Beneath the surface: does putting people first mean profit goes last?

Looking back at this series, which has explored what changed “beneath the surface” since the beginning of the COVID-19 pandemic, one theme has been consistently woven within each issue I touched on: the primary importance of people to business.

Businesses cannot be disassociated from the individuals who are their employees, customers, partners, consumers and other stakeholders. There is no such thing as a wholly virtual business, as even companies born in the digital space, with few physical assets, rely on the ingenuity and patronage of people.

The world continues to change because of developments in globalization, demographics, technology and regulation, and, in many ways, the COVID-19 pandemic has accelerated and magnified these trends. These disruptive forces require organizations and their people to adjust rapidly. This presents challenges at a time when it’s getting harder to source, manage, motivate and retain talent, while controlling costs.

Talent, at all levels of the business, is an increasingly pressing strategic issue for boards. With the onset of the COVID-19 pandemic, there were dire warnings from economists and other industry professionals of potential multiyear recessions and unemployment at levels not seen in many countries since the 1970s. Neither have yet come to pass. Instead, growth has rebounded across many major economies and downbeat predictions about the labor market have not materialized. Rather than soaring unemployment, a scarcity of talent for job openings has become the norm across many sectors.

With these shortages, many companies are finding that employee demands are evolving. According to the EY Work Reimagined Employer Survey, 79% of employers are planning to make moderate to extensive changes, in order to allow more hybrid working. This is reflected in the views of 90% of employees, who say they want flexibility in when and where they work. However, only 40% of respondents have communicated these plans with their employers, underscoring a potential disconnect on crucial issues such as flexibility, culture and productivity.

Other risks identified in the survey include developing next generation talent (39%), establishing and measuring productivity (36%), upskilling/reskilling employees for new ways of working (30%), adopting new technologies to support hybrid working (28%) and supporting employee well-being (28%). A significant takeaway from the survey is that even among employers, flexibility is key: 80% agree that it is important to provide flexibility in where/when employees work and 70% agree that their company’s approach to flexibility impacts their ability to attract and retain talent.

The COVID-19 pandemic has highlighted that to thrive now and in the future, leaders must adapt. The hybrid working model enables leaders to leave behind antiquated systems, and herald new leading practice hybrid options for employees. Leaders need to stop anticipating what will be the new normal, because the new normal has already arrived. Leaders should embrace hybrid work, seek to empower and engage their employees and work to ensure that their organization advances successfully into the future.

Taking this approach is particularly important as productivity continues to be a major factor on bottom lines. Business leaders should be focused on employee experience, with the aim of creating a deliberately different, interactive and collaborative environment designed to promote enthusiasm, involvement and, crucially, employee engagement. Engagement allows the integration of teams within the business, ignites new ideas at all levels of the organization and helps leaders to identify talent and increase employee efficiency.

In addition to a flexible and engaging work environment, employees know what they want from a leader; they want someone that demonstrates emotional intelligence.

The challenge to establishing this path requires decisive, yet empathetic, leadership, where CEOs lead with emotional intelligence, based on shared values, and encourage continuous development for leaders and workers alike. The benefits of this approach are clear. In a recent EY study, 89% of employee respondents agree that empathy leads to better leadership. In fact, 88% feel that empathetic leadership inspires positive change within the workplace, and 87% say that it enables trust among employees and leaders. Additionally, 85% report that empathetic leadership in the workplace increases productivity among employees.

While the need to transform requires an ability to focus on short-, mid- and long-term drivers of change, the ultimate focus for leaders must be on creating sustainable value, where financial efficiency is complemented by stronger responsibility considerations, emphasizing long-term value over short-term wins.

More than anything, business leaders need to fully embrace their employees as strategic assets for their business. More than any other asset, they are the true heart of value creation.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.