RUNNING THE EXTRA MILE

The importance of Employee Engagement.

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?[I recently had the opportunity to moderate a webinar on Employee Engagement hosted by?Tikehau Capital . Employee Engagement is a notion I have been paying attention to for years in my different leadership roles. Here are some notes and thoughts I took away from this webinar session.]

We have just travelled through a,?literally, extra-ordinary year due to the COVID pandemic which has impacted our lives. We can see in our nearby environment a sort of business fatigue which can probably be explained by stress due to the COVID context and changes in our ways of working. The COVID crisis definitely accelerated some transformation streams which had been in the air for a long time, like remote working, and we may consider this a positive change to some extent. At the same time we were all pushed into a new organization of work to which we were not prepared and the sudden disappearance of the ‘social’ dimension of work (being together in the office, having a coffee with colleagues at the coffee machine, etc.) has certainly caused some trouble.

On a longer perspective many businesses have been under the pressure of a deep transformation for quite some years, notably due to the digital revolution – and employees may feel a bit puzzled and some might have even lost the sense of where their company is heading at and the purpose of their own job.

All in all your employees may be a little less engaged these days. And you’d better take care of it.

?“No company can win without energized employees”

Jack Welch, the iconic former CEO of General Electric, once declared that “there are only three measurements that tell you nearly everything you need to know about your organization’s overall performance: Employee Engagement, Customer Satisfaction and Cash-Flow.” And to make the call even clearer he added that “no company [...] can win [...] without energized employees who believe in the mission and understand how to achieve it”.

E-N-G-A-G-E-M-E-N-T is the name of the game.

?What Is Employee Engagement ?

Employee engagement is an intricate notion. It is human, and like humans it’s complex and constantly evolving. It’s multi-faceted: it has to do with job content and the scope of responsibilities as well as compensation, recognition, work life/balance, alignment with purpose of the company, relationship with direct managers and trust into the leadership team, etc. It is composed of and may be influenced by hard elements as well as intangible, see emotional, factors.

Employee engagement represents the level of?connection?employees have with their organization.

Engaged employees may have a special?connection?with their company because of its purpose which makes them proud. That is the case for organizations whose business is about?making good?- like in the health and pharmaceutical sector or education – or those whose mission is about shaping a new sustainable model or inventing the future, often led by inspiring leaders (think about TESLA and Elon Musk, or Yvon Chouinard at PATAGONIA).

From a more?local?perspective, they may also have a special connection:

• to their manager who demonstrates respect, recognizes good work, offers development opportunities, pays attention to work/life balance;
• to their team where a good collaboration spirit exists and where colleagues help each other spontaneously;
• to their job (“I understand how my role contributes to the success of the company”, “my job allows me to make the most of my talents and to learn new things…).

At the end of the day, engaged employees work harder, stay longer, and motivate others to do the same. They?run the extra mile. And that makes a difference.

Employee engagement is not employee?happiness?(I am not quite sure what the new trend of appointing Chief Happiness Officers is about...). Your employees may look happy, with cheerful ‘hellos’ when they come in the morning, happily taking part in Thursday drinks (start-up culture...) and all social occasions. They may do their job well. But…?they may not go beyond what is expected from a ‘good’ employee.. Happy employees may not necessarily be engaged while engaged employees are definitely happier.

Employee engagement is not employee?satisfaction?either. Employees may be satisfied with their salary and benefits, with their working conditions. But… Satisfaction is essential but only one component of engagement. Satisfaction is about “being OK”, a sort of mood like “nothing to complain about, really...”. On the contrary, engaged employees will see this as “not just a job”.

Why Employee Engagement Is Important ?

In 2017, The Engagement Institute?released a study of 1,500 respondents showing that disengaged employees cost companies between $450 and $550 billion a year. Not quite sure how they did the maths, the amount is big enough though to make you think… The related cost is a combination of operational malfunctions and missed opportunities.

Common sense gives some clues: Unless you are in a fully-digitized business your employees are the first and often only touchpoint with your customers and the vectors of your brand DNA. And the energy put behind selling, etc.?is clearly dependent on staff morale and engagement. If they feel good and engaged, they will do their best to please clients and sell more.

In a?meta-analysis ?(from October 2020) of results from studies conducted on employee engagement and performance over the past there decades (covering over 2.7 million employees in 250+ organizations in 96 countries across 50+ sectors) Gallup found out that organizations in the top quartile on employee engagement significantly outperform these in the bottom quartile on various performance outcomes such as:

• 81% lower absenteeism
• 18% to 43% lower staff turnover depending on sectors
• 14 to 18% higher productivity (in production respectively sales)
• 41% fewer quality defects
• 10% higher customer loyalty
• Overall, 23% higher profitability

Each and every from the above items can be translated into business dollars which easily justifies investing in higher employee engagement.

Debunking a few myths about employee engagement

1/ Not just a post-Covid issue...

Obviously, the crisis we have been through in the past 18 months has impacted our morale. Not just in the professional world but also in our personal lives. As a consequence many people are questioning their lives and personal priorities, and we have seen people leaving their jobs and shifting to completely new challenges like opening a bed & breakfast in the countryside or becoming a school teacher. Your employees might also be questioning the purpose of their job and of being part of your company – and they need to be re-engaged into the journey. Hence my recommendation during this post-Covid period is to multiply the opportunities to communicate on the company’s vision, purpose and strategy, as well as multiply touchpoints with your employees to re-confirm the social pact with each and every of them. That said, in a business world where change is the new normal (accelerated by digital transformation, globalization and often shaken by mergers and acquisitions), the notion of engagement is constantly put to the test and will have to be treated with attention moving forward. Well beyond post-Covid effects.

2/ Not just about money...

Some managers still think you can keep people engaged by simply granting salary increases or cash bonuses, i.e. that you can?buy?engagement. Like giving a sea lion a fish to stimulate their motivation to do tricks...

Yet, people don’t feed their families with a noble brand purpose or with “kudos”. Compensation obviously plays a role when employees choose their place of work, but recognition, personal development, and a priority on work-life balance can be decisive factors between two positions with similar pay.

3/ Certainly not just an issue for HR...

Employee engagement is a critical business topic and both the local management (team manager, branch manager, etc.) and the top company leadership need to “walk the talk”. Employee engagement is an entire-organization issue, not simply a concern or KPI for the HR department.

Employee engagement is about sharing a vision or a purpose, it’s about trust in the future and more and more about cultural transformation of the workplace. So it is clearly a topic for CEOs and their ExCos. It is also very much about local and team management, where the employee sits on a day-to-day basis.

What Drives Employee Engagement

Employee engagement is individual and dynamic: It varies depending on the individual and it changes over the course of an employee's career at a workplace depending on multiple events and factors.

Employee engagement is the result of many factors - tangible and intangible:

• Leadership: A strong leader who shares an inspirational vision of the future and inspires trust is obviously a strong driver for employee engagement. That goes with a leadership style where the strategy is not only communicated but truly put in actions, where future plans are communicated as well as progress reports.
• Brand alignment: Employees are all the more engaged into their work than they feel aligned with the purpose and core values of their company. Company culture makes a difference. By culture I mean all the rules, practices and behaviours which frame the daily life at work: it is about respect, about the right to fail, about collaboration spirit (people helping each other), about inclusion and diversity (people will be all the more engaged as they feel respected and welcome at work whoever they are), etc.
• Meaningfullness: Kenneth Thomas, who has theorized “What Really Drives Employee Engagement”, points out that people/employees do need to do things that they feel are meaningful. Hence the importance of working for a company whose purpose is well understood and adopted as well as of having a clear connection between your tasks/job and that purpose. That is what Thomas sees as forming an?intrinsic motivation.
• ?Sense of choice. Again Thomas sees the sense of choice and autonomy has an important driver of engagement: I am free to organize my work; my boss leaves me autonomy as long as I reach my objectives; I have the right to make decisions; etc.
• ?Employee-Manager relationship: Gallup research shows that the manager or team leader alone accounts for 70% of the variance in employee engagement.
• ?Work environment: All elements that constitute the context of work contribute to being engaged or not: comfortable and friendly place of work; flexibility in working hours and possibility to work remotely from home; etc.
• ?Opportunities: An employee who sees opportunities for development within a company, either through training to acquire new competences or through a dynamic career development (either up to more senior levels or through jobs that all together will give them a broader spectrum of competences), will certainly be more loyal to the company. On the contrary, employees who believe there are no future opportunities for them in the company will be resigned and not much engaged.
• ?Reward & Recognition: Compensation, and more broadly, benefits and perks, often comes first in employee surveys whey they are asked about what really matters to them. And it is a common finding of employee surveys that the worst rating in terms of satisfaction is attributed to their compensation. To some extent that may be attributed to a form of “survey psychology”: If I say I am satisfied with my compensation then I will get no salary increase… However, even though employees may actually be less unsatisfied by their level of compensation than what survey results show, compensation remains an essential component of employee engagement. Because, referring to Maslow’s hierarchy of needs, compensation and financial security belong to the most basic and fundamental needs, i.e. safety needs, hence it is a critical foundation for employee engagement. A high compensation does not necessarily generate high engagement, however a compensation that is considered too low will create dissatisfaction and a form of insecurity that will clearly undermine, and possibly kill, any notion of engagement.?That is hygiene. Besides money, it is just as true that an employee is more likely to be engaged and act accordingly if he/she feels appreciated and recognised in his/her work. That does not imply € or $. It is rather a matter of attitude and company culture: it costs zero to say “thank you, I appreciate what you have done”; it doesn’t cost more to praise the merits of an employee publicly. Low cost, high impact. Recognition may also come from getting a high rating of achievement through annual evaluation. Generally speaking, any sign that the company acknowledges and recognizes the work done and engagement at work makes people feel better and shall encourage them to continue and even surpass. But… Again… Recognition has to go in pair with compensation at some point, otherwise public kudos may appear insincere if they are not followed by some more concrete translations (like salary increase, promotion, etc.).

?? “If you can’t measure it, you can’t improve it” (Peter Drucker)

How To Measure Engagement

Employee engagement is partly driven by intangible and emotional elements that can influence your views. And your perception may well be biased by the nearby environment, e.g. the mood and feedback from the few colleagues you speak with at the coffee machine. That is why it is important to put?data behind emotions?and to measure and track employee engagement drivers in a structured manner – and to do it in a comprehensive way across all offices, functions and employees (and not just from your close circle at the headquarters).

You can do it through surveying employees on a regular basis and asking them questions about their understanding and adoption of the company’s strategy and vision, about how they feel about being recognized and well remunerated, about work/life balance, etc. You can ask the same questions on a regular basis and monitor progress over time. With such employee engagement barometers you can identify the key drivers to employee engagement and areas to improve (e.g. you might detect that employees feel they are not well informed about the company’s strategy).

e-NPS, the Holy Grail ?

A lot of people refer to e-NPS as the Gold Standard of measuring employee engagement. eNPS stands for Employee Net Promote Score and is a tool inspired by the famous Net Promoter Score system developed by Bain & Co. to measure customer loyalty. This is a very useful tool: it is a good complement to your Customer Net Promoter Score; and also a super-synthetic indicator (nod to the religion of the “one-number score). The eNPS score will typically derive from the answers to a question relating to recommendation such as: “How likely is it that you would recommend your employer to a friend or acquaintance?” with a scale from 0 to 10 (Extremely Likely). Answers/Respondents will be classified between Promoters (those who give a score at 9 or 10), Passives (Scores 7 or 8) and Detractors (punching scores below 6), and the net score (eNPS) is calculated by subtracting the percentage of employees who are Detractors from the percentage who are Promoters (and ignoring Passives). For example, if 24% of your employees answer with a score at 9 or 10 (Promoters) and 36% put a score below 6 (Detractors) then your?net?score will be -12 (= 24-36). Depending on companies, eNPS may be tracked on a weekly/monthly/annual basis. The “one-question-only” approach makes it easy to run it digitally, people surveyed being able to answer with one thumb from their mobile phones!

Measuring this Employee Net Promoter Score and tracking it over time is certainly a good hygiene and a robust indication of the level of engagement. However, it does not inform on specific root causes for disengagement, hence does not help build an action plan to correct and improve. The eNPS measures the temperature but does not give indications on the “why”. That is why I would recommend a combination of regularly taking the pulse of engagement among employees with a quick eNPS survey (one question, one score) together with a more in-depth survey (barometer) with a more detailed questionnaire (30-40 questions) at regular intervals covering all engagement drivers:

• Company strategy & objectives, e.g. “I understand [my company]’s overall strategy”
• Confidence in the management, e.g. “I trust [my company]’s management to execute the strategy and be successful” or e.g. “My manager is leading me and my team in the right direction”
• Work organization, with questions like : “My place, my responsibilities and my missions are clearly defined” or?“I can organize my work in the way that suits me best”
• Contribution, Recognition & Compensation: “I feel useful in my work and in the development of the company “; “I find that my work is recognized for its fair value “; “I think I have a salary at least equal to what I could earn elsewhere in a comparable position “; etc.
• Working conditions: “The company allows me to reconcile work and private life”. For example, these days it is interesting to understand employee expectations or frustration with remote working.
• Development perspectives: “I can see myself working here for the next 2 years”; “My manager offers me concrete improvement actions (training, projects, other tasks, etc.) “; etc.
• Overall atmosphere : “I am fulfilled in my work”

It is also useful to provide space for free expression and complement the questionnaire with a few open-ended questions so that you can get spontaneous comments and suggestions. For example: ”What topics would like to have more information on??” or ”What would make you feel more recognised??”.

There are a lot of digital platforms providing solutions to run such engagement surveys with a great user experience and with the possibility to draft your own questionnaire (usually I would recommend?30 to 40 questions maximum, so more or less 5 to 10 minutes to complete). Results are available across employees with details per office, function, tenure, gender (if relevant), etc. At Tikehau we have successfully partnered with?Windoo ?in several occasions and I can confirm the ease of implementation (within a few days / couple of weeks) and relevance of their solutions.

And that goes without saying… anonymity is a?must. Employees will answer openly only if their feedback is kept anonymous.

Measuring is just the beginning

The simple fact you give employees an opportunity to express their feelings about their relationship to the company is already positive. However I would like to warn about two pitfalls:

• Do not treat this as a game with too many quick surveys every day/week or so on any type of topic in a “social media” way. Employees may get lost; and you will not be able to follow-up properly anyway. And frankly speaking I do not see much value in such ‘mood surveys’ like “How do you feel this morning ?”.
• ?The first survey will be well perceived by employees who appreciate you give them a voice, but if nothing happens afterwards then the experience will be disappointing and people will react negatively as they would expect their feedback and suggestions to turn into actions and improvements. It is obviously recommended to follow-up on the survey(s): first be transparent and communicate on findings of the survey; and use results to design an action plan to improve and raise engagement. Surveying employees is not the ultimate goal. That is all about caring, about understanding engagement level and drivers, and acting upon it.

Engage the “middle”

The results of your employee engagement survey will point out positive and less positive findings and shall segment your staff between engaged employees (the “promoters” from the eNPS approach), detractors and possibly a lot of employees “in the middle”. Not detractors, rather employees who are fine with their job and feel?somewhat?engaged. Pay attention to those “middle employees”. There is a high return to expect from turning this middle range to the high range as they will combine with the promoters and form a majority group of highly engaged people able to move the company at a higher speed and bring an?engagement culture?to life.

As a matter of conclusion I’d like to make three comments:

1/ Human capital is a critical asset.

Business books often pay attention to key stakeholders such as investors/shareholders and customers. Employees are as much important, if not more. Whatever your business is about, nothing great will happen unless you have the right teams in place with the right attitude. Back to Welch : “No company can win without energized employees”.

2/ Employee engagement is contagious.

If you are highly engaged in what you do, it is likely that people around you will pick it up and follow you. No matter if you are the CEO or a team manager or a teammate. Business leaders have a key role to play in inspiring, role-modelling and also creating stability in a time of change, on a day-to-day basis.

3/ Approach it as a business strategy.

Building a culture of engagement takes time and requires more than launching an annual employee survey and then leaving both?managers and employees on their own, hoping the former will eventually learn something from survey results that will change the way they manage, and that the latter will be satisfied only with this opportunity they have been given,?once, to express their feedback... It requires a plan and resources to build / protect / develop Human Capital as one of the key pillars of the business and value creation plan.

Jean-Michel Janoueix / September 2021