Commitment IssuesRestoring Employee Engagement
Executives say they’re worried about engagement levels, which have fallen most dramatically for top performers. And companies are taking some steps to win over employees, such as CEO town-hall meetings, increased mentoring and more kudos for jobs well done.
But these are largely small-bore moves. Taken as a whole, they fail to invigorate dispirited workplace cultures or address the shifting priorities of employees, who have weathered massive, sudden layoffs, pay freezes or cuts, and tumultuous restructurings over the past year.
If businesses want fired-up, dedicated employees today, they must act boldly. And bold may not be cheap. Real progress on engagement all but requires more investment in people.
What’s more, merely papering over the employer-employee disconnect with a few token programs is unlikely to solve the problem. Instead, what’s needed is a fundamental renewal of the relationship between firm and worker—a connection currently marred by mistrust and anxiety at many companies.
“We are going to have to look at the employment contract again,” says Theresa Welbourne, a business consultant and researcher at the Center for Effective Organizations at the University of Southern California. Businesses are providing little more than a job, even as they ratchet up demands on workers, she argues. “Companies are asking for more and more and more from their employees and not really giving anything in return.”
Employee engagement refers to how committed workers are to their organization, and how much extra effort they are willing to put in on the job. Like many business concepts, it can be misapplied. Firms can obsess too much about engagement survey scores and not tie engagement initiatives directly to business outcomes.
But research shows that engagement levels matter. A Gallup study published in August involving about 32,400 business units found that those in the top quartile on engagement had 18 percent higher productivity, 16 percent higher profitability and 49 percent fewer safety incidents compared with those in the bottom quartile on engagement. Professional services firm Ernst & Young has found similar results in its internal data. The company has seen that high engagement scores are a leading indicator of business success in its divisions, says Kevin Kelly, Ernst & Young’s director of the people team for the Americas.
"We are going to have to look at the employment contract again. Companies are asking for more and more and more from their employees and not really giving anything in return."
—Theresa Welbourne, Center for Effective Organizations, USC
What’s more, a lack of engagement places firms at risk for a brain drain once employees have more options. When the economy recovers and hiring picks up, disheartened top performers could well be wooed away, says Laura Sejen, strategic rewards specialist at advisory firm Watson Wyatt Worldwide.
“It’s your top-performing employees that show the biggest drop in engagement and are going to be targets,” she says. A May survey by Watson Wyatt of 1,300 workers at large U.S. employers found that engagement levels for top performers fell close to 25 percent year over year. Employees overall experienced a 9 percent drop in engagement year over year, Watson Wyatt said.
Sejen says the outsize plunge for high performers has to do with perceptions that firms have hurt themselves in the recession. Watson Wyatt found that 41 percent of employees overall believe that pay and benefit changes made by their employer in the past year have had a negative effect on work quality and customer service. Top performers in particular, Sejen says, “are passionate when they see an impact on quality or customer service.”
Talking to workers
Not surprisingly, employers are nervous about engagement—or the lack of it. Employee engagement is one of the top two priorities of human resource leaders for 2010, according to an October survey by research firm the Corporate Executive Board.
Companies are taking action to bolster engagement. The most common step has been increased communications, which can come in the form of briefings about the firm’s financial strength, staffing plans and business goals. A September study by the Institute for Corporate Productivity research group of nearly 290 firms found that 58 percent of organizations were taking action to prevent an increase in turnover when the economy turns around. Of those, 81 percent cited increased communication to employees, making it the top-ranked answer for steps already taken.
A Watson Wyatt survey of HR executives at 175 U.S.-based firms in August also found increasing communication to be the top-ranked move to keep employees engaged. Other responses in the Watson Wyatt survey included changing roles to expand responsibilities (cited by 47 percent of companies), extra focus on coaching and mentoring (cited by 36 percent) and increasing opportunities for special project assignments (cited by 30 percent).
These tactics can have good results. Take communication, for example. Consulting firm Towers Perrin found that in the second quarter, 83 percent of employees said they had a clear understanding of their company’s goals, up from 69 percent in the first quarter.
By and large, though, companies don’t appear to be tackling the engagement issue in a comprehensive way that creates a more inspiring work climate and gives employees what they want.
Firms are overly focused on rewards and punishments, says Dan Pink, author of the new book Drive: The Surprising Truth About What Motivates Us. Companies “should move past their outdated reliance on carrots and sticks,” Pink says. “That was fine for simple, routine 20th-century tasks. But for creative, conceptual 21st-century work, companies are much better off ensuring that people have ample amounts of autonomy and that their individual efforts are hitched to a larger purpose.”
A revved-up workforce starts at the top, says business consultant Jon Gordon. “For leaders, now is the time to improve your company’s culture and get inside your employees’ heads,” he says.Gaining trust
Gordon, who has written a new book, The Shark and the Goldfish: Positive Ways to Thrive During Waves of Change, says business leaders should remind employees that they have significant control over events —that they can be “heroes, not victims” in tough times. He also calls for executives to “model good behavior.”
That point dovetails with one employee priority today—trustworthy leadership. A recent report by staffing firm Randstad asked 2,200 American employees about traits of their ideal employer. Nearly three-fourths said their dream employer “has an active leadership who serves the company [not themselves],” up from 58 percent last year.
Along these lines, “trust/confidence in management” was among the top reasons employees gave for leaving an organization in a recent survey by Watson Wyatt. For employees overall, it tied as the third-ranked reason. For top-performing employees, it tied as the fourth-ranked reason. Trust did not make employers’ list of the top-five reasons when they were asked why employees leave.
In addition, organizations in the Watson Wyatt study failed to recognize the way employees—in particular top performers—prize job security. Job security was cited as a reason for joining an organization by 37 percent of top-performing employees. That made it the second-ranking reason after “nature of work” for top performers. Thirty-three percent of employees overall mentioned job security, putting it in a tie for second place. Security didn’t make the top-five list for employers when they were asked why employees join an organization.
Other key concerns for employees these days are caring and corporate integrity. Eighty percent of employees in the Randstad survey said their ideal employer “delivers on its promise to customers.” That response tied for top place this year along with “cares about their employees as much as their customers.” Both responses were up from the mid-60s in 2008.
When the economy recovers, disheartened employees may be wooed away. “It’s your top-performing employees that show the biggest drop in engagement and are going to be targets.”
—Laura Sejen, Watson Wyatt Worldwide
Interest in a caring, upstanding, stable employer fits with broader cultural and economic trends. These include Generation Y’s focus on meaningful, collaborative work, the growing importance of corporate social responsibility and increased expectations for transparency and interactivity in the age of Facebook and other “Web 2.0” Internet sites. At the same time, financial risk—in the form of health coverage, retirement benefits and job security —has shifted substantially in recent decades. Employment for life, pensions and health care benefits that were largely paid for by employers have given way to layoffs, battered 401(k)s and years of cost-sharing that have increased health care costs for employees.
The decline in economic security is at the root of the engagement movement. During the 1980s, companies recast the terms of the employment pact that had held sway in America for decades. Gone was the deal that exchanged worker loyalty for lifetime employment. Under tougher international competition and eager to improve profits, businesses began a cycle of large and continuing layoffs.
In response, employees began jumping ship much more readily. What’s more, above-and-beyond efforts by skilled employees declined, and businesses saw smaller increases in productivity, researcher Welbourne says. “Given the employee contract as it has been redefined, it is not easy for employers to snap their fingers and simply get employees to do more,” she has written. “Thus, the employee engagement movement arrived as a way to solve this problem.”
Most observers agree that 1950s-style employment for life is not the answer for employers or workers these days. “It’s not stability people want; they want growth,” Welbourne says.
Brian Kropp, a consultant with the Corporate Executive Board, says that firms can be burned by selling themselves as secure these days. Failing to live up to a promise of a stable workplace “is just hugely damaging,” he says.
But there are other ways for firms to convey a sense of security. For example, if times are tough, companies can opt for such cost-cutting moves as salary reductions and furloughs rather than layoffs. A commitment to training can beef up workers’ employability over time and show the organization’s belief in them and concern for their career well-being. Of course, preserving training budgets means biting into the bottom line, at least in the short term. But smart companies will realize that the best option is a win-win relationship with employees, rather than a one-sided attempt to squeeze them for all they’re worth, says business consultant Laurie Bassi. In Bassi’s view, globalization, demographic changes and other trends are pushing companies in the direction of more “reciprocal” relationships with workers, customers and other stakeholders.
Employees, Bassi says, “are not going to give you the gift of their discretionary effort if you as an employer are not worthy of it.”
A new compact
In recent years, companies have begun tackling the employment contract topic with “employee value proposition” initiatives. Business services provider Sodexo is a case in point. One of the world’s largest employers, with some 355,000 workers in 80 countries, Sodexo began renewing its employee value proposition in 2006. The effort took on greater urgency in early 2008, after engagement scores dipped.
Ninety-seven percent of Sodexo employees have direct contact with clients daily in activities such as food service, facilities management and housekeeping. That means motivated employees are critical to customer satisfaction, says Daniel Vannier, Sodexo’s vice president of human resources research and progress.
With the help of consulting firm Hewitt Associates, Sodexo discovered that keys to higher engagement included employee recognition, more opportunities to communicate with senior leaders and more training opportunities. That led the firm to make a new set of commitments to employees, with the tag line “Your Future, So Sodexo.” It includes this pledge: “We care about our employees in the same way that we care about our clients and we strive to provide each and every employee with a wide range of professional and personal opportunities to improve the quality of their daily life.” The firm also promises “an environment of strong and open two-way communication,” respect for diversity and support for socially responsible involvement in the community.
“It’s a new deal,” Vannier says. “It will really be a competitive advantage for the company.”
Sodexo doesn’t promise anything about job security in the updated compact. But, Vannier says, the firm has made it through the recession so far with minimal layoffs—amounting to less than 1 percent of its workforce.
And the company says it has been living up to its word by introducing focus groups and worker surveys and having senior executives meet more often with employees. Sodexo also has preserved its training programs, which affect 250,000 workers a year. “We have not touched our investment in human resources,” Vannier says.
The new employee deal Sodexo is building has a lot in common with the “high-involvement” workplace described by University of Southern California business professor Edward Lawler. He says high-involvement firms provide workers with challenging jobs, a voice in the management of their tasks and a commitment to low turnover and few layoffs.
Employees in such firms also tend to share in company profits or from gains in productivity and enjoy generous benefits.
Lawler foresees that some firms will continue to choose what he dubs a “travel light” model, which typically means minimal investment in training and little commitment to job security. This management choice is more flexible than the high-involvement approach, he says. But high involvement with workers makes the most sense for firms seeking enduring connections with customers, Lawler says.
“If you want to maintain a long-sustaining relationship with customers, there are advantages of the involvement approach,” he says.
There’s evidence that the most successful firms are opting against a travel-light, transactional relationship with employees. The Institute for Corporate Productivity’s recent study found that higher-performing firms—those that reported the best change over time in revenue growth, market share, profitability and customer satisfaction—were more likely to have invested in leadership training for first-line managers than were lower performers. Higher performers, which made up 19 percent of firms in the study, also were more likely to have increased pay and to have surveyed workers on engagement than lower performers, which constituted 32 percent of the sample.
What’s more, lower-performing companies were twice as likely as high performers to do “significant” cost cutting such as job eliminations during the past 12 to 18 months. About six in 10 lower performers took such actions, compared with roughly three in 10 higher performers.
A more involved relationship with employees seems to correspond with stronger engagement on the part of workers. According to the institute’s study, none of the higher-performing firms that survey workers saw a decrease in engagement in their last employee poll. Nearly half reported an increase in engagement, and just over half said it remained about the same. By contrast, 42 percent of lower-performing companies that survey workers said engagement had dropped, while 33 percent said it stayed the same and 26 percent said it rose.
It remains to be seen whether the bulk of firms will succeed in their engagement efforts as the economy lurches toward a recovery.
But if the current myopia about engagement persists—including an unwillingness to revamp the connection between employer and employees—many firms will continue to find themselves disappointed with what they get out of their workers. They may find key workers getting out. And eventually they may find themselves out of business.
Workforce Management, November 16, 2009, p. 20-25 -- Subscribe Now!