Consultant Claims His System Demonstrates Employee Engagement ROI in 10 Weeks
- A Focus on Measurable Outcomes
- The Model: Professional Services Fees Plus a Share of Results
- CEOs Lack a System With ROI for Employee Engagement
Smith’s specific approach, which like most consultants he will not share in detail, focuses on tapping the motivational power of involvement; i.e., creating a culture that makes every employee in the organization feel that they at any time can come up with an idea to cut costs, improve service, create a new product, highlight a risk, etc. with the absolute conviction that each idea will be seriously considered without regard to internal politics and to then see their ideas implemented nearly every day.
“I started the consulting business in 1991 originally serving CEOs as their interim CIO (chief information officer)," he says. "After many years of reengineering IT departments, it occurred to me that the most effective process we used to cut IT spending had far more to do with fixing the politics, culture and silos that were abusing the IT resource, as well as abusing the IT staff. I learned that success required a dual process: reduce spending on things that didn’t matter and protect the highly valuable staff from constant criticism. During one of these assignments, the company was attempting an IPO and couldn’t get their expenses aligned with the proposed offering price. They sent out an RFP to the big four consulting companies. Since I was there I asked if I could submit a simple letter explaining our process and what we expected to deliver: $35 million in cost savings in eight weeks. We got the deal and delivered exactly what we proposed using the same process we used to get control of IT spending.”
A Focus on Measurable OutcomesThis confirmed to Smith that the process had a broader application, and “we moved on to focus exclusively on engaging employees enterprise-wide to reduce costs by suspending the negative effects of politics, culture and silos to focus employees on making concrete suggestions to improve the organization. We provide the script for the CEO to deliver a single-question survey via video. The rules are that we collect all the suggestions and managers must review them within two days and announce the changes to employees. As the employees see things change that they never thought would change, they ramp up their suggestions.”
“So while we’re targeting costs, many other things that drive employees nuts are being addressed in two days as well, irrespective of whether costs are involved," Smith explains. "We never went back to the IT consulting once this approach started working.” He notes that he's paid based on the results, and says his largest projects generated fees in the low seven figures. "Seventy-five percent of our fees are based on the improvement employees deliver to the income statement...there are no invoices for expenses or consulting during the 10-week project.”
Smith won’t reveal all the details of the process, but he says the essential ingredient for success is total CEO support. “The methodology is our intellectual property, so I won’t go into great detail. We sell only to the CEO, and we become part of the project, reporting to the CEO and collecting all the data. The politics, silos and culture are suspended by the fact that if a member of leadership or management rejects a seemingly good idea, we escalate the debate, which could reach the CEO’s staff meeting. As you might guess, very few make it that far.”
The process, he reiterates, is completed in 10 weeks. “Hundreds of policies are killed or altered, and occasionally a corporate bully is sent home to the surprise and approval of the employees. HR is not involved whatsoever...actually, they're kept very busy with all the employee comments directed at HR.”
Pushed to provide more details, Smith explains: “It’s most accurate to state that we improve the company’s earnings through engaging employees, the most knowledgeable people in the company, by eliminating the obstructions in the culture, politics and silos. We do this by working directly for the CEO and receive all employee input to the one-question survey the CEO asks employees—communicated through all internal communications vehicles. Working with individuals throughout the company, each suggestion is vetted and, if found to be reasonable, it's given to the responsible manager for immediate execution. Refusals are then escalated and may eventually reach the CEO’s desk for final arbitration. Actions must be taken immediately.”
The more employees see action, Smith says, the more they contribute. "In one case, the company anticipated having to lay off three thousand people. Three weeks into the 10 weeks the CEO made a very big decision to eliminate an executive perk based on employee input. At that point we had eight hundred suggestions. After the CEO announced he was eliminating the perk, employee input soured to 4,700 suggestions in seven days. This points out the weakness in the current approaches of waiting weeks or months to announce changes driven by an employee engagement survey.”
The key motivator, Smith says, is that employees see that the system directly relates to change, even to the elimination of toxic management, and the element of politics is removed by focusing specifically on a non-political issue: ways to improve organizational results and the experience for all.
Smith explains that his plan does not include financial or tangible rewards for employees. "First, all the input is anonymous so rewarding specific suggestions, notwithstanding the financial value, is not possible. Secondly, what the company does with the savings is a company and sometimes a board decision. The engagement is a result of employees seeing their input acted upon. Killing or altering dumb policies, sending a bully home, acting on identified risks, both ethical and legal issues, improving benefits and more, all combine to reward employees. The example I used about the input soaring from 800 to 7,400 in seven days is the best indication that listening and taking action is a sufficient incentive. Employees like and appreciate seeing the ‘dumb’ things eliminated. We use the word dumb throughout our process because that’s what employees think about what’s going on. There are no studies that prove financial rewards serve to improve engagement and for twenty years we have seen employees respond with no financial incentives."
The Model: Professional Services Fees Plus a Share of ResultsSmith says his company’s sales presentations are short and simple. “We will decrease expenses by 10%, even if following an internal- or external-led cost reduction initiative. Employee morale will improve and employee engagement will be the source of all changes.” The key to success, he explains, is having the CEO sponsor the initiative. “I update the CEO staff meeting every week, giving progress reports and confronting roadblocks. The 10-week time constraint serves to get management action completed quickly. We add one or two client people to our team for the 10 weeks so the company becomes familiar with the process, and we leave all the rules and documentation behind so they can carry forward themselves.”
Smith notes he has worked with nine companies since he started focusing on cost reductions through employee engagement. “These have all been public companies that have had to decide whether to re-invest the savings or share with the investors. Because of the size of these transactions, the results are shared with the analysts and investors. They are open to reference checks.”
The employee engagement space, Smith believes, is mostly going down the wrong path. “All the companies that I'm aware of in the employee engagement space are doing the same thing," he says. "They sell to HR and offer little or no support for the CHRO, who has little impact on the politics, culture and silos. HR isn't positioned to deliver the results that impress employees; they can deliver only what they can sell to management. This helps explain why no studies have shown any appreciable results arising from HR-led employee engagement surveys. Considering the billions being spent, that’s really a shame.”
CEOs Lack a System With ROI for Employee EngagementSo why don’t more CEO’s understand the power of employee engagement? “There are two reasons," Smith claims. "One, there’s no proof anyone is improving business results through employee engagement or employee experience, and two, there’s no roadmap to follow. Every company has different issues and different politics, culture and silos to deal with, and most importantly, different CEOs. I cannot be convinced that ISO or another organization will solve the human nature challenge. There are simply not enough quality managers in any organization. Unlike quality, engagement can only be measured by its impact on performance. All other measurements, including Gallup’s Q12, are in fact subjective and of little value.”
Smith says the singular focus on daily performance and experience improvement without ambiguity has the combined benefit of providing clear financial and quality-of-work/life benefits using a process that's easily baked into the culture if led by the CEO. For another article about Smith’s approach, click here.
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For more information, contact Bruce Bolger at Bolger@TheEEA.org, 914-591-7600, ext. 230.