Every ship needs a motivated crew

Last weekend 530 heads of "human resources" were marooned off the Devon coast for two-and-a-half days. Isolated in the comforts of the cruise liner Oriana, they discussed strategic issues at the fourth annual Human Resources Forum.

Three key messages emerged from the varied programme. Motivated staff provide the customer service essential to profitability; linking people strategy to business strategy significantly improves corporate success; and social responsibility is good for commercial success.

Entrepreneur Julian Richer, founder of hi-fi retailers Richer Sounds, said that delivering great customer service at a profit takes "a balance between control and motivation or fun." The balance is subtle. On control he emphasised the importance of measurement - but stressed that it must be explained to staff. Measurement must be linked to reward. But not by annual staff assessments. "Surely we [as managers] should know what they are like all the time," he said.

There are five ways, he said, to motivate people: make work fun and don't work people too hard; offer recognition in the form of "nice letters" thanking them for special efforts; rewards; informative communication; and reciprocal loyalty through job security and promoting people internally. Apparently it works for Richer Sounds, which has the highest sales per square foot of any retail outlet in the world.

The findings of two research projects by Richmond Events, the Forum's organisers, were also revealed. The first, in conjunction with Cranfield School of Management and communications consultants AVICoM, asked "can linking people strategy to business strategy significantly increase corporate success?" Describing what has been called the Service-Profit Chain, Pennie Frow from Cranfield said that satisfied employees give better service and so create satisfied customers. A satisfied customer is a loyal customer and loyalty is a strong predictor of profit performance.

However, HR is less likely to have a seat at the strategy table now than 10 years ago. There is considerable corporate resistance to investing in employee commitment. Resistance comes from the CEO and shareholders, partly because of the difficulties of providing numerical evidence of the return. Yet, said James Brooke of AVICoM, there is evidence that people management is a key predictor of company performance.

Two thirds of surveyed blue-chip companies felt that their companies had at best a partial commitment to investing in employee satisfaction, although 80 per cent said it has a positive impact on long-term performance. But only half thought it had a major impact in the short-term. The pressure to show short-term results too often outweighsmore-profitable strategies.

A series of expert-led discussion groups made up of senior HR, communications and marketing executives concluded that organisations must rethink their internal structures. Traditional functions will become anachronisms. Teams will work across disciplines to ensure that customer needs, brands and employee capabilities are aligned. If the traditional HR function doesn't change, it will soon be moribund. The most forward looking HR people are those who outsource routine administration and align themselves to the company's business strategies.

The second study, "a question of corporate citizenship", by the Future Foundation and Consumers' Association, supported the idea that being a "good citizen" aids commercial success. Particularly important is being seen to be honest, open and fair. This in turn relates to customer satisfaction and loyalty. However, compared with a similar study last year, the team found a small but worrying decline in trust.