The Culture Builders

Leadership Strategies for Employee Performance

Jane Sparrow

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351891882
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Wirtschaftspädagogik

As with many people-oriented initiatives, employee engagement remains an emerging science with as many advocates as detractors. In The Culture Builders Jane Sparrow shares the insight of her research and experience into how companies are creating an engaged workforce. Along the way she looks at the evidence, the case for engagement and how organizations are measuring and defining it. Having an engagement strategy is merely a first step and so the book explores how to enable the manager-as-engager. Alongside the practical models and the guidance, there are stories and examples from leaders and organizations allowing you to learn, amongst other things, about the strong sense of purpose felt in John Lewis Partnership; the importance Innocence places on values; how Sony has used visual metaphors to give context and strategic direction and how MGM Resorts targets engagement strategies to the needs of specific employee groups. The need for sustained employee performance has been put into sharp focus in recent years. The Culture Builders is a book that provides the theory and practice to connect employee engagement to long-term performance. Simply reading it won't guarantee that performance. Reading it, learning and applying the lessons it offers, will dramatically improve your chances.

PART

I

The Organisational Engagement Strategy

CHAPTER

1

What is Engagement?

Type the word ‘engagement’ into Google and it gives more than 312,000,000 results – probably even more by the time you read this text. It’s a word used in a variety of contexts and active situations: engage customers, engage stakeholders, engage colleagues.

It’s an increasingly frequent term that attracts a wide range of descriptions, so perhaps it’s best to start with exploring what we mean by engagement and why it matters.

Within this book, engagement refers to employee, or colleague, engagement. This is, in itself, an industry in its own right, and there are numerous books, papers and research reports that talk about engagement. Consequently, as we see, there are hundreds of definitions. The essence may be the same in each, but the expression is affected by our experiences of being engaged and disengaged.

Let’s look at some of the best definitions of engagement.

The Management Competencies for Enhancing Employee Engagement Research Insight report (CIPD 2011), defined employee engagement as:

Being focused in what you do (thinking), feeling good about yourself in your role and the organisation (feeling), and acting in a way that demonstrates commitment to the organisational values and objectives (acting).

Gatenby and colleagues add depth to the word, and define engagement as follows:

Engagement is about creating opportunities for employees to connect with their colleagues, managers, and wider organisation. It is also about creating an environment where employees are motivated to want to connect with their work and really care about doing a good job. It is a concept that places flexibility, change and continuous improvement at the heart of what it means to be an employee and an employer in a twenty-first century workplace.

(Gatenby et al. 2009, p. 4)

I like this definition, but many leaders tire of hearing Communications and HR professionals talk passionately about ‘employee engagement’ with no practical depth behind making it happen. What we’re really talking about here is:

How do we boost individual and company performance by engaging people, through inclusion and participation, providing a framework of direction and unlocking the true potential in people to do extraordinary things?

Great leaders have an intuitive sense of how to engage people for performance. During my interviews for this book, great leaders didn’t see the examples they gave me as ‘best practices of engagement’; they are part of the way they get on and do things to create a culture that breeds success in their businesses. Great leaders engage naturally. However, for those of us still on the journey (and those who recognise that there is always room for improvement), let’s look in more detail at why it’s important and how we can achieve it.

CHAPTER

2

Why Engage People in Business?

I have realised in the last six years what’s possible when you get the right level of alignment of the organisation with a clear strategy. When leaders and the organisation are truly engaged, amazing things become possible.

Stuart Fletcher, former President of International Business at Diageo

Business cases for employee engagement have strengthened recently as more evidence has become available linking it to customer satisfaction and profit. However, the most powerful evidence of the need to engage employees to nurture culture and increase performance is when CEOs and leaders intuitively notice the benefits without needing to see a business case. During my time as Director of Employee Engagement and Change at Sony Europe, I worked closely with Fujio Nishida, Sony Europe’s President. He used to say that he would instinctively feel the positive difference of an engaged workforce, and believed it was critical to sustain a culture of long-term innovation in the business.

Not every leader feels the difference so quickly, so let’s capture some of the critical reasons to engage employees for a performance culture (see Figure 2.1). The first element is, quite rightly, the most focused upon – business performance. Beyond this, I’ve also covered the wider benefits, including confidence, reductions in sickness, and increased customer satisfaction and customer benefits.

Business Performance: Revenue, Profit, Earnings per Share

There are many studies that attribute an increase in revenues and profits/earnings per share to greater employee engagement. Public sector bodies have also seen positive outcomes connected to financial management and individual motivation. Here is a selection.

The report Engaging for Success: Enhancing Performance through Employee Engagement (MacLeod and Clarke 2009) concluded that engagement has tangible outcomes at an organisational and individual level. At an organisational level, it found better outcomes in the public sector: specifically, better financial performance and higher levels of innovation and advocacy. For the individual, it reported higher levels of wellbeing and a more satisfying workplace.

During 2006, Gallup examined almost 24,000 business units and compared top-quartile and bottom-quartile financial performance with engagement scores (Harter et al. 2006, Gallup Q12 meta-analysis, cited in MacLeod and Clarke 2009). It found that those with scores in the bottom quartile averaged 31–51 per cent more employee turnover, 51 per cent more inventory shrinkage and 62 per cent more accidents. Those with engagement scores in the top quartile averaged 12 per cent higher customer advocacy, 18 per cent higher productivity and 12 per cent higher profitability.

Figure 2.1 Engagement for Performance Model

Source: Copyright Best Companies LLP and reproduced with kind permission.

Tower Perrins-ISR carried out a global survey in 2006 that included data gathered from opinion surveys of more than 664,000 employees from 50 companies around the world, representing a range of industries and sizes (Tower Perrins-ISR 2006). The survey compared the financial performance of organisations with a highly engaged workforce to their peers with a less engaged workforce over a 12-month period.

The conclusions indicated a significant difference in bottom-line results in companies with highly engaged employees compared with companies with low levels of employee engagement. Most noticeable was the near 52 per cent gap in the performance improvement in operating income over the year between companies with highly engaged employees versus companies whose employees had low engagement scores. Companies with high levels of employee engagement improved 19.2 per cent in operating income, while companies with low levels of employee engagement declined 32.7 per cent over the study period.

In evidence to the MacLeod review (MacLeod and Clarke 2009), Standard Chartered Bank reported that in 2007 it found that branches with a statistically significant increase in levels of employee engagement (0.2 or more on a scale of five) had a 16 per cent higher profit margin growth than branches with decreased levels of employee engagement.

A Watson Wyatt study of 115 companies suggested that a company with highly engaged employees achieves a financial performance four times greater than companies with poor engagement (Watson Wyatt 2009). They also reported that the highly engaged were more than twice as likely to be top performers – almost 60 per cent of them exceeded or far exceeded expectations for performance. Moreover, the highly engaged missed 43 per cent fewer days of work due to illness.

Hewitt reports that companies with a greater than 10 per cent profit growth had 39 per cent more engaged employees and 45 per cent fewer disengaged employees than those with less than 10 per cent growth (Hewitt Associates 2004).

A paper by Fleming, Coffman and Harter in the Harvard Business Review found that customer and employee engagement augment each other at the local level, creating an opportunity for accelerated improvement and growth of overall financial performance (Fleming, Coffman and Harter 2005). Analysis of the performance of 1,979 business units in ten companies revealed that those units that scored above the median on both employee and customer engagement were on average 3.4 times more effective financially (in terms of total sales and revenue performance to target and year over year gain in sales and revenue) than units in the bottom half of both measures.

The Best Companies to Work For survey¹ is conducted annually and attracts companies that are keen to benchmark their engagement levels against others. It has surveyed 3,270 companies since 2001.

Best Companies states that there is a direct correlation between companies which are featured on the Best Companies listing and increased profits. FTSE 100 companies that are high on the Best Companies listing have significantly higher profits than their peers in the index.

Moreover, organisations that have consistently featured in the Best Companies to Work For lists over the period 2005–2009 increased their turnover by 67 per cent and their profits by 64.2 per cent.

Jonathan Austin, Founder and CEO of Best Companies, says the evidence is clear that organisations paying attention to engaging their people are more successful. Here’s how he explains it:

Let’s look at shareholder value. To do that, we’re going to put you in a time machine and send you back to 2006. With you, you have a wallet containing £2,000 and copies of the 2011 Best Companies to Work For lists.

Step out of the time machine, walk into a stockbroker’s office and invest that money. Put £1,000 of it into the FTSE 100. Then take the other £1,000 and invest it in all publicly quoted companies that appear in this year’s Best Companies To Work For lists.

Done that? Good. Now, back into the time machine, return to the present day, and head for home …. At home, on the doormat, there’s a letter from your stockbroker with some surprising news.

Your overall FTSE 100 investment of £1,000 is now worth about … £1,000 …. Oh well.

But your investment in the Best Companies portfolio selection? … That’s now worth close to £2,000.

The point is clearly made by Jonathan. Best Companies goes further to report that over a five-year period, organisations that have consistently featured in the Best Companies to Work For lists, such as KPMG, Deloitte, Beaverbrooks and Haygarth, have seen a 67 per cent increase in turnover and a 64.2 per cent increase in profits (see Figure 2.2).

Figure 2.2 Why engagement matters

Source: Copyright Best Companies LLP and reproduced with kind permission. Produced by Russell Investments

The data about the value of employee engagement are vast, but the summary is that hard numbers exist, in many businesses, to support the logical case for a focus on engagement.

Competitive Advantage

On top of the evidence around business measures based on current data, organisations need a strong competitive advantage if growth is to be sustained. Employee engagement has a huge impact in this area, through routes such as innovation and the ability to make breakthroughs in process, operations and product design.

A highly engaged workforce is more likely to find ways to outsmart the competition and find creative ways to excel for customers.

As the MacLeod report commented:

In a world where most factors of production are increasingly standardised, where a production line or the goods on a supermarket shelf are much the same the world over, employee engagement is the difference that makes the difference – and could make all the difference as we face the realities of globalised competition and of the millions of graduates and even more skilled and committed workers that China, India and other economies are producing each year.

(MacLeod and Clarke 2009)

Given this context, can any organisation, leader or manager afford to ignore employee engagement?

Confidence

Employee engagement creates a more confident workforce. Confidence is a behaviour that many organisations are keen to encourage, particularly as studies show it leads to more successful businesses. As reported by Macleod and Clarke (2009), Towers Perrin found that broadly three-quarters of the highly engaged believe they can impact costs, quality and customer service, while only 25 per cent of the disengaged believe they can.

Sickness

According to the CBI, engaged employees in the UK take an average of 2.69 sick days per year; the disengaged take 6.19 (CBI-AXA 2007, cited in MacLeod and Clarke 2009). The CBI reports that sickness absence costs the UK economy £13.4 billion a year.

Running the maths on this statistic proves what a tremendous cost disengagement is, and it’s even greater if we consider the emotional costs for colleagues that often cover work for their sick team members.

Gallup found that engagement levels can be predictors of sickness absence, with more highly engaged employees taking an average of 2.7 days per year, compared with disengaged employees taking an average of 6.2 days per year (Harter et al. 2006, Gallup Q12 meta-analysis, cited in MacLeod and Clarke 2009).

Attrition

We operate in a world where competitive advantage and performance is highly reliant on the talent organisations attract, recruit and retain. The cost of attracting great people is high, and it’s critical that bright talent ...