What is the relationship between employee engagement and business success?
The outdated view: organizations should focus only on productivity.
The enlightened view: organizations with engaged employees out-perform competitors.
Many companies - same approach
The strength of this relationship came into focus at a Fortune magazine leadership conference in New York City. After a day and a half of outstanding presentations by senior executives from many of the world’s most admired and highest performing organizations, our group of attendees came to a consensus.
The showcased companies had something in common - their approach to people. The description of industries and tactics were varied but as each presentation touched on how people were managed – it was as though they shared the same PowerPoint slides.
The shared approach centered around:
- Engaged employees serve customers and think up new ideas more effectively than disengaged employees.
- Engaged employees sell more to existing customers while attracting and keeping new customers. This raises sales and the firm’s financial valuation.
- Employee engagement should be tracked by periodic survey.
I bounced our observation off Geoff Colvin, Fortune’s amazing Senior Editor at Large, that in spite of being in some difficult industries (e.g. airline) the root of their success appeared to be their ability to focus and engage staff. He agreed and suggested that the ability to get more out of people might be the ultimate competitive advantage.
Three observations:
Engagement is a by-product
Craig Ramsey from Intuit presented, at the same conference, both their organization’s amazing emphasis on engagement and their detailed engagement tracking metrics. He stated that engagement remains high because senior management uses tracking results to guide ongoing mentoring activities. The CEO reviews the most current results before going to a location office, checking to see if site leaders need coaching on how to manage their team more effectively. Senior management maintains engagement by reinforcing among managers the actions which promote engagement (and ensuring only engagement-enhancing managers get promoted).
Engagement is about contribution
Engagement isn’t soft – it is about giving people a clear guide to allow them to gauge their own progress within their work. I mentioned this earlier in my blog about Teresa Amabile’s excellent Rotman Magazine article. Amabile found people were put off by insincere praise or other trivial schemes designed to entertain. Professionals believe their work has significance and deserves both consideration and objective oversight. We need to describe crucial work in bite-sized, daily steps so professionals can derive a sense of accomplishment as they contribute. Amabile also stresses that professionals need to perceive respect from management for both themselves as individuals and their contribution, which leads to the final observation.
Engagement is about observable respect
Pixar’s Oscar Winning Director Brad Bird is interviewed in an excellent McKinsey Quarterly article, by Robert Sutton and Hayagreeva Rao, both professors from Stanford, with Allen P. Webb, a McKinsey Quarterly editor. Brad’s comment about low and high morale should be memorized by every manager.
Please also note his comments about directors who restrict people’s input and ignore efforts to bring up problems (alas typical management behaviors). These are observable actions which powerfully influence morale (or engagement) but fall outside the influence of metric-centered management techniques. SMG’s method is specifically designed to bring accountability to observable actions like these.
Here are Brad’s comments on morale and the associated ROI of morale from this article, but leaders should read the entire text to glean other insights. For example, how Pixar hired Brad to stir things up and keep them off-balance, even though Pixar had been wildly successful in every venture and Brad had failed in his previous movie.
“In my experience, the thing that has the most significant impact on a movie’s budget—but never shows up in a budget—is morale. If you have low morale, for every $1 you spend, you get about 25 cents of value. If you have high morale, for every $1 you spend, you get about $3 of value. Companies should pay much more attention to morale.
Before I got the chance to make films myself, I worked on a number of badly run productions and learned how not to make a film. I saw directors systematically restricting people’s input and ignoring any effort to bring up problems. As a result, people didn’t feel invested in their work, and their productivity went down. As their productivity fell, the number of hours of overtime would increase, and the film became a money pit.”
Comments