Firms must adopt policies to cater for employees' changing needs, writes Gabrielle Monaghan

Companies need to start getting to know their staff or risk losing both talent and profitability, according to one of the world's leading human resources (HR) strategists.

HR managerial practices account for 17 per cent of a change in an organisation's profitability, while a company's strategy and research and development is responsible for just 2 per cent and 8 per cent, respectively, Dr Lynda Gratton said.

Gratton is professor of management practice at London Business School and was named last year as one of the top 50 thinkers by a British newspaper.

Gratton, one of just four women on the list, advises multinationals including Nokia, Royal Bank of Scotland, and Unilever on their human resources strategy. This week, she was addressing the Ibec HR Summit in Dublin.

"Companies make a mistake in thinking about people as assets that they can move around," Gratton said, "because employees are investors - they invest their time in a company."

Supermarket giant Tesco, she pointed out in an interview, was one company that set out to understand better what motivated its workers, employing the techniques it used for customer research.

Its survey found that the proportion of staff who "live to work" and "work to live" was on the decline.

In their place were growing breeds of an employee virtually unknown a generation ago: those who "want it all", "work-life balancers" and "pleasure seekers."

The "want it all" employees are typically young executives, eager to be promoted and receive better pay, but determined to live life to the full outside the office as well.

"Work-life balance" staff are those who would happily sacrifice career progression in favour of spending more time at home, while "pleasure seekers" are usually young, single and spending their lunchtimes and tea breaks mulling what clothes to buy or which holiday to go on next.

"The work-life balance people also want to get on in work and the people who work to live want the flexibility to earn money for their lives outside the office," Gratton said.

"Whether you want these people in your organisation or not, they will always be there. There may be pleasure seekers working in the company's warehouse and, as a company, you have to make sure they find their job enjoyable."

Other research has shown that this new breed of workers, unlike the post-war generation, are more loyal to themselves than the company they work for and are therefore more likely to quit if they can get a better deal elsewhere.

Tesco used the results of its survey to devise working practices better suited to its eclectic range of employees in a bid to improve staff retention. For instance, it began offering career breaks of up to eight months so "pleasure seekers" could travel the world.

It's increasingly important for organisations to examine how effectively they are managing staff because of the emergence of three major global trends that are challenging the way companies function.

"The first is recognising demographic changes," she said. "Young people and baby boomers want something different at work. Those under 30 want work-life balance and an interesting job. And now they are becoming more assertive about it.

"Companies now say that when they interview MBA graduates, the three questions asked by the interviewee are 'what sort of job will I be doing, what is your environmental policy, and how is the work-life balance situation here?'

"And the candidates will choose where to work based on the answers to those questions.

"The second challenge organisations face is technology and the way young people communicate with each other, such as by creating online communities. And the third is the morphology of an organisation, as partnerships and outsourcing increase."

The changing nature of organisations and their environment means companies will have to be more flexible with their employees and ensure roles are interesting enough for staff. Productivity among BT engineers climbed 20 per cent in a year after the telecoms company introduced flexible working arrangements, Gratton said.

"There will always be companies that understand this and those that don't," she said. "It has a lot to do with the chief executive and how good the HR director is. Terry Leahy and former HR director Clare Chapman, for instance, were fantastic in helping Tesco develop human resources."

Over the last decade, Gratton has led the Leading Edge Research Consortium, a major research initiative involving companies such as Hewlett-Packard and Citibank.

Along with directing the London Business School's executive programme, Human Resource Strategy in Transforming Organisations, Gratton has written several books and papers on the subject.

In her 2004 book, The Democratic Enterprise: Liberating Your Business with Freedom, Flexibility and Commitment, the professor set out a practical blueprint for designing smarter working relationships in companies based on free choice and shared purpose, where autonomy, choice and trust breed speed, flexibility and commitment. Although few organisations can claim to be perfectly democratic, elements of democracy can be found in firms such as BT, McKinsey and BP, according to the book.

"If people have a choice of when and where they work in companies, then the company disintegrates into free agents," Gratton said. "Choice is good, but you have to help people work together as a community.

"For instance, at BT, if a member of staff wants to stop flexible working, they have to speak to their peer group and show how this move would have a positive impact on the business.

"In the Democratic Enterprise, I talk about being a citizen. In Athenian democracy, being a citizen meant having not only having rights but also obligations."