As the demands on organisations intensify, unlocking employee energy, engagement and discretionary effort has become one of the defining challenges of sustainable performance.
Labour productivity is stagnating across much of the world. After decades of steady gains, many advanced economies – and an increasing number of developing ones – are experiencing a marked slowdown.
In Australia, the trend is particularly acute. ABS data shows that the 20-year average annual growth rate in labour productivity has fallen from 1.8 per cent in 2003-04 to just 0.8 per cent in 2023-24.
For years now, many organisations have been focused on improving efficiency as a means to uplift productivity. While this may have proven effective in years’ past, it has increasingly left employees feeling the pressure to deliver more with less – a phrase those of us in HR have become all too familiar with in recent years.
In recent years, the conversation has shifted to AI being the silver bullet that will drive greater productivity gains, yet its ROI has yet to be realised and, in many respects, it’s fuelling the ‘more with less’ narrative.
This requires more deliberate thinking about how AI is deployed so that it enhances – rather than erodes – productivity.
When implemented intentionally and strategically, AI can accelerate organisational performance. But AI alone is not a solution.
In fact, recent research published in the Harvard Business Review shows that AI effectiveness is often limited by behavioural factors, and Deloitte research found that organisations that implement human change management alongside AI implementation achieve 1.5x outcomes compared to those who focus on the technology alone.
In this context, it is clear that leaders must also focus on the underlying drivers of employee engagement that determine whether productivity gains are realised or lost.
In many organisations, low engagement is where productivity gains are most at risk.
For example, research from Microsoft’s 2025 Work Trend Index shows that 48 per cent of employees feel their work is chaotic and fragmented. Similarly, the OC Tanner Global Culture report points to weakening organisational connection, with many employees feeling unsupported and increasingly isolated.
Where should organisations start?
The good news is that teams are proving to be a significant part of the solution. The evidence is consistent – teams are the single most important driver of full engagement. While a poor manager is one of the most common reasons employees leave, a great manager leading a committed team can lift engagement, retention and performance.
But not every group of employees functions as a team. Professor Michael West, Professor of Work and Organisational Psychology at Lancaster University, defines a true team as having three essential elements:
- A group of three or more people
- A clear shared purpose or goal
- Interdependence in achieving that goal
By this definition, many groups within organisations are not teams at all but TINOs – teams in name only – because they lack shared goals or do not work interdependently.
West’s research shows that when TINOs begin to operate as genuine teams, their performance can increase by around 20 per cent.
So how can HR help to turn TINOs into high-performing teams? In our opinion, there are three conditions that first need to be in case.
“While a poor manager is one of the most common reasons employees leave, a great manager leading a committed team can lift engagement, retention and performance.”
The three conditions for success
For decades, Squadify’s work with teams has revealed a recurring truth: many teams are unclear about their direction and even why they exist as a team at all.
Organisational restructures, siloed working models and a shift towards remote working have led to teams becoming splintered and falling back on task-based goals in place of more strategic objectives and holistic approaches that would more fully engage the members in truly collaborating to deliver great results.
This lack of real clarity of the team’s shared goals, and ways of working undermines performance and engagement, even when other conditions, such as trust or delivering against commitments seem strong. Through research and practice, we’ve learned that clarity is not just important, it’s foundational.
Squadify’s framework for team success rests on three critical conditions, which we call the ‘3 Cs’:
- Clarity: Why the team is doing what it is doing, what success looks like and how that success will be achieved. This includes strategies, pathways and behavioural expectations.
- Climate: Both the hard elements (resources, processes, systems) and the soft elements (culture and stakeholder relationships) that shape the team’s operating environment.
- Competence: The knowledge, skills, behaviours and attitudes team members require to perform effectively.
Empirically, clarity comes first. When teams know their purpose and approach, they can build the right climate and develop the necessary competence.
Our collaboration with the London School of Economics confirmed what experience suggested: clarity and climate are the primary drivers of performance.
Competence, while important, ranked lower. Improving clarity lifts other conditions, such as trust, psychological safety and innovation, by double digits.
Why? Because trust without clarity is hollow. Teams need to know what they’re trusting each other to deliver.
The threshold that changes everything
New analytics from Squadify highlight another important insight: there is a measurable clarity threshold that reliably predicts team performance. The pivotal factor is interdependence, which can be distilled into one question, “Does the team know how to work together?”
This single metric reflects the alignment of all clarity elements – shared goals, strategies, customer focus – and signals readiness for high performance. It’s only when a team leverages this interdependence that the team becomes greater than the sum of its parts.
Once that threshold is crossed, performance shifts regimes—improvements compound across what the team delivers (clarity), how they work and collaborate (climate), and what each team member brings to the team (competence).
A practical example
In July 2023, one of us (Justine) progressed into the role of Regional VP HR for Schneider Electric, a global energy management company, and took over a team that had experienced powerful external pressures: including record high inflation, a 50-year record low unemployment, an unprecedented volume of legislative change and a dramatic shift to hybrid working post-COVID.
The annual culture survey scores for the team reported low engagement. We worked with Squadify to rebuild the team and focused first on building connection, recognising that the “busyness” behind screens was the antithesis of true connection.
We then focused on shared clarity to build deeper levels of trust – diving deeper into our strategy and priorities, as well as exploring our ways of working and adopting some AGILE principles.
We introduced a weekly stand-up meeting along with a Kanban to give transparency to everyone and visibility on accountabilities. The process of getting the team to define clear shared goals, setting priorities together and in parallel building connections between team members, enabled us to leverage successes and accelerate our shared learning.
We learnt that, ultimately, without the focus on clarity, trust and connection, we could take our team only so far. Once we’d done the deeper and different work on clarity, then we saw a sustained increase in the trust and connections, and a renewed sense of purpose and pride in the team.
This holistic clarity of goals and ways of working enabled the team to quickly become effective and re-engage positively with their work. This was reflected in our annual engagement survey results which showed significant improvements, increasing employee engagement by 50 per cent team alignment by 58 per cent.
An unexpected benefit was that the clarity and connections enabled the team to raise their innovation score too.
Key takeaways for HR
For HR leaders, three actions matter now:
- Shift engagement efforts from sentiment tracking to clarity interventions – explicitly aligning purpose, goals, decision rights, and ways of working at team level deepens trust and improves employee engagement;
- Equip managers to facilitate open conversations about the importance of interdependence, not just individual performance;
- Treat engagement as a leading indicator of AI readiness, not a “soft” outcome – because teams that trust each other and understand how they collaborate are the ones able to absorb, adapt, and benefit from AI at speed.
Elevate your team’s success with AHRI’s course on performance mastery. Learn the principles that underpin successful performance management, including balancing performance outputs with behavioural standards, and aligning staff performance with organisational objectives.
Justine Cooper FCPHR is the former Vice President of HR, Pacific Zone at Schneider Electric and an AHRI State Councillor for NSW. Juliet Owen is the Chief Data Officer at Squadify.
