Why Many Leaders Don't Understand That Employee Engagement Drives Revenue Growth

This article originally appeared in Forbes.

It’s a three-part “chicken or egg” question: which stakeholder group should leaders focus on first: customers, employees or investors?

Last month, I listened to two accomplished CEOs make a compelling case that employee engagement comes first. Both spoke to Marshall Goldsmith’s 100 Coaches program, of which I am a member.

First up was Garry Ridge, CEO of WD-40, who believes that in the long run, values are the most critical element in his firm's success. To give you a further hint how he feels, Ridge doesn't use the term "manager." At WD-40, these folks are called coaches.

Ridge drew a series of three increasingly larger circles. In the center is “why”; this is all about communicating purpose to employees. Then, he wrote “how”; at WD-40, this translates to creating “positive lasting memories.” Finally, is “what”; this is their mission.

He told us all this because Ridge believes that if you focus on employee engagement, employees will take care of everything else. They will produce the energy, drive, and solutions necessary to delight customers and keep investors happy.

Alan Mulally agrees. He ran both Boeing Commercial Aircraft and became CEO of Ford in 2008 when the company was just months away from running out of cash. If there was ever a time to focus only on finances, you could certainly argue this was it.

But in the three hours Mulally spent talking to us, his tenure at Ford turned out to be more than a predominant focus on the financials. Instead, he described his "Our Working Together Management System." Mulally focused on the ways that Ford employees worked together and described himself as steward of those values and behaviors, rather than as the guy who was supposed to have all the solutions.

He says many things that other leaders say—people first, everyone is included, positive attitude—but unlike most leaders, Mulally relentlessly focuses his energies on protecting these behaviors.

He does not believe that it is a leader's role to have the solution to every problem, but rather to find the folks who know how to solve a problem, which is often someone "five levels down."

During Mulally’s tenure, employee engagement skyrocketed. While proud of the manner in which his team transformed Ford’s product lineup and financial results, he spent the most time talking about ways in which his system empowered employees to identify problems and solve them, instead of hiding them, as Ford used to do.

Mulally’s approach empowers others. Instead of trying to be the smartest person in the room, or asking his executives to be the smartest people, he tirelessly fosters and protects a system in which the person who can solve a problem is the one the system identifies.

If you want to understand how different Mulally is from most leaders, during his weekly Business Plan Review meetings, he said the same thing every time an executive revealed a problem.

“Thank you.”

Mulally explained that only when you identify a problem can you begin to solve it. Contrast this approach with bite-your-head-off CEOs who scream, “Don’t bring me problems! Only solutions!”

We engaged both Ridge and Mulally in a robust discussion around why more leaders don't focus on employee engagement in a meaningful manner. No one in the room of quite a few accomplished people had a compelling answer; it seems illogical to do otherwise.

Listening to these two leaders, it seems so obvious that if you engage your employees, your employees will do the rest. But there is a price to instituting such a process, and many leaders seem unwilling to pay it.

Both Ridge and Mulally function as stewards of the system they have built. Instead of being driven by ego and trying to be the smartest person in the room, they protect the behaviors they wish to foster, such as transparency and respect. Doing so takes discipline and grit: a long-term focus on bringing out the best in others, instead of merely showcasing “your” best.

David Nour is the author of ten books including the best-selling Relationship Economics, which makes the case that relationships are the greatest off-balance sheet asset any organization can possess. His new book is Co-Create: How Your Business Will Profit from Innovative and Strategic Collaboration. He is a trusted advisor to many leading companies, a global speaker, member of the Marshall Goldsmith #MG100 global executive coaches, venture partner at EGL Holdings, and an adjunct professor at Emory University’s Goizueta Business School in Atlanta, GA.