Employee Engagement Drives Productivity and Profits

Don Rheem

Our February Vistage speaker, Don Rheem, made a compelling case that CEOs can dramatically improve their business results by being more intentional about their culture. By focusing on employee engagement and creating a place where employees love coming to work every day, CEOs, at little cost, can significantly increase productivity and revenues, enhance customer retention, and reduce employee turnover, absenteeism, sick leave, theft, and accidents. Below are 7 things every CEO should know about employee engagement with links to 3 minute videos of Don making his case for each. These would be great to use in helping your leaders understand why high employee engagement can be such a competitive advantage and what their role is in creating a great place to work.

Video 1: Why should CEOs care about employee engagement?

Don make his case that “There is no other business issue that a company can focus on that will yield a higher return for a lower cost. Nothing else comes close.”

Video 2: Three things CEOs can do to improve employee engagement

Initial action items that create the most value are as follows:

1) Recognition – How often are employees recognized and validated in your company? Feedback needs to be more frequent, more specific, and more timely. This is inexpensive but can have a dramatic impact on engagement.

2) Feedback & Review – Annual reviews are a negative experience for the person giving and the person receiving the feedback. Rheem believes the practice should be eliminated. Employees want feedback more regularly and the time between when they want it and when they get it is far too long if feedback is only given once a year. Feedback should be given on a monthly basis

3) Test & Evaluate – “You can’t manage you don’t measure.” An initial benchmark needs to be established so that improvements in employee engagement can be monitored and leaders held accountable.

Video 3: Dangers of measuring employee engagement:

A survey is a great way to measure employee engagement, but there are a lot of tools out there so it is important to choose a good one. Rheem suggests three things to be cautious of when selecting a survey tool.

1) Measure employee engagement, not employee satisfaction. Employee satisfaction is an outcome of employee engagement, but employee satisfaction is not a leading indicator of employee engagement. Many survey tools that say they address employee engagement actually attempt to measure employee satisfaction. Satisfaction can be attributed to other things besides engagement such as salary and benefits.

2) Try to avoid asking about salary when trying to measure employee engagement. Pay is almost always among the lowest satisfaction items on surveys because employees feel low scores in this area may increase the likelihood of a pay increase. If higher salaries are not an option, don’t ask the question on a survey.

3) Many survey tools are too long. Employees tend to lose interest after 30 questions. Keeping your survey to under 30 questions will still capture key driers of performance

Video 4 : Pending Labor Shortage

In the next few years, the demand for labor will eclipse the supply and employees will be in the driver seat. There are 2 ways the CEO’s can attract and retain talent:

1) Pay higher wages (this can be challenging for CEO’s since labor will typically be the highest item on the income statement when costs rise)

2) Create a culture where people love coming to work. Highly engaged employees are less inclined to leave for higher pay elsewhere.

Video 5: Key Factors in Employee Engagement

When measuring employee engagement, a 4 point measurement scale can be highly effective: actively engaged, somewhat engaged, somewhat disengaged, actively disengaged. There are also 3 other things that employees need to feel engaged and the confluence of these three things is the sweet spot of engagement:

1) Focus- employees need to know the companies goals and their role in accomplishing these goals. A “clear line of site” on what needs to be done is important

2) Capabilities – employees need to be given the tools, resources, and training needed to accomplish company goals in order for them to care

3) Will – your employees’ desire to do their job (discretionary effort) is critical.

Employees need all 3 of these to feel engaged and these criteria are measurable.

Video 6: The Biggest mistake that CEOs are making

The largest mistake that CEOs are making in regards to employee engagement is a lack of understanding on what truly drives human behavior in the workplace. Money is not the answer. Intrinsic motivation is something that can only be volunteered by employees, not demanded. Company culture and managers are the ways to unlock intrinsic motivation. Culture includes elements such as core values, mission, vision, and corporate social responsibility. The simplest definition of company culture is “What does it feel like to work here.” The behavior of your leaders must be congruent with the company culture, they are the key to creating or destroying your culture – employees hire join a company, but they quit their manager. Toxic managers cannot be tolerated.

Video 7: The annual review is dead- what can CEOs do about it?

What do you replace the annual review with if it is dead? First you need to separate the notion of giving a raise with performance reviews. You can still pay for performance, just don’t make the salary discussion the primary place where performance feedback and coaching takes place. This makes performance reviews safer for employees and allows more honest communication. Best practice for reviews is to conduct them monthly. Every employee should have an individualized action plan that they have developed with their manager to help them achieve goals that are important to them. This will increase their sense of autonomy and empowerment which will increase their level of engagement.

Monthly action plan reviews do not need to take more than 15-30 minutes. The manager should begin the meeting by asking the employee how they did on their action plan in the last 3 days. After listening the employee, the manager can offer course corrections, delete items that were accomplished, and add new items. The action plan is very much a living document, and the manager takes on the role of a coach. In the last 5 minutes of the monthly review, the manager should ask “what do you need from me in the next month? What can I do to help you make progress on your plan?”

Building and Sustaining a High Performance Culture

Dramatically changing your culture around employee engagement takes 12 – 18 months. To make rapid and sustained improvement, hire a consulting firms like Don’s to help you measure engagement and train your leaders to improve it. Here are the steps Don recommends.

1) Measure employee engagement (not job satisfaction) annually at the work-group level and then give each work group leader and their team specific feedback on what is working and what could be improved. Hold them accountable for developing and implement action plans to improve it in their groups.

2) Train your leaders (1-2 days) on how to foster engagement and how to change the behaviors and habits that can squash it. Clearly communicate to managers and employees what engaged vs. disengaged behaviors look like.

3) Provide additional coaching to key leaders, and focus on moving employees in the middle from “disengaged” to “engaged.” Employees and leaders who are “actively disengaged” and especially toxic managers who are resistant to change need to be terminated.

4) Hire based on fit with your high engagement/high performance culture, and on-board new employees with a mentor other than their boss.

5) Clearly communicate your vision and core values and recognize people who are living up to them.

6) Replace the annual performance/salary review with 15 minute monthly employee action plan updates and feedback sessions.

7) Continue the employee engagement and feedback process annually to measure progress and foster continuous improvement and accountability.

For more information, go to engagient.com

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