For example, a well-known pharmaceutical company found that its executives and scientists in China were leaving the company at an alarming rate. The annual engagement survey provided no information to help diagnose this problem. By running a statistical analysis on all the variables among these departing high-potential workers, the company realized that in China, unlike other parts of the world, people were expecting very high rates of compensation increase every year.
The job market there was highly competitive, so people were being poached based on salary progression alone. Today more and more companies are deploying analytics solutions to predict retention, correlating factors such as compensation, travel schedule, manager, and demographics to understand why certain people are less engaged than others.
Do these all result in high engagement? So what matters today? Most studies show that compensation is an important factor in employee satisfaction. Research by Aon Hewitt, for example, shows that it ranks among the top five drivers but is not number one. One organization we studied told us that among the highest-potential employees, the organization could directly correlate pay increases with retention—but among the remaining 90 percent of the workforce, compensation simply had to be competitive and fair within job families.
Our discussions with clients confirmed that once pay is competitive and fair, the 20 issues we discuss in this paper have a much greater effect. The first and perhaps most important part of employee engagement is job-person fit. We need to make sure jobs are meaningful, people have the tools and autonomy to succeed, and that we select the right people for the right job.
This is anything but a simple undertaking.
Nearly every job has been changed and often transformed by technology, and we constantly look for ways to do more with less. Well-run companies constantly look at the work they do, trying to find ways to outsource more to technology and produce more output with less expensive human input. Despite these pressures to improve productivity, research shows that when we enrich jobs, giving people more autonomy, decision-making power, time, and support, the company makes more money. Zeynep Ton, a Massachusetts Institute of Technology professor, in her book The Good Jobs Strategy shows that retailers like Whole Foods, Costco, UPS, and Mercadona deliver higher profitability per employee by giving their employees above-average wages and greater control over their jobs.
At Mercadona and Costco, for example, stores are staffed by people cross-trained to handle many positions: They manage cash registers, stock shelves, rearrange the store, develop promotions, and manage others.
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The result is both a set of highly empowered teams that have the training and freedom to be both autonomous and productive as well as above-average retention and engagement rates. As we design jobs to be meaningful, we must also carefully select the right person for each job. Fewer than 40 percent of all hiring teams use any form of formal prehire assessment: Most managers look for relevant experience, college credentials, or GPA.
When we hire people who fit, they perform well, and they love their work. The concept of culture has also become an important part of job fit. Zappos, a company that prides itself on culture as strategy, uses its 10 core values to assess people for cultural fit in the early stages of the application process. This type of assessment has helped Zappos maintain a high level of engagement, low turnover, and its place among one of the best customer-service providers in online retail. Research also shows that meaningful work takes place in small teams.
Finally, engaged people need time to think, create, and rest. A well-known retailer, for example, sends workers home when the store is slow. Then, when things get busy, they return to the store. This company is one of the most profitable in its industry, in part, because slack time gives its workforce the freedom to take care of their home lives and put more effort into their work. It may seem counterproductive to let people take time off during the week, but in fact the opposite is true.
Overworked people tend to burn out, produce lower-quality output, provide lower levels of customer service, become depressed, and sometimes just flail around in their exhaustion. The second element of an irresistible organization is the one business and HR leaders think about the most: management. In many ways, management is the most important capability we have. CEOs can create strategies, investors can optimize capital, and marketers can create demand, but when it comes to building products and offerings, serving clients, and developing internal processes, middle managers make things happen.
Investment in fundamental management practices has a tremendous impact on engagement, performance, and retention.
In our review of engagement issues, the first area we found is the importance of simple, clear goals. When people have clearly defined goals that are written down and shared freely, everyone feels more comfortable, and more work gets done. Goals create alignment, clarity, and job satisfaction—and they have to be revisited and discussed regularly.
Goal setting is a challenge. Only 51 percent of companies even attempt to develop aligned goals, and, among these, only 6 percent regularly revisit them. We found that companies that revisit goals quarterly have threefold greater improvement in performance and retention than those that revisit goals yearly. High-performing managers create simple goals, make sure they are clear and transparent, and revisit them regularly. Google, for example, uses an agile goal-setting process called OKR objectives and key results , which was originally developed at Intel.
At Google, this creates alignment because employees can see who is dependent on their work.
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The second management practice that drives engagement is coaching. While directed management is important, it plays a smaller role than one might think. It is the coaching and development role of management that is the most valuable. What makes a great coach? They invest heavily in management development and ensure that new leaders are given ample support.
High-impact leadership organizations spend 1. The fourth issue is the need to simplify or reengineer the annual performance appraisal. This process, which has been institutionalized in more than 75 percent of all the companies we visit, is among the most damaging and disheartening process employees face each year.
Only 8 percent of surveyed companies think the process is worth the time they put into it, and the focus on rating and ranking takes the focus away from the coaching and development that people often desperately need. In many companies, the process does not involve enough continuous feedback, places too much weight on the actual rating, and often does not encourage hyperperformers to perform at an even higher level. This culture of continuous development is a management culture widely used in high-engagement companies. The third major element of an irresistible organization is the need to build a flexible, humane, and inclusive workplace.
Most employees today have complicated lives. Studies show that 68 percent of women would rather have more free time than make more money, and while 40 percent of professional men work more than 50 hours per week, 80 percent would like to work fewer hours. SAS, the No. Free food, yoga classes, happy hours, commute buses with Internet access, and even free laundry service have now become commonplace in high-pressure companies across a wide range of industries. In addition to such benefits and employee wellness programs, research also shows that open, flexible workplaces have a major impact on engagement.
They bring executives out into the open Mayor Bloomberg created an open work space in New York City, which was credited with bringing teams together to rapidly respond to city crises ; they enable people to meet more easily The new circular Apple campus is designed to encourage groups to meet others ; and they give people highly flexible places to work, depending on the way they feel on a given day Zappos lets employees work from local restaurants, where the company pays for Wi-Fi.
Research shows that introverts still want a quiet office, but modern workspaces give people the flexibility to be together or alone, depending on the task at hand. A second key engagement driver is the need for continuous and ongoing recognition. The key to success here is to create a social environment where recognition can flow from peer to peer, freeing managers from being the judge and jury of employee recognition. Companies that build this culture see tremendous impact.
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When JetBlue implemented a peer-to-peer recognition system focused on company values, employee satisfaction surged by 88 percent. Finally, highly engaged workplaces are also inclusive and diverse: People feel comfortable being themselves. While 71 percent of organizations try to foster diversity and inclusion, only 11 percent have such an environment today. Diversity and inclusion is not an HR strategy; it is a business strategy.
Not only do diverse workplaces attract people from a wider sample, research also shows that teams that operate in an inclusive culture outperform their peers by a staggering 80 percent.
How do organizations become more inclusive? Inclusion usually comes from the top: Leaders must overcome their unconscious biases and make every effort to listen, create open forums for discussion, and promote people with varied backgrounds gender, nationality, race, age who embrace listening and inclusive values. Our research shows that inclusion, unlike diversity, is a cultural issue—one that requires support from top-level leaders as well as all levels of management. Most engagement research shows that learning opportunities, professional development, and career progression are among the top drivers of employee satisfaction.
Employees under the age of 25 rate professional development as their number one driver of engagement, and this is the number two priority for workers up to age Building opportunities for growth is a complex and systemic challenge. First, there must be developmental opportunities, both formal and informal, that let people learn on the job, take developmental assignments, and find support when they need help.
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