Rules of the Game for People Businesses - BCG · Rules of the Game for People Businesses ... and...

Rules of the Game for People Businesses

Succeed ing in the Economy ’s H ighes t -Growth Segment

BCG

Rules of the G

ame for People B

usinesses

www.bcg.com

BCGREPORT

AmsterdamAthensAtlantaAucklandBangkokBarcelonaBeijingBerlinBostonBrusselsBudapestBuenos AiresChicagoCologneCopenhagenDallasDüsseldorfFrankfurt HamburgHelsinkiHong Kong

HoustonIstanbulJakartaKuala LumpurLisbonLondonLos AngelesMadridMelbourneMexico CityMiamiMilan MonterreyMoscowMumbaiMunichNagoyaNew DelhiNew YorkOsloParis

PragueRomeSan FranciscoSantiagoSão PauloSeoulShanghaiSingaporeStockholmStuttgartSydneyTaipeiTokyoTorontoViennaWarsawWashingtonZürich

The Boston Consulting Group is a general management consulting firmthat is a global leader in business strategy. BCG has helped companiesin every major industry and market achieve a competitive advantage bydeveloping and implementing winning strategies. Founded in 1963, thefirm now operates 60 offices in 37 countries. For further information,please visit our Web site at www.bcg.com.

For a complete list of BCG publications and information about how to obtain copies, please visit our

Web site at www.bcg.com.

To receive future publications in electronic form about this topic or others, please visit our subscription

Web site at www.bcg.com/subscribe.



FELIX BARBER

PHIL CATCHINGS

YVES MORIEUX

A P R I L 2 0 0 5

www.bcg.com

© The Boston Consulting Group, Inc. 2005. All rights reserved.

For information or permission to reprint, please contact BCG at:E-mail: [email protected]: +1 617 973 1339, attention BCG/PermissionsMail: BCG/Permissions

The Boston Consulting Group, Inc.Exchange PlaceBoston, MA 02109USA

2 BCG REPORT2

3Rules of the Game for People Businesses

Table of Contents

Note to the Reader 4

Introduction 5

The Four Challenges Unique to People Businesses 6

Performance Measures for Employees 10

The Limitations of Capital-Oriented Metrics 10

Reliable Metrics for Employee Performance 10

The Importance of Linking Employee Metrics to Shareholder Value 13

People and Operations Management Systems 15

The Building Blocks of Effective People Management 15

A Tale of Two People Businesses: IT Services and Hotel Management 17

The Compensation Challenge 21

Competitive Compensation Benchmarks 22

The Impact of Compensation on Shareholder Risks and Returns 22

The Logic of Compensation 23

The Ladder of Strategic Advantage 25

Industry Consolidation and Business Economics 26

The Evolution of New Competitive Advantage 26

Depth, Breadth, and Globalization 27

The Pricing Advantage 28

Offshoring 28

Outstanding Performers at the Top of the Ladder 28

Rules of the Game for People Businesses 30

Appendix I: The Top People Businesses Around the World 31

Appendix II: The Strategic Advantage of Outstanding Performers 32

Note to the Reader

4 BCG REPORT

This report is dedicated to helping clients build accountable, engaged, and effective organizations in peoplebusinesses.

The authors would like to thank everyone who assisted in preparing the report—particularly Nicolaus Drostezu Vischering for his extensive research and analytical support, and Sally Seymour for her key support in thewriting and editing process. Thanks also go to members of the editorial and production teams, includingKatherine Andrews, Patricia Berrian, Gary Callahan, Kim Friedman, and Gina Goldstein.

We hope you find our insights helpful, and we look forward to your comments.

Phil CatchingsSenior Vice President and [email protected]

Yves MorieuxVice President and [email protected]

Felix Barber Senior AdviserZü[email protected]

5

Introduction

People businesses are the fastest-growing sector indeveloped economies. The world’s top 25 peoplebusinesses in terms of revenues have as manyemployees as the top 25 global companies. They alsohave greater returns on assets, although their salesper employee are only one-seventh as high. Peoplebusinesses—companies with high employee costs as apercentage of sales and with low investment in capi-tal—have different busi-ness economics, respondto different strategies, andneed to be managed bydifferent rules.

Yet most managers andinvestors in people businesses have only the rules fortraditional businesses to go by. It’s no surprise, there-fore, that sometimes they seem to be in the wronggame. Investors employing traditional financialmetrics—such as return on assets or return onequity—to benchmark one people business againstanother are using the wrong scorecard. Companiesthat treat people management as a support func-tion—delegating it to human resources, as tradi-tional companies do—are less productive becausethey fail to require line management to provide theactive coaching people businesses need. And chiefexecutives who focus only on investing in humancapital to achieve competitive advantage may be sur-prised to find that employees expect to receive mostof the profits in return.

In this report, we focus on four areas of people busi-nesses that are markedly different from traditionalbusinesses: performance measures, people manage-ment, rewards, and strategies. We are convinced that

if managers of people businesses understand andplay by the emerging rules for these enterprises, asignificant portion of the global economy will realizemajor benefits in productivity and profits.

We have identified more than 100 for-profit compa-nies throughout the world with revenues of $1.2 bil-lion or more in people businesses. (See Appendix

I, page 31.) In addition,most large companieshave employee-intensiveactivities, and a growingnumber are breakingthese activities out as sep-arate businesses. More

and more industrial companies, for example, arecharging independently for service and advice, aswell as for their products. When that happens, themanufacturer may offer to service the products of other producers, resulting in a new peoplebusiness. Similarly, some banks are beginning toset up their retail businesses as commission-basedbrokerages—putting risk taking and product cre-ation in a separate business unit and bringing in some products from outside vendors. These new retail financial-services businesses are peoplebusinesses. When large companies from any indus-try sector establish shared service centers for IT,HR, or other support activities, it is often only amatter of time before they begin to offer theseservices on the open market, creating new peoplebusinesses.

If your company is a people business—or about todevelop one or several in the future—then thisreport is for you.


People businesses respond todifferent strategies and havedifferent business economics,so they need different rules.

Over the past two decades, people businesses havebecome big business. They account for 25 percentof private-sector employment and well over half ofemployment growth in advanced economies. (SeeExhibit 1.) People businesses cover a wide range ofservices, including

• accounting

• advertising agencies

• contract catering

• contract research

• couriers

• employment agencies

• engineering contracting

• facilities management

• financial advice and brokerage

• hospital management

• hotel management

• information technology and telecommunicationsservices

• legal advice

• management consulting

• security

In all of these businesses, employees make up thegreater portion of costs, and investments in capitalare low compared with those costs. (See the insert“How We Define People Businesses,” page 8.) Not sur-prisingly, people businesses are major employers.The top ten for-profit people businesses, as meas-ured by employees, have nearly as many employeesas the top ten worldwide companies, as measured bymarket capitalization, although the ratio of employ-ees to revenue in the former is more than six timeswhat it is in the latter. (See Exhibit 2.)

Moreover, the top ten state-owned and not-for-profit people businesses have equivalent numbers

The Four Challenges Unique to People Businesses

6 BCG REPORT

E X H I B I T 1

PEOPLE BUSINESSES ARE GROWING FASTER THAN OTHER SERVICE BUSINESSES

SOURCES: National Labor Surveys; Nomenclature Général des Activités

Economiques dans l’Union Européenne (NACE); North American Industry

Classification System (NAIC); French, German, and U.K. national statistics

offices; BCG analysis.1Excludes public-sector and not-for-profit companies.2The United Kingdom excludes Northern Ireland.

Peopleemployed(millions)

1

0

20

40

60

80

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

United StatesOverall growth (1994–2003): 11%

Agriculture, fishery, mining, manufacturing, utilities, and construction

Agriculture, fishery, mining, manufacturing, utilities, and construction

Retail, banking, insurance, transportation, and telecommunications

People businesses

Growth (1994–2003)

–5%

12%

30%

Peopleemployed(millions)

1

0

20

40

60

80

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Retail, banking, insurance, transportation, and telecommunications

People businesses

Growth (1994–2003)

–12%

13%

45%

France, Germany, and the United Kingdom2

Overall growth (1994–2003): 8%

on their payrolls.1 Many large partnerships (such asAccenture) and state-owned businesses (such asDeutsche Post World Net) have been floated on thestock market. What’s more, the growth of peoplebusinesses—whether organic or resulting from con-solidation—has been intense. The global share ofthe top seven advertising agencies, for example, hasincreased from 20 percent in 1996 to more than 60percent today.

People businesses throughout the world offer awide variety of services for a vast range of con-sumers and businesses. Although they differ inmany ways and encompass both high-value-addedtalent businesses and lower-value-added services,they nevertheless share four distinctive challengesthat make managing them very different from man-aging traditional businesses. These challengesrelate to performance metrics, operations, com-pensation, and strategic advantage.

• Performance Measures: Traditional, capital-orientedfinancial metrics—such as return on assets orreturn on equity—aren’t suited to measuring theperformance of people. For instance, achieving ahigh return on capital is easy if you don’t requiremuch capital.

• People Management: In people businesses, peoplemanagement is a core operational process, not asupport function. Furthermore, because employ-ees are such an important element in both costand value creation, managing them well is criticalin driving investor returns.

• Rewards: People businesses, particularly the im-portant segment of talent-based businesses, faceunique compensation challenges. They are muchmore sensitive to pay and productivity than tradi-tional businesses are. Setting compensation cannotbe considered simply in terms of how much to payemployees. Compensation is also the primarydeterminant of shareholder risks and returns.

• Strategic Advantage: Although human capital is by far the most important source of value in peo-ple businesses, companies can only hire it, they


E X H I B I T 2

PEOPLE BUSINESSES ARE MAJOR EMPLOYERS

SOURCES: BCG analysis; FT Global 500, 2004.

NOTE: All data are for 2003.1Excludes logistics and financial services.

Global top ten for-profit people businesses by employment

Number of employees

(thousands)

Compass Group

United Parcel Service of America

Sodexho Alliance

Deutsche Post World Net1

Group 4 Falck

ISS Group

Hospital Corporation of America

Securitas Group

Aramark Corporation

FedEx

413

356

308

254

246

245

242

211

200

196

2,671

18

33

13

30

5

6

22

7

9

22

165

1

2

3

4

5

6

7

8

9

10

1

2

3

4

5

6

7

8

9

10

Global top ten companies by market capitalization

Number of employees

(thousands)Revenue

($billions)

Wal-Mart

General Electric Company

HSBC Group

Citigroup

Pfizer

Exxon Mobil Corporation

BP

American International Group

Intel Corporation

Microsoft Corporation

1,500

300

232

159

122

106

103

86

80

55

2,743

244

134

41

77

45

247

233

81

30

32

1,164

Revenue ($billions)

1. Not all people businesses create new jobs, however. Although risingincomes, larger numbers of unmarried employees, and increasing timepressure on working parents have created an enormous demand for con-sumer services, business services—once a part of the internal functions ofindustrial companies or the public sector—are now more likely to be out-sourced.

The cost structure of all businesses, before taxes,consists of just four different types of cost: employeecosts, capital costs related to tangible assets, capi-tal costs related to intangible assets, and purchases.Employee costs are fairly straightforward: salaries,benefits, and pension costs for employees, includingmanagement (but excluding those costs for employ-ees working in R&D because we include R&D costsin the capital costs of intangible assets). Capitalcosts are made up of depreciation, interest, and amarket-required rate of return on capital. Intangibleassets exclude goodwill but include a capital chargeon capitalized R&D. (It is always possible to createmanagement accounts in this form using internaldata.) We have defined people businesses narrowlyas those businesses for which employee costs arepredominant, capital costs are low compared withemployee costs, and R&D investments are modest.

R&D-based businesses, such as standard software—in which a high percentage of employees areengaged in R&D—share with people businesses thefirst three challenges described in this report,regarding metrics, operations, and compensation.However, because of their high investment in intan-gible assets and their business economics—and theresponse to those challenges that these necessi-tate—R&D-based businesses are significantly differ-ent, and we have not included them in our narrowdefinition of people businesses.

The exhibit at right shows how closely typical com-panies in different industries meet the criteria for apeople business. People businesses are those busi-nesses for which the new management rules of thegame—described in this report—most closely apply.However, the new rules are relevant to a much widerrange of businesses as well. Businesses lie on aspectrum from people intensive to capital intensive.The traditional management rules, oriented toachieving a high return on capital, most closely fitthe needs of capital-intensive businesses, such asprocess industries or property. But many businesses,such as restaurants or airlines, are in the middle ofthe spectrum. For these organizations, the old rulesmake sense, but additional insights can be gainedfrom the new rules for people businesses.

H O W W E D E F I N E P E O P L E B U S I N E S S E S

EMPLOYEES ARE THE MOST IMPORTANT COST FOR PEOPLE BUSINESSES

SOURCE: BCG analysis.

NOTE: A significant share of purchases (such as office space) is also employee

driven.

Employee costs Capital costs (tangibles)

Capital costs (intangibles and R&D) Purchases

People businesses

Examples of other businesses

0 20 40 60 80 100%

%0 20 40 60 80 100

Oil

Utilities

Automotive

Food retail

Chemicals

Pharmaceuticals

Airlines

Pubs and restaurants

Software

Consumer brands

Telecom services

Oil, engineering, andindustrial services

Contract catering

Hotels, hospital management,and health care services

Postal and courier services

IT services

Employment agencies

Advertising

Security and facilitiesmanagement

Contract research andgeneral outsourcing

Financial brokerageand advice

8 BCG REPORT

9

can’t own it: human capital belongs to theemployees. Because human capital does not offeropportunities for acquiring economies of scale,achieving strong strategic advantage in a peoplebusiness requires changing the game and trans-forming the business economics by leveraginghuman capital with intellectual, organizational,or customer capital.

When employees make the difference, metrics,operations, compensation, and strategies need to

focus on returns from people—as well as on returnsfrom capital investment. A manager’s ability tomeasure the productivity of employees—and toenhance it operationally, reward it appropriately,and transform it strategically—is central to build-ing sustained competitive advantage. It can’t bedone with traditional concepts of management.That is why people businesses need new rules of thegame for managing their most critical resource:people.


Performance Measures for Employees

10 BCG REPORT

If what gets measured gets done, we won’t managepeople businesses well until we start measuringwhat matters most to them: employees and cus-tomers. So the challenge for most people businessestoday is not asset productivity but employee andcustomer productivity. Many companies currentlyhave adequate measures for customers. Few compa-nies, however, measure the performance of theiremployees in a systematic way. Yet measures of per-formance, for people businesses, are probably themost important measure of all.

The Limitations of Capital-Oriented Metrics

Traditional capital-oriented measures tell us verylittle about employees. In fact, they can often bequite misleading. An IT services company’s balancesheet, for example, may appear healthy in terms ofreturn on capital, even though the firm may havelost half its top software engineers.

For people businesses, which often have few bal-ance-sheet assets, achieving a high return on assetsdoesn’t necessarily mean good performance.2 Re-turn on assets is strongly influenced by asset inten-sity. (See Exhibit 3.) If the asset base is small, evenmodest capital investments may cause big swings inreturn on assets—and high returns on assets arecomparatively easy to achieve.

Return on equity is even more questionable as abenchmark of operational performance. About 30percent of all large people businesses have nega-tive equity, once you exclude goodwill. If theymake a profit, they have negative return on equity.For roughly another 30 percent, goodwill accountsfor more than half of equity. That means return onequity is largely determined by the size, frequency,and financing of acquisitions—and by goodwillaccounting. (See Exhibit 4.) Interpreting thereturn on equity for people businesses is an arcanescience.

Reliable Metrics for Employee Performance

Fortunately, measuring the performance of peoplebusinesses is relatively straightforward. In theseenterprises, employees represent most of the costand create most of the value. What they do largelydetermines how customers behave. Management’stask is to make employees more productive thanthey would be on their own, so the company canearn more for its work than it needs to pay itsemployees. Since employees are critical to the suc-cess of a people business—and they are a large andstable denominator for performance measures—itmakes sense to work with employee-oriented ratherthan capital-oriented measures.

The idea of measuring employee productivity isnothing new. Why, then, have employee-orientedperformance measures not caught on? Most com-panies already have some measures of employeeproductivity in place, but few pay much attentionto them—particularly at the corporate level. Thatis probably because the most common measures ofemployee productivity, such as sales per employee

E X H I B I T 3

ASSET INTENSITY CAN AFFECT RETURN ON ASSETS AS MUCH AS PERFORMANCE


NOTE: Return on net operating assets (excluding goodwill and intangible assets)

is before taxes. Data are from a 44-company sample of people businesses with

more that $1.3 billion in 2003 revenues.

Companies with employee costs/net operating assets

<1x 1–4x >4x

Average returnon net operating assets(%)

0

10

20

30

40

50

60

70

80

90

100

2. The research for this section of the report is based on a sample of 44 ofthe top 100 people businesses in terms of revenues. We chose these com-panies because they publish their employee costs and we could easily esti-mate their share of capital costs. The companies studied represent a widevariety of industries, including advertising, contract research, catering, IT,telecom, medical services, and security and facilities management.

Percentage of people businesses

1

Percentage of people businesses

1

Goodwill as a percentage of equity

0

10

20

30

40

50

0–50 51–100 101–200 >200 %

%

Goodwill and intangibles as apercentage of equity

5

25

32

38

Goodwill ≤ equity Goodwill > equity

0

10

20

30

40

50

7

30

40

23

0–50 51–100 101–200 >200

Goodwill and intangibles ≤ equity

Goodwill and intangibles > equity


and profit per employee, are easily distorted. Theyaren’t comparable across different businesses orconsistent for one business over time. For example,sales per employee—still the most common meas-ure of employee productivity—is strongly affectedby the level of outsourcing and capital investmentin the business. If a business outsources activitiescarried out by half its employees—and the cost ofoutsourcing is the same as keeping those activitiesin-house—productivity doesn’t increase but salesper employee doubles.

Our approach to measuring the performance ofemployees, which we call workonomics, eliminatesthese distortions and represents the true value ofemployee productivity.3 Common measures ofshareholder value creation in a traditional capital-oriented performance management system, such aseconomic value added or cash value added, are vari-ants on the same theme. They all measure share-holder value creation in terms of economic profit:the dollar amount by which a company’s actualreturn on invested capital exceeds the returninvestors require.

Economic profit is likewise the key measure in theworkonomics system, but it is defined from anemployee- instead of a capital-oriented perspective.Workonomics defines an employee’s productivity asthe amount a company could, in principle, affordto pay for an average employee and still achieve therequired return on investment for shareholders.From a capital-oriented perspective, value creationis the amount of capital invested multiplied by thedifference between the actual return and therequired return on capital. From an employee-ori-ented perspective, value creation is the number ofemployees multiplied by the difference betweenemployee productivity and cost per employee. Fromeither perspective, the measure of shareholdervalue—economic profit—is the same, but the per-formance drivers considered are quite different.Workonomics turns the spotlight on the employee’scontribution to value creation and suggestsemployee-oriented levers to improve it. (SeeExhibit 5, page 12.)

E X H I B I T 4

HOW PEOPLE BUSINESSES TREAT GOODWILL DETERMINES THEIR RETURN ON EQUITY


NOTE: The value for equity in these calculations consists of the company’s

equity and the minority’s interests.1Data are from a 44-company sample of people businesses with more than

$1.3 billion in 2003 revenues.

3. The Boston Consulting Group has been using workonomics successfullywith clients since 1998. The approach was pioneered by consultants in thefirm’s Swiss and German offices. For their practical application of work link-ing human and customer capital to shareholder value, Rainer Strack, a vicepresident and director in BCG’s Düsseldorf office, and Ulrich Villis, a man-ager in the firm’s Munich office, won Germany’s Eric Gutenberg award.

12 BCG REPORT

E X H I B I T 5

FOR PEOPLE BUSINESSES, AN EMPLOYEE-ORIENTED PERSPECTIVE ON SHAREHOLDER VALUE MAKES MORE SENSE THAN A CAPITAL-ORIENTED PERSPECTIVE

SOURCE: BCG analysis.1Usually calculated on a posttax basis to be comparable with (posttax) capital costs.2Usually calculated on a pretax basis to be comparable with (pretax) employee costs.

Employee perspective

$ per employee

Return on assets

Required return on assets

Economicprofit

1

Capital costs

Amount of capital invested ($)

%

Workonomics productivity

Average employeecost per employee

Number of employees (thousands)

Employee costs

Economic profit2

Capital perspective

E X H I B I T 6

FOR PEOPLE BUSINESSES, EMPLOYEE-ORIENTED METRICS ARE MORE CONSISTENT THAN RETURN ON ASSETS


NOTE: Return on net operating assets excludes goodwill and intangible assets. Data are from a 44-company sample of people businesses with more than $1.3 billion in 2003

revenues.

Average return on net operating assets (%)

0

10

20

30

40

50

60

70

80

90

100

<1x 1–4x >4xCompanies with employee costs/

net operating assets

Return on assets is strongly influenced by asset intensity

Average economic profit as a percentage of employee costs

Employee-oriented metrics are relatively constant

Companies with employee costs/net operating assets

0

2

4

6

8

10

12

14

16

18

20

<1x 1–4x >4x


Interestingly, when people businesses use work-onomics measures, their performance scores aremore consistent than when they use return on assetsas a measure. (See Exhibit 6.) Most companies fallwithin a relatively narrow performance band, withproductivity between about 0 and 20 percent aboveemployee costs (and the median around 10 per-cent). Performance differences among companies inthis range are typically the result of variations in thequality of operational management. Only a few play-ers stand out as achieving substantially higher pro-ductivity in relation to employee costs; these typicallyhave not only excellent operations but also markedlysuperior strategic positioning.

The Importance of Linking Employee Metrics to Shareholder Value

A full set of employee-oriented metrics can bedefined by asking the same questions aboutemployees that have traditionally been askedabout capital. (See Exhibit 7.) In a capital-inten-sive business, for example, we ask how well ourcapital investment—a chemical plant, say—is util-ized. In a people business, we will ask how wellemployees are utilized. The parallels can be takena long way. The passive side of the balance sheet,for instance, examines how capital investment is financed. It is equally meaningful to ask howhuman capital is financed. Fixed salaries are like

debt financing: the suppliers of human or finan-cial capital provide capital for a fixed fee with lim-ited risk and receive a low return. Variable com-pensation, profit shares, and options are more likeequity. Human capital takes a risk and expects ahigher return. A dollar’s worth of profit sharingcosts shareholders less than a dollar of fixed salarybecause it reduces their risk.

Obviously, engaged employees are critical for peoplebusinesses. To improve employee performance, youneed to understand what motivates them. That callsfor a new set of questions that have no equivalent incapital investments, since machine tools and chemi-cal plants do not (yet) have emotions.

Most surveys designed to measure employee satis-faction and engagement are quite good, but theyoften accomplish their task the hard way: with longlists of questions that make it difficult for manage-ment to move from problems to solutions. To trulyengage employees, companies need to meet theirown business objectives and their employees’ per-sonal objectives. Many surveys bypass companyobjectives and move straight to the question ofemployee goals. A better survey would start withcompany objectives and the performance disci-plines that enable them. Then it would relateemployee objectives back to those disciplines. Theresults make it easier to move from problem toaction. (See Exhibit 8, page 14.)

E X H I B I T 7

EMPLOYEE MEASURES CAN MIRROR CAPITAL MEASURES


Capital-driven traditional measures People-driven workonomics measures

Employee productivity

Employee costs

Work force competencies and capacity

New hires and attrition

Work force utilization

Work force development plan

Employee leverage (fixed and variable compensation)

Long-term contingent compensation (such as options)

Employee contracts (such as “golden handcuffs”)

Return on assets

Cost of capital

Balance sheet/balance sheet structure

Balance sheet changes

Plant and equipment utilization

Capital investment plan

Capital leverage (debt-to-equity ratio)

Capital gains

Long- and short-term financing

14 BCG REPORT

Employees are motivated at least in part by beingpart of a successful, effective, and efficient organiza-tion. Therefore, it makes sense to ask them not onlyhow well they feel the company is meeting their ownneeds but also whether it has established the per-formance disciplines that can help them meet thecompany’s objectives. Those disciplines are

• clear, commonly shared goals

• structure and accountability

• a process to manage performance and incentives

• platforms for collaboration

• a competent work force capable of achieving thecompany’s objectives

It takes courage on the part of management to askemployees whether it is doing a good job at organ-izing and running the company. But when a com-pany clearly understands the performance disci-plines it needs, it can assess whether those needsare being met in a way that also meets employees’personal needs and motivates them to excel. Doesthe organization provide employees with roles thatmake them feel they can personally make a differ-

ence to the success of the company? Do the HRprocesses that ensure a competent work force alsoprovide career development so that employees canlearn and grow in responsibility?

Occasionally, company objectives and employeeobjectives are in direct conflict. For example, down-sizing may be necessary to boost profits, but it’s notusually in the interests of the employees who arelaid off. A company that has downsized does notdepend for its long-term success on motivating laid-off employees. But if performance disciplines disre-gard the personal objectives of employees on whomthe company does depend for its long-term success,then the disciplines will fail. What’s more, the fail-ure will be particularly harsh in the case of cus-tomer-facing employees, for whom motivation iscrucial to productivity. Good performance requiresthat both company and employee objectives be met.Employee surveys can accurately describe theextent, nature, and location within the organizationwhere performance is lacking, but we advise in-depth management and employee interviewsbefore and after administering employee surveys, toget a richer understanding of complex problemsand challenges.

E X H I B I T 8

TO ENGAGE EMPLOYEES, COMPANIES NEED TO MEET THEIR OWN BUSINESS OBJECTIVES AND EMPLOYEE OBJECTIVES


From the company perspective: performance disciplines

From the employee perspective:personal motivators

Collective commitment to objectives

Leadership

Shared sense ofpurpose

Sharp individual and team

accountabilities

Platforms for collaboration

Capable work force Pathways for personal growth

Opportunity to make a difference

Rewards and recognition

Supportiveteam

environment

Rigorous performance management

tion process for new acquisitions, and they play anintegral role in reports and rewards.

The Building Blocks of Effective People Management

Good information is the starting point—but onlythe starting point—of a powerful operations andpeople management system. In addition, the infor-mation must be readily accessible, not merely avail-able. And once it is accessed, it must be fully under-stood and then translated into action.

Companies frequently have better informationabout the costs of employees than about the valuethey create. Few companies do a good job of bench-marking their competitive performance inemployee-oriented terms. But the hardest chal-lenges come with moving from information toaction. Employee performance indicators, forexample, are often reported but rarely translatedinto a plan of action that is implemented with suffi-cient control. (See Exhibit 9.)

Because people businesses require fewer assets thantraditional businesses, their returns are extremelysensitive to small changes in operational perfor-mance. Consider that, on average, a 5 percent im-provement in employee productivity, or a similar re-duction in employee costs, increases profits for peoplebusinesses by 15 percent of assets (because employeecosts are typically three times the value of assets) andincreases economic profit by 50 percent (because eco-nomic profit is typically 10 percent of employee costs).

Leading people businesses understand these ratiosand focus on developing strong people and opera-tions management systems. One highly successfulcorporation with a portfolio of people businessesdefines seven excellence indicators and introducesthem across all the businesses. It is then the job ofthe director of excellence, who reports to the CEO,to oversee a system that quantifies the drivers of eachindicator. Those drivers include such hard-to-assessprocesses as people development. The excellencemeasures are a key part of the postmerger integra-


People and Operations Management Systems

E X H I B I T 9

EMPLOYEE METRICS CAN BE SKETCHY AND RESULT IN LITTLE ACTION


Work force Productivity

0

2

4

6

8

10

0

2

4

6

8

10

Motivation

05

1015

2025

3035

40

45

50

Reported Planned Supportedby action plans

AvailableCompetenciesLeadershipskills

Number of ratios

Few qualitative controlling ratios exist So far, human resources controls only a reporting system

Quantitative controlling ratios focus onpersonnel costs and work force

Number of ratios Number of ratios

Current focus on head count and costs (input),not on productivity (output)

No systematic management of competence, motivation, and leadership

No call to action or effective feedback loop

Personnelcosts

Focus ofratios

Focus ofratios

Status ofratios

16 BCG REPORT

E X H I B I T 1 0

PEOPLE AND OPERATIONAL MANAGEMENT SYSTEMSREQUIRE THREE LEVELS OF BUILDING BLOCKS


1

2

3

INFORMATION

UNDERSTANDING

ACTION

Shareholdervalue metrics

Customermetrics Benchmarks

Employeecompetencies

andengagement

Customersatisfaction

Organizationalcontext

Employeemetrics

Analysis ofoutstandingperformers

Peopleprocesses

Businessfocus

A finely tuned operations and people manage-ment system encompasses three levels: infor-mation (employee metrics, customer metrics, andbenchmarks); understanding (employee competen-cies and engagement, customer satisfaction, and out-standing performers); and action (HR processes,organizational context, and business focus). Allthree levels are institutionalized and linked to cre-ate a fast and effective feedback loop. (See Exhibit10.) Let’s examine each of these levels in greaterdetail.

Information. It is critical to establish hard linksbetween employee metrics and financial accounts.Linking accounts to employee metrics—such asemployee productivity, utilization, and attrition;number of employees; and cost per employee—gives status and weight to the employee perspective.This approach is much more useful than a conven-tional balanced-scorecard approach, which offersonly a soft link between financial accounts and peo-ple performance. The numbers can then informmanagement discussions about operationalimprovements.

Since an objective measure of employee perfor-mance is crucial for managing employees and de-termining appropriate compensation, pushing forperformance measures at the individual level isimportant. For traditional businesses, employeeproductivity is often hard to measure at the individ-ual, or even the small-team, level. People busi-nesses, however, have a high share of customer-fac-ing activities for which the results on a granularlevel are immediately observable. But the datawon’t appear automatically. Accounting and behav-ioral norms have to be put in place. If, for example,hours spent on projects are not recorded, or areinaccurately recorded, then it won’t be possible tolink customer revenues with employee costs.

Hard links can also be established between customermetrics and financial accounts. Doing so is particu-larly helpful in consumer or small-business servicesthat use direct marketing because it permits trackingof the lifetime value of a customer, customer attri-tion, and the costs of gaining a new customer. Ifemployee activities are customer facing, measuringthe value of employees by the value they create forindividual customers will create an important linkbetween employee and customer perspectives.

People businesses typically serve customers from ageographically dispersed network of branches oroffices. These offer an ideal opportunity to learnfrom regular, systematic internal benchmarks amongperformance units. Good internal benchmarksrequire central control over metrics and technologyto facilitate comparisons across the group.

Finally, competitive benchmarks covering employeeand customer performance indicators, as well asfinancial measures, are useful in assessing the trueperformance gap between competitors. Profit dif-ferences often understate the magnitude of a per-formance problem in situations where it is difficultfor customers to change suppliers or for employeesto change employers. Looking only at profit differ-ences can lead to complacency and, at some laterpoint, to a rude awakening.

Understanding. This level focuses less on absolutenumbers and more on understanding how well apeople business is motivating and training employ-ees. A precise measure of employee competenciesmay be an elusive ideal, but companies can accu-rately measure whether they are succeeding in

17

either standardized best-practice processes can beintroduced and constantly improved with new infor-mation, or knowledge networks can be established sothat separate business-unit heads, branch or officemanagers, and other employees can learn from oneanother without the need for standardized processes.

A Tale of Two People Businesses: IT Services and Hotel Management

To appreciate the value that a good operational man-agement system brings, consider the benefits that

two very different peoplebusinesses were able togain by changing the waythey measured and evalu-ated their employees. Inthe first example, an ITservices-and-software com-

pany introduced employee-oriented metrics. In thesecond example, a hotel management company wasdoing most things quite well but had one or two sig-nificant blind spots.

An IT Services-and-Software Company. The parentof the IT services company owned mostly asset-driven businesses, so it seemed natural to apply thetraditional measures of return on sales and returnon capital across its whole portfolio. And from thatperspective, the IT services business’s performancelooked acceptable. Its return on capital was abovethe required rate of return and similar to that of itsparent. Yet the company was losing both marketshare and its best engineers. Feeling uneasy aboutthe future, the parent decided to establish a new setof employee-oriented measures and benchmarks.Here’s what it discovered as a result.

Information. The new metrics revealed a muchlarger performance problem than conventionalfinancial measures had indicated. It turned out thatthe IT services business was as much as 25 percentless productive than its competitors. Return on cap-ital seemed satisfactory only because the businessrequired very little capital. Productivity, by contrast,exceeded employee costs by only 3 percent, where-as benchmarked competitors achieved an excess of12 percent. Furthermore, those same competitors


recruiting and retaining the employees they wantand whether they are outplacing or improving thepoor performers. One important measure forunderstanding employee behavior is customer satis-faction. Not only is this a good indicator of how theemployee is doing with current customers, butstrong customer satisfaction scores can also beadvertised to gain new customers.

Tracking employees who score significantly higherthan others provides another way to understand thedrivers of productive behavior. In high-value-addedpeople businesses, thereare often wide variations in productivity amongemployees—not just 50percent but as much as 500percent. Understandingwhat outstanding perform-ers do differently is invaluable for improving the per-formance of other employees. Top-performing teamsand employees tend to do the right things the rightway. They use their time more productively and adaptservice processes to reduce their costs and increasetheir value.4

Action. There are no results unless the work of gath-ering information is translated into action. Not sur-prisingly, changes in people management—manage-ment selection, compensation, career paths, andother HR processes—represent one powerful set ofperformance improvement levers in people busi-nesses. However, developing an understanding ofemployee engagement and top performers oftenreveals quite different and equally powerful levers toincrease productivity. Employee engagement, forexample, is often hampered by poor organizationaldesign. Resources and constraints must be adjustedso that the players in the game are better able tomeet the company’s goals, as well as their own. Topperformers often adopt a different and more prof-itable business focus. Other employees’ efforts mayneed to be refocused on more profitable customers,product groups, or activities.

The corporate center needs to decide how to lever-age insights and understanding across the network.Depending on what is appropriate for the business,

4. For a compelling argument supporting the links among employee engagement, customer satisfaction, and performance, see James L. Heskett, W. EarlSasser, and Leonard A. Schlesinger, The Value Profit Chain: Manage Employees Like Customers and Customers Like Employees (New York: Free Press, 2003).

Companies frequently havebetter information about the

costs of employees than aboutthe value they create.

ords. This lack of customer information was, initself, revealing.

Understanding. The software company’s own salesteam was too small for two reasons. First, the com-pany gave priority to using external value-addedresellers (VARs), although that strategy had beenunsuccessful so far. Second, it was difficult to hiremore salespeople because their status relative toVARs was perceived to be low and compensationand incentives were also low.

In addition, engineering processes and staffing man-agement were found to be causing some of the soft-ware installation problems. Although the companyhad not carried out formal customer surveys toassess satisfaction, rudimentary information revealedthat customers were indeed unhappy with the instal-lations, which often failed to be on time and onbudget. The engineering hours required forinstalling basic software were not decreasing—asthey should have been, considering that the com-pany had years of experience with this type of ser-vice. The flaw in the experience curve turned out tobe people management. Basic installations werebeing used to train new engineers, and although thesmart ones quickly learned shortcuts, that knowl-edge was never transferred to their colleagues. As aresult, the company lost the benefit of its best engi-neers’ experience when they moved on to more com-plex assignments or left the company. Meanwhile,competitors were moving faster to adopt more stan-dardized, efficient installation processes.

R&D should have helped codify this learning andsecure productivity gains, but it was frequentlydiverted to solve difficult one-off problems on cus-tom installations. That explained the poor pricerealization on installations. It also partially ex-plained the poor utilization. In order to cover upoverruns, the engineers weren’t recording all thehours they spent on a project. Staffing managementissues explained the rest of the low utilization prob-lem. Installation project managers were trying tokeep their top engineers to themselves, even whenthose employees were needed on other projects.

Low service sales were also in part a people manage-ment problem. Sales for services not covered by war-ranty—except for those of a few outstanding per-formers—were low because most service engineersdidn’t see themselves as salespeople. And it was diffi-

18 BCG REPORT

were paying their employees nearly 15 percentmore. Although they offered a base pay similar tothat offered by the IT services business, they com-plemented that pay with better benefits and highervariable compensation—advantages that wereharder to spot initially. (See Exhibit 11.)

Deeper analysis helped pinpoint the problems moreprecisely. (See Exhibit 12.) Margins on “solutionsales” (product licenses, installation, and servicebundles) from the company’s own sales force werevery good, but the sales force was small and attritionwas high. In software installation, where mostemployees worked, the positive margins resultedfrom pay scales below industry levels. What’s more,utilization of the installation staff was down, and thecompany had trouble realizing full price on its instal-lations. Service margins were high, but the volumewas low. Product license fees were also low and failedto cover the cost of R&D. (See Exhibit 13.)

Analyses of accounts from a customer perspec-tive (such as service revenues by customer in rela-tion to installed base by customer) would have beenuseful, but the information couldn’t be gatheredquickly, although it was available in company rec-

E X H I B I T 1 1

AN IT SERVICES-AND-SOFTWARE COMPANY HAS LOW MARGINS AND LOW PAY


Inadequate employee margin• 3% for IT company• 12% for benchmarks

Pay per employee low• $107,000 for IT company• $123,000 for benchmarks

EP = Economic profit (profit in excess of required return on capital)

VAP = Productivity, or value added (less a capital charge for invested capital) per person employed

ACP = Average personnel cost per person employed

P = Number of people employed

Company

$2,170,000

EP

VAP ACP P

$110,000 $107,000 702

–x


E X H I B I T 1 2

CONDUCTING A PERFORMANCE ANALYSIS BY FUNCTION IDENTIFIES ISSUES


Company$2,170,000

EP

EP

EP pre-R&D

EP EP

EPCompany

$2,170,000

VAP ACP P$110,000 $107,000 702

–x

Licenses–$4,030,000

VAP ACP P$123,000 $154,000 130

–x

Installation$3,150,000

VAP ACP P$107,000 $100,000 450

–x

Sales$24,500,000

VAP ACP P$471,000 $121,000 70

–x

Service$3,050,000

VAP ACP P$107,000 $82,000 122

–x

Insufficient volumeto cover R&D costs?

Insufficientmargin

Attractive margins butsmall volumes

High contribution but insufficient sales capacity to drive volume?

EP = Economic profit (profit in excess of required return on capital) VAP = Productivity, or value added (less a capital charge for invested capital) per person employedACP = Average personnel cost per person employed P = Number of people employed

E X H I B I T 1 3

DIVING INTO INSTALLATION DATA SHARPLY DEFINES SOME PROBLEMS


–

–

x

x

x

x x

EPInstallation$3,150,000

VAP ACP

$100,000

P

450

Billed hoursP

936Value addedBilled hours

$114

Billed hoursBillable P

1,170 Billable PP

80% RevenueBilled hours

Non-P costs

Billed hours$51

Available hoursBillable P

1,800Billed hours

Available hours65%

Planned revenueBilled hours

$185Actual rate

Planned rate89%

$165

$107,000

Low utilization of billable staff

Absorptionproblems

EP = Economic profit (profit in excess of required return on capital) VAP = Productivity, or value added (less a capital charge for invested capital) per person employed

ACP = Average personnel cost per person employed P = Number of people employed

cult to manage, measure, and reward the serviceengineers on their sales performance because infor-mation on the installed base was hard to access.

Action. Although the employee-oriented measuresrevealed many problems, they also suggested manyopportunities to increase sales and productivity.The company could, for example, shift its focusfrom VAR sales to strengthening its own sales force.It could put more emphasis on training service en-gineers and on providing them with incentives tosell service to the installed base. It could introducenew project and staffing management processes ininstallation. It could focus R&D on capturing andcodifying knowledge about basic software installa-tion. And it could improve the employee- and cus-tomer-oriented information systems to plan, moni-tor, and control performance more effectively.However, because operational management was sopoor, these problems were caught late. In the shortterm, compensation increases intended to hire,retain, and motivate the right staff were likely toabsorb part of the gains.

A Hotel Management Company. As the IT servicescompany found, problems concerning the manage-ment of operations frequently yield to a straightfor-ward analysis. But sometimes a problem can seemintractable, at least at first. That was the situation ahotel management company faced. Although it wasdoing most things quite well, a couple of blind spotswere causing inordinate problems. Specifically, theutilization of hotel beds, particularly in goodmonths, never seemed to reach the levels manage-ment thought were possible. Potential guests werebeing turned away even when rooms were available.Because the reception staff people influenced theacceptance or rejection of reservations—especiallylast-minute reservations—management suspectedthat their attitude was responsible for the under-booking problem. So the company introducedtraining programs and adopted incentives. Butrooms were still going unused.

It turned out that the problem was not, as originallysupposed, apathy on the part of reception staff or, as some wilder speculation suggested, that these employees were deliberately sabotaging the hotelchain. In fact, the staff people did care about hotel

bookings, but they cared more about keeping hotelguests happy.

Their top concern was to avoid having hotel guestsringing reception or coming to the desk to com-plain that the television didn’t work or the bedswere unmade. The staff felt obliged to fix theguests’ problems, but the only resource at its dis-posal was spare rooms. This was why these employ-ees were loath to fully book the hotel. No amountof training was going to change their attitude. Whatmight change it, however, was to provide receptionstaff people with other resources, such as a guaran-tee that rooms would be fully equipped, made up,and functioning. At the very least, they could begiven some authority over those employees whocould remedy such problems quickly. In short,hotel management needed to fix the organizationaldynamics, not improve individual employees’ moti-vation or capabilities. (See Exhibit 14.)

20 BCG REPORT

E X H I B I T 1 4

CHANGES IN A HOTEL’S ORGANIZATIONAL DYNAMICSCAN AFFECT BOOKINGS


Hotel receptiondesk staff

Actors

Rooms in reserveResources

Organizationalcontext

Rooms out of orderConstraints

Results Happy hotel guests,unoccupied rooms

Change the actorsRemove influence of reception desk on room bookings

Improve room maintenance processes

Give reception desk more control over room maintenance

Increase weight of room occupancy in incentives

Satisfy hotel guests and achieve high room occupancy

Change goals

Change resources

Change constraints

Goals Happy hotel guests,high room occupancy

100%$

90%$

Adopt strategyto change results

The Compensation Challenge


Compensation raises big issues in all businesses, butthe impact of those issues is greatest in people busi-nesses, where employees represent most of the costsand most of the value created. The appropriate dis-tribution of rewards and risks between shareholdersand employees, the effective use of variable com-pensation to reward and retain employees, and theequitable compensation of individual employeesand of different classes of employee are hot-buttonissues in most people businesses. Here are some ofthe complexities they face.

• Because operating profits in people businessesare typically only 15 percent of employee costs,even small changes in the level and structure ofcompensation have a major impact on the leveland volatility of profits. If, for example, you pay

out 15 percent of your employee costs in variablebonuses, you are paying a sum equal to your oper-ating profit. But consider also that if youexchange the 15 percent variable bonuses forfixed compensation—without changing employeecompensation over the economic cycle—thenoperating profits become roughly twice asvolatile, with correspondingly greater risks forshareholders. (See Exhibit 15.)

• Variable compensation that is based on perfor-mance (measured and paid on an annual basis)makes sense in many people businesses, especiallythose in which most employees are engaged incustomer-facing activities and the productivity orprofitability of individuals or small teams varieswidely according to their own efforts. Compare

E X H I B I T 1 5

PROFIT-VARIABLE BONUSES REDUCE PROFIT VOLATILITY AND HENCE SHAREHOLDER COSTS


Pretax profit ($millions)

Pretax profit ($millions)

–500

–400

–300

–200

–100

0

100

200

300

400

500

600

–500

–400

–300

–200

–100

100

200

300

400

500

600

Fixed bonus, 10% of employee costs ($millions)

Profit-variable bonus, 10% of employee costs ($millions)

’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03

Year

’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03

Year

0

100

200

300

400

0

100

200

300

400

0

that with an R&D business, where productivity isalso variable but is measurable only over the longterm and for relatively large teams, or with a tra-ditional manufacturing business, where individ-ual productivity results more from capital invest-ments and defined production processes thanfrom personal or team effort.

• Retention of key employees is a crucial successfactor. Establishing long-term compensation withvesting and introducing noncompete policies aretwo ways to increase retention. However, there arelegal restrictions onvesting and noncom-pete clauses in somecountries and for someclasses of employee.

• Many people business-es originated as partnerships or were puttogether through the acquisition of owner-man-aged businesses where the previous owners con-tinue to work. That puts tough demands on acompensation culture that aims to provide acontinued sense of ownership.

• If the management team consists of long-termemployees and previous owners of independentcompanies who have earnouts negotiated at dif-ferent times and at different stages of the eco-nomic cycle, there may be substantial differ-ences in the contractual arrangements ofmanagers with similar responsibilities. That caneasily lead to disagreement over the explo-sive issue of what constitutes equitable managercompensation.

• Although productivity is comparatively easy tomeasure in people businesses, there can be prac-tical difficulties in comparing the “worth” of dif-ferent individuals. For instance, how do you com-pare the measurable value of customer-facingemployees with the less measurable value of otheremployees? Or how do you compare the value ofemployees on a team when the value of individualmembers is harder to measure than that of theteam as a whole?

Recognizing that every business encounterscompensation problems that are unique to its cir-cumstances, we would like to offer a few sugges-

tions for working through these issues in peoplebusinesses.

Competitive Compensation Benchmarks

A good compensation process begins with competi-tive benchmarks. In people businesses, variablecompensation is often an important part of totalcompensation at all levels of the organization. Infact, when variable compensation is included,differences in compensation among individualemployees in directly competitive businesses can be

as great as 20 percent,independent of differ-ences in local costs. As wesaw in the IT servicescompany’s story, those dif-ferences can seriouslyaffect the perception of

profits and organizational performance.

If bonuses account for a substantial percentage ofcompensation, high-performing companies willtend not only to have higher profits but also to paytheir employees more, thereby enhancing theirability to recruit and retain staff. In contrast, theproductivity gap that poor performers must close tocatch up with the leaders is often larger than profitdifferences would suggest.

The Impact of Compensation on Shareholder Risks and Returns

In people businesses, compensation is the largestfactor affecting shareholder risks and returnsbecause people are the largest cost and the primarysource of value. Modest changes in compensationcan have a big impact on profits. Therefore, peoplebusinesses need to decide how explicit and directthey want the link between variable compensationand profits to be.

That link is most explicit and direct when the overallbonus pool is defined from the top down as a shareof total earnings before bonus payments. Such anapproach is common in investment banking and insome private banks, where bonuses may be setbetween 25 and 55 percent of overall earningsbefore bonuses. In most businesses, however, evenwhen bonuses are equally high, the overall bonuspool is determined from the bottom up, according

22 BCG REPORT

In people businesses, employeecompensation is critical

because people are the largestcost and source of value.

to employees’ personal targets. That often results inbonuses that are less linked with earnings since prof-its can mysteriously decline, even when employeesmeet their personal targets. Overall bonus pools canbe difficult for top management to control whenthey result from a series of independent lower-leveldecisions. At the opposite extreme—where thebonus pool is set as a percentage of fixed salaries—the pool is controllable, but bonuses don’t rise andfall with company performance.

Each of these alternatives will affect shareholderrisks and returns differently. A dollar of profit-vari-able compensation costs shareholders, on a risk-adjusted basis, substantially less than a dollar of fixedsalary. The cost difference is calculable. Man-agement needs to be very clear about which scenarioit is choosing and understand and communicate theconsequences of that choice for shareholders.

Each alternative also has a very different impact onemployees in terms of communicating a sense ofownership. A direct link between earnings andbonuses provides a more vivid sense of ownershipthan a target bonus in percentage of salary, with anaward based on qualitative assessment.

The Logic of Compensation

Differences in compensation can easily lead to fric-tion among employees—particularly when roleswithin the company are diverse, when the companyhas grown by acquiring other organizations withdifferent pay schemes, and when the variable com-ponent of compensation is high. But even large dif-ferences in compensation need not pose a problemif they can be justified by clear logic based on busi-ness economics and the company’s strategy.

When it comes to the level of compensation, thekey questions to address are how the company com-pares with competitive benchmarks and whetherthere is a reason for compensation to be higher orlower than those benchmarks. When it comes to thestructure of the compensation plan, ask the follow-ing key questions:

• Are there substantial variations in productivity(independent of asset investment, market, orcompetitive environment) among employees orteams doing similar jobs?

• Are these productivity differences measurable inthe short and long term?

• Are these productivity differences measurable atthe individual and team level?

• Could we make them measurable? What would themeasures be? How could we put them in place?

• Have we clearly separated rewards for pastachievement from rewards for current perfor-mance? (For example, rather than pay highersalaries to the previous owners of acquired busi-nesses, could we more explicitly denominatehigher compensation as an earnout and thereforeassociate it with the purchase price?)

Typically, if the productivity differences amongemployees are substantial and measurable, theshare of variable compensation will be correspond-ingly high. Jobs in which performance differencescan be measured annually are candidates for highannual bonuses. Jobs in which differences can bemeasured only over the long term—software devel-opment, for example—are candidates for long-termvariable compensation, such as stock options.

If performance is readily measurable at the teamlevel but hard to measure for individuals, then atop-down system of defining rewards, first forteams and then for individuals, makes sense. Atop-down system that starts with an overall bonuspool based on overall performance, and then dis-tributes bonuses to teams and individuals, ensuresthat bonuses will not remain high when profitsfall. This can easily happen when bonuses aredetermined from the bottom up, on the basis ofhard-to-measure personal targets.

In all businesses, but particularly in people busi-nesses, bonuses should reflect the employee’s con-tribution not only to producing value and manag-ing costs but also to team building andapprenticeship. That requires a clear process ofobtaining inputs from lateral and upward feed-back. The Boston Consulting Group, which is itselfa leading people business, explicitly considers amatrix of business management and people man-agement in granting promotions, awardingbonuses, and providing performance manage-ment. (See Exhibit 16, page 24.) General Electricand other companies follow a similar approach.


24 BCG REPORT

E X H I B I T 1 6

PERFORMANCE EVALUATIONS SHOULD REFLECT PEOPLE MANAGEMENT AND BUSINESS PERFORMANCEExecutive Upward Feedback and the Dot Matrix at BCG

SOURCE: BCG Vice President Feedback Survey.

NOTE: Officers in the northeast quadrant of the matrix have not only good revenues but also good upward feedback.

0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6

Examples of apprenticeship questions in vice presidents’ upward feedback

• Prioritizes initiatives realistically, resulting in sustainable workloads?

• Focuses team on key issues and provides appropriate guidance?

• Develops people effectively, coaches, and encourages?

• Builds affiliation and morale, and makes people feel part of BCG?

Business performance index

Upward feedback index

0

2

4

6

8

10

12

Example of dot matrix for officers

The Ladder of Strategic Advantage


Most people businesses with truly superior returnshave found a way to build organizational capitalthat creates substantial value over and above thevalue of their employees (and the added costsrequired to create that value). And in doing so,they have climbed to the top of the strategicadvantage ladder. (See Exhibit 17.)

At its most basic, a people business is a subcon-tractor looking for opportunities to “shop bodies”at an hourly rate to companies that want to man-age capacity flexibly. But at that level, the valueadded by the company over and above the valueadded by the individual employees is very limited.The subcontractor takes a first step toward addingmore value when it focuses on a particular activityto accumulate experience and know-how. Greaterexperience makes it possible to do the work better,or cheaper, than a less experienced outsourcingcompany or individual service provider. Greaterdepth of process experience usually leads tohigher returns because, with the right manage-ment, experience improves the speed, quality, andcost with which the service can be performed. Inmost surveys of business process outsourcing,

process experience is right at the top of buying cri-teria, above breadth of experience or global reach.(See Exhibit 18.)

Typically, the more specialized the activity subcon-tracted, the greater the opportunity to add value.For example, in working with companies that havea portfolio of facilities management businesses, wefound that their more specialized activities—suchas cleaning a “clean room” in a high-tech produc-tion site (as opposed to cleaning an office build-ing)—yield the better returns.

Often, however, the individual employee learns,but the organization does not—as we saw in thecase of the IT services-and-software company.Organizational learning is a result of good organi-zational design and management processes, but itis difficult to get these right. Economies of scaleand experience in people businesses tend to beless dramatic than in industrial businesses, where

E X H I B I T 1 7

BUSINESSES NEED TO CLIMB THE STRATEGIC ADVANTAGE LADDER


Proprietaryoffer

Brandawareness

Volumebenefits

Distinctivecapability

Focus andexperience

“Body shopping”

Additional steps on the ladder areimportant in some businesses

Network benefitsfor national and global customers

Breadth of offer and

bundled servicesOffshoring

Prices based on value of output, not time spent

Beyond people business

E X H I B I T 1 8

IN MOST PEOPLE BUSINESSES, CUSTOMERS RATE PROCESS EXPERIENCE THE HIGHEST

SOURCE: BCG interviews.

Process experience

Service-level guarantee

Cost-savings guarantee

Experience in businessprocess outsourcing

Access to technologyand software

Financial stability

Range of services

Global reach

Recommendation

Prior experiencewith vendor

On-site presence

Full range of back-office services 2

2.4

3

3.3

3.5

3.7

3.9

4

4.1

4.2

4.3

4.5

0 1 2 3 4 5

Selection criteria for a business-process-outsourcing vendor

processes are embodied and learning institution-alized in machinery or software.

Industry Consolidation and Business Economics

At some stage in an industry’s development, lead-ing players will target aggressive growth to achievescale benefits, often through acquisition. That hasbeen the pattern in advertising, industrial clean-ing, security, temporary help, and other sectors.

The initial phase of consolidation may be frustrat-ing for the company leading the effort. There isoften a period in which growth, particularlygrowth through acquisition, brings added costs ofcomplexity but few scale benefits. People busi-nesses may drive for growth in the belief that anumber of potentially valuable activities—such asinvestments in national advertising, proprietaryinformation systems, or product development—promise steep economies of scale. However, suchinvestments will make economic sense only forcompanies above a certain size. During the con-solidation process, there may be no competitorsabove that threshold for a long time. In otherwords, reaching the lower rungs on the strategicadvantage ladder may initially bring few benefitsin performance. But at some point, opportunitiesbecome attractive. H&R Block, for example, is aclear leader in U.S. personal-tax advisory servicesand an outstanding performer. It spends between$100 million and $200 million a year on marketingand advertising, but that represents only a smallpercentage of revenues. For smaller companies,the investment needed to make an impact withnational advertising would be prohibitive.

Once the threshold for such scale-related invest-ments is reached, competitive dynamics change.Before that, many competitors on the bottomrungs of the strategic advantage ladder can makereasonably good returns, and operations count formore than strategic position. But very few com-petitors reach the top of the ladder. A clear indus-try leader can make exceptional returns, whileothers fall far behind or are acquired.

The Evolution of New Competitive Advantage

Software businesses provide an interesting exam-ple of how people businesses can evolve to achieve

26 BCG REPORT

greater advantage. Most software applications startwith customized products, of which the standardcore represents a small part of the added valueand is occasionally more “vapor ware” than soft-ware. At that stage, the business exhibits limitedscale economies. But as experience with the appli-cation grows, so too does that standard portion ofthe added value in the business. (See Exhibit 19.)Volume and experience begin to provide competi-tive advantage, and R&D becomes a significantpart of total value added.

For SAP, the world’s largest enterprise-resource-planning (ERP) software company and third-largest independent software supplier, R&Dexpenditures on its own new-product generationand applications represent 14 percent of sales.R&D is, essentially, a volume-sensitive fixed cost. Itgives the company a potential for competitiveadvantage different from that of an IT servicescompany that focuses predominantly on customsoftware contracts, consulting, or IT process out-sourcing. Industry leaders in ERP systems, such asSAP, can transcend the people business category(as we have narrowly defined it) and achieveexceptional returns by exploiting the scale effectsof their strong share position. (See Exhibit 20.)

Companies like SAP, with strong core products,can even outsource much of the software installa-tion and customization to partners and focus on

E X H I B I T 1 9

AS PEOPLE BUSINESSES MATURE, MORE PROPRIETARY PRODUCTS TEND TO EMERGE

SOURCE: BCG study.

Implementation time (hours)

TotalLicense/implementation ratio

Previous-generationsoftware

5,600

590

90

6801:6.5

Time and cost fora typical contract

3,333

340

130

4701:2.5

Current-generationsoftware

A Business Software Product

Software revenues(€thousands)• Implementation

• License

comparisons and standard processes for employeeactivities, the franchiser continues to leverage thepeople business in the metrics and people man-agement processes.

Cendant Corporation is an interesting company tolook at in this light. It is the world’s leading fran-chiser of hotel brands that include Ramada,Howard Johnson, and Travelodge. Cendant doesnot own or manage any hotels, but it supportseach of its brands with advertising, marketing, andloyalty programs. It also provides links with travelWeb sites and ensures that all franchisees meetrequired quality standards. In addition, Cendant isthe world’s largest residential real-estate fran-chiser, franchising such powerful and well-knownbrands as Century 21 and Coldwell Banker. Thepattern of deconstructing the service value chaininto separate businesses representing distinct com-petencies—property ownership, scale-intensiveactivities (such as branding, purchasing, and busi-ness process design), and people—is prevalent inmany consumer services. Although most brandowners retain some participation in the people-intensive aspects of the business—and may evenmanage some hotels—many other hotel and ser-vice brands operate like Cendant.

As companies create proprietary content and addvalue beyond that provided by their employees intheir daily work, management must decide ifshareholder value can best be created by keepingthe people-intensive activities in-house or by focus-ing on the added business value and franchising orsubcontracting people-intensive activities. That istrue for all people businesses, including businessservices. In fact, as business services reach scaleand mature, these issues, which many consumerservices already face, may become more relevant.

Depth, Breadth, and Globalization

In climbing the ladder of competitive advantage,depth of experience typically counts more thanbreadth, but there are some businesses in whichgeographic spread and range of services are key.In advertising, for example, global reach is becom-ing more important as consumer and businessbrands increasingly look to global campaignsdriven by one agency worldwide. In businesses thatinvolve large-scale projects—such as oil field ser-


those parts of the value chain—such as productdevelopment and branding—that have strongscale effects and potential for high returns.Outside of software, few business-servicesproviders have developed to the point at which thebusiness value added—beyond employee manage-ment—is sufficient to become a separate business.

In consumer services, however, this pattern isquite common and explains why some sectors—such as hotel management and real estate broker-age—are less represented in the top global peoplebusinesses. The hotel business, for example, oftensplits into three parts: real estate companies thatown the hotels; franchisers of hotel brands thatown the brands, control the reservation systems,and define the corporate identity of the hotels;and franchisees that manage the hotels.

The hotel franchiser is no longer a people busi-ness. Instead, it subcontracts the people businessto the franchisee and retains only the more scale-sensitive and less people-intensive value added.However, to the extent that the hotel franchiseradds value by offering franchisees benchmark

E X H I B I T 2 0

PROPRIETARY CONTENT INCREASES THE POTENTIAL TO OUTPERFORM INDUSTRY PERFORMANCE RANGES


SAP

IT serviceaverage

90

100

110

120

130

140

150

160

170

180

190Productivity per employee

Personnel cost per employee(%)

Custom software and IT services performance range for most European and U.S. players

Global leader in ERP with proprietary software

28 BCG REPORT

vices—or that bid on long-term contracts frompublic or private partnerships, a portfolio of skillsmay be valuable in securing and implementing theoverall contract.

The Pricing Advantage

Pricing structures are also important for capitaliz-ing on superior value creation as well as lower costs.Pricing by the hour is probably the least favorablecontract for a people business whose proposition issuperior value. A fixed-price-for-output contract, by contrast, provides anadvantage for the com-petitor that can producethe same quality of workin less time, with fewerpeople, or at lower ratesof pay. For competitorswhose advantage lies in providing greater value forthe customer, a success fee or a commission mayoffer the best opportunity—especially when thevalue of the advice for customers is considerablymore than they have to pay for it. Some of the high-est rates of return in our sample of people busi-nesses are earned by financial services advisers andbrokers operating on a commission basis in highlyleveraged activities, such as commercial insurancebrokerage and private banking. Since industry pric-ing structures can change over time, people busi-nesses should try to influence them to their advan-tage. In advertising, for example, the typical pricingstructure has shifted from a percentage of advertis-ing spending (good for agencies that create long-running campaigns, but risky) to fixed-fee struc-tures, which limit the agency’s returns to superiorvalue creation for the customer, and, more recently,to pricing based on a fixed fee but with a perfor-mance incentive specifically related to the successof the campaign.

Somewhat paradoxically perhaps, the businesseswith the most attractive pricing structures are oftenthose with the poorest information about employeeproductivity. A business dependent on charging outhours has no choice but to carefully record thehours spent by employees on different jobs and thefees received for them. In contrast, if the business is

paid on commission, there is no customer pressureto measure the cost in employee hours of doing thework. Without customer pressure, however, thosehours may not get tracked, even if the informationwould be highly valuable in understandingemployee and customer profitability.5

Offshoring

By definition, people businesses have highemployee costs as a percentage of their total coststructures, which makes them ideal candidates for

moving offshore to lower-wage countries. But manyservices have to be pro-vided on the spot.There’s little value in hav-ing a cheap and veryhigh-quality hotel avail-

able in Kuala Lumpur if you are on a business tripto London. It is also difficult to clean an office ormow a lawn from a thousand miles away.

Many people businesses are protected from off-shoring, but some, such as call centers and IT ser-vices, are not. In the initial period of substitution,very attractive returns can be made by competitorsmoving people businesses offshore. Wipro, a lead-ing Indian IT services provider, is a case in point.Supplying IT services to customers in the UnitedStates, Europe, and Japan, Wipro has increasedsales at a compound annual growth rate of 50 per-cent for the past five years to achieve an annualrevenue running rate of $1.7 billion in the thirdquarter of 2004. Employee costs that are a fractionof what competitors spend in the United Statesand Europe make exceptionally high margins pos-sible. (See Exhibit 21.)

Outstanding Performers at the Top of the Ladder

We found that the best performers among the toppeople businesses in our sample achieved produc-tivity per employee of more than 30 percent aboveemployee costs. That compares with an average formost people businesses closer to 10 percent.Except for a few that depend on low employeecosts, these outstanding performers are all at the

5. For this observation, we are indebted to Mark C. Scott, The Professional Service Firm: The Manager’s Guide to Maximising Profit and Value (Chichester,England: John Wiley & Sons, 1998).

Businesses with the mostattractive pricing strategiesoften have the worst data

about employee performance.


top of the strategic advantage ladder. In Appendix

II on page 32, we detail what it took to reach this

level of achievement for five businesses from very

different industries: H&R Block (personal tax

advice), Rentokil Initial (hygiene and pest con-

trol), SAP (ERP software), The Capita Group

(business process outsourcing), and UBS Wealth

Management (private banking).

All five companies are clear leaders in large marketsegments—some with a truly extraordinary marketposition. H&R Block, for example, has more than11,000 locations in the United States and is respon-sible for filing 15 percent of all personal tax returnsin that country. All these companies have been ableto convert their market position into strong brandawareness, reputation, and position. Capita, forinstance, was awarded 24 percent of all large U.K.business-process-outsourcing contracts and wasnominated the “most admired support-servicescompany” three years in a row. And all five compa-nies have used their volume and experience tobuild distinctive capabilities. Rentokil Initial, forexample, has standardized hygiene and pest-controlprocesses and uses its network density—a benefit ofits market share—to create a cost advantage in cus-tomer service. UBS enhanced its customer relation-ships by introducing a trained and monitored“trusted adviser” process.

Most of these companies have found a way to cre-ate a truly proprietary offer, which has taken themto the next level of people businesses—and evenbeyond. SAP created a standard in ERP softwareand has moved beyond people by building sub-stantial R&D-based intangible assets. RentokilInitial invested in microbiology for washroomhygiene and produced a range of products to sup-port and differentiate its services. H&R Blockcame up with the innovation of e-filing taxes,which, in turn, led to the new customer benefit offast tax refunds. The company has also leveragedthe customer knowledge it has gained in filing taxreturns into a range of financial products, such asloans against expected tax refunds and mortgages.

E X H I B I T 2 1

LOW-COST LOCATIONS OFFER EXCEPTIONAL PERFORMANCE WHEREAS ARBITRAGE OPPORTUNITIES PREVAIL IN IT SERVICES


Wipro

SAP

IT serviceaverage

90

100

110

120

130

140

150

160

170

180

190Productivity per employee

Personnel cost per employee(%)

Custom software and IT services performance range for most European and U.S. players

Leading Indian IT offshore company (labor cost per employee is less than one-third that of European and U.S. players)

Global leader in ERP with proprietary software


30 BCG REPORT

People businesses are important and becomingmore so. They are the biggest, highest-growth sec-tor of employment in advanced economies. For thatreason, they offer enormous opportunities andunprecedented value—if they are managed accord-ing to the right rules.

• First, introduce new employee-oriented metricslinked to financial accounts in order to assess andmanage your most important asset: employees.Answer the same questions about employees that,in a traditional accounting view, you wouldanswer about capital investments. As an input tomanaging employee engagement, measureemployee perceptions about whether you aremeeting company and employee objectives.

• Second, develop a sharp, fine-tuned operationsand people management system that covers threelevels: information (employee metrics, customermetrics, and benchmarks); understanding(employee competencies and engagement, cus-tomer satisfaction, and outstanding performers);and action (HR processes, organizational con-text, and business focus). People businessesrequire far more granular information andunderstanding than traditional businesses do.The leverage from getting the people manage-ment system right is five to ten times what it is in

other businesses because people are five to tentimes more important in relation to invested cap-ital. People management is a core process for linemanagement.

• Third, use compensation, particularly perfor-mance-related compensation, as a versatile leverfor managing people and profits. How compensa-tion schemes are designed and implemented canhave everything to do with shareholder risks andreturns. Getting compensation right provides keyemployees with a sense of ownership. Getting itwrong can be highly divisive.

• Fourth, continuously renew strategic advantageby finding ways to be a better people business.Climb the strategic advantage ladder, transform-ing the company into a business whose organiza-tional capital and intellectual property are addingat least half as much value as employees.

As the world economy shifts from manufacturing toservice- and knowledge-based industries, capitalitself is becoming relatively less important. By justabout any measure, people are increasingly centralto business performance. For people businesses inparticular, the challenge is not asset productivitybut employee productivity. It’s a new game. Don’tplay it by the old rules.

Appendix I: The Top People Businesses Around the WorldRevenues, 2003 ($billions)


Security and facilities management (15)Tyco International* 7.4Securitas Group 7.3ISS Group 5.5Group 4 Falck 5.2Emcor Group 4.5AMEC* 4.5Rentokil Initial 4.1Secom Company* 4.0The ServiceMaster Company 3.6Johnson Controls* 3.3Imtech Corporation 2.4ABM Industries 2.3Bilfinger Berger* 1.5Ferrovial* 1.5Prosegur 1.3

Advertising (7)Omnicom Group 8.6WPP Group 6.7Interpublic 5.9Publicis Groupe 4.4Havas 1.9Dentsu 1.7Grey Global Group 1.3

Employment agencies (4)Adecco Group 3.1Manpower 2.1Randstad Group 1.2Vedior 1.2

IT services (18)IBM Global Services 42.6Electronic Data Systems Corporation 21.5Computer Sciences Corporation 14.8Accenture 13.4HP Services 12.3Capgemini 6.5Siemens Business Services 5.9SAP* 5.4Unisys 4.7Affiliated Computer Services 3.8Atos Origin 3.4BearingPoint 3.1CSK Corporation 3.1LogicaCMG 2.8Oracle Corporation* 2.1TietoEnator 1.6Tata Consultancy Services 1.5Compuware Corporation 1.3

Postal and courier services (5)United Parcel Service of America 33.5Deutsche Post World Net 30.5FedEx 24.7La Poste* 15.7TPG 13.4

Contract research and general outsourcing (7)Science Applications International Corporation 6.7Lockheed Martin Corporation* 6.6Serco Group 2.2Quintiles Transnational Corporation* 2.0Interserve Group 2.0The Capita Group 1.8Altran Group 1.5

Financial brokerage and advice (12)Marsh & McLennan Companies 11.6Aon Corporation 9.8FMR Corporation 9.2Merrill Lynch & Company 8.9UBS Wealth Management 5.0Crédit Suisse Private Banking 4.4H&R Block 4.2Charles Schwab & Company 4.1

Willis Group 2.1The Vanguard Group 2.0CB Richard Ellis 1.6Arthur J. Gallagher & Company 1.3

Hotels, hospital management, and health care services (14)Hospital Corporation of America 21.8Tenet Healthcare Corporation 13.2Marriott International 8.7Accor 7.7Fresenius Medical Care* 6.4HealthSouth Corporation (2002) 4.3Triad Hospitals 3.9Universal Health Services 3.6Community Health Systems 2.8Health Management Associates 2.6DaVita 2.0Sana Kliniken 2.0Gambro 2.0Générale de Santé 1.3

Contract catering (7)Compass Group 18.4Sodexho Alliance 13.2Aramark Corporation 9.4LSG Sky Chefs Group 3.0Elior Group 2.7Gate Gourmet Group 1.7Delaware North Companies 1.6

Oil, engineering, and industrial services (17)Bechtel Corporation 16.3Halliburton Company 16.3Schlumberger 13.9Suez Group* 10.6Fluor Corporation 8.8United Technologies Corporation* 8.4Aker Kvaerner Group 5.5Jacobs Engineering Group 4.6Siemens Industrial Solutions and Services* 4.5URS Corporation 3.2CH2M Hill 2.2Aecom Technology Corporation 1.9SGS 1.8Penauille Polyservices 1.8Birla Parsons 1.7WS Atkins 1.6Ryder System* 1.4

Telecom services (11)T-Systems International 12.0BT Global Services* 9.4NTT Data Systems Technologies 7.3Getronics 3.0Equant 2.9NextiraOne 2.3Convergys Corporation 2.3Ericsson* 2.3Telecom Italia* 2.2Lucent Technologies* 1.8Teléfonica* 1.2

HR, consulting, accounting, and law (12)Deloitte Touche Tohmatsu 16.4Pricewaterhouse Coopers 16.3Ernst & Young Global 14.5KPMG International 12.2McKinsey & Company 3.0Booz Allen Hamilton 2.7BDO Seidman 2.6Hewitt Associates 2.0Grant Thornton 1.8Towers Perrin 1.4Clifford Chance 1.4Skadden, Arps, Slate, Meagher, & Flom 1.3

SOURCE: BCG research.

*The organization’s service business only or its people-business units only.

32 BCG REPORT

Appendix II: The Strategic Advantage of Outstanding Performers

H&R Block Rentokil Initial SAP

• Personal tax preparation and advice

• Brand• Standard processes• Unique service combination• Financial advisory partner

• First with e-filing and fast refunds• Unique service combination (office,

online, and financial services)• Mortgages now 50 percent of profits

• Between $100 million and $200 million on marketing and advertising

• Very high U.S. consumer awareness

• Low-cost standard processes• 87 percent of clients with refunds

compared with U.S. average of 77 percent• Customer relationships leveraged to

cross-sell financial services

• More than 11,000 locations in the United States

• 15 percent of all U.S. tax returns

• Proprietary, vertical value chain• Network density

• R&D and product investment: microbiology and washroom hygiene

• Proprietary equipment manufacture

• Strong, long-established pest-control brand

• Standard service processes• Network density resulting in

substantial cost advantage

• Dominance in U.K. pest-control hygiene• Founded with 1924 contract to debug

U.K. Parliament buildings

• Hygiene core• Refocus under way following

expansion to broad BPO portfolio

• Proprietary software• R&D 14 percent of sales

• First with popular standard ERP software

• Interbrand/Business Week’s thirty-fifth- ranking global brand

• Strengthened by deep partner- network support

• More than 25 industry-specific business solutions

• Software (my SAP) linking e-commerce to ERP

• Global leader in ERP software• 36,000 installations• 1,000 partners

• ERP software

• Capital, scale, and reputation for megacontracts (such as BBC TV and TfL CCS

1)

• Joint venture with Indian partner resulting in additional offshoring opportunities

• Management Today’s “most admired support- services company” for three consecutive years

• Royal Bank of Scotland awarded “company of the year”

• Integrated provider: IT, HR, CRM, infrastructure, and general process reengineering

• Proven ability to make it happen

• 24 percent of all large U.K. BPO contracts• 36 percent market share in life and

pensions outsourcing

• White-collar outsourcing• United Kingdom and Ireland only

• Swiss branding• Distinctive, standardized CRM

• Swiss banking secrecy laws

• Strong global reputation• Focus on personal and

institutional trust

• Client relationship experience• Explicit trained and monitored

“trusted adviser” process

• World’s largest private bank• 737 billion Swiss francs of invested

assets in second quarter 2004• 140 years in private banking

The Capita Group UBS Wealth Management

Proprietaryoffer

Brandawareness


Greaterexperience

Clearfocus

“Body shopping”


Proprietaryoffer

Brandawareness


Greaterexperience

Clearfocus

“Body shopping”


• Private banking (offshore)

* * ** * *

SOURCE: BCG research.

NOTE: SAP was not included as a people business in ratio comparisons because of high proprietary content but is included here to illustrate the potential to become a people business.1BBC TV’s license fee collection and Transport for London’s Congestion Charging Scheme.

The Boston Consulting Group is a general management consulting firmthat is a global leader in business strategy. BCG has helped companiesin every major industry and market achieve a competitive advantage bydeveloping and implementing winning strategies. Founded in 1963, thefirm now operates 60 offices in 37 countries. For further information,please visit our Web site at www.bcg.com.

For a complete list of BCG publications and information about how to obtain copies, please visit our

Web site at www.bcg.com.

To receive future publications in electronic form about this topic or others, please visit our subscription

Web site at www.bcg.com/subscribe.



BCG

Rules of the G

ame for People B

usinesses

www.bcg.com

BCGREPORT

AmsterdamAthensAtlantaAucklandBangkokBarcelonaBeijingBerlinBostonBrusselsBudapestBuenos AiresChicagoCologneCopenhagenDallasDüsseldorfFrankfurt HamburgHelsinkiHong Kong

HoustonIstanbulJakartaKuala LumpurLisbonLondonLos AngelesMadridMelbourneMexico CityMiamiMilan MonterreyMoscowMumbaiMunichNagoyaNew DelhiNew YorkOsloParis

PragueRomeSan FranciscoSantiagoSão PauloSeoulShanghaiSingaporeStockholmStuttgartSydneyTaipeiTokyoTorontoViennaWarsawWashingtonZürich

Rules of the Game for People Businesses - BCG · Rules of the Game for People Businesses ... and...

Documents

Transcript of Rules of the Game for People Businesses - BCG · Rules of the Game for People Businesses ... and...