December 14, 2009: Business Intelligence, Human Resource Musings
by Chris Sands
Yesterday I read the MacLeod review on employee engagement, ‘Engaging for Success’ . It bought to mind my experience as a Sunday footballer. Much of the time I played in teams who were at the bottom or close to the bottom of the league. Getting out of bed on a Sunday morning was miserable. The pitches were always too wet or too hard. The knocks always hurt. And what has this got to do with David MacLeod and Nita Clarke’s report? Well, it reminded me that when I played in a team that did very well, funnily enough getting out of bed was easy, the pitches were great and it was easy to shrug off bumps and bruises. Under all the criteria of engagement I would say that I was much more engaged when we were winning.
Did we win because we were more engaged, or did our winning make us more engaged? I think that this lies at the heart of a lot of the frustration that HR professionals currently feel. They see Rolls Royce companies such as Diageo, Astra Zeneca and, oh, Rolls Royce being held up as shining lights that have ‘got’ this engagement thing. They see the ‘compelling’ evidence that those companies that were in the top engagement quartile were 12% more profitable and 18% more productive and had earnings per share 2.6 the level of those below the 50th percentile. So why is the Board not falling over themselves to adopt an engagement strategy? It boils down, in my mind , to whether you are seeing the cause or the effect? Believe me, in a lot of the teams I played in no matter how engaged we were, we would still have been rubbish.
So let’s get back to first principles. Peter Druker, whose centenary it is this year, said that a business is “defined by the want the customer satisfies when he or she buys a product or a service. To satisfy the customer is the mission and purpose of every business”. When customers stop wanting horse drawn buggies or gas lamps or video players, no matter how good we are at it and how engaged our staff are we will be out of business. To achieve the function of a business we assemble people, land and capital and we do this in the best possible way to deliver to those customers.
Having said all of this, let me be clear, engagement is important, but not as an abstract concept. Here HR professionals have to work with their colleagues in other functional areas such as sales and marketing and production. If your organisation wants to be more innovative because this will better serve your customers with the products and services that they need then we can use engagement measures as part of the executive dashboard. There is a narrative that the executive team will understand and which can be tested. Let us say that our customers want new products at lower prices but with higher quality. We can measure all of these things. How many new products we release, whether they are variations or whether they are standalone new products. What price points we are able to achieve and what are the levels of quality. And so on.
Now measure engagement. Don’t over do the measurements at first. Why not start with the question that Dr Jim Hartner of Gallup and Dr Frank Schmidt of the University of Iowa found to have the most effective correlation to performance, “At work, do you have an opportunity to do what you do best everyday?” Then drill into the data. Is there a correlation between areas of high engagement and the outputs that the organisation wishes to achieve? If there is, then get to understand that specific area better. Is there a causation? What is driving that difference? Is it better and more appropriate leadership? Or do the people there have a better understanding of what they are supposed to be doing, or have better information or understand how they fit into the overall scheme of things?
Then, put a value on it. Marcus Buckingham in his white paper ‘The Strengths Engagement Track: A Benchmark Study of Sixty-Five High Performing Teams‘ gives the fascinating example of a US Retail giant with 3,000 stores that plotted store profit against a geographic economic potential measure and was able to highlight one store trading at a profit of $1,500,000 and one trading at a loss of $300,000 with the same economic potential, the same products and the same marketing. What would this mean to the executive? Well $1,800,000.
Now that should get HR some air time!