leaders Should Ask Themselves Every Day

Increase Profitability

Leon Meyer GM At Westin Cape Town Shares 4 Experience-Driven Tips On How To Keep Your Team Productive

Productivity is a fundamental requirement for an organisation – it’s the seed that builds a business and contributes to higher profit margins.

Leon Meyer

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Productivity is a fundamental requirement for an organisation – it’s the seed that builds a business and contributes to higher profit margins. But what’s the best way to ensure employees remain productive, and happy in their day job?

The answer is simple and highly effective and I choose to sum it up with three short phrases – respect, trust and teamwork.

In partnership with my management team, which consists of about eight staffers across various disciplines, we strive to tick these boxes.

Related: 5 Surprising Elements That Boost Your Productivity (One of Them Is Colour)

In total we’re ultimately responsible for managing roughly 500 employees.

Five hundred employees across several departments is a mighty job. But with teamwork, good listening skills and the right attitude from the top to filter down, any business can run like a well-oiled machine.

I’d like share with you the essentials for building and maintaining a productive workforce, and these apply to all industries, not just the hospitality sector:

1. What’s your definition of a productive team and how do you achieve that?

We need to keep in mind that productivity is a result, one that CEOs and managing directors strive for with their teams. But what happens beforehand in order to achieve that result determines whether it will be achieved at all, and is equally important. I suggest the following to ensure a productive team:

Define roles and responsibilitiesDirection is incredibly important; everyone needs to know exactly where they’re going and how they need to get there, so KPIs are essential.

Often when roles and responsibilities are unclear, things go pear-shaped. I am an advocate for setting clear KPIs, it’s a good way to steer us in the right direction, and in turn helps to grow the business and the individual in his/her role.

Be flexible: Rigid environments are the worst kind, allow your employees some flexibility and the opportunity to be themselves in the workplace. We spend so much of our time at work, we need to be ourselves there.

Celebrate the team: When there are achievements, celebrate them, single out individuals who are excelling and living the company values. This builds morale and is indicative of appreciation, which is fundamental when running and building a business.

2. What has and continues to be your philosophy since managing a large team?

Know your strengths and weaknesses, as well as your team’s and leverage off that. Be prepared to learn from others, no one can operate in isolation, regardless of the level on which you operate. Accept criticism and don’t bulldoze someone’s ideas, that’s how you build trust.

3. What in your view are the top characteristics the team look for in a leader?

  • Be consistent – inconsistency screams bad leader
  • Provide guidance – this is key, don’t turn a blind eye, give input and council
  • Listen – always listen intently
  • Be impartial – always be fair
  • Give credit – it builds morale and shows you recognise good work
  • Be patient – Rome wasn’t built in a day, and remember not everyone thinks the same as you do

4. What’s your view on an open door policy and how does it assist with managing a team and ensuring everyone remains productive?

I believe in an open door policy. It’s essential to build and develop trust. I’m the first to admit that it takes a while to build that trust, but once the team (on all levels in all departments) know your door is always open, and that they can trust you implicitly, half the battle has been won.

I host a GM’s roundtable every two months, just to establish how everyone is feeling and where everyone is at. It gives staff the opportunity to bring their challenges to the table, and I deal with them the best I can.

It’s 100 percent confidential and line managers are not allowed to attend. During this meeting we try reach common ground, and I commit to addressing and ultimately solving the problem(s).

Related: 10 Ways To Make Your Employees 10x More Productive

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Increase Profitability

Why Purpose Drives Profits

If you want to succeed, it’s time to start engaging where it matters.

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Over the past two years, many clients have been extending brand positioning exercises into purpose-driven expressions.

When we look at it, it makes sense given the country’s demographics. With many of our fellow countrymen struggling to make ends meet, brands have stepped in to provide them with a picture of a future worth striving for.

Global customer-centricity study, Insights 2020, led by research firm Kantar Millward Brown, has attempted to understand how brands could drive customer-centric growth as well as the factors that really make a difference. The research surveyed 10 495 individuals in 60 countries, and there are some significant efforts worth investing in if brands want to engage where it matters most, in consumers’ hearts.

The research uncovered that for market-leading companies and brands, traditional value drivers such as quality, packaging, or distribution are necessary, but no longer provide a competitive advantage; most brands are capable of providing these drivers. What is important, are a few critical approaches.

1. Purpose-led brands

The study found that when companies or brands linked to a purpose, 80% of them outperformed the market. Only 32% of non-purpose led brands managed to perform better than the market. 

Related: How To Calculate Gross Profit

2. On the ground

It’s important to engage with consumers in their space and on their terms. Through the use of memorable campaigns, experiential events and activations it is critical to engage with consumers on their turf.

3. Be truthful and authentic

Consumers can smell something inauthentic a mile away, especially when it’s coming from a brand. This forces brands to strive for authenticity in everything they do, especially when it comes to marketing. Building values and principle-based attributes into your brand as a guiding tool is essential.

4. Helping consumers commit

By allowing individuals to attach themselves to a brand with a purpose, it helps consumers personally commit to a cause that they consider important. When a consumer is personally invested, the link between the brand and product or service deepens.

Related: Profit Share for Increased Performance

5. Balancing heritage and modern relevance

There is a continuous tussle in balancing the traditional market, transitional market and the new consumers brands are trying to attract. Keeping the heritage and roots of the brand true to itself, while creating relevance for the new market, is a battle marketers are still fighting.

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Increase Profitability

Need To Trim The Fat To Boost Profitability? Listen To Your Clients First

Jeff Bezos believed that once you win the client over by doing this, everything else will follow – not least profitability.

Marc Wachsberger

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Finding the balance between offering the extras that set you apart from your competitors and keeping things ‘lean and mean’ to minimise wastage and maximise return on investment is a tricky balancing act.

I’ve noticed that many businesses try to attract or retain customers by offering what they think their customers want, rather than finding out what they really need, and then delivering that. That’s an expensive mistake to make – and it’s not going to achieve the business results you need.

I’ve also observed that now is the age of the new entrepreneur – the game changers who disrupt the status quo long set by big bureaucratic competitors who think that their customers will just accept an inflationary (or slightly larger) increase every year, just because they always have.

While Amazon has been around for a while now, there’s also an important lesson to be learned from its launch goal, which was to bring the price to the client. Jeff Bezos believed that once you win the client over by doing this, everything else will follow – not least profitability.

How have I applied these lessons in my business?

Firstly, we design our hotels backwards – we focus on the needs of our clients, very aware that what hotel guests wanted years ago is not what they want now. That’s why we don’t offer thing like a turn-down service with chocolates on the pillow. Nobody eats the chocolates, and nobody uses the toiletries – so why should we include the costs of these unwanted extras (and the cost of the staff required to implement them) in the final bill to our clients?

Related: 7 Steps To Optimise Your Cycle Of Customer Service

We do, however, offer free WiFi internet connectivity, free parking in our buildings, free laundry services and either bed-and-breakfast options or self-catering rooms.

Simply put, we’ve cut the fat that nobody wants anyway, and added the value that our guests have said they expect.

Our clients have said that they expect the whole hotel to be a workstation, and not just the business centre in a dark, unwanted corner. So, we’ve put a workstation in every room, with always-on access to the internet. Our hotels are designed with beautiful work spaces that cater for nomadic entrepreneurs and double up as comfortable meeting spaces, again – gone are days of boardroom only meetings, our spaces are primed for work and play in one integrated space.

Our clients have pointed out that they’re already paying for their room – so why should they pay for parking?

Many of our clients stay with us for days or weeks at a time, and have said it would be helpful if we did their laundry. So, we do that for them – and we don’t charge them for it.

Related: Good Customer Service Is About Relating At The Same Level

It’s true that many of our old-school competitors offer a broader range of products and services than we do, but we’ve built a successful business on adding the value that our clients need, removing the costs and extras that annoy them, and keeping costs (theirs as well as ours) under control by cutting out unnecessary frills.

It’s an approach that’s worked for The Capital Hotels and Apartments as a disruptor in the hotel and long-stay accommodation industry, and I’m confident that its principles would apply to any other industry that’s ripe for disruption.

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