Research shows that having too great a focus on engagement may cause you to overlook other critical performance indicators that impact ‘people equity’
By William Schiemann, CEO, Metrus Group
When Randy Fredricks joined a Fortune 100 company earlier this year, he was elated! To be hired for what he felt was a great job in the current economy was almost too good to be true. He sang the praises of his new employer, offered to keep an eye out for openings for his friends…at first.
Six months into the job, his outlook is different – he doesn’t recommend his employer’s products any longer, and he’s asked his friends to keep an eye out for openings for him.
The truth is, Randy’s not alone. Many firms exhibit some decline in employee engagement – and it costs them dearly. Our research and that of many others demonstrates that when engagement plummets, customer service, quality and productivity also drop, while costs and employee turnover rise. In a recent cross-industry study conducted by Metrus Group, we found performance differences of nearly 10% between organizations where employee engagement was high and those with low-engagement operations.
Many employers thought that with unemployment hovering at 10%, people would be delighted just to have a paycheck. And they were correct – up to a point. Many employees are delighted to have a paycheck, but it doesn’t mean they’re satisfied, committed or even engaged with the organization.
There are probably as many definitions of engagement as there are organizations using the term. Unfortunately, the term is frequently misunderstood and misused. Two common misconceptions:
While it might be tempting to include all three performance factors under the umbrella of Engagement, doing so clouds the way we manage and the consequences. For example, gaps in alignment tend to hurt strategy execution, operational goals and financial performance. In contrast, gaps in capabilities tend to lead to poor customer outcomes. Gaps in engagement are more likely to lead to turnover and other adverse workforce outcomes. Understanding and addressing all three factors is the surest way of sustaining engagement over the long term and driving up bottom-line performance.
There are many factors that influence engagement. The most common one is the quality of supervision. It has been demonstrated in many studies that more people quit their supervisor than their company. It’s the supervisor who has greatest responsibility for translating the company practices and values to employees. When supervisors demonstrate low trust, lack of respect, poor recognition, unethical behaviors, ineffective communication and unfair treatment of the employee or other coworkers, engagement quickly disappears.
The degree of employee engagement can also be affected by organization-wide factors, including:
Because there are many different causes of low engagement, it’s crucial that organizations monitor these factors and have good systems for identifying and eliminating them. Decades of research have shown that there may be a few drivers that are common across a business unit or even an organization – and which can be attacked systemically – but there are also drivers of low engagement that vary substantially from manager to manager and must be dealt with on a case-by-case basis.
Let’s return to Randy’s situation. What could have been so damaging to his level of engagement in just a few short months? A recent study conducted by the Metrus Institute and reported in ASQ’s Quality Progress magazine offers some answers.
In a survey of over 2,000 companies, we examined the impact of some common recession-busting tactics on our three “ACE” factors – alignment, capabilities and engagement. Common wisdom has it that actions such as hiring freezes, pay cuts and layoffs are likely to have an across-the-board negative impact on these three factors. But there’s actually a significant difference in the impact of specific tactics, as the accompanying table shows.
As expected, when resources are reduced, engagement, alignment and capabilities are all adversely impacted. Shouldering additional responsibilities while one’s own job is potentially at risk is unlikely to lead to a positive outcome. Resources are reduced, priorities change and the environment becomes more uncertain.
A somewhat different result is found when the focus is on pay and benefits. The negative impact on employee engagement isn’t entirely unexpected. But reductions in these areas had little impact on alignment or capabilities. We believe that when the need for such reductions is seen as part of an overall program aimed at continuing to achieve key goals, it’s understood and often even appreciated.
Most interesting of all, furloughs (unpaid time off) had little impact on any of the three factors – even engagement didn’t show a significant decline. One reason: This action is distinguished from a pay or benefit cut in that there’s an even exchange in pay for time – that is, a 20% reduction in pay is accompanied by one day off per week. While this is unlikely to be a welcome turn of events, it’s at least perceived as an equitable arrangement that impacts both company and employee.
The biggest negative impact came from a somewhat unexpected area: reduction of service levels to customers. This held true whether the decrease was in service to external customers or to service between departments inside the company. Reduction here yielded a strong negative impact on both engagement and alignment, as well as a somewhat negative impact on capabilities. In this case, the focus on the customer – often one of the strongest core values – is perceived to have been set aside and employees may well wonder: “If our mission is to serve customers well with products and/or services, yet we’re intentionally decreasing that level of service, what other goal can be more important?” Also, if customers are lost due to lower levels of service, that’s unlikely to lead to a long-term business recovery. People know that customer engagement is just as important as employee engagement, and once lost it will take time and effort to rebuild.
How Recession-Fighting Action Impacted People Equity
To maintain and grow engagement in your organization, consider the following:
You can’t manage what you can’t measure. If you don’t have a good engagement- measurement system in place, you’re flying blind. Employee surveys are probably the most cost-effective way to measure engagement, but you can use other methods as well, such as focus groups and feedback panels. To get the most for your survey dollar, think about using surveys that measure not only engagement, but also alignment and capabilities. This will allow you to identify your gaps holistically and focus corrective resources efficiently.
Look for systemic issues in your engagement findings. This means using a survey or tool that senses different drivers of engagement. For example, a recent banking client had systemic problems with rewards and clarity of direction due to its leadership and HR practices. By building an integrated action plan, they were able to achieve significant impact by focusing resources on one or two key areas.
Look at the variance in engagement scores across your organization. In a recent study of hundreds of units across 70 hospitals, we found unit engagement scores as low as 18% and as high as 95%. Across 1,500 fast-food restaurants, in which the managers were selected and trained the same way, we found similar variances. In areas of low engagement, you’re likely to also find operational, customer and/or turnover problems. In addition to looking for systemic issues, it’s also important to assess which parts of the organization have unique concerns. In the hospital group mentioned above, the first conclusion was that an engagement improvement program should be launched company-wide. Upon reviewing the data more thoroughly, however, it was found that about 20% of the hospitals were the ones who would benefit most from such an initiative; a group of others were found to be outliers in alignment, while still others scored well in all areas and didn’t require a major investment. In this way, resources were targeted where they could have the most impact.
Examine the way you communicate. People are always asking us to identify the most common cause of low engagement. In over 80% of the companies, we find that behind issues of trust, performance management, recognition, fair treatment and respect there are harder to identify, yet critical, communications problems. Very often, although managers have the best intentions, they inadvertently communicate in a tone and style that alienate employees. Or worse, they fail to provide employees with clear objectives and both positive and negative feedback in a timely, consistent fashion.
The value of your greatest asset – your human capital – depends on the three ACE factors identified in this article. Every organization needs to pay attention to all of them when developing its personnel. Keeping employees engaged requires equipping them with needed skills and aligning their values and goals with those of the organization
Now we have a bit more information about what may have happened with Randy. He joined the company with great enthusiasm – engagement is generally high on Day 1, especially when jobs are somewhat hard to come by. He was energized to become a part of the company and its culture, and deliver to customers the high-levels of quality promised in the company’s mission statement. This company, however, decided to reduce the level of service available to customers as a cost-saving measure, and executives believed the cuts were in areas unimportant to most of their customers. But Randy quickly saw the difference between the initial promise and the new policy, and his view of capabilities fell off very quickly.
Over the next few months, he found himself unable to provide what he – and customers – expected from the company. They weren’t bashful about sharing their displeasure with Randy. His inability to resolve the situation became a source of great frustration. Not surprisingly, Randy’s level of engagement nosedived.
This situation can be corrected if the company undertakes an assessment of the three ACE factors – alignment, capabilities and engagement – as well as engagement of the customers themselves prior to taking action. This ensures that whatever action is taken will be empirically grounded, thereby avoiding the hit-and-miss approach to problem solving. Some steps have been suggested above, but the specific solution will depend upon the strategy and the culture of the organization.
If this were your organization, your employees and your customers, what would you do?
William Schiemann, Ph.D. is the CEO of Metrus Group. Dr. Schiemann and his firm are known for their pioneering work in the creation of performance gauges and scorecards to measure strategy implementation, and for establishing linkages between employee, customer, and financial outcomes. He is co-author of Bullseye! Hitting Your Strategic Targets Through High-Impact Measurement and the author of Reinventing Talent Management: How to Maximize Performance in the New Economy. For more information on Metrus Group, go to www.metrus.com