People Fuel Growth: How High Growth Companies Leverage Talent


About This Study

Growth is on every executive's mind… especially in our current metric-focused business environment, where every quarter must show returns. Business cycles are shortening, and firms must develop both strategy and operational plans that respond to rapid business environment changes.

When we speak with clients across industries, we hear a common refrain. Post the Great Recession, firms became extraordinarily good at "control", and being able to drive margin growth. In the same breath they tell us, they have perhaps lost the ability to think of growth holistically.

Aon reviewed more than 40 studies and frameworks focused on what companies can do to "grow" and found that a consistent pattern emerges. All these frameworks present a set of levers that companies can pull: portfolio repositioning, market transformation, geographic expansion, segment domination.

However, one important piece of the puzzle is overlooked or positioned as an afterthought What is this one last lever for growth that is figuratively staring you in the face, and literally sitting right in front of you (or behind, or beside)?

People.

Although we may want our organizations to act like well-oiled machines, they are ultimately made up of people. A recent study' estimated that 84% of the market value of the S&P 500 is in the form of intangible assets. These intangible assets are created by people and in many cases—are the people themselves. Even the most technologically enabled organizations are led and operated by people. People therefore Offer organizations an untapped opportunity for growth—the "last lever" to make growth happen.

Firms that demonstrated consistent revenue and profitability intertwined their business and people strategies in a dynamic manner, rather than having them be sequential (business strategy leading to people strategy).

We sought to understand the impact people have on growth through interviews with the CHROS of 25 high-growth Fortune 1000 firms (see the sidebar on "scope"). We also analyzed our proprietary data to identify differences between high- and average-growth firms. The goal of the study was to look for practical ways that organizations drive growth through people, and how they convert thought to action.

What emerged was Aon Hewitt's model for growth, which describes the role of people in fueling extraordinary growth. It important to note that this model does not encompass the entire organizational strategy, but simply the "growth" portion of this strategy.

Across the board, the firms we interviewed kept their vision static, unchanging, even as the external environment ebbed and flowed. Firms responded to their external environment through their strategy, and growth should be at the center of that strategy.

Challenges:

  • 70% of Fortune 1000 companies have disappeared in the last 70 years
  • Corporate profits have peaked in 2015 and are trending downward
  • Talent shortages continue to put a premium on skills and experience

Scope of the Study:

  • 25 CHROs in 15+ industries
  • 1.1 million employees represented
  • Over half a trillion USD total sales revenue
  • Companies designated as “High Growth” had top quartile revenue growth and above median EBITDA growth compared to peers, over a 3-5 year period (revenue and profitability parameters)

Global Span of Profiled Organizations

While all firms interviewed were headquartered in the US, most had global operations

Aon's growth model describes how organizations can use people as the key lever for driving their growth strategies. It captures the role that people play in driving growth.

The focus, therefore, is not on the organizational strategy, but on all the elements below "Intentional alignment" can mean multiple things depending on the function in question, but our model specifically describes how an organization brings about intentional alignment from a "people" standpoint by utilizing the five elements below it: collaboration, discipline, design, clarity, and mindset & action.

  • Collective Ambition: Singular vision, purpose and aspiration at the leadership team level towards driving growth.
  • Customer Centricity: Intimate understanding of customers, predicting their needs and what they value; identifying how the firm can uniquely deliver to those needs.
  • Collaboration: A focus on creating ‘collective genius’ by leveraging diversity of skillsets, and driving innovation at the intersection or organization boundaries.
  • Discipline: Building a systematic approach to deploy, manage, optimize, and track resources and talent.
  • Design: Aligning the organization, culture, processes, and people programs to the growth goals of the firm.
  • Clarity: Making certain each and every employee feels a part of the growth journey and knows their exact role in it.
  • Mindset & Action: Ensuring that leaders have the conviction, resilience, and long-term vision to bring to life the right cultural environment for fostering growth.

Collective Ambition:

Collective ambition is derived from the vision, is connected to the mission, and helps drive the “growth” aspect of strategy. This vision often comes from the CEO, but not necessarily – vision can come from a legacy or can be shared throughout the executive team.

At a high level, collective ambition is about leaders at the organization (primarily at the C-suite level) having a common set of priorities and direction about the growth choices they will make over time. As we will see later in the model, this sense of direction helps guide the organization and the employee base, and provides aspirational goals to be achieved.

A strong sense of direction can build solidarity and conviction among senior leadership, who must be willing to sacrifice the interest of their function or business unit for the good of the enterprise.

Collective ambition can be tracked through a common metric, but is not a metric in and of itself. It creates the foundation or basis for the operational plans that get cascaded throughout the organization.

How do organizations bring collective ambition to life?

  • Review the mission of the organization within the context of the environment – make sure it is current and reflects the economic and competitive landscape.
  • Ensure regular cadence among top leadership to discuss growth trajectory and the overall growth plan.
  • Tie measures and incentives to collective goals.

100% of our profiled companies said collective ambition was key to their growth trajectory

Expert Tip: Telecommunications Company

This company underwent a dramatic transformation in its executive compensation structure to build collective ambition among its senior leadership team. Two years ago, the company had 11 different versions of its annual bonus program for these leaders. The program was whittled down to one payment model, emphasizing alignment to the organization’s common purpose.

Expert Tip: Global Electronics Firm

This global organization was extremely thoughtful in its approach to the planning and communication of its growth plan. Once a draft of the growth plan was created, leadership socialized and sought input from each business unit.

These business units gave each other input and feedback, which helped to bring unity and a clear line of sight across the firm. The organization then collapsed verticals at the local level and set location-based level targets to achieve a sense of common purpose.

"Ambition in the absence of a group is meaningless. The leadership team must have an understanding of growth, and how to achieve it."

Customer Centricity:

Customer centricity is a deep understanding of the distinct needs of an organization's customers—and how the organization IS uniquely capable of delivering to those needs. It about creating an engine (whether it be a team, third party, or organizational mechanism) that knows the needs of customers, both expressed and latent, and is able to predict future needs.

Customer centricity is more than just metrics (such as sales goals) that focus on customers. The overall customer promise can be brought to life through metrics, but an organization that uses only metrics as its customer-centric engine is missing out on the give and take present in a tangible customer relationship.

Customer centricity is about listening and creating a deep and meaningful two-way conversation with the customer.

Academia agrees. One study found a significant relationship between customer orientation (defined as a "potent competitive weapon, shifting organizational values, beliefs, assumptions, and premises toward a two-way relationship between customer and the firm") and firm performances.

How do organizations bring customer centricity to life?

  • Understand who your customers are and how you are able to provide distinctive value.
  • Listen to customers and teach your employees how to listen; establish ways in which your employees can relay that feedback into your products or solutions.
  • Hire, develop, and train your employees to enable them to fulfill those customer needs.
  • Spend time translating customer needs into employee understanding and action

+10 Points Difference in Net Promoter Score (NPS)Z for high growth companies vs. average growth companies.

Expert Tip: Financial Services Firm

One firm we spoke with was extremely focused on the needs of their customers, aligning major decisions around their current and future needs. Because of this deep understanding, the firm replaced its "points" system with actual cash—making its offerings stranger and mare attuned to the customer than those of other financial services firms.

This firm also listened to customers by bringing support centers back to the United States. Overall, its executives are acutely aware of their responsibilities and always take prudent risks and exercise caution when it comes to the customers who rely on them.

Expert Tip: Real Estate Firm

Deep expertise can make the difference to customers. One of our interviewees expressed that their firm built deep local expertise by encouraging their leaders to become “one stop shops” for their clients, offering more than just individual products. As a result they became trusted advisors to clients.

Collaboration:

High growth happens at the boundaries of an organization's units. Collaboration is more than just 'working together', it is a focus on creating cross-functional, cross-unit collaboration by leveraging a diversity of skillsets to drive innovation and focus on creative problem solving.

Many of the organizations we spoke to built up their verticals, but were careful to create 'connection points' that joined these verticals in meaningful ways. Collaboration more than just a prescription of organization structure—that is, a justification to flatten the organization and eliminate functional boundaries. Flattening may be a solution at some organizations, but it is far more important to empower employees and encourage work on shared goals.

We looked to the work of Harvard professor Linda Hill to better understand how to build communities of innovation. She recommends that these communities have a sense of purpose, values, and rules of engagement, defined at the relevant group level. These communities must be able to instigate creative abrasion, yet allow for agility: "You want an organization that argues with you." To tie this together, there must be creative resolution as well: the ability to pursue multiple experiments, learn from outcomes, and adjust plans accordingly.

How do organizations bring collaboration to life?

  • Align employees around a common cause (customer interests, product development, geographic Issues), regardless of organizational boundaries.
  • Eliminate psychological and physical boundaries among organization and business functions.
  • Ensure that adequate 'connection points' exist within the organization structure so vertical silos do not become walls.

Insight:

To build cross-functional collaboration organizations need four things to be in place:

  • Strong Leadership
  • Empowerment
  • Shared Goals
  • Appropriate Reward Systems

Expert Tip: Apparel Manufacturer

At this organization, product verticals shared relevant insights with each other on customer trends, materials, seasonal adjustments. In a sense, they were able to create a 'playbook' across the company—and were able to pull relevant insights from this knowledge pool when entering into new situations and markets.

Sharing relevant knowledge at this organization was not just 'nice to have—it was integral to the culture and the continued relevance of the manufacturer in the market. This sense of shared purpose became a part of the products themselves, as certain lines of products shared technology and materials that led to a better overall product mix.

Expert Tip: Consumer Products Company

This firm allowed for organic innovation by letting leaders wear multiple hats. This focus extended down to all employees, who were expected to get comfortable with the organization’s entire portfolio of brands and products. There were frequent rotations at both the managerial and leadership levels.

“We are always looking for Venn diagrams between our products and our brands.”

Discipline:

Although many of the other concepts in our model deal with expansion and collective growth, restraint also extremely important at high growth organizations. Discipline is the idea that discussions about growth include control and consistent optimization. Nearly all of the profiled organizations had a systematic way to track, manage, and optimize resources. They consistently measured and tuned their processes over time.

Even during periods of instability and risk, these firms looked to the future and continued to control what they could. There was a certain humbleness emanating from many of our interviews, as the leaders we spoke to were careful to represent both the good and the bad. Again and again we heard the phrase "Never let a good crisis go to waste"—using failure as a learning opportunity. In fact, economic down periods were not just a source of potential for these firms—they saw them as additional opportunities to remove inefficiencies.

Discipline is about controlling Inefficiencies, and is not limited to margin improvement or cost cutting. High growth organizations enact discipline every day even as they focus on ways to expand. They constantly look for opportunities to improve and deliver operational efficiency.

Steven Bradley of Baylor University did a study on resourcefulness of over 1,000 entrepreneurs. He found that one of the keys to survival and growth was what he called "innovation of effort", making the best of the given situation and being able to problem solve in the face of limited resources'.

How do organizations bring discipline to life?

  • Keep your 'eyes on the prize'—in both good times and bad. Learn from experiences in the past when constraints were in place
  • Shore up resources for the future, especially in functions with a focus on innovation.
  • Deploy both people and capital resources to areas of highest return. use this process to create a common language for growth initiatives.

Insights from Top Companies from Leaders

High-growth companies prune more high-potentials than average-growth companies:

  • 10% designate less employees as high potentials each year
  • 15% remove more employees from the high potential designation each year

Expert Tip: Technology Firm

Over time, the ownership structure of this organization changed due to a private equity investment. This private equity firm insisted on returning cash to the shareholders and controlling costs. The firm used this as an opportunity to optimize and learn.

Expert Tip: Manufacturing Firm

While each of the high growth organizations we interviewed defined their own independent growth story, one highly acquisitive high growth company used a non-negotiable set of eight principles to direct optimization for acquired companies.

These guiding principles were closely followed by leadership. who used them to ensure that each of the acquired companies were connected to the larger whole. Although these comp antes were generally allowed to operate as they naturally would, they had to follow a consistent methodology based on the eight principles of continuous improvement.

Design:

Design about aligning organization, processes, and people programs to growth. The best firms integrate their people strategy and the design of programs within their organizational strategy, not the other way around.

In terms of workforce, design could be about creating a team specifically focused on growth and positioning that team correctly within the organizational framework. It's also about ensuring the firm is staffed appropriately both in terms of skills and human capital by either deploying or acquiring talent. From a total rewards perspective, design is about having a balance of long-term and short-term rewards. In leadership, it is equipping leaders to empower their teams in order to contribute to the growth of the organization.

High growth organizations know when to pull each HR lever to achieve their goals. They do not simply pull all HR levers at all times, hoping for the best. They know that the 'when and where' to deploy a certain process or resource is just as important as knowing when not to move forward.

How do organizations bring design to life?

  • Integrate the people strategy into the organization's strategy, rather than trying to integrate the organization's strategy into employees
  • Incent your growth businesses differently than your "cash cow" businesses.
  • Keep an eye on all HR processes and ensure that the HR analytics you run pertain to business goals, rather than HR outcomes.
  • Carefully monitor financial and human capital risk.

Insight:

High growth firms are more likely (+16%) to focus on organization and HR effectiveness programs compared to average firms.

High growth firms are also two times more likely to focus on culture (see below).

Expert Tip: Technology Firm

One technology firm we interviewed drove growth through their results and people orientation. Their mantra was that growth not only needs to be continuous, but accelerating. In practice, this means that year over year growth rates must be greater than last year's rate.

To that end, they heavily leveraged their variable compensation, structuring their bonus rates so that bonuses do not get paid out until they hit the past year's performance. This helped to drive their aggressive sales culture. They also frequently communicated growth messages and provided education and training to their employees with a specific focus on growth.

Clarity:

Do you know your organization's growth strategy over the next few years? You may not, but you are likely aware of the overall goal and where you tit in that goal. Clarity is communicating the growth path of the organization in a simple, understandable, and at times "catchy" fashion. Most importantly, it is ensuring that every employee throughout the organization knows the mission of the organization and how they contribute to the growth story.

A few of our profiled companies described clarity as a simple, repeatable drumbeat Of messages that translates complex strategy into execution in plain terms that every employee is able to identify with. As our case studies help to exemplify, in some cases metrics can help to define the connection between employee and growth goal in a quantitative manner; however, this can differ by company.

Clarity is more than rolling down growth metrics to the last level—it is communicating the message consistently and ensuring growth goals are not just a focus of the top of the organization, but a common thread running through every employee. Also, clarity is neither the operational plan for growth nor a sense of collective ambition. These concepts are defined at the leadership level. As leadership author lames M. Kouzes describes, "It would serve us well to have the humility and grace to acknowledge that the amazing people who reside in the cubicles are the ones who are responsible for most of our successes.

How do organizations bring clarity to life?

  • Don't keep the organizational strategy nebulous, craft it so that all employees understand how they contribute to organizational goals.
  • Minimize the complexity of goals and metrics when cascading messages throughout the organization.
  • Reinforce simple growth goals in multiple channels (meetings, social media, formal
  • communications, HR programs, etc.).

Insights from Aon’s “Inside the Employee Mindset”

Honesty/ openness was the #1 suggestion employees gave to improve their organization’s communication.

Expert Tip: Chemicals Manufacturer

This organization had a hard focus on “eliminating over-complication” that resounded throughout the company. The simple slogan tied metrics to the mission and vision of the company. Leaders also ensured that employees knew they were being judged according to this mission, and carefully tracked progress toward the organization’s goals.

Expert Tip: Airline Organization

This high-growth airline company had to get their employees on hoard with the company's singular mission of timeliness to the customer. me company exhaustively drove this point home and permeated it throughout the organization. This clarity of mission and company purpose kept employees focused on where they into the larger picture of the company as a whole.

"All of our employees have one simple mission: Get passengers from Point A to Point B on time. The rest falls in place."

Mindset & Action:

Underlying the last four elements of our growth model (collaboration, discipline, design, and clarity) a combination of two elements we call "mindset and action." Mindset and action about creating the right cultural environment to foster growth and align leaders' and employees' behaviors to the larger growth objectives.

In other words, leaders must espouse growth and reflect the growth efforts of the firm through their behavior (by not giving in to short-term pressure and sticking with the growth agenda). Organizations must articulate the growth-related behaviors that help drive growth and identify growth champions who magnify these behaviors.

This may be a shift for many organizations that have historically focused on efficiency and cutting where necessary. The growth mindset expands a short-term focus to include long-term objectives, the impact of which may not be felt for years or even decades.

Changes in mindset aren't sufficient to drive growth. Changes must lead to action. Many firms have healthy ideas about how to grow, and others may have pockets of growth where these elements are present, but very few are executing on all cylinders and growing the organization to its full potential. Bringing a plan to execution is critical, and involves every part of the organization.

How do organizations bring mindset & action to life?

  • Create a structured change plan with specific, timed outcomes—a project plan for change.
  • Have regular discussions with employees about culture and cultural change.
  • Consistently engrain new employees in the organizational culture.

Insight:

The top three cultural dimensions identified at high growth organizations through our study were:

  • Open/ Transparent
  • Consensus-Driven
  • Empowered

Expert Tip: Farming Firm

Leadership at this firm is made up of highly respected, long-tenured specialists in specific domains. A new CHRO was appointed to “shake things up” and found the leadership to be adverse to feedback and change.

To combat this mindset, the CHRO introduced a cultural change using a leadership rotation program, and utilized enterprise payment structures to build alignment throughout the top tier of the organization.

Expert Tip: Materials Organization

One materials organization we spoke with articulated their tight recruiting screen which, in addition to determining critical skills for success. filtered cut personalities that would not mesh well with the organization's culture.

This same attention to a consistent culture also applied to acquisitions. Acquired companies and their senior leadership would undertake a judicious review by the acquiring company, which allowed the materials organization to maintain its culture, even as they accelerated their expansion.

Conclusion

The vision of the company is a long-term view—one that should not change over time. This view, coupled with the external environment, is what sets the organizational strategy. As people get involved in the equation, leadership must have a sense of collective ambition and customer centricity that helps to intentionally align the rest of the organization to their mission and purpose. This alignment is done dynamically using collaboration, discipline, design, and clarity. Employees can help provide feedback and impact collective ambition and customer centricity, which feeds back into the model. By empowering their people to help reach growth goals, organizations can ensure they are optimizing their chances at becoming a high growth organization.

Many of the organizations we spoke with explained that their journey was not a straight line—there were temptations to take shortcuts, eat into long term investments, focus on quarterly profits. However, nearly all of these leaders were able to articulate their mindset of growth and press on through a combination of conviction, perseverance, and grit. Out of the many organizations we interviewed, nearly every leader spoke about their organization with pride and had a long-term view of where they saw the company in the future. This stark line in the sand against the ever-encroaching, volatile tide of demands of the market is what makes growth companies truly special.

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