5 Human Resource Lessons from the World's Most Admired Companies

Fortune Magazine's World's Most Admired Companies (WMAC) issue is out and once again, the top five seems like a familiar bunch: Apple, Google, Berkshire Hathaway, Southwest Airlines, and Proctor & Gamble. This is the third year that Apple has topped the prestigious list, two appearances shy of General Electric's record for most times as the "World's Most Admired Company". For the past ten years, the Hay Group has performed supplemental research to discover the best practices that make these companies so consistently successful.

Their 2010 study found that top organizations leverage their goodwill and give their employees the conditions needed to contribute and succeed. Here are ways ways that the WMAC achieves these objectives.

1) INVOLVE EMPLOYEES AT ALL LEVELS

Companies on the WMAC list are more likely to engage employees and ask for their feedback. In fact, 91% of the WMAC regularly reach out to employees for ideas on how to improve organizational efficiency, comapred to 76% of all companies. Not only does this generate great ideas for the company but it keeps employees motivated and aligned with the organization's goals. The vast majority of respondents from the WMAC (94 percent) believe employee engagement efforts reduced employee turnover, and 85 percent believe employee engagement efforts reduced employee performance problems, compared to 67 percent and 72 percent at peer companies respectively.

2)WORK/LIFE BALANCE

Half of the WMAC said that intend to focus on improving work/life balance over the next two years to avoid burning out and to retain top talent. This is compared to only 30% of peer companies who has the same focus. Successful managers recognize that people's lives are more holistic and that beng respectful of this fact leads to happier and more productive employees.

3)KEEPING SKILLS CURRENT

The WMAC make efforts to ensure that employee skills are updated to keep up with changing job demands. Employees benefit from personal and professional development while the WMAC benefits from greater employee productivity and effectiveness. Hay Group Vice-President Mel Stark notes that the WMAC "actually manage to pay less for talent than their peers – about 5% less; they tend to have less of a need to hire expensive outside talent for jobs, because they are better at grooming people internally and retaining employees. The lower costs of recruiting and training new people have a ripple effect across an organization"

4) MANAGING PERFORMANCE

Managers are encouraged to coach employees on an on-going basis, providing feedback and solutions. Employees have clear expectations and understand their role in the organization's broader objectives. Managers must be aware of employees' activities so they can provide advice and counsel as well as ensure employees are engaged and on the correct path. However, it is important to make the distinction between managing performance and smothering it with too much attention. While managers need to be there to guide employees in the right direction the employees need to be in the drivers seat.

5) LINKING REWARD AND CONTRIBUTION

The WMAC tend to attract and retain top talent in the long-term and many of their top management were developed internally.  

Mel Stark believes this is because "these companies do a better job of rewarding top performers – delivering the best pay increases to those who are truly deserving and holding the line on pay for marginal performers. Over time, this results in a compounded effect of top performers earning appreciably more than others.”

The WMAC have systems and processes that offer significantly higher rewards for their high-performing employees than peer companies. Although this is an incurred cost in the short-term, the long-term benefits far outweigh to increased compensation paid to employees.

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To arrive at the top 50 Most Admired Companies overall, the Hay Group asked 4,100 executives, directors, and securities analysts who had responded to the industry surveys to select the 10 companies they admired most. They chose from a list made up of the companies that ranked in the top 25% in last year's surveys, plus those that finished in the top 20% of their industry.

(via Talent Management with quotes from Hay Group)