Many top managers measure the success of a company by economic indicators such as revenue and profit. If the figures are right, the company is considered successful. However, upon closer inspection of these hard facts, it becomes evident that many are directly or indirectly influenced by soft factors. Soft factors refer to non-monetary aspects like employee satisfaction, motivation, commitment, communication, and corporate culture.
The awareness that soft factors are crucial for companies is widespread. Many managers and executives realize that these factors impact the overall performance and consequently, the profits of a company.
How do soft factors influence corporate success?
Answering this question isn’t easy, as current knowledge on measuring, evaluating, and representing soft factors is insufficient. Only when these data become measurable and tangible can their impact on hard facts be proven with figures. This enables a company to assess and leverage its actual position regarding soft factors.
The question arises whether quantifying everything is necessary to use and understand it. As Albert Einstein said, “Not everything that can be counted counts, and not everything that counts can be counted.” Do we need to make things tangible to understand and change them?
Another problem in trying to measure soft factors is time. Gauging performance in this domain is often seen as an additional burden, and priorities are elsewhere. Although there’s much understanding of this subject, skepticism still prevails in many companies.
Certainly, the strongest influencers of soft factors in a company are its leaders, through the corporate culture they embody. A leader can affect employee satisfaction, motivation, engagement, communication, recognition culture, feedback culture, and much more. They also indirectly impact employee turnover, a company’s attractiveness in the job market, and customer satisfaction.
There are simply too few skilled leaders
Finding good leaders is not so simple. According to the Gallup Institute, statistically, only one in ten employees has the talent to lead. For every ten potential candidates for a leadership position, only one would be suitable. The beginning of good leadership lies in promotion or hiring decisions. However, many companies fail at this stage, with the wrong candidate chosen 82% of the time.
According to Gallup, talent, in various forms, is the foundation for excellence. If we are exceptionally talented in a domain, work becomes more enjoyable or doesn’t feel like “work” at all. Lacking this talent, reaching the level of a talented colleague is tough. Hiring the right people for positions makes them engaged team members and top performers, maintaining high productivity among employees.
People utilizing their talents adapt to new roles more easily and produce higher quality. Correlations were also found between top talents and important business outcomes regarding higher productivity, more revenue and profitability, lower turnover, and fewer absences. Hiring more suitable leaders can benefit the entire company, fostering cross-departmental engagement and reaching higher levels of performance. Thus, leadership holds great potential.
Study: Only One in 10 People Possess the Talent to Manage
Good management leads to excellent quality of life
Strength-based management pays off in companies. Gallup found that individuals using their strengths daily have three times better life quality, are six times more engaged at work, 8% more productive, and 15% less likely to quit their job.
To establish strength-based management, leaders who are open about their strengths, can admit weaknesses, and ask for support in these areas are needed. Admitting imperfection is important; otherwise, much time is wasted hiding weaknesses. Highly successful leaders know how crucial it is to employ their strengths, especially early in their careers, it was vital to emphasize what one is particularly good at.
This also impacts employee engagement. When leaders focus on their employees’ strengths, employees feel empowered, and engagement arises naturally. Strength-based management can also assist in team assembly. Considering each individual's strengths can form a team that complements each other perfectly.
Study: Employees Who Use Their Strengths Outperform Those Who Don’t
Ignoring has serious consequences
Soft factors can not only increase profits but also jeopardize them if considered unimportant and unnecessary. If a company does not address employees' needs or pay attention to their well-being, corporate success suffers. This neglect leads to increased stress for employees, lacking the necessary support from leaders or the company.
Only 29% of employees in Germany feel that their company cares about their well-being. Considering burnout costs German companies around 9 billion euros annually due to decreasing productivity, countermeasures are essential.
- 31% felt stressed yesterday…
- 24% felt tired or burnt out yesterday…
- 22% behaved poorly towards their family due to stress on three or more days…
- 12% suffered from burnout, depression, or anxiety disorders in the last 12 months…
These alarming figures cannot be ignored, not just because of the costs arising from downtime and declining productivity, but to not endanger people’s health.
Study: The High Cost of Worker Burnout in Germany
Soft factors are diverse and hard to grasp, yet they are the prime driver in a company for sustainable development and successful growth. This influence is often underestimated by corporate management.
Ignoring or neglecting soft factors poses a risk to employees and the company.
What do you think are the most crucial soft factors in a company? Do you believe that corporate success can be increased through soft factors? We look forward to discussing with you!