December 16, 2009: Wall Street Journal (Gary Hamel's Management 2.0)
by Gary Hamel
How would you feel about a physician who killed more patients than he helped? What about a police detective who committed more murders than he solved? Or a teacher whose students were more likely to get dumber than smarter as the school year progressed? And what if you discovered that these perverse outcomes were more the rule than the exception—that they were characteristic of most doctors, policemen and professors? You’d be more than perplexed. You’d be incensed, outraged. You’d demand that something must be done!
Given this, why are we complacent when confronted with data that suggest most managers are more likely to douse the flames of employee enthusiasm than fan them, and are more likely to frustrate extraordinary accomplishment than to foster it?
Consider the recent “Global Workforce Survey” conducted by Towers Perrin, an HR consultancy. In an attempt to measure the extent of employee engagement around the world, the company polled more than 90,000 workers in 18 countries. The survey covered many of the key factors that determine workplace engagement, including: the ability to participate in decision-making, the encouragement given for innovative thinking, the availability of skill-enhancing job assignments and the interest shown by senior executives in employee well-being.
Here’s what the researchers discovered: barely one-fifth (21%) of employees are truly engaged in their work, in the sense that they would “go the extra mile” for their employer. Nearly four out of ten (38%) are mostly or entirely disengaged, while the rest are in the tepid middle. There’s no way to sugarcoat it—this data represents a stinging indictment of the legacy management practices found in most companies.
So why aren’t we scandalized by this data? I talk to thousands of managers each year and for most of them, employee engagement isn’t Topic A, or B or even C. How do we account for this heedlessness? There are several possible hypotheses:
1. Ignorance: It may be that managers don’t actually realize that most of their employees are emotional zombies—at least while they’re at work. Maybe corporate leaders haven’t seen the many studies that mirror the results of the Towers Perrin survey. Or maybe their allotment of emotional intelligence is so meager that they are unable to distinguish between enthusiasm and ennui.
2. Indifference: Another explanation: managers know that a lot of employees are flatlining at work, but maybe they simply don’t care—either because a callous corporate culture has drained them of empathy, or because they view engagement as financially unimportant—a nice-to-have, but not a business imperative.
3. Impotence: It could be that managers do care, but can’t imagine how they could change things for the better. After all, a lot of jobs are just plain boring. Retail clerks, factory workers, call center staff, administrative assistants—of course these folks are disengaged. Given that, the data’s hardly surprising. After all, prison wardens aren’t surprised that their charges aren’t bubbling with joi d’vivre, and neither are managers.
Let’s evaluate these hypotheses. The first seems to me unlikely. Anybody who has ever read a Dilbert strip knows that cynicism and passivity are endemic in large organizations. Only an ostrich could have missed this.
The second hypothesis has more to recommend it. I believe there are many managers who have yet to grasp the essential connection between engagement and financial success. Companies that score highly on engagement have better earnings growth and fatter margins than those that do not—a fact borne out by another Towers Perrin study, as well as by the work of Professor Raj Sisodia of Bentley College. This correlation between enjoyment and profitability is likely to strengthen in the years ahead. Let me use the example of the Apple iPhone to explain why.
Think about it: how did Apple manage to jump into the mobile phone business so quickly, despite a complete lack of industry experience? The answer: by accessing a lot of commodity knowledge that was available in the form of standardized components from third party suppliers. While this helps to explain how Apple got into the business so speedily, it doesn’t explain why the iPhone has succeeded so spectacularly. Consider this: in the third quarter of 2009, Apple’s iPhone division delivered $1.6 billion in profits, while Nokia earned just $1.1 billion. What make’s these figures eye-popping is that Nokia’s global handset market share hovers around 35% while Apple’s is less than 3%, this according to TechCrunch.
The lesson here: you don’t have to be the biggest to be the most profitable—but you have to be the most highly differentiated. Apple made the iPhone a money machine by injecting it with a lot of non-commodity knowledge. When it debuted in June 2007, the iPhone offered users a unique portfolio of functions: a touch screen display, a built-in music player, a capable web browser, and a suite of useful applications that let users check the weather, track their stocks and watch YouTube videos.
The fact that Apple’s margins are so much better than Nokia’s reflects a simple reality: in making a mobile phone, Apple adds a lot more differentiation to the standard componentry than Nokia does, and Apple adds it in a highly efficient manner. Or to state it another way, among all the various players in the iPhone value chain, Apple has, by far, the highest ratio of differentiation-to-cost, and thus the fattest margins.
In a world of commoditized knowledge, the returns go to the companies who can produce non-standard knowledge. Success here is measured by profit per employee, adjusted for capital intensity. Apple’s profit per head is significantly higher than its major competitors, as is the company’s ratio of profits to net fixed assets.
It doesn’t matter much where your company sits in its industry ecosystem, nor how vertically or horizontally integrated it is—what matters is its relative “share of customer value” in the final product or solution, and its cost of producing that value. The greater the share of differentiation, the greater the bargaining power with business partners. Likewise, the lower the cost to produce that value, the bigger the profits.
Of course, Apple isn’t immune to the forces of commoditization. Within a few months of its launch, many of the iPhone’s original features had been duplicated by its competitors. So Apple had to innovate again. It invited third-party developers to write applications for the iPhone and thereby laid the groundwork for a revolution in portable computing (100,000 apps so far, and still counting). But once again, competitors like Blackberry and Google are in hot pursuit.
So what does all this have to do with engagement? Just this: in a world where customers wake up every morning asking, “what’s new, what’s different and what’s amazing?” success depends on a company’s ability to unleash the initiative, imagination and passion of employees at all levels—and this can only happen if all those folks are connected heart and soul with their work, their company and its mission.
Let me break it down:
– In every industry, there are huge swathes of critical knowledge that have been commoditized—and what hasn’t yet been commoditized soon will be.
– Given that, we have to wave goodbye to the “knowledge economy” and say hello to the “creative economy.”
– What matters today is how fast a company can generate new insights and build new knowledge—of the sort that enhances customer value.
– To escape the curse of commoditization, a company has to be a game-changer, and that requires employees who are proactive, inventive and zealous.
– Problem is, you can’t command people to be enthusiastic, creative and passionate.
– These critical ingredients for success in the creative economy are gifts that people will bring to work each day only if they’re truly engaged. (Eric Raymond made this point way back in 2001 when he argued that in the new economy, “enjoyment predicts productivity.”)
Today, no leader can afford to be indifferent to the challenge of engaging employees in the work of creating the future. Engagement may have been optional in the past, but it’s pretty much the whole game today.
What about the third hypothesis? Sure, (some of you are saying), engagement is important, but let’s not kid ourselves—it’s easy to see how Apple’s super-smart engineers and designers might get excited about creating mind-blowing products, but my company is way more prosaic and a lot of the work around here really is mind-numbing. It’s not that I don’t care about engagement, but I can’t make a silk purse out of a sow’s ear. The reason so few of my people are truly engaged in their work is because so few their jobs are truly inspiring. Isn’t that what the data are telling us?
Uhmm, no. Surprisingly, 86% of the employees in the Towers Perrin study said they loved or liked their job. So what, then, are the culprits? Julie Gebauer, who heads up the Workforce Effectiveness Practice at Towers Perrin, points to three things that are critical to engagement: first, the scope employees have to learn and advance—are there opportunities for them to grow; second, the company’s reputation and its commitment to making a difference in the world—is this a company that deserves the best efforts of its people; and third, the behaviors and values of the organization’s leaders—are they people employees respect and want to follow?
These are all management issues. It is managers who empower individuals and create space for them to excel—or not. It is managers who help to articulate a compelling and socially relevant vision and then passionately pursue it—or not. It is managers who demonstrate praiseworthy values—or not. And more often than not, they don’t. Here, again, the survey data is disturbing.
Only 38% of employees believe that “senior management [is] sincerely interested in employee wellbeing.” Fewer than 4 in 10 agree that “senior management communicates openly and honestly.” A scant 40% of employees believe that “senior management communicates [the] reasons for business decisions,” while just 44% believe that “senior management tries to be visible and accessible.” Perhaps most damning of all, less than half of those polled believe that “senior management’s decisions [are] consistent with our values.”
My conclusion from all of this: first, engagement is essential to the competitiveness of every company and every economy—and we need to be doing a whole lot better than we are. We’ve got to get management’s dirty little secret out of the HR closet and into the boardroom. And second, if we’re going to improve engagement, we have to start by admitting that the real problem isn’t irksome, monotonous work, but stony-hearted, spirit-deflating managers.
If you’d like to DO something about this sorry state of affairs, may I recommend you start by picking up two mind-expanding books? The first, “Closing the Engagement Gap,” is co-authored by Julie Gebauer and contains a wealth of provocative insights and practical recommendations based in part on the findings of the Global Workforce Survey. The second, “Total Engagement,” by Byron Reeves and Leighton Reed, offers a radical prescription for taking the work out work, by making it more like play.
Thursday, December 31, 2009
Wednesday, December 30, 2009
Boosting Employee Engagement With Multimedia Storytelling: Jim Haudan Interview
December 15, 2009: DirectorTom.com
by Thomas R. Clifford
As soon as I had this book in my hands, I knew I had to interview Jim Hauden!
“The Art of Engagement: Bridging the Gap Between People and Possibilities” is not only an engaging piece of work, it’s practical, relevant and compelling. And the real kicker? Jim is a big proponent of visual storytelling.
It doesn't matter what position you hold, what title you have or how long you've been with your organization. If you're wondering how to inspire and connect people to their work and to your organization's "big picture," consider this book your survival manual. Get it. Read it. Use it. Repeat.
Thanks, Jim, for sharing your time and insights with us here. I hope your book and this interview inspires everyone reading this as much as it has inspired me!
Lately, we’re hearing a lot of talk about employee engagement. What is it, really, and why does should anyone care?
“Engagement” has become a somewhat dangerous word in the workplace. Some people think “engagement” is a recycled version of “people are happy here, and we know this because our employee satisfaction scores are high.” But that’s a far cry from true strategic engagement, where people are fully mobilized to bring something to life that doesn’t yet exist.
Strategic engagement requires three things:
1. The ability to think in systems,
2. Being connected to the strategy in the way that’s most relevant to you, and
3. The knowledge that allows you to take actions make a difference
First, engagement absolutely requires the ability to think in systems. Many of the most important things in our lives are systems. It’s critical to see how everything fits together. Then, it’s just as important to see how your own work fits into the whole and how you contribute to the business – how you make a real difference. This knowledge makes you think and act in very different ways. How all this happens is astutely connected to the way people want to be engaged. It requires tapping into their curiosity, helping them feel comfortable and safe in saying what they think, and allowing them to take part in solving the puzzles of the business.
Why do employees become disengaged at work? What are some of the main forces behind it?
Disengagement happens when people see themselves as separate, as doing work that isn’t connected to the success of the business and to what their co-workers are doing. Engagement is defined in ways that are relevant not to the leader, but to the follower. Bigger than all that, disengagement is a result of people not believing that they’re part of the future, that they don’t make enough of a difference. It’s those internal voices that tell us that we’re not really as good as we think we are, that keep us from seeing our place in the system or how we contribute.
Engagement and money. Is there really a connection?
We can cite productivity statistics, satisfaction statistics, and engagement statistics. They all point to the same conclusion – when we tap into the heads, hearts, and hands of our people, we get better results. Better said, we need to access the dormant human potential of all the people in our organizations. Leaders need to help people to bring out the best versions of their people so they can mobilize around the strategy that we are trying to bring to life for the future.
You’re a big advocate of using stories to ignite conversation and move people into action. How can organizations harness the power of multi-media to help employees feel and act more connected to their work and the organization’s mission?
A number of companies are starting to see the difference between using multi-media to “tell and sell” and using it to create insight and to model examples of success. One company calls their examples “proof points” of what behavior looks like when it is in concert with a new strategy. Multi-media can be a powerful way to answer one of the most profound questions that people rarely ask regarding strategy: “What does it look like?” As long as people are concerned that what they think it should look like might be different from what leaders are picturing, they’ll sit back and wait for others to go first. But if leaders can vividly create insight through multi-media in terms of what it looks like when strategy is being executed, we can start to close that gap. We begin to reduce the apprehension that people feel when it comes to taking the risk to bring new strategies to life.
Having engaged employees is only half of the equation. Strategy execution is the other half. How can video or audio stories help leadership execute their vision and strategies so everyone on board “gets it?”
Engagement without purpose is, well, purposeless. It’s like teamwork without a challenge. If you’re pursuing engagement for engagement’s sake, it’s a waste of time. But if you see a challenge that needs to be brought to life, and know that people are the ones who are asked to bring it to life, engagement is the mechanism, and strategy is the target for that engagement.
What would you say to those who think multi-media stories can’t a make a difference in their engagement efforts?
I’d say, “Rethink your assumptions.” Multi-media doesn’t have to be glitzy and aggressive. It can’t be just a show-and-tell in an attempt to persuade people to become motivated and inspired. That’s a total fallacy because people ultimately inspire themselves. As leaders, we create the opportunity for people to be inspired on their own by inviting them to think about the business and their role in it.
Here’s an example. Hampton, one of our hotel clients, is working mightily to redefine the role of a general manager. There are a lot of ways to use multi-media to simply tell people what leadership thinks they need to do to succeed in that new role. However, a better use of multi-media is to create a story that is documented from the associate perspective, the customer’s perspective, and the community perspective. This is the way to show the impact that a general manager has on people’s lives when they lead with excellence. They can figure out the “how’s” on their own.
From your perspective, what’s the biggest mistake people make?
When it’s time to engage their organizations in strategy, leaders can forget what it’s like “not to know.” They may have been working on strategy for six months, and may have become bored by content that hasn’t yet been fully understood by their people! Henry Ford once asked his marketing department, “When are we going to stop running that ad?” The response was, “Sir, we haven’t released it yet.” There is a gap between what’s new to one group and what’s old to another group, and that gap tends to create incorrect assumptions.
Any advice for organizations thinking about integrating storytelling in their engagement strategies?
The key is to make storytelling part of your entire culture. The most successful organizations create the opportunity for people to tell stories that illustrate, reinforce, and personalize the behaviors that are most critical to future success. For instance, if your strategy includes extraordinary customer intimacy, open meetings by telling stories about examples that have occurred in your own life that can be translated into your business strategy. Another example could be risk-taking, ways of providing innovative ways to think about products, services, and processes. Ask people to place a spotlight on this aspect of your strategy by telling stories. Use experiences that people have every day to challenge the way we are executing our strategy.
Jim Haudan's bio:
For the past 20 years, Jim Haudan has not only built a thriving business, but has helped numerous individuals unleash their hidden potential. With origins as a coach and school administrator, its easy to see what led him to co-found a company dedicated to business learning. His innovative, creative methods draw people into a business by tapping into basic human curiosity and intelligence. By fully engaging people in their work, they become ready, willing and able to deliver on company strategies, producing real results. Root Learning has made the list of the Best Small and Medium Companies to work for in America for five straight years and was recently recognized by the Wall Street Journal and Winning Workplaces as one of the top small employers with exceptional workplaces. Obviously, Mr. Haudan is on to something.
by Thomas R. Clifford
As soon as I had this book in my hands, I knew I had to interview Jim Hauden!
“The Art of Engagement: Bridging the Gap Between People and Possibilities” is not only an engaging piece of work, it’s practical, relevant and compelling. And the real kicker? Jim is a big proponent of visual storytelling.
It doesn't matter what position you hold, what title you have or how long you've been with your organization. If you're wondering how to inspire and connect people to their work and to your organization's "big picture," consider this book your survival manual. Get it. Read it. Use it. Repeat.
Thanks, Jim, for sharing your time and insights with us here. I hope your book and this interview inspires everyone reading this as much as it has inspired me!
Lately, we’re hearing a lot of talk about employee engagement. What is it, really, and why does should anyone care?
“Engagement” has become a somewhat dangerous word in the workplace. Some people think “engagement” is a recycled version of “people are happy here, and we know this because our employee satisfaction scores are high.” But that’s a far cry from true strategic engagement, where people are fully mobilized to bring something to life that doesn’t yet exist.
Strategic engagement requires three things:
1. The ability to think in systems,
2. Being connected to the strategy in the way that’s most relevant to you, and
3. The knowledge that allows you to take actions make a difference
First, engagement absolutely requires the ability to think in systems. Many of the most important things in our lives are systems. It’s critical to see how everything fits together. Then, it’s just as important to see how your own work fits into the whole and how you contribute to the business – how you make a real difference. This knowledge makes you think and act in very different ways. How all this happens is astutely connected to the way people want to be engaged. It requires tapping into their curiosity, helping them feel comfortable and safe in saying what they think, and allowing them to take part in solving the puzzles of the business.
Why do employees become disengaged at work? What are some of the main forces behind it?
Disengagement happens when people see themselves as separate, as doing work that isn’t connected to the success of the business and to what their co-workers are doing. Engagement is defined in ways that are relevant not to the leader, but to the follower. Bigger than all that, disengagement is a result of people not believing that they’re part of the future, that they don’t make enough of a difference. It’s those internal voices that tell us that we’re not really as good as we think we are, that keep us from seeing our place in the system or how we contribute.
Engagement and money. Is there really a connection?
We can cite productivity statistics, satisfaction statistics, and engagement statistics. They all point to the same conclusion – when we tap into the heads, hearts, and hands of our people, we get better results. Better said, we need to access the dormant human potential of all the people in our organizations. Leaders need to help people to bring out the best versions of their people so they can mobilize around the strategy that we are trying to bring to life for the future.
You’re a big advocate of using stories to ignite conversation and move people into action. How can organizations harness the power of multi-media to help employees feel and act more connected to their work and the organization’s mission?
A number of companies are starting to see the difference between using multi-media to “tell and sell” and using it to create insight and to model examples of success. One company calls their examples “proof points” of what behavior looks like when it is in concert with a new strategy. Multi-media can be a powerful way to answer one of the most profound questions that people rarely ask regarding strategy: “What does it look like?” As long as people are concerned that what they think it should look like might be different from what leaders are picturing, they’ll sit back and wait for others to go first. But if leaders can vividly create insight through multi-media in terms of what it looks like when strategy is being executed, we can start to close that gap. We begin to reduce the apprehension that people feel when it comes to taking the risk to bring new strategies to life.
Having engaged employees is only half of the equation. Strategy execution is the other half. How can video or audio stories help leadership execute their vision and strategies so everyone on board “gets it?”
Engagement without purpose is, well, purposeless. It’s like teamwork without a challenge. If you’re pursuing engagement for engagement’s sake, it’s a waste of time. But if you see a challenge that needs to be brought to life, and know that people are the ones who are asked to bring it to life, engagement is the mechanism, and strategy is the target for that engagement.
What would you say to those who think multi-media stories can’t a make a difference in their engagement efforts?
I’d say, “Rethink your assumptions.” Multi-media doesn’t have to be glitzy and aggressive. It can’t be just a show-and-tell in an attempt to persuade people to become motivated and inspired. That’s a total fallacy because people ultimately inspire themselves. As leaders, we create the opportunity for people to be inspired on their own by inviting them to think about the business and their role in it.
Here’s an example. Hampton, one of our hotel clients, is working mightily to redefine the role of a general manager. There are a lot of ways to use multi-media to simply tell people what leadership thinks they need to do to succeed in that new role. However, a better use of multi-media is to create a story that is documented from the associate perspective, the customer’s perspective, and the community perspective. This is the way to show the impact that a general manager has on people’s lives when they lead with excellence. They can figure out the “how’s” on their own.
From your perspective, what’s the biggest mistake people make?
When it’s time to engage their organizations in strategy, leaders can forget what it’s like “not to know.” They may have been working on strategy for six months, and may have become bored by content that hasn’t yet been fully understood by their people! Henry Ford once asked his marketing department, “When are we going to stop running that ad?” The response was, “Sir, we haven’t released it yet.” There is a gap between what’s new to one group and what’s old to another group, and that gap tends to create incorrect assumptions.
Any advice for organizations thinking about integrating storytelling in their engagement strategies?
The key is to make storytelling part of your entire culture. The most successful organizations create the opportunity for people to tell stories that illustrate, reinforce, and personalize the behaviors that are most critical to future success. For instance, if your strategy includes extraordinary customer intimacy, open meetings by telling stories about examples that have occurred in your own life that can be translated into your business strategy. Another example could be risk-taking, ways of providing innovative ways to think about products, services, and processes. Ask people to place a spotlight on this aspect of your strategy by telling stories. Use experiences that people have every day to challenge the way we are executing our strategy.
Jim Haudan's bio:
For the past 20 years, Jim Haudan has not only built a thriving business, but has helped numerous individuals unleash their hidden potential. With origins as a coach and school administrator, its easy to see what led him to co-found a company dedicated to business learning. His innovative, creative methods draw people into a business by tapping into basic human curiosity and intelligence. By fully engaging people in their work, they become ready, willing and able to deliver on company strategies, producing real results. Root Learning has made the list of the Best Small and Medium Companies to work for in America for five straight years and was recently recognized by the Wall Street Journal and Winning Workplaces as one of the top small employers with exceptional workplaces. Obviously, Mr. Haudan is on to something.
Tuesday, December 29, 2009
Lack of Employee Engagement Hurts Business Performance
December 21, 2009: IT Business Edge
by Ann All
Companies are coming off a rough 18 months. So it's time to regroup, realign business objectives in light of the economic conditions and communicate them to employees. Yet that last step might be suffering, based on research conducted by the UK's Department for Business, Innovation and Skills (Bis).
According to a YouGov survey of more than 2,100 working people, just 24 percent said their employer had clearly articulated its 2010 objectives to the work force. Thirty-two percent doubted there was a plan for their business. Perhaps not surprisingly, only 27 per cent of respondents said they were fully prepared for challenges they would face at work in the coming year.
This lack of communication could be especially worrisome for IT, which as I wrote last week faces a double whammy of low staff levels and heightened corporate expectations. While there's a lot of talk about "employee engagement," it's tough for managers to rally the troops if they're feeling uncertain themselves. Nonetheless, it's important to do so. Poor employee engagement "can put the brakes on improved business performance," said David MacLeod, adviser to Bis and co-author of a report titled "Engaging for Success." He said:
MacLeod said engaging with staff goes beyond the warm and fuzzy and yields financial beneifts. If employee engagement levels rise by 10 percent, companies can increase profits by up to £1,500 (US $2,400) per employee per year.
Need more proof? Researchers who wrote a paper soon to be published in the Strategic Management Journal correlated sales growth with an organizational culture in which employees had higher opinions of their company than did society at large. They saw a 9 percent drop in sales over a year at 28 companies where employees thought far less of their company than customers did. Conversely, sales rose 7.46 percent for the companies whose employees liked it much more than consumers did.
Notice MacLeod's mention of "clear goals?" That meshes well with what Brad Hall, managing director of Human Capital Systems and author of "The New Human Capital Strategy," told me when I interviewed him in October. He suggested coming up with specific goals for each role in an organization -- all of which should be tied to larger corporate goals, of course. Then tie employee training, performance appraisals and incentives to those goals. In that same post, I offered advice from Globoforce CEO Eric Mosley, who said giving employees rewards keyed to corporate values can help improve overall company morale.
by Ann All
Companies are coming off a rough 18 months. So it's time to regroup, realign business objectives in light of the economic conditions and communicate them to employees. Yet that last step might be suffering, based on research conducted by the UK's Department for Business, Innovation and Skills (Bis).
According to a YouGov survey of more than 2,100 working people, just 24 percent said their employer had clearly articulated its 2010 objectives to the work force. Thirty-two percent doubted there was a plan for their business. Perhaps not surprisingly, only 27 per cent of respondents said they were fully prepared for challenges they would face at work in the coming year.
This lack of communication could be especially worrisome for IT, which as I wrote last week faces a double whammy of low staff levels and heightened corporate expectations. While there's a lot of talk about "employee engagement," it's tough for managers to rally the troops if they're feeling uncertain themselves. Nonetheless, it's important to do so. Poor employee engagement "can put the brakes on improved business performance," said David MacLeod, adviser to Bis and co-author of a report titled "Engaging for Success." He said:
If leaders don't explain where the business is going and what it's seeking to achieve, how can people be motivated or know what they're meant to contribute? Clear goals are a key ingredient for achieving performance and productivity -- but worryingly this research suggests many employers haven't yet grasped this for 2010.
MacLeod said engaging with staff goes beyond the warm and fuzzy and yields financial beneifts. If employee engagement levels rise by 10 percent, companies can increase profits by up to £1,500 (US $2,400) per employee per year.
Need more proof? Researchers who wrote a paper soon to be published in the Strategic Management Journal correlated sales growth with an organizational culture in which employees had higher opinions of their company than did society at large. They saw a 9 percent drop in sales over a year at 28 companies where employees thought far less of their company than customers did. Conversely, sales rose 7.46 percent for the companies whose employees liked it much more than consumers did.
Notice MacLeod's mention of "clear goals?" That meshes well with what Brad Hall, managing director of Human Capital Systems and author of "The New Human Capital Strategy," told me when I interviewed him in October. He suggested coming up with specific goals for each role in an organization -- all of which should be tied to larger corporate goals, of course. Then tie employee training, performance appraisals and incentives to those goals. In that same post, I offered advice from Globoforce CEO Eric Mosley, who said giving employees rewards keyed to corporate values can help improve overall company morale.
Monday, December 28, 2009
Disengaged Workers Cost Billions: Economics Of Engagement Subject Of Study
by Faye Beauchine
December 21, 2009: Travel Procurement
Good managers know intuitively that engaged employees are good for business. To support that precept, the Enterprise Engagement Alliance has gathered an impressive body of research that squarely aligns employee engagement with business results.
In a recent white paper, The Economics of Engagement, independent research from a number of respected organizations--Towers Perrin, the Human Capital Institute, Sears, IBM and Costco--confirms the positive economic impact of cultivating and retaining engaged employees. The studies provide ample scientific support of the financial impact--and shareholder return--of engaged versus disengaged employees.
With less than one-third of U.S. employees engaged, according to both Gallup and Towers Perrin, the upside is significant. It's possible to reclaim some of the $350 billion lost annually by U.S. companies to employee disengagement.
Highly engaged employees expend discretionary effort and that usually translates to bottom-line results. Employees engaged in their work experience a strong connection that taps into emotional and relational efforts--their hearts and minds. These efforts lead to greater results as measured by traditional metrics (productivity, retention) as well as to different approaches (macro rather than micro, delayed rather than immediate effect).
If you're just showing up at work and not contributing discretionary effort, it could be a sign of disengagement. Even major league brands that have never had morale issues aren't immune. For the first time, they have had pay cuts, leave without pay, layoffs--and they don't know how to grapple with these issues.
Companies understand that they need employees to take care of their customers and that engaged employees take care of customers better. Consequently, they are investing in employee engagement as a remedy to the issues facing most companies today: the economy, layoffs and doing more work with fewer people. It serves as a reminder to employees that they and their contributions are valued and that they can make a difference in business today.
What has accelerated the importance of engagement are concerns that when the economy improves, employees who feel disengaged will jump ship the first chance they get, leaving their employers struggling to maintain an effective workforce.
Some companies and CEOs understand the value of engagement and the new measurement methods. While there is no simple formula to achieve higher engagement, there are some fundamentals. The organization needs a solid culture and value system that supports engagement. Senior leaders have to drive the process. Managers must be selected and developed with employee engagement in mind. And employees must be made partners in the process.
Measurement tools, best practices and techniques also exist. The most important unanswered questions about employee engagement programs are how the various elements of the programs (training, communication, recognition, incentives, etc.) affect the outcome and what is their cumulative effect on engagement.
Decision sciences (analytics) can isolate the variables in specific programs and determine what works and what doesn't. Constant data analysis offers insights that allow us to predict, in any situation, what elements provide the greatest impact--and at what cost.
So engage your employees, measure the impact and grow your business.
Fay Beauchine, Carlson Marketing engagement and events president, serves on the executive committee of the Enterprise Engagement Alliance--a coalition of marketing communication, incentive, media and research firms that sponsored the white paper authored by Human Capital Institute president Allan Schweye. Beauchine also is president of the National Business Travel Association Foundation and president-elect of the Site International Foundation.
December 21, 2009: Travel Procurement
Good managers know intuitively that engaged employees are good for business. To support that precept, the Enterprise Engagement Alliance has gathered an impressive body of research that squarely aligns employee engagement with business results.
In a recent white paper, The Economics of Engagement, independent research from a number of respected organizations--Towers Perrin, the Human Capital Institute, Sears, IBM and Costco--confirms the positive economic impact of cultivating and retaining engaged employees. The studies provide ample scientific support of the financial impact--and shareholder return--of engaged versus disengaged employees.
With less than one-third of U.S. employees engaged, according to both Gallup and Towers Perrin, the upside is significant. It's possible to reclaim some of the $350 billion lost annually by U.S. companies to employee disengagement.
Highly engaged employees expend discretionary effort and that usually translates to bottom-line results. Employees engaged in their work experience a strong connection that taps into emotional and relational efforts--their hearts and minds. These efforts lead to greater results as measured by traditional metrics (productivity, retention) as well as to different approaches (macro rather than micro, delayed rather than immediate effect).
If you're just showing up at work and not contributing discretionary effort, it could be a sign of disengagement. Even major league brands that have never had morale issues aren't immune. For the first time, they have had pay cuts, leave without pay, layoffs--and they don't know how to grapple with these issues.
Companies understand that they need employees to take care of their customers and that engaged employees take care of customers better. Consequently, they are investing in employee engagement as a remedy to the issues facing most companies today: the economy, layoffs and doing more work with fewer people. It serves as a reminder to employees that they and their contributions are valued and that they can make a difference in business today.
What has accelerated the importance of engagement are concerns that when the economy improves, employees who feel disengaged will jump ship the first chance they get, leaving their employers struggling to maintain an effective workforce.
Some companies and CEOs understand the value of engagement and the new measurement methods. While there is no simple formula to achieve higher engagement, there are some fundamentals. The organization needs a solid culture and value system that supports engagement. Senior leaders have to drive the process. Managers must be selected and developed with employee engagement in mind. And employees must be made partners in the process.
Measurement tools, best practices and techniques also exist. The most important unanswered questions about employee engagement programs are how the various elements of the programs (training, communication, recognition, incentives, etc.) affect the outcome and what is their cumulative effect on engagement.
Decision sciences (analytics) can isolate the variables in specific programs and determine what works and what doesn't. Constant data analysis offers insights that allow us to predict, in any situation, what elements provide the greatest impact--and at what cost.
So engage your employees, measure the impact and grow your business.
Fay Beauchine, Carlson Marketing engagement and events president, serves on the executive committee of the Enterprise Engagement Alliance--a coalition of marketing communication, incentive, media and research firms that sponsored the white paper authored by Human Capital Institute president Allan Schweye. Beauchine also is president of the National Business Travel Association Foundation and president-elect of the Site International Foundation.
Sunday, December 27, 2009
How to Keep Morale Up in a Down Economy
December 7, 2009: MSN Business on Main
by Toddi Gunther
Speak to employees at companies where cost-cutting and layoffs continue and it'll be clear that any talk of the recession being over isn't having much of an impact on workplace morale.
But while it might seem challenging to keep employees in this position focused, motivated and productive, it's essential for companies to engage them and inspire them to do their best. This isn't just talk, either, as studies have shown that high employee engagement correlates with strong business results like better performance, improved job retention, increased job satisfaction and organizational loyalty, and reduced stress.
"The willingness to go the extra mile, motivation to perform to the highest standards, creative energy applied to work, and interest in the company's success … is the secret sauce of successful companies," says Marcia G. Rhodes, spokeswoman for WorldatWork, a global association of human resources experts.
Ken Thomas, author of "Intrinsic Motivation at Work: What Really Drives Employee Engagement" and co-author of a measure of employee engagement used for management training and organizational change called the Work Engagement Profile, agrees: "It is a win-win [because] organizations need their workers to be engaged, but workers also want their work to be engaging."
Thomas notes that because today's work is more likely to be in the service sector rather than the manufacturing sector, more judgment and creativity are required from employees. "In this environment, then, good work isn't just about complying with routines and rules," he says. "It requires a deeper level of commitment and psychological involvement — a different degree of motivation."
To that end, small-business owners actually have an advantage over large corporations when it comes to keeping workers engaged. That's because "employees in small companies are much closer to the results of their work," says Cindy Ventrice, a workplace consultant and author of "Make Their Day! Employee Recognition That Works." And when employees can see the value of the work they do and make the connection between their job and the greater good of the organization, they are much more likely to be engaged.
So, in light of all the benefits of employee engagement, what exactly can small-business owners do to keep their employees loyal and productive? Don Lowman, managing director of strategic growth for human resources services at Towers Perrin, a global professional services firm, advises companies to do five things well for employees: know them, grow them, inspire them, involve them and reward them.
With that framework in mind, here are a few simple strategies that companies can use to initiate and/or improve employee engagement:
Spend time. Business owners need to spend time with their employees, answer their questions, and continually reinforce each employee's value to the company, says Rhodes of WorldatWork. "Money pays the bills but it doesn't engage the spirit, inspire enthusiasm or drive innovation," she says.
Implement recognition programs. Increasing the amount of recognition employees receive often increases engagement, says Ventrice. One strategy she recommends is to start a recognition notebook. A manager writes a note of praise or appreciation for an employee and then either passes it along to someone to do the same or leaves it somewhere for another person to write in. "It becomes a traveling trophy of positive comments and a permanent reminder of all the accomplishments," says Ventrice. Another strategy: Give away gift cards of small denominations for a job well done and then ask the recipient to name two or three others who helped to get the job done and give them gift cards, too.
Provide meaningful feedback. Communication, says Rhodes, even if negative, is what employees crave. According to a new Leadership IQ study, 66 percent of employees believe they have too little interaction with their boss. The study also shows that 53 percent of employees say that when their boss does praise excellent performance, the feedback does not provide enough useful information to help them repeat it.
While keeping employees engaged is hard work, the upside is that your employees will work much harder because of it.
Toddi is an award-winning journalist, writer and editor and currently is a contributing writer covering career management issues for The Wall Street Journal.
by Toddi Gunther
Speak to employees at companies where cost-cutting and layoffs continue and it'll be clear that any talk of the recession being over isn't having much of an impact on workplace morale.
But while it might seem challenging to keep employees in this position focused, motivated and productive, it's essential for companies to engage them and inspire them to do their best. This isn't just talk, either, as studies have shown that high employee engagement correlates with strong business results like better performance, improved job retention, increased job satisfaction and organizational loyalty, and reduced stress.
"The willingness to go the extra mile, motivation to perform to the highest standards, creative energy applied to work, and interest in the company's success … is the secret sauce of successful companies," says Marcia G. Rhodes, spokeswoman for WorldatWork, a global association of human resources experts.
Ken Thomas, author of "Intrinsic Motivation at Work: What Really Drives Employee Engagement" and co-author of a measure of employee engagement used for management training and organizational change called the Work Engagement Profile, agrees: "It is a win-win [because] organizations need their workers to be engaged, but workers also want their work to be engaging."
Thomas notes that because today's work is more likely to be in the service sector rather than the manufacturing sector, more judgment and creativity are required from employees. "In this environment, then, good work isn't just about complying with routines and rules," he says. "It requires a deeper level of commitment and psychological involvement — a different degree of motivation."
To that end, small-business owners actually have an advantage over large corporations when it comes to keeping workers engaged. That's because "employees in small companies are much closer to the results of their work," says Cindy Ventrice, a workplace consultant and author of "Make Their Day! Employee Recognition That Works." And when employees can see the value of the work they do and make the connection between their job and the greater good of the organization, they are much more likely to be engaged.
So, in light of all the benefits of employee engagement, what exactly can small-business owners do to keep their employees loyal and productive? Don Lowman, managing director of strategic growth for human resources services at Towers Perrin, a global professional services firm, advises companies to do five things well for employees: know them, grow them, inspire them, involve them and reward them.
With that framework in mind, here are a few simple strategies that companies can use to initiate and/or improve employee engagement:
Spend time. Business owners need to spend time with their employees, answer their questions, and continually reinforce each employee's value to the company, says Rhodes of WorldatWork. "Money pays the bills but it doesn't engage the spirit, inspire enthusiasm or drive innovation," she says.
Implement recognition programs. Increasing the amount of recognition employees receive often increases engagement, says Ventrice. One strategy she recommends is to start a recognition notebook. A manager writes a note of praise or appreciation for an employee and then either passes it along to someone to do the same or leaves it somewhere for another person to write in. "It becomes a traveling trophy of positive comments and a permanent reminder of all the accomplishments," says Ventrice. Another strategy: Give away gift cards of small denominations for a job well done and then ask the recipient to name two or three others who helped to get the job done and give them gift cards, too.
Provide meaningful feedback. Communication, says Rhodes, even if negative, is what employees crave. According to a new Leadership IQ study, 66 percent of employees believe they have too little interaction with their boss. The study also shows that 53 percent of employees say that when their boss does praise excellent performance, the feedback does not provide enough useful information to help them repeat it.
While keeping employees engaged is hard work, the upside is that your employees will work much harder because of it.
Toddi is an award-winning journalist, writer and editor and currently is a contributing writer covering career management issues for The Wall Street Journal.
Saturday, December 26, 2009
Employee Discontent Expected to Reach Crisis Level Next Year
November 19, 2009: PRNewswire
PHILADELPHIA, Nov. 19 /PRNewswire-FirstCall/ -- Employee turnover is expected to rise next year as a new survey shows that many workers are unhappy with their present jobs. Sixty percent of employees intend to leave and an additional one-in-four are networking and updating their resumes, according to research from Right Management. Right Management is the talent and career management expert within Manpower, the global leader in employment services.
Right Management surveyed more than 900 workers in North America and asked: Do you plan to pursue new job opportunities as the economy improves in 2010?
* 60% - Yes, I intend to leave
* 21% - Maybe, so I'm networking
* 6% - Not likely, but I've updated my resume
* 13% - No, I intend to stay
"The study provides a barometer of employee engagement in the workplace, with results that might alarm and surprise many employers," said Douglas J. Matthews, President and Chief Operating Officer at Right Management. "Employees are clearly expressing their pent up frustration with how they have been treated through the downturn. While employers may have taken the necessary steps to streamline operations to remain viable, it appears many employees may have felt neglected in the process. The result is a disengaged and disgruntled workforce."
Matthews cautions that the best workers are mobile in any economy. "We know that people are attracted by career development opportunities, attaining work/life balance and working for an innovative company culture. If management doesn't provide employees with these opportunities, then workers are going to take their knowledge and skills elsewhere. Talented staff can change jobs because they can and want to, not because they have to."
"As leaders, we need to accommodate different lifestyles and work choices and find ways to balance these with business needs to ensure high levels of productivity and performance," states Matthews. "This influences how organizations attract, engage and retain talent. A segmented, customized and flexible talent strategy is critical to stem the alarming levels of employee turnover anticipated next year."
Right Management surveyed 904 employees in North America via an online poll. The survey ran between October 19 and November 5, 2009.
About Right Management
Right Management is the talent and career management expert within Manpower, the global leader in employment services. Right Management helps clients win in the changing world of work by designing and executing workforce solutions that align talent strategy with business strategy. Our expertise spans Talent Assessment, Leader Development, Organizational Effectiveness, Employee Engagement, and Workforce Transition and Outplacement. With offices in over 50 countries, Right Management partners with companies of all sizes. More than 80% of Fortune 500 companies are currently working with us to help them grow talent, reduce costs and accelerate performance.
SOURCE Right Management
PHILADELPHIA, Nov. 19 /PRNewswire-FirstCall/ -- Employee turnover is expected to rise next year as a new survey shows that many workers are unhappy with their present jobs. Sixty percent of employees intend to leave and an additional one-in-four are networking and updating their resumes, according to research from Right Management. Right Management is the talent and career management expert within Manpower, the global leader in employment services.
Right Management surveyed more than 900 workers in North America and asked: Do you plan to pursue new job opportunities as the economy improves in 2010?
* 60% - Yes, I intend to leave
* 21% - Maybe, so I'm networking
* 6% - Not likely, but I've updated my resume
* 13% - No, I intend to stay
"The study provides a barometer of employee engagement in the workplace, with results that might alarm and surprise many employers," said Douglas J. Matthews, President and Chief Operating Officer at Right Management. "Employees are clearly expressing their pent up frustration with how they have been treated through the downturn. While employers may have taken the necessary steps to streamline operations to remain viable, it appears many employees may have felt neglected in the process. The result is a disengaged and disgruntled workforce."
Matthews cautions that the best workers are mobile in any economy. "We know that people are attracted by career development opportunities, attaining work/life balance and working for an innovative company culture. If management doesn't provide employees with these opportunities, then workers are going to take their knowledge and skills elsewhere. Talented staff can change jobs because they can and want to, not because they have to."
"As leaders, we need to accommodate different lifestyles and work choices and find ways to balance these with business needs to ensure high levels of productivity and performance," states Matthews. "This influences how organizations attract, engage and retain talent. A segmented, customized and flexible talent strategy is critical to stem the alarming levels of employee turnover anticipated next year."
Right Management surveyed 904 employees in North America via an online poll. The survey ran between October 19 and November 5, 2009.
About Right Management
Right Management is the talent and career management expert within Manpower, the global leader in employment services. Right Management helps clients win in the changing world of work by designing and executing workforce solutions that align talent strategy with business strategy. Our expertise spans Talent Assessment, Leader Development, Organizational Effectiveness, Employee Engagement, and Workforce Transition and Outplacement. With offices in over 50 countries, Right Management partners with companies of all sizes. More than 80% of Fortune 500 companies are currently working with us to help them grow talent, reduce costs and accelerate performance.
SOURCE Right Management
Friday, December 25, 2009
Employee Engagement: A Leadership Priority
December 7, 2009: Economic Times
by R Gopalakrishnan
A leadership priority is emerging — how to improve employee engagement within companies: There have been disquieting developments
in recent
times. All over the world, good employee policies exist in the manuals. However, the management capability to engage with the workforce and to implement the policies humanely is under pressure.
In his book The Idea of Justice, Prof Amartya Sen refers to the two Indian philosophical concepts of Niti and Nyaya. Niti relates to the policies, principles and institutions of justice while the Nyaya refers to the actual delivery of justice. The former is committed to better justice, while the latter is deeply concerned with the prevention of injustice.
Prevention of injustice is very different from pursuit of perfect justice. They are two sides of the same coin, but their value perception is different. So far as the Indian legislative framework is concerned, laws pertaining to worker relations have for long needed to be updated. Labour reforms have been widely discussed, but the subject remains on the pending agenda.
However, at the firm level, managers can act on remedying the nyaya perceived by the employees in the employee-employer relation; its practice can be modernised by forward-looking managements. This requires special effort by company leaders.
Evidence of pressure: Consider the evidence that employees do suffer from a feeling of unfair treatment, resulting in desperation and depression among employees of both developed and emerging markets.
Well-known French companies such as France Telecom, Renault, Peugeot and EDF have experienced increasing suicides among workers in the last two years. The cynic may observe that the French suicide rate is generally high compared to Britain, Germany and the US. That is true. However, even in the US, the rate of suicides has increased by 28% in the last two years.
Employees feel that they are expected to offer loyalty to their employer, but they do not receive an equal commitment from the employer to protect their jobs. Managers are so focused on corporate survival that they seem to have a limited bandwidth to attend to the employees’ feeling of injustice. Employees everywhere say that they are ‘in distress’ or that they are ‘stressed out’.
Surveys in the US over the last few years show that indices like ‘loyalty’ and ‘trust’ have collapsed from the 80% levels to 30% levels. More than half the respondents feel a sense of stagnation and disinterest in their work. The recession has increased uncertainty simultaneously with a perceived ‘onslaught’ by managers to increase workforce productivity.
All in all, in the developed countries, permanent workers are unhappy and are disenchanted with both their work and their employers’ attitude.
Temporary workers too have their own grievances. In South Korea, industrial action by temporaries has been experienced at Ssangyong and Donghee. In Japan, the president of Rengo has stated his disapproval of “temporaries being treated the same as robots”.
In India too, we have witnessed hyper cases of industrial action recently. After many decades of relative labour tranquillity, company executives have been killed at Grazino in the north and Pricol in the south. Strikes have occurred at Gurgaon-Manesar, Chennai and Coimbatore.
Employees in the emerging markets are deeply concerned about inflation, food and security. Prices of essential commodities have already increased sharply. Food experts predict that the rise in food prices is only the beginning of a serious, new threat. Richard Henry, chief economist at IFC’s agribusiness department, believes that “last year’s food crisis was a fairly small one — and was cut short by the global financial crisis — the next one is bound to be more prolonged”. In emerging countries, such forecasts cause very deep concerns.
Universally, employees are a worried lot. All of these are alarming trends and need to be taken seriously. Solutions must be found and implemented at the firm level. Within the firm, it must be focused upon at the departmental level and at the level of the individual relationship. Employees feel engaged or disengaged at the transactional level within departments.
A firm-level approach: Managers must consider a four-pronged approach:
l First, the subject of employee engagement needs to be driven down the company by the CEO. I think there is a general lack of awareness of the problem down the line. It is also mixed up with the general economic downturn. Poor employee engagement, it must be clearly understood, is a precursor to some other problem which is brewing. That is why there needs to be top-level engagement. If enough employees feel disengaged, the consequences will certainly be disruptive. Operating managers have to act. It cannot be left to the HR department.
l Second, there must be the action to measure and track employee engagement. Techniques are available and excellent companies already track their employee engagement scores. However, the extent to which such companies act on the results is unclear. Further, I suspect that very few companies measure employee engagement and prefer to get a qualitative feel; so their agenda to respond is also too general. The general approach may have worked in the past, but will not be good enough for the future.
l Third, operating managers need a refresher training on empathy and listening skills. Unions have been quiet for over two decades now with the passing of labour leaders like Datta Samant and Kuchelar. A whole new generation of managers has taken leadership roles without any direct experience of dealing with employee discontent. Listening skills are difficult to develop especially when a manager’s career thus far has not required him to do much of it. There need to be powerful conversations at the operating level, where employees feel they have been listened to even if all their suggestions have not been accepted.
l Fourth, and last, the top leadership of the company must institutionalise ways to connect directly with the lower levels of employees. Many Tata companies practice a monthly dialogue or a two-way webcast. Many formal and informal models of listening downwards have been practised. These need to be brushed up and implemented earnestly.
(The author is executive director at Tata Sons)
by R Gopalakrishnan
A leadership priority is emerging — how to improve employee engagement within companies: There have been disquieting developments
in recent
times. All over the world, good employee policies exist in the manuals. However, the management capability to engage with the workforce and to implement the policies humanely is under pressure.
In his book The Idea of Justice, Prof Amartya Sen refers to the two Indian philosophical concepts of Niti and Nyaya. Niti relates to the policies, principles and institutions of justice while the Nyaya refers to the actual delivery of justice. The former is committed to better justice, while the latter is deeply concerned with the prevention of injustice.
Prevention of injustice is very different from pursuit of perfect justice. They are two sides of the same coin, but their value perception is different. So far as the Indian legislative framework is concerned, laws pertaining to worker relations have for long needed to be updated. Labour reforms have been widely discussed, but the subject remains on the pending agenda.
However, at the firm level, managers can act on remedying the nyaya perceived by the employees in the employee-employer relation; its practice can be modernised by forward-looking managements. This requires special effort by company leaders.
Evidence of pressure: Consider the evidence that employees do suffer from a feeling of unfair treatment, resulting in desperation and depression among employees of both developed and emerging markets.
Well-known French companies such as France Telecom, Renault, Peugeot and EDF have experienced increasing suicides among workers in the last two years. The cynic may observe that the French suicide rate is generally high compared to Britain, Germany and the US. That is true. However, even in the US, the rate of suicides has increased by 28% in the last two years.
Employees feel that they are expected to offer loyalty to their employer, but they do not receive an equal commitment from the employer to protect their jobs. Managers are so focused on corporate survival that they seem to have a limited bandwidth to attend to the employees’ feeling of injustice. Employees everywhere say that they are ‘in distress’ or that they are ‘stressed out’.
Surveys in the US over the last few years show that indices like ‘loyalty’ and ‘trust’ have collapsed from the 80% levels to 30% levels. More than half the respondents feel a sense of stagnation and disinterest in their work. The recession has increased uncertainty simultaneously with a perceived ‘onslaught’ by managers to increase workforce productivity.
All in all, in the developed countries, permanent workers are unhappy and are disenchanted with both their work and their employers’ attitude.
Temporary workers too have their own grievances. In South Korea, industrial action by temporaries has been experienced at Ssangyong and Donghee. In Japan, the president of Rengo has stated his disapproval of “temporaries being treated the same as robots”.
In India too, we have witnessed hyper cases of industrial action recently. After many decades of relative labour tranquillity, company executives have been killed at Grazino in the north and Pricol in the south. Strikes have occurred at Gurgaon-Manesar, Chennai and Coimbatore.
Employees in the emerging markets are deeply concerned about inflation, food and security. Prices of essential commodities have already increased sharply. Food experts predict that the rise in food prices is only the beginning of a serious, new threat. Richard Henry, chief economist at IFC’s agribusiness department, believes that “last year’s food crisis was a fairly small one — and was cut short by the global financial crisis — the next one is bound to be more prolonged”. In emerging countries, such forecasts cause very deep concerns.
Universally, employees are a worried lot. All of these are alarming trends and need to be taken seriously. Solutions must be found and implemented at the firm level. Within the firm, it must be focused upon at the departmental level and at the level of the individual relationship. Employees feel engaged or disengaged at the transactional level within departments.
A firm-level approach: Managers must consider a four-pronged approach:
l First, the subject of employee engagement needs to be driven down the company by the CEO. I think there is a general lack of awareness of the problem down the line. It is also mixed up with the general economic downturn. Poor employee engagement, it must be clearly understood, is a precursor to some other problem which is brewing. That is why there needs to be top-level engagement. If enough employees feel disengaged, the consequences will certainly be disruptive. Operating managers have to act. It cannot be left to the HR department.
l Second, there must be the action to measure and track employee engagement. Techniques are available and excellent companies already track their employee engagement scores. However, the extent to which such companies act on the results is unclear. Further, I suspect that very few companies measure employee engagement and prefer to get a qualitative feel; so their agenda to respond is also too general. The general approach may have worked in the past, but will not be good enough for the future.
l Third, operating managers need a refresher training on empathy and listening skills. Unions have been quiet for over two decades now with the passing of labour leaders like Datta Samant and Kuchelar. A whole new generation of managers has taken leadership roles without any direct experience of dealing with employee discontent. Listening skills are difficult to develop especially when a manager’s career thus far has not required him to do much of it. There need to be powerful conversations at the operating level, where employees feel they have been listened to even if all their suggestions have not been accepted.
l Fourth, and last, the top leadership of the company must institutionalise ways to connect directly with the lower levels of employees. Many Tata companies practice a monthly dialogue or a two-way webcast. Many formal and informal models of listening downwards have been practised. These need to be brushed up and implemented earnestly.
(The author is executive director at Tata Sons)
Thursday, December 24, 2009
Leadership lessons from Obama, mismanagement tips from Scrooge
December 14, 2009: Morning Manager
by Harvey Schachter
U.S. President Barack Obama was criticized for dithering, taking too long to formulate his Afghanistan policy. But leadership expert Michael Watkins, writing on Harvard Business School's blogs, views it as a 'deeply deliberative' decision-making process that offers lessons for managers everywhere:
Gather the right minds
You can't hope to get the right decision if you don't start with the right inputs - and that includes the people involved in deliberating. Gathering the right minds around the table is key. Those minds must have the requisite range of expertise, opinion and "cognitive orientation" - you want creative and practical minds, analytical and values-driven minds and structured and flexible minds.
Decide how you will decide
To avoid degenerating into positional bickering, you need to outline a structure for deciding, with a set of distinct phases that should include defining the problem, establishing criteria for evaluating potential outcomes, generating and testing alternatives, and reaching closure. "The virtue of the phased approach is that it moves people through digestible experiences of education and adjustment, blunting the reflexive resort to position-taking, and avoiding premature convergence on an 'obvious' solution," Mr. Watkins writes.
Define desired outcomes
It's easy for the scope of the decision-making to either expand dangerously or get watered down. The best antidote is to define early and commit to a statement of desired outcomes. For U.S. President Barack Obama's team, that would have involved considering, up front, difficult questions, such as whether the goal in Afghanistan is to defeat the Taliban, and if so, over what time frame. Is it building civil society with the Afghan people? Is it buttressing stability in Pakistan? Is it getting U.S. troops home as quickly as possible? "The resulting mission statement, along with supporting criteria for rigorously evaluating potential outcomes, provides an essential anchor for the hard work of option generation and deliberation."
Watch your assumptions
The most dangerous things in the world are outdated assumptions, he warns, because they become the basis for flawed thinking. For example, we might infer that if "A" is true, "B" and "C" follow. But what if "A" is not true - perhaps it was once true, but no longer holds? He cites as an example: Is Al Qaeda still the primary threat to U.S. interests in the region? It's vital to bring the any fundamental assumptions to the surface and then test the soundness of those assumptions through careful and honest analysis. The idea is to build a shared foundation of facts and hypotheses on which the decision can be built.
Seek minority views
To get good decisions, you need disagreements, which will help you steer clear of "groupthink." Michael Roberto, in Why Great Leaders Don't Take Yes For An Answer, suggests giving those with minority viewpoints a good hearing, appointing a devil's advocate, or setting up two opposing teams to debate the matter. U.S. Vice-President Joseph Biden's strong opposition to a large troop increase probably helped the decision-making team in this vein.
Know when, how to end it
Be deliberate, but know when it's time to call the question. "Decision-makers like Obama have to set deadlines and other action-forcing events to bring the process to a conclusion. They must demand that everyone around the table support the outcome, even if there is not full consensus that it is the right way to go," he concludes.
POWER POINTS
Make a list, check it twice
On your last day at work before the coming holidays, leave a note detailing where you left off unfinished tasks; what tasks were postponed for your return; what needs immediate attention when you return; and anything else you worry you'll forget during your time off. Include a reminder to turn off your out-of-office e-mail reply and update your voice mail on your return. Ali Hale on Dumb Little Man
Tip from a coal miner's daughter
Marketing advice from country singer Loretta Lynn: "You either have to be first, best, or different." The Planning Shop Report
Repeat response
If you receive a few e-mail questions or requests that are repetitive, you can automate your response by writing your reply as a new e-mail signature on your e-mail program and having it available at the click of a mouse. This concept also works in BlackBerrys, under the AutoText feature. The Womack Company newsletter
Customers need more time
If you use daily deals as part of your e-mail marketing strategy, you may be missing out by leaving your customers insufficient time to see the e-mail and respond. A recent study by Pivotal Veracity found that e-mail recipients in August took on average 25.9 hours to open marketing messages. Retail E-mail
Picture-perfect meetings
Have you ever thought of hiring an artist to take minutes at your meetings? Bigger Picture is a Danish company that tries to make meetings, workshops and conferences more effective by capturing what happens at them visually rather than with words. If it seems like a stretch, perhaps a combination of visual and word minutes might work. Springwise Newsletter
Touchy touchpads
Most laptop owners have been frustrated by their cursor acting unpredictably when their wrist accidentally grazes the touchpad. TouchFreeze, a free software utility, prevents that by disabling your touchpad as soon as you start typing and then re-enabling it when you stop.
Lifehacker.com
Learning from scrooge
This is the season for readings of Charles Dickens' classic A Christmas Carol, and management writer Phil Whitely says you should be paying attention early in the story to how Ebenezer Scrooge manages - or, more accurately, mismanages - his employee, Bob Cratchit.
We are told, for example, that Scrooge is mean and rich - the assumption being that those attributes are linked. By treating his employee poorly - Cratchit labours in what Dickens describes as a "dismal little cell" with "a very small fire," and has to warm his hands by the light of a candle - Scrooge saves money.
Writing in management-Issues.com, Mr. Whitely notes that Dickens doesn't pause to comment on whether, if the productivity of the clerk mattered to the business, the capacity of his fingers to function would be of commercial benefit to a profit-hungry boss. But many modern employers are equally oblivious, notes Mr. Whitely, who worked at an office where the IT server had air conditioning but the workers did not.
He adds that the most cursory risk assessment by Scrooge would have indicated that Cratchit was highly likely to seek employment elsewhere, and there would be no guarantee of finding a replacement of similar calibre.
"In Scrooge's rigidity and myopia, one can identify the genesis of the MBA: The pretence that employee welfare matters only to the employee and is a net cost to the business; the emphasis upon accountancy, rather than understanding the business; the ignorance of the links between employee engagement and business performance; the neglect of the risk of loss of talent through indifferent management and poor leadership," Mr. Whitely says.
It's a classic story in more ways than we may have realized.
Self-management: The pause that protects
A few weeks ago, Thomas Nelson chief executive officer Michael Hyatt let his anger get away, and took a cheap shot at another organization in his Twitter feed to 45,000 followers. It was a reminder to him that between a stimulus - something that irritates us - and our response, we have to ensure there is space for reflection. Think of it as a big pause button that you hit, before responding.
Give yourself time to cool down, and act more maturely than might be your first instinct. "It is amazing how different things look when you get a little perspective," he wrote on michaelhyatt.com. "Eight to 24 hours later, things almost always look different."
Wednesday, December 23, 2009
Importance of People Priorities in Merger Success
Organizations are counting on value beyond short-term synergies
December 14, 2009:
by Towers Perrin: SOA World Magazine
TORONTO, ONTARIO -- (Marketwire) -- 12/14/09 -- a track record of effectively managing people-related issues during an acquisition are far more likely to have a very successful deal. This is the conclusion of a recent study by the Canadian Financial Executives Research Foundation (CFERF, the research institute of FEI Canada, the professional membership association for senior financial leaders), and sponsored by Towers Perrin. The most successful dealmakers put more effort into getting the right mix of skills and competencies, communicating and managing change with employees and properly estimating people-related synergies.
While 64% of financial leaders surveyed report revenue growth to be their key measure of merger and acquisition (M&A) success and 53% report that they look to achieve specific synergies beyond cost reduction, some are still focused on profit margin growth (50%) and cost reduction (37%) as key measures of a merger's success.
"The numbers suggest that while Canada's dealmakers count on the traditional short-term synergies and operational efficiencies, they are truly looking at long-term value creation and growth, which now includes a focus on people priorities, when on the acquisition trail, said Ramona Dzinkowski, executive director, CFERF. "Companies with access to capital are taking advantage of opportunities to acquire distressed companies, and others are actively pursuing corporate growth, whether that's acquiring new products or services, or opening up new markets and this demands that people priorities and risks become an important component in the merger checklist."
Aligning diverse corporate cultures was reported to be the single biggest integration challenge to M&A success. Interestingly, very successful dealmakers considered their human resources (HR) function to be significantly more effective in this area than other respondents (69% versus 48%), suggesting that increasing HR function capabilities may be one path to improving merger outcomes.
Companies looking to improve their odds in achieving M&A success are focusing on improving internal knowledge about M&A within their corporate functions, with 51% identifying the need to improve the HR function's M&A knowledge and 44% improving the business acumen of corporate HR and 38% identifying the need to improve the ability of finance to quantify people risks.
Approximately one third of respondents are considering actions such as reviewing their internal M&A processes (32%), increasing the involvement of finance in post-closing people-related issues (32%), and involving HR earlier in the process (29%).
Learning from Experience - The Keys to M&A Success
Senior financial leaders revealed that there is a long list of people risk considerations identified in the early due diligence stage; these range from key talent retention to workforce reactions and employee engagement. Senior financial leaders look to factor in a broad range of risks when doing deals, whether formally, by quantifying the risks into the purchase price, or informally, by making every effort to ensure risks such as employee engagement or turnover of critical staff are addressed.
"Successful dealmakers have developed new skills and have evolved processes to manage M&A deals, beyond the due diligence phase and well into integration planning and implementation stages," said Eric D'Amours, National M&A Practice Leader, Towers Perrin. "Financial leaders are largely accountable for ensuring deal success, and at companies where very successful deals have been completed, people priorities and risks have taken centre stage whether it's considering the impact of people risks even at the pre-deal stage, to making sure the organization has capability to address workforce integration challenges down the line."
Moreover, while the study revealed that a majority of respondents acknowledge the various people risks in a transaction, only a small minority are able to quantify and address those risks in their financials, even those with significant financial consequences, such as pension and benefits volatility.
Survey Methodology
The CFERF study was conducted online in October 2009 with 108 Finance executives who had recently completed a merger or acquisition. In addition, CFERF hosted a half-day forum where 17 senior financial executives shared their people risk experiences within an M&A context. Of those participants, 51% of respondents were from publicly-accountable companies, 38% were from privately-held organizations and the balance represented other ownership structures, such as Crown Corporations. The majority of respondents hold the title of Chief Financial Officer (45%) with the balance holding other Finance positions such as VP Finance, Controller, Finance Director or Treasurer.
About the Canadian Financial Executives Research Foundation (CFERF)
CFERF is the research institute of Financial Executives International Canada (FEI Canada), the all-industry professional membership association for senior financial executives that provides professional development, thought leadership and advocacy services to its 2,000 members. CFERF's primary objective is to study emerging financial management issues in Canada with the aim of increasing the competitive capabilities of Canadian companies across the country. Further information can be found at www.feicanada.org.
About Towers Perrin
Towers Perrin is a global professional services firm that helps organizations improve performance through effective people, risk and financial management. The firm provides innovative solutions in the areas of human capital strategy, program design and management, and in the areas of risk and capital management, insurance and reinsurance intermediary services, and actuarial consulting. Towers Perrin has offices and alliance partners in the United States, Canada, Europe, Asia, Latin America, South Africa, Australia, New Zealand and the Middle East. More information about Towers Perrin is available at www.towersperrin.com.
Tuesday, December 22, 2009
Funny Thing Happened with My Transparent Leadership Today…
December 9, 2009: The Employee Engagement Network
by Jonena Reith
I was on a conference call with two of my staff discussing our yearly calendar and holiday letter that we’ve sent out for the past 18 years. Both had done their homework and came to the meeting fully prepared to discuss the agenda items of design, budget, printing, mailing, etc.
I say that I pride myself in transparent leadership, but at the end of the call, I was asked: “You’re not unhappy with me because I said that we can only meet our deadline if you’re not as picky as usual?” Yikes, I had to step back! I’ve told our employees and contractors over and over that they can “lovingly” bring to my attention flaws or things that bug them about me and that I will try my best to be a team player open to the need for improvement.
Of course, I laughed and told her that, no, I wasn’t upset and that she was rightly justified in bringing up my need for perfection. The truth is that I am picky when it comes to marketing pieces and most everything else that goes out with the TBD logo on it, so I promised to trust their judgment for the look and feel and not to be so picky going forward. After all, these two women have handled this marketing project for a few years now. It’s time to pass the whole baton to them and for me to “get out of the weeds.”
So the moral of the story is: (1) Remember that on conference calls we can’t see each other’s body language to get a read on their reactions to the conversation. (2) Don’t assume that just because you say your office is always open and that you welcome constructive criticism that everyone will believe deep down that you mean it and that you won’t retaliate at performance appraisal time.
Oh, and thanks Lisa for being honest with me!
Leaders grow by being open to feedback and mentoring from the people around us. I want to be a trusted, transparent leader. I hope you do too!
by Jonena Reith
I was on a conference call with two of my staff discussing our yearly calendar and holiday letter that we’ve sent out for the past 18 years. Both had done their homework and came to the meeting fully prepared to discuss the agenda items of design, budget, printing, mailing, etc.
I say that I pride myself in transparent leadership, but at the end of the call, I was asked: “You’re not unhappy with me because I said that we can only meet our deadline if you’re not as picky as usual?” Yikes, I had to step back! I’ve told our employees and contractors over and over that they can “lovingly” bring to my attention flaws or things that bug them about me and that I will try my best to be a team player open to the need for improvement.
Of course, I laughed and told her that, no, I wasn’t upset and that she was rightly justified in bringing up my need for perfection. The truth is that I am picky when it comes to marketing pieces and most everything else that goes out with the TBD logo on it, so I promised to trust their judgment for the look and feel and not to be so picky going forward. After all, these two women have handled this marketing project for a few years now. It’s time to pass the whole baton to them and for me to “get out of the weeds.”
So the moral of the story is: (1) Remember that on conference calls we can’t see each other’s body language to get a read on their reactions to the conversation. (2) Don’t assume that just because you say your office is always open and that you welcome constructive criticism that everyone will believe deep down that you mean it and that you won’t retaliate at performance appraisal time.
Oh, and thanks Lisa for being honest with me!
Leaders grow by being open to feedback and mentoring from the people around us. I want to be a trusted, transparent leader. I hope you do too!
Monday, December 21, 2009
What Drives Employee Engagement?
December 3, 2009: Mumblr
by Abishek
by Abishek
I came across a blog post titled “Employee Engagement: What Exactly is it?” The post points to a study by The Conference Board which studied different research reports published by various consulting firms. Interesting thing is that they look at the top drivers of engagement and I have always maintained that there is a lot of value in attempting to identify the key drivers of engagement. The post concludes that these research studies generally agreed on the following drivers:
Trust and integrity – how well managers communicate and ‘walk the talk’.
Nature of the job –Is it mentally stimulating day-to-day?
Line of sight between employee performance and company performance – Does the employee understand how their work contributes to the company’s performance?
Career Growth opportunities –Are there future opportunities for growth?
Pride about the company – How much self-esteem does the employee feel by being associated with their company?
Coworkers/team members – significantly influence one’s level of engagement
Employee development – Is the company making an effort to develop the employee’s skills?
Relationship with one’s manager – Does the employee value his or her relationship with his or her manager?
The post acknowledges that there are lots of variances in the data, but concludes that across all variables “the relationship with one’s manager” is the strongest driver. I completely agree with the fact that the quality of direct supervisors plays a crucial role in shaping engagement. However, there are times when organizations need to focus differently. What happens when broad workplace systems / processes / policies are not in place? A manager can still soothe his people, but not for long. Discontent will brew fast with the organizational functioning. And, managers may be helpless.
Whether organizational functioning or workgroup experiences shape engagement really depends on the unique situation of the organization in question. I would rather not be so quick in putting all the onus on managers.
On another note, the Towers Perrin’s Global Workforce Study of over 90000 employees identified the following key drivers of talent attraction, retention and engagement. Interestingly, the drivers are different, indicating different solutions for different issues.
Sunday, December 20, 2009
Six Tips to Boost Employee Engagement
December 3, 2009: Australian Anthill
by Persephone Nicholas
With one in five Australian workers admittedly unhappy at work, those companies that can keep their employees engaged have all sorts of advantages. Here are some tips to help your staff get the most out of themselves.
Shock statistic of the week: one in five Australians are extraordinarily unhappy at work.
According to Melissa Dunn Lampe of global research-based consulting company Gallup, unhappiness is a vice Australia can ill afford. She estimates this malaise, caused by employee disengagement, costs the country up to $42 billion each year.
The flip side of the coin, according to Gallup, is that organisations with an engaged workforce (employees who are switched on and passionate about their work) are 27 percent more profitable, achieving 50 percent higher sales and 38 percent above-average productivity. Building an engaged workforce can also reduce accidents at work by up to 62 percent, staff turnover by up to 50 percent and absenteeism by up to 27 percent.
The idea of a link between people’s feelings and their behaviour isn’t new. Yet Gallup’s survey of 6.1 million respondents worldwide, representing 700,000 workgroups in more than 100 countries, sheds new light on the importance of recognising and rewarding employee contributions in the workplace.
Dunn Lampe says employers need to give employees a clear sense of purpose by “creating environments where people feel they are making a contribution, not just coming in and doing a job, where they can link themselves to a higher purpose the organisation fulfils for society or for their industry in some way”.
Purposeful employees deserve appropriate feedback. Those who received feedback on their strengths were most likely (43 percent) to be engaged, followed by those receiving feedback on their weaknesses (33 percent engagement). Worst off is a groups she calls “the ignored”, who were assessed on neither strengths nor weaknesses — resulting in an engagement score of just 2 percent. “They are getting nothing and are extraordinarily unlikely to be engaged or give any discretionary effort to their work.”
Employers ignore employees at their peril. “You’d be mad not to have an institutionalised system to give people high quality feedback on a very regular basis. You’d be crazy to let your people stay in that ignored bucket because there is no way you’re going to get the most out of them.”
Employee disengagement results in ailing business and is linked to ill health and stress in disengaged individuals. “People who are actively disengaged are much more likely to have health problems like high blood pressure and diabetes and are much more likely to self-report that in the last month there were three or more days when they behaved badly towards their friends and/or family because of stress at work. The implications are huge for people’s health, life satisfaction and longevity.”
She says we must take responsibility for our circumstances. “A lot of times at work we create a situation, intentionally or not, that we don’t enjoy then whinge about it rather than taking some positive action to make a change in the right direction.”
Ironically, disengagement is no indication an employee will leave. Dunn Lampe counsels taking control. “For the benefit of your own health, seriously consider a move. Half of the people in Australia who are actively disengaged told us they intend to be with their current employer a year from now. Don’t do that to yourself. If you’re really unhappy at work, figure out a way to get out of there and get somewhere else.”
“Take responsibility for your own engagement. Talk with your manager and tell them the sorts of things in your role you most enjoy, solicit their assistance in tailoring your role so you do as much of that as possible. We all have things about our jobs we enjoy more than others but you can come up with strategies to do what you need to and get it over with so you can focus on things you’re naturally talented at.”
She has no time for self-pity. “If you’re one of those people who whinges, ‘I don’t get enough recognition for what I do around here,’ then my first question to you is, ‘When was the last time you went out of your way to give someone else some?’”
We must not lose focus in uncertain times. “When times are tough, people have less choice about where they’re going. Managers should focus on the basics and give people as much clarity and stability as possible, some hope for the future and show their humanity at work. Creating engaging workplaces is not complicated but it does require deliberate effort.”
Melissa Dunn Lampe’s tips for creating a more engaging workplace
1. Treat your staff as people first, then employees. Look at them as individuals and get to know them.
2. Show your humanity — ask for help when you need it and show compassion when appropriate.
3. Try, even in uncertain times, to create as much stability as possible. Be clear about expectations and priorities and define expected behaviours plus business outcomes.
4. Give recognition and praise generously. Encourage your people to be generous with one another and their subordinates.
5. Give regular, specific, positive feedback and correct inappropriate behaviour immediately.
6. Create a purpose-driven environment. People need to connect to something greater than themselves or simply achieving sales targets.
by Persephone Nicholas
With one in five Australian workers admittedly unhappy at work, those companies that can keep their employees engaged have all sorts of advantages. Here are some tips to help your staff get the most out of themselves.
Shock statistic of the week: one in five Australians are extraordinarily unhappy at work.
According to Melissa Dunn Lampe of global research-based consulting company Gallup, unhappiness is a vice Australia can ill afford. She estimates this malaise, caused by employee disengagement, costs the country up to $42 billion each year.
The flip side of the coin, according to Gallup, is that organisations with an engaged workforce (employees who are switched on and passionate about their work) are 27 percent more profitable, achieving 50 percent higher sales and 38 percent above-average productivity. Building an engaged workforce can also reduce accidents at work by up to 62 percent, staff turnover by up to 50 percent and absenteeism by up to 27 percent.
The idea of a link between people’s feelings and their behaviour isn’t new. Yet Gallup’s survey of 6.1 million respondents worldwide, representing 700,000 workgroups in more than 100 countries, sheds new light on the importance of recognising and rewarding employee contributions in the workplace.
Dunn Lampe says employers need to give employees a clear sense of purpose by “creating environments where people feel they are making a contribution, not just coming in and doing a job, where they can link themselves to a higher purpose the organisation fulfils for society or for their industry in some way”.
Purposeful employees deserve appropriate feedback. Those who received feedback on their strengths were most likely (43 percent) to be engaged, followed by those receiving feedback on their weaknesses (33 percent engagement). Worst off is a groups she calls “the ignored”, who were assessed on neither strengths nor weaknesses — resulting in an engagement score of just 2 percent. “They are getting nothing and are extraordinarily unlikely to be engaged or give any discretionary effort to their work.”
Employers ignore employees at their peril. “You’d be mad not to have an institutionalised system to give people high quality feedback on a very regular basis. You’d be crazy to let your people stay in that ignored bucket because there is no way you’re going to get the most out of them.”
Employee disengagement results in ailing business and is linked to ill health and stress in disengaged individuals. “People who are actively disengaged are much more likely to have health problems like high blood pressure and diabetes and are much more likely to self-report that in the last month there were three or more days when they behaved badly towards their friends and/or family because of stress at work. The implications are huge for people’s health, life satisfaction and longevity.”
She says we must take responsibility for our circumstances. “A lot of times at work we create a situation, intentionally or not, that we don’t enjoy then whinge about it rather than taking some positive action to make a change in the right direction.”
Ironically, disengagement is no indication an employee will leave. Dunn Lampe counsels taking control. “For the benefit of your own health, seriously consider a move. Half of the people in Australia who are actively disengaged told us they intend to be with their current employer a year from now. Don’t do that to yourself. If you’re really unhappy at work, figure out a way to get out of there and get somewhere else.”
“Take responsibility for your own engagement. Talk with your manager and tell them the sorts of things in your role you most enjoy, solicit their assistance in tailoring your role so you do as much of that as possible. We all have things about our jobs we enjoy more than others but you can come up with strategies to do what you need to and get it over with so you can focus on things you’re naturally talented at.”
She has no time for self-pity. “If you’re one of those people who whinges, ‘I don’t get enough recognition for what I do around here,’ then my first question to you is, ‘When was the last time you went out of your way to give someone else some?’”
We must not lose focus in uncertain times. “When times are tough, people have less choice about where they’re going. Managers should focus on the basics and give people as much clarity and stability as possible, some hope for the future and show their humanity at work. Creating engaging workplaces is not complicated but it does require deliberate effort.”
Melissa Dunn Lampe’s tips for creating a more engaging workplace
1. Treat your staff as people first, then employees. Look at them as individuals and get to know them.
2. Show your humanity — ask for help when you need it and show compassion when appropriate.
3. Try, even in uncertain times, to create as much stability as possible. Be clear about expectations and priorities and define expected behaviours plus business outcomes.
4. Give recognition and praise generously. Encourage your people to be generous with one another and their subordinates.
5. Give regular, specific, positive feedback and correct inappropriate behaviour immediately.
6. Create a purpose-driven environment. People need to connect to something greater than themselves or simply achieving sales targets.
Saturday, December 19, 2009
The End of Employee Engagement
December 10, 2009: Leaders' Forum
by Theresa M. Welbourne
by Theresa M. Welbourne
It's been many years since we in the HR world started talking about employee engagement. And since that time the following has happened (or not happened):
1. We have no agreement on what engagement is.
2. Many people refer to their employee engagement survey questions when defining engagement.
3. It has become one of HR's most successful fads, with everyone and everybody using it to describe what they do (myself included, albeit I was dragged along unwillingly).
4. We are all very comfortable having no agreement with what it is.
5. No one has an answer to the "engaged in what" question. Think about it for a minute, your employees could be engaged in baking cookies all day; that is probably only good if you are in the business of baking cookies. What about the rest of us?
6. Did you know that there are examples of companies winning the most engaged company awards and then going into bankruptcy a few days later? Is that ok?
7. Did you know that there are conditions under which raising employee survey engagement scores actually leads to lower employee performance? Here's how that works. Manager X has a bonus tied to the engagement survey scores. Manager X gets a low score on a question that leads the manager to take all his/her employees out for fun; make sure they like each other; they like their jobs. Employees start having a great time at work. Employee engagement scores go up; performance goes down.
8. When you don't know what something is (employee engagement) and you spend lots of money on it, and you do not have a calculated return on the investment, some day some other executive will come after your budget. When times get tough, your budget goes away.
9. Employees jump for joy that the employee engagement initiative went away; now they can do their jobs.
10. Firm performance improves because HR is finally done pestering everyone about employee engagement.
Is there a better way? Yes.
Friday, December 18, 2009
Employee engagement, business intelligence and Sunday morning football.
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!
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!
Thursday, December 17, 2009
Employee Engagement and Recognition: The Recipe for Retention
December 11, 2009
It was a most unusual reception area. It was painted in bold primary colors, and had the most fascinating reading material – every inch of the walls was covered with handwritten messages from their clients – personal greetings and testimonials about their great experiences with the company.
A sign on the reception desk directed me down the hallway of this up-and-coming firm to the conference room, where I met the Director of Community Relations, who took me on a tour.
Everyone I passed said a cheery “hello!” and gave me a huge smile. In the open cubicle areas, everyone greeted me, and those who were further away jumped up and waved. In the break room, the soda machine advertised something really refreshing — the values of the organization, painted in very large letters across the front of the machine!
Everywhere I looked, I saw satisfied, motivated, happy people doing the jobs they do well. They know what is expected of them; they work in an environment that prioritizes values and productivity at the same time. And the results are evident. Jobing.com has become a well-known provider of internet-based recruitment strategies and resources for employees and employers.
In “First, Break All The Rules”, Gallup Poll researchers Marcus Buckingham and Curt Coffman write that peak performers want to know what is expected of them at work and that their work has meaning to the organization. Buckingham and Coffman found a positive correlation between employee satisfaction and business success indicators, including profits, market share, customer loyalty and even return to shareholders.
Jobing.com expanded its product line and regional operations and continues to grow its market share year after year. There is no doubt that this is due, in part, to its teamwork and employees’ drive. Satisfied employees are driven to produce.
Employee satisfaction is a main ingredient of employee engagement. Satisfaction catapults when employees are recognized for their contributions. Organizations need to ensure the right recognition for the right people. In short, recognition has to be personally meaningful to the employee.
A colleague of mine received a gift basket from her boss as a thank-you. It was full of chocolate items — if it could be made with chocolate or covered in chocolate, it was in there. There’s just one problem – she’s highly allergic to chocolate, and it’s well-known in the office! Now, that working relationship – productive for five years – is a significantly less sweet experience. She believes her manager really doesn’t know her. If he can overlook a serious allergy, is he also overlooking her work achievements?
An online survey of 1,002 randomly selected, full-time employed adults throughout the United States, showed that recognition programs specifically targeted to employees’ preferences play a huge role in employee satisfaction. The October 2005 survey by Maritz Research showed survey respondents who were recognized with employee-specific recognition programs were:
• Eleven times more likely to be completely satisfied with their jobs than those who are not completely satisfied with their employee recognition programs (76 percent versus 7 percent)
• Seven times more likely to spend the rest of their careers with their present company than those who are not completely satisfied with their employee recognition programs (63 percent vs. 9 percent)
• Five times more likely to feel highly valued at their job than those who are not completely satisfied with their employee recognition programs. (73 percent vs. 16 percent)
What can you do to foster a recipe for recognition to increase employee engagement and retention? Start with the main ingredients:
• Establish budget to provide realistic recognition program foundation
• Know your employees’ preferences
• Provide the appropriate forum of recognition, either public or private
• Set up measurable criteria to assess the effectiveness of the recognition program
The U.S. Department of Labor reports that 46 percent of those who quit their jobs last year did so because they felt unappreciated. That’s staggering – employees would rather endure the rigors of a job search than stay in a place where recognition is given little attention. By putting some of the ingredients in place for personalized and well-thought-out recognition programs, you create a recipe for employee engagement and, consequently, increased retention. Your organization will become one those 46 percent will look to join.
Debbie Benami-Rahm, M.S., President of DBR Career Services, is a Human Resources strategist who works with businesses to provide employee selection and engagement solutions, resulting in maximized retention and decreased turnover costs. She also works with individuals in career transition. She is the author of “Uncover the Hidden Applicant,” an interviewing resource guide, and creator of the HR² Method for Engaging and Retaining Employees. Debbie can be reached at: Debbie@DBRcareerservices.com For more information, please visit http://www.DBRcareerservices.com
http://www.callcentercafe.com/2009/12/11/employee-engagement-and-recognition-the-recipe-for-retention/
Wednesday, December 16, 2009
Employee engagement. Not child’s play, but we can learn from our kids
December 14, 2009
by Greg Savage: The Savage Truth
In the world of managing staffing companies, I imagine the last 12 months are up there amongst the hardest ever. For us at Aquent, despite our market leading position, we have had to respond to declining demand with staff reductions, reduced hours and a range of spending cuts. Good commercial sense of course, and our business is in prime shape because of it, but it pays not to underestimate the human toll.
I have been travelling a lot around the business lately and it’s obvious our people are bruised by a very challenging year. Faith in the company remains rock solid I am pleased to say, but no employer should take staff engagement for granted, and this will never be so true as the market recovers and people consider their options.
Of course I was well aware of the challenge of morale, engagement and staff retention right through the downturn, but a little scenario has been playing out even closer to home than Aquent, that has driven this lesson home to me recently.
I have a 19-year-old daughter, just completing second year of a Bachelor of Business in Marketing at University in Sydney. (I will call her ‘M‘ here because mentioning her name on my blog will provoke World War 3 at home). Being a true child of her generation, ‘M’ can’t envisage life without a car, massive mobile phone bills, and a not inconsiderable social life. Equally, I can’t imagine a world where I pay for these trappings of her good life.
So ‘M’ has a job. And it’s a good job too – on the surface. For reasons soon to become clear, I won’t mention her employers’ name, but she has a retail role in one of the flagship outlets. It’s well paid too, and with Sunday overtime, it keeps her in the style she feels she deserves, while enabling her to complete university as well.
Having a father in the recruitment industry is a double edged sword for ‘M’ however, because I encouraged her (vigorously) to also look for experience in a field closer to her career goal. And to her credit she secured “work experience” with Pulse Communications, a successful PR company, which is part of the STW Communications Group in Sydney. This arrangement is like an internship and she has worked every Friday at Pulse for the last three months. Great experience, but unpaid.
Now this is where it gets interesting. ‘M’ detests her well paid ‘real’ job. People are cold and disinterested. They operate in cliques that exclude newcomers. Her boss doesn’t work the days she does, so she has never met her! On one occasion the supervisor left at 4 pm and all five of the other employees working on the same shift as ‘M’, moved out back into the staff room and stayed there until closing time. The fact they had left a trainee to handle a long line of irate customers, while they smoked and joked, apparently caused them no concern at all. The culture is such that when she arrives for work a cheerful “good morning” is met with stony silence more often than not. When she leaves maybe one person out of five will say goodbye. The tiniest error is met with derision and scolding. I was saddened to have her tell me she goes to work with “a heavy feeling of dread in her stomach”.
But Pulse is so different. As I warned her she would, she stacks boxes and stuffs envelopes, but they have also give her interesting research and include her in client meetings as an observer. On her second day she was invited to lunch with the team celebrating a big win. People know her name, include her in all goings on, and the CEO asks her how things are going. She loves going there, and has learned so much she has been totally re-enthused about a career in communications.
I was stunned and delighted be told by ‘M’ that during her (obscenely long) Uni vacation, she has volunteered to work at Pulse three days a week. And she is not paid one cent.
So what do we learn from this? ‘M’ hates her paid job and only turns up for the money. She does her best, but no doubt her unhappiness must show in her customer service – or at least it will eventually. She is looking for a new job and will leave as soon as she can. But Pulse, where she is not even paid, brings a sparkle to her eye. She looks forward to going there. She speaks in awe of the people who work there, and has taken a renewed interest in her university studies as a result.
And so I reflected on this lesson. I am not expecting anyone at Aquent to volunteer for three days unpaid work a week any time soon (!) But the importance of creating a culture and an environment where people want to be is clearer than ever. Commercial success is important, but so is belief in the business and a return on our efforts that are to measured in fun and self-respect as well as dollars
I will be working with the senior Aquent management team to create just such a work place at Aquent.
by Greg Savage: The Savage Truth
In the world of managing staffing companies, I imagine the last 12 months are up there amongst the hardest ever. For us at Aquent, despite our market leading position, we have had to respond to declining demand with staff reductions, reduced hours and a range of spending cuts. Good commercial sense of course, and our business is in prime shape because of it, but it pays not to underestimate the human toll.
I have been travelling a lot around the business lately and it’s obvious our people are bruised by a very challenging year. Faith in the company remains rock solid I am pleased to say, but no employer should take staff engagement for granted, and this will never be so true as the market recovers and people consider their options.
Of course I was well aware of the challenge of morale, engagement and staff retention right through the downturn, but a little scenario has been playing out even closer to home than Aquent, that has driven this lesson home to me recently.
I have a 19-year-old daughter, just completing second year of a Bachelor of Business in Marketing at University in Sydney. (I will call her ‘M‘ here because mentioning her name on my blog will provoke World War 3 at home). Being a true child of her generation, ‘M’ can’t envisage life without a car, massive mobile phone bills, and a not inconsiderable social life. Equally, I can’t imagine a world where I pay for these trappings of her good life.
So ‘M’ has a job. And it’s a good job too – on the surface. For reasons soon to become clear, I won’t mention her employers’ name, but she has a retail role in one of the flagship outlets. It’s well paid too, and with Sunday overtime, it keeps her in the style she feels she deserves, while enabling her to complete university as well.
Having a father in the recruitment industry is a double edged sword for ‘M’ however, because I encouraged her (vigorously) to also look for experience in a field closer to her career goal. And to her credit she secured “work experience” with Pulse Communications, a successful PR company, which is part of the STW Communications Group in Sydney. This arrangement is like an internship and she has worked every Friday at Pulse for the last three months. Great experience, but unpaid.
Now this is where it gets interesting. ‘M’ detests her well paid ‘real’ job. People are cold and disinterested. They operate in cliques that exclude newcomers. Her boss doesn’t work the days she does, so she has never met her! On one occasion the supervisor left at 4 pm and all five of the other employees working on the same shift as ‘M’, moved out back into the staff room and stayed there until closing time. The fact they had left a trainee to handle a long line of irate customers, while they smoked and joked, apparently caused them no concern at all. The culture is such that when she arrives for work a cheerful “good morning” is met with stony silence more often than not. When she leaves maybe one person out of five will say goodbye. The tiniest error is met with derision and scolding. I was saddened to have her tell me she goes to work with “a heavy feeling of dread in her stomach”.
But Pulse is so different. As I warned her she would, she stacks boxes and stuffs envelopes, but they have also give her interesting research and include her in client meetings as an observer. On her second day she was invited to lunch with the team celebrating a big win. People know her name, include her in all goings on, and the CEO asks her how things are going. She loves going there, and has learned so much she has been totally re-enthused about a career in communications.
I was stunned and delighted be told by ‘M’ that during her (obscenely long) Uni vacation, she has volunteered to work at Pulse three days a week. And she is not paid one cent.
So what do we learn from this? ‘M’ hates her paid job and only turns up for the money. She does her best, but no doubt her unhappiness must show in her customer service – or at least it will eventually. She is looking for a new job and will leave as soon as she can. But Pulse, where she is not even paid, brings a sparkle to her eye. She looks forward to going there. She speaks in awe of the people who work there, and has taken a renewed interest in her university studies as a result.
And so I reflected on this lesson. I am not expecting anyone at Aquent to volunteer for three days unpaid work a week any time soon (!) But the importance of creating a culture and an environment where people want to be is clearer than ever. Commercial success is important, but so is belief in the business and a return on our efforts that are to measured in fun and self-respect as well as dollars
I will be working with the senior Aquent management team to create just such a work place at Aquent.
Tuesday, December 15, 2009
Employee satisfaction vs. employee engagement -- and how to measure them
Once you've differentiated between employee satisfaction and employee engagement, another challenge remains: assessing them
Dear Bob ...
While I was reading your "Legless Dog Syndrome" article, it got me thinking about a friend's situation -- specifically, the managers' lack of leadership traits where she works.
[ Also on InfoWorld, Bob dismisses other bad methods of measurement in "A case for the separation of management and software" | Get sage advice on IT careers and management from Bob Lewis in InfoWorld's Advice Line newsletter. ]
The team she works on is scheduled for their periodic Employee Engagement Survey soon. From what she tells me, the engagement survey is not supposed to be an employee satisfaction survey, but the questions sure seem to be for an employee satisfaction survey.
An example question is, "How would you rate your manager's involvement in your day to day duties?" or one of my favorites, "How would you rate (on a scale of 1 to 10) your daily work mood?"
The management team puts on a PowerPoint presentation that specifically states "Engagement is not satisfaction." I kind of agree, but the questions are more related to satisfaction, in my opinion. The goal is to raise the scores every time. Thus far, the scores have been consistently low with no movement.
Anyway, is there a difference between an Employee Engagement Survey versus an Employee Satisfaction Survey, or is this some clever management speak? I know my opinion is the latter.
- Unengaged
Dear Unengaged ...
My opinion? The two surveys should be different, because engagement and satisfaction are different concepts.
Or maybe the two surveys should be the same, but different from what either looks like in typical companies. Here's how I think it works:
Fully engaged employees -- those who are emotionally invested in the success of the organization they work in -- should find their work environment satisfying, and satisfied employees are likely to be satisfied because they're in an environment that's thoroughly engaging.
Poor leaders who fail to understand what employee engagement entails are also unlikely to understand what makes for a satisfying work environment. So they'll ask the wrong, but very similar, questions about one, the other, or both -- such as whether employees like the furnishings, the parking arrangements, or what have you. As a consequence, they'll get very similar, bad surveys that fail to ask whether employees are fully engaged in the business, or why.
- Bob
Monday, December 14, 2009
More Clever Economic Indicators
Professors, economists and company chiefs share some off-the-beaten-path insights.
December 12, 2009: Forbes.comby Knowledge@Wharton
Rock fish, 401(k) withdrawals, shopping bags and snowflakes: When deciphering America's economic future, tea leaves come in many forms. To get a good read, Knowledge@Wharton asked a few professors, economists and company bosses in a range of industries what they saw in their cup of tea--which economic indicators they planned to watch during the final quarter of 2009, and what they are waiting to see in 2010 that would convince them the economy is turning around. On the macro side, from retail to real estate, finance to factories, the central theme of employment echoed again and again. Retailers linked it to consumer confidence, real estate watchers to office space, bankers to loan losses, and manufacturers to product demand.
Indeed, Wharton real estate professor Susan Wachter believes that high unemployment will persist through 2010, impacting the real estate market. Although the residential housing market is turning around, the commercial real estate market is the next shoe to drop, and that isn't going to turn around until employment does, she says. "Commercial is a lagging indicator, and it follows employment. Employment itself is a lagging indicator. Probably six months after we see employment improving we'll see commercial improving, and we don't see employment changing in 2010."
Steven Silverstein, for one, is preparing for a long haul. The CEO of Spencer Gifts, a mall retailer that targets the 18- to 24-year-old demographic, Silverstein says he's "adjusting to the new normal" of a cautious consumer. "The consumer has a different mindset now.... We're not going to see the revenue growth that we have been accustomed to in the past."
On a macro level, Silverstein is keeping an eye on inflation and employment--especially teen employment, since his stores appeal to young people. Store to store,he's looking more closely than ever at his margins, keeping inventories tight, focusing on efficiency and expenses, and getting costs out of the system. "Everybody realizes we have to tighten our belts a little bit."
The number one economic indicator for Silverstein is consumer confidence. "I don't sell anything that people need. I only sell things that people have to have," Silverstein says of his store's offerings. "We're all about how the consumer is feeling and what's in his or her wallet." He remains optimistic that consumers will come back eventually. "They're resilient," he says. "Nobody likes to stay home forever. We might be pleasantly surprised in the fourth quarter."
Retailers aren't the only ones watching retail sales. Bankers are too. "Everyone's looking for that magic indicator," says Paul Merski, senior vice president and chief economist of Independent Community Bankers of America, an association of more than 5,000 community banks throughout the U.S. "The one thing I would look at is holiday retail sales. If that's down in the dumps, it's an indication that confidence hasn't returned and risk-taking hasn't returned. ... The strength of the economy is still tied very much to personal consumption spending."
Merski says he's also watching any indicator linked to jobs. "If you have roughly 10% of the workforce idle, that is a significant drag on consumer confidence ... and the capacity to spend." In addition, bank customers haven't been taking out enough loans. "Loan demand has decreased dramatically," says Merski, adding that the common refrain that credit is hard to get isn't really true. The fact is, banks would like to make loans--after all, loans mean income for a bank--but consumers and businesses are too nervous to borrow. "Both businesses and households are de-leveraging, repairing their balance sheets and not seeking as much credit," he says. "As a small business, if your sales are down and you're laying off workers, why would you need more credit?"
One of the biggest question marks in retail is how long consumers can hold off on spending the way they used to, says Wharton operations and information management professor Marshall Fisher. Last year, consumers "hunkered down massively when the economy tanked," and retailers were caught off guard. With holiday sales sluggish, inventories piled up, and retailers were forced to slash prices to unheard of lows to get merchandise out the door. Since then, consumer behavior has changed. Consumers are delaying purchases and trading down to lower-priced items. "It remains to be seen whether that will persist," Fisher says. "If you talk to people from Walmart, they'll say, 'These customers are ours for good. There's been a sea-change in how people think about consumption.' Talk to people from [luxury retailer] Tiffany ( TIF - news - people ), and they will say, 'The fundamentals of human behavior are invariant. People will go back.' I would say that's a big, big question mark."
Underlying that question mark is the issue of leverage, Fisher points out. Before the recession, "the buoyancy of the economy was driven by leverage." People borrowed, spent, took out money from home equity loans and spent again. Today, with unemployment rising and home prices stagnant, "consumers--instead of borrowing money--are paying down their debt," Fisher says. "Will that persist? If it does, then that has long-term implications."
More Savings Accounts for Children
Household insecurity is familiar to R. Michael Menzies, president and CEO of Easton Bank and Trust in Easton, Md. "We have one of the highest unemployment rates in all of Maryland," Menzies says. A wealthy retirement community, Easton has grown in the past few years due to in-migration and real estate activity. But the recession has cast a pall over that growth. Loan losses are at a record high as asset values have fallen and over-leveraged customers have lost their jobs, Menzies says. Delinquencies are also up. "When they begin to trend down, that will be an indicator that people are going back to work."
Menzies doesn't stick to paper indicators to show him where his business might be headed. "I can tell you that we have some of the best rock fishing in the history of the Chesapeake Bay, and I'm the only boat out there right now," he says, wondering if his fellow fishermen are having trouble putting fuel in their boats. Another possible economic sign for Menzies: restaurants. "When people eat, they feel good. ... [Right now], restaurants are average to slow. In this community, when the restaurants pick up, it indicates people are making money and going out to eat."
For some bankers, the careful consumer is actually good for business. Arkadi Kuhlmann, president and CEO of ING ( ING - news - people ) Direct--an online bank based in Wilmington, Del., that advertises low fees and simple ways to save -- has seen an influx of new customers since the recession took hold. The number of children's savings accounts jumped 28% this year, for example. "Parents are opening accounts for their children and teaching them how to save," he says. "I think Americans have gotten the message of getting your debt down. ... We're not going back to the way it was before. ... I haven't talked to a person in the last year who hasn't cut back on a trip, decided against a purchase or scaled back in some way. ... People are saving. And they're actually reducing their debt more than they're saving."
Kuhlmann sees signs that his customers are still under economic duress. While there is evidence of new customers opening savings accounts and retirement plans at the bank, there is also a troubling trend of customers borrowing from their 401(k)s and IRAs. "It's a bit strange that we have an increase in saving, a decrease in debt, and people are still taking money out of their 401(k)s." Kuhlmann says. "People tapping into their 401(k)s show they're still under stress." A decrease in 401(k) withdrawals will be a sign for Kuhlmann that the economy has turned around.
He even sees signs of the weakened economy in his staff, who have held on to their jobs since the economy slowed. Company surveys show employee engagement is down--yet turnover has all but ceased. "If turnover increases, that means people are out there looking for more opportunities," Kuhlmann suggests. "We traditionally have about an 18% turnover. This last year it's been 3%. ... People just don't move. [Our first thought] is that this is really great. ... People are staying because they want to be here. The truth is that probably a bunch of people do want to leave but can't."
Low turnover is bad business for Douglas E. Frost, owner and president of Frost Manufacturing in Worcester, Mass. Frost is in the "marking and identification business," making name plates, badges, building directories, rubber stamps and placards for companies in Massachusetts and beyond. One bit of steady work has typically come from a Fortune 500 company that makes information storage systems. For years, the company contracted with Frost to make name plates for new hires. Before the downturn, he churned out 50 to 70 name plates a week. Today, he's lucky if he makes 30. Work from other clients showed a similar drop. "In October to November of last year, the faucet just turned off. I've been through a lot of recessions," says Frost, who is the fourth-generation owner of the company. "I've never seen orders stop so fast. Sales dropped 40% in a month and they have stayed down since."
One bright spot for Frost is local universities and colleges, which continue to demand signage as they renovate dorm rooms and build new buildings. And of course, there's always the weather. "When the snow goes away, we get some business from all those signs that get wrecked by the plows," he says.
For the nation at large, there are a few early indicators of economic thaw. November brought hope on the job front when the nation's unemployment rate dropped to 10% from 10.2% and U.S. employers cut 11,000 jobs, the lowest monthly job loss in nearly two years. But experts say jobs remain a lingering concern that will continue to reverberate into other areas of the economy.
Jobs are an essential component of a full real estate recovery, says Wharton real estate professor Peter Linneman. "Jobs are what fill space -- think of an office building. A lot of [economic indicators] matter, but jobs really matter."
Linneman says he couldn't pick just two or three economic indicators that would tell him where the economy was headed, saying he watches about 50 metrics involving GDP, jobs, manufacturing, output, capital flows and more. "I view the world as a Seurat painting--a whole lot of dots that alone mean very little, but taken in a larger context, they make a bigger picture. You have to get far enough away to see the picture, but close enough to see the dots. And the dots constantly change. It's like a motion picture of dots rather than a still-life of dots. It's like a Seurat movie. And the picture is the economy."
For Erin Armendinger, managing director of Wharton's Jay H. Baker Retailing Initiative, dots come in the form of shopping bags. And she is starting to see some positive paper-bag indicators: There seem to be a few more shopping bags on the streets of Manhattan, for example. Many of those bags sport store logos--a switch from the end of 2008, when flagrant spending became taboo.
"People are more comfortable purchasing at this point than they might have been last year," Armendinger says. "During holiday 2008, we heard stories of people asking for plain whitebags at high-end stores [because]they were not comfortable with what others thought of them spending money. We are not seeing that now."
Still, there's a long way to go, especially if unemployment persists. "Unemployment has a psychological effect on people," Armendinger adds. When unemployment is rising, even people who have jobs may be skittish about splurging on discretionary items, putting a damper on retail sales. She thinks the retail industry will be watching comparable store sales during the holiday season to see if shoppers spend more than they did in the same period last year. Retailers will also be watching "conversions"--that is, how many shoppers who walk into the store actually buy something instead of just looking around. And in the malls, retailers will be paying attention to foot traffic as a sign of consumer confidence.
"If people are not confident enough to go to the mall, then there's not even a chance of converting them," says Armendinger. Retailers need to get consumers "through the door, get them spending, and get them spending at full price. Until that happens, we don't really have a healthy economy."
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