Profits are important. I think more businesses will adopt a multiple stakeholder approach in 2011, realizing that relationships with customers, suppliers, the community and especially employees will be the keys to business success.

I predict 2011 will be marked by a growing realization by companies about the importance of supporting, growing and driving employee engagement, more so than the pursuit of profits as the primary business priority. If you begin with the fundamental goal of increasing employee loyalty that will lead to customer loyalty and loyal customers will drive profit into your business. You can then use those profits in part to invest back in your employees to give them better tools and resources to do their jobs.

This “Circle Of Growth™” philosophy will undoubtedly grow in popularity and practice, not only in the U.S., but at a global level as well. I . I recently had the opportunity to visit other countries, from Brazil to Vietnam, and the response to these philosophies was very positive. This experience tells me that businesses around the world are more open than ever to a new way of thinking about business objectives and how business is conducted.

In addition to focusing on employee engagement, successful businesses in 2011 will also:

1. Focus on developing a “trust and track” system for performance management, rather than relying on a “command and control” system of leadership. In other words, the days of company leaders simply dictating what employees do to improve revenue or reduce cost without regard for their opinions or welfare are on the way out. A trust and track management system fosters more independent thinking, empowerment and accountability among workers.
 
2. Spend money to enhance company culture. Right now, most employees are staying in place because the economy makes it hard to get other jobs. But when the economy starts to rebound, you’ll be at risk of losing your good people if you don’t consistently show them how much you appreciate what they do for you. It doesn’t take a lot of money. It just takes a commitment from the top and an ongoing effort to improve internal culture.

3. Focus on engaging talented employees, not simply hiring talented employees. We have a big performance problem in this country. That’s because only about one-third of workers are totally engaged in their work. American companies are losing money because of reduced productivity, which points directly to this lack of engagement. In fact, one study showed that highly engaged employees outperform their disengaged colleagues by 20-28 percent (Conference Board, 2006). Spend time developing your stars.

4. Elevate character over technical knowledge or skills when hiring leaders. This market provides employers tremendous opportunity to hire talented leaders with great skills. But hiring leadership should be 60% fit and 40% skill. Take the time and have the patience to make sure your newest leaders help maintain and even elevate your culture.

5. Develop corporate and individual performance and compensation goals that encompass more than just the bottom line profit. While overall profitability is certainly an important goal and a key component of any balanced scorecard, individual and corporate performance measures should take into account employee and customer satisfaction, as well as people’s ability to build relationships and adhere to the company’s core values.

6. Hire for fit and fire for a lack of it. Coming out of this very bad economic period, companies should do some soul searching and ask, “How do we want to start over?” Part of this analysis should be, “Who is going to be on board to help with our rebuilding effort, and who do we want to keep on our team? Who fits?” Don’t be afraid to get rid of those that don’t “believe.”

7. Expand communications with employees. Company newsletters and intranets will continue to be essential elements of employee communications, but so will blogs and “tweets” from multiple executives … and not just the CEO. For companies that are focusing on retention, I also think you will see the return of personal notes of thanks and appreciation. Technology will never replace the personal touch when it comes to enhancing important relationships.

I believe that, as entrepreneurs, we have a higher calling. I believe that our #1 job is to enhance the lives of the people that work with us. Many successful business leaders have already grasped this approach.
 
Why am I so confident that other companies will adopt this employee-first philosophy? Because the track record of companies that have pursued it is very strong: Southwest Airlines, The Container Store, Costco and Whole Foods are great examples. In the 10-year period ending June 2006, these companies, which focused on building positive employee cultures and employee engagement, returned 1,026 percent for their shareholders. Meanwhile, companies in the S+P 500 earned 126 percent. Bottom line…focusing on culture and the factors that build it pays off, and will do so even more in 2011.