SWOT Analysis

SWOT is an acronym used to describe the particular Strengths, Weaknesses, Opportunities, and Threats that are strategic factors for a specific company. A SWOT analysis should not only result in the identification of a corporation’s core competencies, but also in the identification of opportunities that the firm is not currently able to take advantage of due to a lack of appropriate resources. (Wheelen, Hunger pg 107)

The SWOT analysis framework has gained widespread acceptance because it is both simple and powerful for strategy development. However, like any planning tool, SWOT is only as good as the information it contains. Thorough market research and accurate information systems are essential for the SWOT analysis to identify key issues in the environment. (Marketing and Its Environment, pg 44)

Assess your market:

• What is happening externally and internally that will affect our company?
• Who are our customers?
• What are the strengths and weaknesses of each competitor? (Think Competitive Advantage)
• What are the driving forces behind sales trends?
• What are important and potentially important markets?
• What is happening in the world that might affect our company?
• What does it take to be successful in this market? (List the strengths all companies need to compete successfully in this market.)

Assess your company:

• What do we do best?
• What are our company resources – assets, intellectual property, and people?
• What are our company capabilities (functions)?

Assess your competition:

• How are we different from the competition?
• What are the general market conditions of our business?
• What needs are there for our products and services?
• What are the customer-market-technology opportunities?
• What are the customer’s problems and complains with the current products and services in the industry?
• What “If only….” Statements does a customer make?

Opportunity an area of “need” in which a company can perform profitably.

Threat

challenge posed by an unfavorable trend or development that would lead (in absence of a defensive marketing action) to deterioration in profits/sales.

An evaluation needs to be completed drawing conclusions about how the opportunities and threats may affect the firm.

EXTERNAL: MACRO- demographic/economic, technological, social/cultural, political/legal MICRO- customers, competitors, channels, suppliers, publics INTERNAL RESOURCES: the firm

Competitor analysis is a critical aspect of this step.

• Identify the actual competitors as well as substitutes.
• Assess competitors’ objectives, strategies, strengths & weaknesses, and reaction patterns.
• Select which competitors to attack or avoid.

The Internal Analysis of strengths and weaknesses focuses on internal factors that give an organization certain advantages and disadvantages in meeting the needs of its target market. Strengths refer to core competencies that give the firm an advantage in meeting the needs of its target markets. Any analysis of company strengths should be market oriented/customer focused because strengths are only meaningful when they assist the firm in meeting customer needs. Weaknesses refer to any limitations a company faces in developing or implementing a strategy (?). Weaknesses should also be examined from a customer perspective because customers often perceive weaknesses that a company cannot see. Being market focused when analyzing strengths and weaknesses does not mean that non-market oriented strengths and weaknesses should be forgotten. Rather, it suggests that all firms should tie their strengths and weaknesses to customer requirements. Only those strengths that relate to satisfying a customer need should be considered true core competencies. (Marketing and Its Environment, pg 44)

The following area analyses are used to look at all internal factors effecting a company:

• Resources: Profitability, sales, product quality brand associations, existing overall brand, relative cost of this new product, employee capability, product portfolio analysis
• Capabilities: Goal: To identify internal strategic strengths, weaknesses, problems, constraints and uncertainties

The External Analysis examines opportunities and threats that exist in the environment. Both opportunities and threats exist independently of the firm. The way to differentiate between a strength or weakness from an opportunity or threat is to ask: Would this issue exist if the company did not exist? If the answer is yes, it should be considered external to the firm. Opportunities refer to favorable conditions in the environment that could produce rewards for the organization if acted upon properly. That is, opportunities are situations that exist but must be acted on if the firm is to benefit from them. Threats refer to conditions or barriers that may prevent the firms from reaching its objectives. (Marketing and Its Environment, pg 44)

The following area analyses are used to look at all external factors effecting a company:

• Customer analysis: Segments, motivations, unmet needs
• Competitive analysis: Identify completely, put in strategic groups, evaluate performance, image, their objectives, strategies, culture, cost structure, strengths, weakness
• Market analysis: Overall size, projected growth, profitability, entry barriers, cost structure, distribution system, trends, key success factors
• Environmental analysis: Technological, governmental, economic, cultural, demographic, scenarios, information-need areas Goal: To identify external opportunities, threats, trends, and strategic uncertainties

The SWOT Matrix helps visualize the analysis. Also, when executing this analysis it is important to understand how these element work together. When an organization matched internal strengths to external opportunities, it creates core competencies in meeting the needs of its customers. In addition, an organization should act to convert internal weaknesses into strengths and external threats into opportunities.

SWOT

Focus on your strengths. Shore up your weaknesses. Capitalize on your opportunities. Recognize your threats.

Identify

• Against whom do we compete?
• Who are our most intense competitors? Less intense?
• Makers of substitute products?
• Can these competitors be grouped into strategic groups on the basis of assets, competencies, or strategies?
• Who are potential competitive entrants? What are their barriers to entry?

Evaluate

• What are their objectives and strategies?
• What is their cost structure? Do they have a cost advantage or disadvantage?
• What is their image and positioning strategy?
• Which are the most successful/unsuccessful competitors over time? Why?
• What are the strengths and weaknesses of each competitor?
• Evaluate competitors with respect to their assets and competencies.

Size and Growth What are important and potentially important markets? What are their size and growth characteristics? What markets are declining? What are the driving forces behind sales trends?

Profitability For each major market consider the following: Is this a business are in which the average firm will make money? How intense is the competition among existing firms? Evaluate the threats from potential entrants and substitute products. What is the bargaining power of suppliers and customers? How attractive/profitable are the market now and in the future?

Cost Structure What are the major cost and value-added components for various types of competitors?

Distribution Systems What are the alternative channels of distribution? How are they changing?

Market Trends What are the trends in the market?

Key Success Factors What are the key success factors, assets and competencies needed to compete successfully? How will these change in the future?

Environmental Analysis An environmental analysis is the four dimension of the External Analysis. The interest is in environmental trends and events that have the potential to affect strategy. This analysis should identify such trends and events and the estimate their likelihood and impact. When conducting this type of analysis, it is easy to get bogged down in an extensive, broad survey of trends. It is necessary to restrict the analysis to those areas relevant enough to have significant impact on strategy.

This analysis is divided into five areas: economic, technological, political-legal, sociocultural, and future.

Economic What economic trends might have an impact on business activity? (Interest rates, inflation, unemployment levels, energy availability, disposable income, etc)

Technological To what extent are existing technologies maturing? What technological developments or trends are affecting or could affect our industry?

Government What changes in regulation are possible? What will their impact be on our industry? What tax or other incentives are being developed that might affect strategy development? Are there political or government stability risks?

Sociocultural What are the current or emerging trends in lifestyle, fashions, and other components of culture? What are there implications? What demographic trends will affect the market size of the industry? (growth rate, income, population shifts) Do these trends represent an opportunity or a threat?

Future What are significant trends and future events? What are the key areas of uncertainty as to trends or events that have the potential to impact strategy?

Internal Analysis Understanding a business in depth is the goal of internal analysis. This analysis is based resources and capabilities of the firm.

Resources A good starting point to identify company resources is to look at tangible, intangible and human resources.

Tangible resources are the easiest to identify and evaluate: financial resources and physical assets are identifies and valued in the firm’s financial statements.

Intangible resources are largely invisible, but over time become more important to the firm than tangible assets because they can be a main source for a competitive advantage. Such intangible recourses include reputational assets (brands, image, etc.) and technological assets (proprietary technology and know-how).

Human resources or human capital are the productive services human beings offer the firm in terms of their skills, knowledge, reasoning, and decision-making abilities.

strategic planning analysis

Capabilities

Resources are not productive on their own. The most productive tasks require that resources collaborate closely together within teams. The term organizational capabilities is used to refer to a firm’s capacity for undertaking a particular productive activity. Our interest is not in capabilities per se, but in capabilities relative to other firms. To identify the firm’s capabilities we will use the functional classification approach. A functional classification identifies organizational capabilities in relation to each of the principal functional areas.

strategic planning swot

You may also be interested in:

• Dilbert Again – This Time on External Analysis Another Dilbert comic- I know! It does bring up a...
• Internal Analysis Definition: The Internal Analysis of strengths and weaknesses focuses on...
• External Analysis Definition: The External Analysis examines opportunities and threats that exist...

The need for change is often inherent in a strategic plan, and this can shift the power dynamics in any organization as it represents a re-prioritization of resources and activity.  With this acknowledged, it is a clear role of leadership, and leadership alone, that must embrace the process, implementation and execution of new strategic actions.  Leadership is tasked with viewing strategy execution as their job. Having a keen understanding of the process of change is vital.

Comprehensive communication about the effectiveness of the purpose of a strategic plan is often a big initial hurdle.  Often strategic goals are viewed as an extra expense that raises costs.  To gain acceptance of new directions based on strategic thinking, the actions of any given plan need to be viewed as solutions to challenges or problems that exist or are likely to exist in the near future.  Cost-benefit analysis and cause and effect comparisons to prod strategic action are also effective ways to bring people on board.

Once key leaders see that the strategic plan is not only additive but also vital to future viability, their position should shift if they have the organization’s best interest in mind.  At this point, building alignment for cross-functionality and even organizational structure shifts can be viewed as solid maneuvers that are based on necessity and not a whim.

At an everyday level, leaders must embrace the strategic change in their approach to work.  For example, if a strategic plan calls for less standardization to create an environment for the development of innovations, then leaders must abide by that playbook.  On the other end of the spectrum, if increased efficiencies are part of a strategic goal, then leaders would have to also abide by and enforce increased standard operating procedures (SOPs).

Overall, this process is not easy. Don’t assume robust, passionate discussions are a rejection of the developments you seek.  Instead, try to inject the values that your organization keeps into the process.  These values should help you anchor the discussions against the tides of tangents and emotions, while keeping the dialogue progressive with the organization’s success and longevity in mind.

Strategy Check:  Are your leaders onboard to fundamentally embrace the strategic plan?

You may also be interested in:

• Can You Say What Your Strategy Is? Everyone knows their strategy until you ask them what it...
• Occasionally Look at the Results of Business Plans “However beautiful the strategy, you should occasionally look at the...
• Perfection is in the Process On January 25, the Wall Street Journal ran an article...

This section of our February 2010 Strategy Huddle focuses on a question that we receive from many clients: How do I determine the importance of my customer comments / feedback in setting strategy?

You may also be interested in:

• Determining Customer Feedback in Setting Strategy & WSJ Article (55 mins) Watch a recorded video of the latest Strategy Huddle and...
• What is a Competitive Advantage & How To Determine it in Today’s Environment (15 mins) This is part of our Strategy Huddle Series from March...
• M3’s Take on the February 2010 Wall Street Journal Article: “Strategic Plans Lose Favor” (20 mins) This is part of our ongoing Strategy Huddle series from...

Revelations by management made in the article make you wonder if execution strategies found a way into any of the strategic plans at hand. Some include: the need for monthly instead of quarterly reviews; the need to review a strategic plan to see if it is “as relevant as it was three-years ago”; and a “switch from distant calendars and rigid forecasts of the past.”

The only thing that should be rigid in a strategic plan is an organizational commitment to properly execute it. This includes monthly executive reviews that are fed by weekly staff updates. If problems in the action elements of the plan arise, this prompts corrective adjustment each month.

If something within a plan can’t be executed, the plan needs to be adjusted… and it can’t take three years to have this happen. Regular, cyclical communications from the staff to the managers to the executives are essential. Routine assessments for internal and external feed into this process as well. These can’t be implemented when crisis calls, these need to find their place during the writing of the plan itself.

In this way execution is tied into planning, much like a journey is guided by a compass. Make no mistake; this is a time investment, and one that requires an organizational structure with its influences in check. In fact the “Inability to manage change effectively or to overcome internal resistance to change” is cited as the #1 Obstacle to Strategy Execution in Warton Business School professor Lawrence Hrebiniak’s Making Strategy Work (2005).

Proper strategy execution keeps a plan adaptive. Contrary to what the WSJ article states, being adaptive is not a new approach. It’s just a necessary one that seems to get overlooked or underestimated once strategic plans find final approvals, yet no good plan is so final that it is fireproof to changes inherent around us all.

STRATEGY CHECK:  Is your strategy execution process lined up that will keep your plan current and aligned for your organization?

You may also be interested in:

• Occasionally Look at the Results of Business Plans “However beautiful the strategy, you should occasionally look at the...
• Leadership Must Unite for Strategic Success Whether you are at the helm of a strategic plan...
• Can You Say What Your Strategy Is? Everyone knows their strategy until you ask them what it...

Editor’s Note: Our last strategy check included this quote, which generated so much positive feedback, we decided to dedicate a whole newsletter to it.

Processes when performed correctly create a rhythmic routine, and for very large organizations having everyone march to the same beat is a real accomplishment… except when the very road you walk on goes from a cobblestone path to a jet-way tarmac.

In a recent talk, the Boy Scouts of America’s VP of Operations Gary Butler highlighted how easy it is to mistake action for outcomes and in doing so he illustrated Churchill’s point in a real word example. For over 100 years, the Boy Scouts of America has been perfecting the processes that deliver programs and services to youth worldwide. An overall unintended outcome, however, has been a decline in membership levels. “We did not connect processes to the results, in fact, we valued process over results.” Butler states.

Intensive reviews by this stalwart organization have initiated a fundamental shift in the way BSA sets its strategic direction and processes to solve the issues that have been eroding its membership base. They have created key performance measurements to be monitored in the pursuit of membership retention and growth now fall within six key departments: Marketing, Governance, Programs and Services, Financing, Talent Management (Volunteers), and Administrative Services. Sourcing data reports from these areas, new processes have been designed to be simple to duplicate and repeat, but most importantly flexible to react to each Councils’ real opportunities or threats – and emphasizing what instead of the how.

Old Emphasis – “The How” Fully-engaged Boards Strategic Implementation Fiscally-Sound Councils

New Emphasis – “The What” Fully-Trained Boards Creating a Strategic Plan Fundraising Campaigns

Soon real-time information on the market (inputs) and performance measures (outputs) will be integrated into the “New” BSA strategic management tools. All functional areas and geographic locations will be able to drive their results, from the national to troop level. All the while, the overall goal stays embedded and crystal clear: Grow Membership and Impact Youth’s Lives.

As such, make the mission of the Boy Scouts of America, “To prepare young people to make ethical and moral choices over their lifetimes by instilling in them the values of the Scout Oath and Law” viable for the next 100 years.

Not to be underestimated, this organizational change is an uphill battle, requiring well-entrenched mindsets to be shifted and re-focused. As the BSA is one of our client’s, we’ll be bringing you periodic updates as this massive change begins to transform an American icon.

STRATEGY CHECK: Take a peek at your 2010 strategy to ensure the outcomes you are seeking are clear and focused on intentional, purposeful results.

You may also be interested in:

• Perfection is in the Process On January 25, the Wall Street Journal ran an article...
• Leadership Must Unite for Strategic Success Whether you are at the helm of a strategic plan...
• Can You Say What Your Strategy Is? Everyone knows their strategy until you ask them what it...

It’s like the scene from the bad dreams you had as a kid; the ones where you show up to take your final exam and don’t remember a thing. You’re at a business function explaining what your company does and someone asks what your strategy is, and you have no answer. You should have one. You want to have one. But nothing comes to mind. While choosing a strategy isn’t impossible, it is a word that’s often misunderstood.

What is strategy?

Your strategic plan will contain many things, including your mission, vision, principles, objectives and tactics, but none of them are your strategy. Your strategy, simply, is the way in which you plan on matching what you do best with the customers you plan to reach.

Your strategy should:

• Establish unique value proposition compared to your competitors
• Be executed through operations that provide different and tailored value to customers
• Identify clear tradeoffs and clarifies what not to do
• Focus on activities that fit together and reinforce each other
• Drive continual improvement within the organization and moves it toward its vision

What isn’t your Strategy?

Knowing what strategy is can also be explained by looking at what strategy is not. Dr. Michael Porter, the leading strategy guru and professor at Harvard, had this to say at the 2006 World Business Forum in Chicago. Strategy is not

• Best practice improvement
• Execution
• Aspirations
• A vision
• Learning
• Agility
• Flexibility
• Innovation
• The Internet (or any technology)
• Downsizing
• Restructuring
• Mergers/Consolidation
• Alliances/Partnering
• Outsourcing

So Which is Yours? A Broad View:

In the 1980 classic Competitive Strategy: Techniques for Analysing Industries and Competitors, Michael Porter simplifies the scheme by reducing it down to the three best strategies. They are cost leadership, differentiation, and market segmentation (or focus).

Cost Leadership Strategy

Organizations that choose this route aim to produce a product or service that matches a given level of quality, at a lower cost than their competitors. They then either sell their product or service at a normative cost in order to maximize revenue or they sell at a lower cost in order to gain market share. The key to this strategy is efficiency.

If your organization’s strengths include operational excellence, or efficient distribution channels, or any other attribute that allows for cost savings in production, this strategy is an option.

The risk with this strategy is that eventually other companies will also be able to produce at a lower cost, due to the efficiencies brought about by advances in technology.

Differentiation Strategy

Businesses that choose this strategy have a unique quality to their product that customers see as better or at least different from the other options available in that market. This uniqueness gives the producer the chance to sell at a premium price.

If your organization’s core competencies grant you greater skill or creativity in production, and your sales and marketing effectively communicate the advantages of your product or service over your competitors, this may be a good choice.

Focus Strategy

This strategy is also called a segmentation strategy because it involves carving your market in order to focus on a smaller group in which you can implement either a cost leadership or differentiation strategy. One benefit of using a focus strategy is that businesses can build loyalty in their given segment.

While businesses that choose to focus on one smaller segment of an industry may not have the leverage with suppliers that other organizations may, they generally have more intimate knowledge of their target customers and are able to tailor their products or services to them, and therefore charge greater prices or enjoy greater loyalty.

What to do

While your over-arching statements like mission, vision and principles give your long-term direction, there still needs to be something that lives in between those statements and the decisions you make to bring them into fruition. Choosing a strategy means that your company and the employees within have a solid answer for not only where you’re going, but how you’ll get there. With an obvious strategy, you have the structure needed to decide between different objectives and tactics that make up your action plan, and lead your organization to victory.

You may also be interested in:

• Lessons from the Successes of Steve Jobs: Focus, Focus Focus Does the pressure of business get to you? Do you...
• Leadership Must Unite for Strategic Success Whether you are at the helm of a strategic plan...
• Choosing a Market Penetration Strategy The most common growth strategy is to focus on what...

What can we learn from his dramatic recovery, and how solidly Apple has turned out successes through four different industries (Music, Movies, Cell Phones and Computing)?

A Dramatic Turn-Around that Speaks to Today’s Climate

For businesses who are currently navigating the global economic crisis, an example like Apple’s last decade of performance offers not only inspiration and hope, but great insight for cash-strapped organizations hoping to not only hold on but eventually thrive. In 2000, Apple was worth only $5 Billion and facing possible bankruptcy. Coming into 2010 they’re worth $170 billion, produce the leading mp3 player, the most popular mobile phone and have transformed all of the industries in which they do business. So, what did Jobs do when he took back the helm?

Steve’s Three Things: How Focusing on the Basics Gave Apple their Foundation

Humility

When Jobs came back on board at Apple, the company was not poised to launch the huge successes that have become so iconic to their brand in the last decade, like the iPod. The company was facing possible bankruptcy and had lost consumer confidence. Steve Jobs shocked many when he decided to turn to competitor Microsoft for help.

Such a move, especially for a personality not known for humility, what a bold move, but displayed Jobs’ fierce dedication to his company’s success, over his image. As leaders, owners and managers, our humility can greatly impact and inspire our organizations.

Simplicity

Next, Jobs dramatically paired down Apple’s product line from a broader range, to just four different computers. Doing this allowed the company to focus on creating four excellent tools for home and business, and also saved the company money by eliminating projects that didn’t contribute to the new vision Jobs had brought when he took back control. With this new focus, Apple created the iMac: an all-in-one solution that generating sales for future investments.

Is your organization possibly wasting resources on projects or initiatives that aren’t in line with achieving your vision? Are there areas in which you could re-align resources towards sources that will better help you reach your goals?

People

As soon as Jobs came back on board, he assembled a stellar management team- many of whom had worked with him at his previous company. As a testament to the quality and fit of this brain-trust, nearly all of them have stayed on board throughout this decade of achievement.

Having the right people in place within your organization is one of the most powerful elements to executing your corporate strategy. When talented, committed personnel are given the authority and ownership to guide initiatives toward success, you can take a great deal of chance out of whether your strategy will succeed.

One More Thing

As driven as Steve Jobs is toward success, and as wealthy as he has become as a result, you may be surprised to learn that his motivations aren’t to make a ton of money. As told by some of his closest comrades, instead of being inspired by monetary success, Jobs is driven by his intense, abiding and passionate love for his company.

Those close to him can truly trust that he would to anything to see Apple succeed, and as those who have weathered the ups and downs and surprises brought by running a business know, sometimes that’s what pulls the company through.

You may also be interested in:

• 7 Innovation Secrets of Steve Jobs Check out some quick tips from innovation guru Steve Jobs...
• Inspirational Quotes from Steve Jobs Are you feeling like you’re in a strategic planning rut?...
• Leadership Must Unite for Strategic Success Whether you are at the helm of a strategic plan...

But, one important thing to remember is that once the economic crisis has ended and business has gone back to normal, you’ll still be working with many of those vendors- and you don’t want to burn your long-term relationship now, just for savings today.

One of the articles that we referenced, from Network World, highlights the practice of re negotiations in Indian technology firms, specifically detailing how some companies are taking the short-term route of forcing suppliers into accepting unfavorable provisions and damaging long-term relationships.

Of particular financial pain to vendors, he continues, are software deals that, as a study from Accenture points out, are “being clinched largely on the strength of off-list discounts of up to 70%.”

Evidently, that isn’t a sustainable way to do business. And smart CIOs look for everyone’s best interests — even their vendors’, says the CIO of a pharma company. He says that he focuses on coming up with alternative options to these discounts that are discussed in a spirit of partnership.

That spirit of support, says industry watchers, is also complementary to the way business is done in India, where relationships count. Many CIOs agree that relationships can sometimes be deal clinchers and so it only follows that when it’s time for renegotiations, relationships play an important role. “We stress the importance of the relationship we both enjoy and how it is up to both parties to ensure that it survives,” says Suresh Kumar, Director-IT, KPMG

The important thing to remember here is that every organization exists within an ecosystem. Right now, almost all of those ecosystems have been negatively effected by the current economic crisis, and every member relies on the success of one another, to some extent. If squeezing too hard on a supplier damages their long-term viability, then you may be threatened yourself when they’re no longer around. Furthermore, you’ll be sitting down to negotiate again some time after the crisis is averted, and you’d much rather have an ally across the table rather than an adversary who carries a grudge.

If you plan begin the negotiation conversation by bringing up market value, or even more favorable competitor pricing, be aware of the message you’re sending: “we’re considering leaving you and willing to do it.” This can start things off badly by putting your vendor in a defensive posture- it can feel more like arm-twisting and less like an attempt to find a win-win situation. Instead, make sure that you’ve figured out a situation that you feel works well for both parties. Networkworld’s article explains the same sentiment shared by Indian companies as such:

Fortunately for vendors, many CIOs agree with Sahai and reject the idea of browbeating their vendors into submission. They say that strong relationships and knowing a vendor’s senior management on first name basis, all help in a renegotiating process, but what really clinches things is having an alternative option before a negotiation.And, all it takes to put those tricks up your sleeve is some homework. Some skillful negotiators will, for example, ensure that they thoroughly understand the market and the product.

Remember, we’re all in this together. The economic crisis has caused many business leaders to think short-term, and in their own interests, but that won’t help in the big picture. Instead of getting caught in that trap, use sound strategy and long-term business practices that strengthen the relationships you have with the organizations you rely on.

You may also be interested in:

• Cutting Costs Now by Renegotiating with Suppliers and Vendors Something good can come out of the recession. We know....
• How to Really Have Customer Relationships Guest post from Chris Champayne Customer relationship management centers around...
• Post-Recession Planning: Employee Retention Will Present a Challenge Planning for the recession to be over? Good. For most...

Google’s Search Efforts Enough to Cultivate Human Capital?

Google’s problems are stemming from changes within its corporate structure and culture. Promising engineers, designers, and sales executives who were once attracted to the company’s start-up atmosphere and soaring stock prices have been jumping ship as the company has shed the startup feel and seen stock prices level off. But, will their algorithm, which culls data from employee reviews and promotion as well as pay histories, actually stop the exodus?

Getting inside unhappy employee’s heads, as the company expects their new algorithm to do, can easily be done with a pen, paper and an attentive ear. According to new and past Googlers, the flood of employees leaving for new startups have simple needs. They no longer feel they can make the same impact as the company matures. They feel that Google doesn’t provide enough career planning, and some find the human resources department impersonal. You don’t have to be the leader in high-tech search to address a fundamental problem like this- you just have to work harder at developing your human capital. If your company wants to take steps to stem a potential staffing loss, here’s where to start:

How to Develop Human Capital:

While Google seems to be taking a complicated route with their new “unhappy employee search technology,” you can take steps today by examining your organization’s approaches to staff development and employee engagement.

How effective is your training and development program?  Do your employees have the best tools and work environment to do their jobs? You may have a formalized program, but, again, what really matters is that your employees are doing their best work and achieving their fullest potential. If employees really are your most important asset, you need to develop them to realize the full value of your investment.

Training and development needs to be linked directly to improvement at work. Make sure that you’re training for the capabilities that your organization needs to move forward. We’re constantly amazed at how many training programs aren’t linked to the overall strategy. For example, if you want to improve your productivity, send your employees to a time management workshop instead of a teambuilding ropes course.

Retaining Human Capital:

This doesn’t have to be overly complicated. When it comes down to keeping your people, don’t stress over the fact that you don’t have the resources that Google does. While their new system may help them identify which among their thousands of employees are most at risk, it’s not a silver bullet. The basics of employee retention have not changed.

The words employee retention hit most business owners in the gut. Managing people can be a hard concept for some people, and retention seems to be the perceived outcome of poor management (which isn’t necessarily the case because employees leave for numerous reasons unrelated to their jobs). Nevertheless, do you know the number one reason people leave their jobs? Not feeling appreciated by their boss. Employees need to feel appreciated, challenged, and fairly rewarded to stick around.

How is your retention rate? Because you have invested a significant amount of time and money into your employees, retaining them becomes imperative. Otherwise, you let your most valued asset walk out the door.
So before you consider investing millions of R&D dollars developing a sophisticated algorithm, consider these common-sense approaches to developing and retaining a crucial resource: human capital.

DON’T MISS OUT!

Also, if you haven’t voted for MSP in the People’s Choice Stevie Awards, votes will be accepted until May 30th, so don’t miss out- Because the American Business Awards knows time is money, your vote could win YOU a $1,000 Amazon.com gift card. If you have the time, vote today.

You may also be interested in:

• Google’s Approach to Employee Engagement: Surprise! It’s an Algorithm With Google’s recent announcement that they developed an algorithm for...
• Balanced companies, loyal employees For strategic execution to happen, you have to engage with...
• Do Your Employees Trust Your Performance Management Process? Managers face this problem far too often: you want to...

Since yesterday’s WSJ article announcing the algorithm explained the what, but not the how, it may not have been the best approach for the company. According to WSJ:

Google officials are reluctant to share details of the formula, which is still being tested. The inputs include information from surveys and peer reviews, and Google says the algorithm already has identified employees who felt underused, a key complaint among those who contemplate leaving.

While the company prides itself in being able to search effeciently, we wonder if they have a solid plan in place to actually improve their efforts at employee engagement. While many are awaiting more information on what they expect to be Google’s reinvention of staff retention, information further in the article points to a lack of execution in fundamental employee engagement practices:

Current and former Googlers said the company is losing talent because some employees feel they can’t make the same impact as the company matures. Several said Google provides little formal career planning, and some found the company’s human-resources programs too impersonal.

“They need to come up with ways to keep people engaged,” said Valerie Frederickson, a Silicon Valley personnel consultant who has worked with former Google employees. “If Google was doing this enough, they wouldn’t be losing all these people.”

I want to see a plan for change. If I were working at Google, it wouldn’t be enough for them to tell me “rest assured, if you’re feeling underutilized, we’ll find you.” I’d want to know that there’s a plan for each and every employee to feel as fulfilled in their job as they did when they announced to friends and family, “I’m a Googler now!”

More discussion on the web:

• Google’s Approach to Higher Turnover, Lower Engagement
• Google can now predict which employees will quit?
• Google algorithm knows which employees will quit?
• Google Turns “Magic Algorithm” Inwards, Predicts Which Employees Will Quit
• QuitRank: Google Algorithm Predicts When Employees Will Quit
• Employee engagement 2.0 has arrived courtesy of Google
• Google’s new algorithm: Will it help engage employees?

You may also be interested in:

• The Facts About Employee Engagement Still Unconvinced About the Power of Employee Engagement? Look at...
• Employee Engagement Stats from Harvard Harvard Business Publishing recently posted the results of an...
• Google’s Answer to Unhappy Employees May Miss the Mark Google announced this week that in response to an increase...