Employee Engagement Report

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Corporate Leadership Council

Driving Performance and Retention Through Employee Engagement A Quantitative Analysis of Effective Engagement Strategies

cil

Te le

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nfe re

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Road Map for the Discussion

A Unique Point in Time

Sizing the Opportunity

The Voice of the Workforce

Reframing the Organization’s Response

The Evolving Employment Contract

Source: Corporate Leadership Council 2004 Employee Engagement Survey. © 2004 Corporate Executive Board

1

What Is Employee Engagement? Competing frameworks and definitions…

...contradicting advice…

…and widely differing claims for ROI…

Sample Engagement Definitions

Sample Engagement “Advice”

Claimed Benefits of Engagements

• Engagement is a positive emotional connection to an employee’s work • Engagement is affective, normative, and continuance commitment • Engaged employees are inspired to go above and beyond the call of duty to help meet business goals

• Become a “great place to work” through building trust in colleagues and ensuring employee pride and enjoyment

• Increase total shareholder return by up to 47 percent

• Segmentation is the key to managing employee commitment and productivity

• Better customer feedback

• Great managers are key to achieving an engaged workforce

• Higher sales

• Reduce absenteeism • Less shrinkage of inventory

• To achieve motivation, give the employee a “kick in the pants”

…lead to conceptual confusion and no clear road map for action

And We’re Supposed to Do What…? “Frankly, we don’t even agree on what it is we’re attempting to change, much less how to go about changing it.” SVP of Administration Financial Services Company

Source: Allen, Natalie, and John Meyer, “Affective, Continuance, and Normative Commitment to the Organization: An Examination of Construct Validity,” Journal of Vocational Behavior, 1996; Herzberg, Frederick. “One More Time: How do You Motivate Employees? ” Harvard Business Review (Classic), January 2003; Coffman, Curt and Gabriel Gonzales-Molina, Follow This Path: How the World’s Greatest Organizations Drive Growth by Unleashing High Potential, New York: Warner Books, 2002; Towers, Perrin, Understanding What Drives Employee Engagement, 2003; Age Wave and Harris Interactive, The New Employee/Employer Equation, 2003; Watson Wyatt, WorkUSA2000: Employee Commitment and the Bottom Line, 2000; Hay Group, The Retention Dilemma: Why Productive Workers Leave—Seven Drivers for Keeping Them ; Hewitt Associates, LLC, Best Employers in Canada, 2003, http://www.greatplace towork.com/; Corporate Leadership Council research. © 2004 Corporate Executive Board

2

Bringing It All Together Engagement is the extent to which employees commit to something or someone in their organization and how hard they work and how long they stay as a result of that commitment

Two Commitment “Types”

Rational Commitment The extent to which employees believe that managers, teams, or organizations are in their self-interest (financial, developmental, or professional). Emotional Commitment The extent to which employees value, enjoy and believe in their jobs, managers, teams, or organizations.

Four Focal Points of Commitment

Day-to-Day Work

Team

Direct Manager

Organization

The Outputs of Commitment: Discretionary Effort and Intent to Leave Discretionary Effort An employee’s willingness to go “above and beyond” the call of duty, such as helping others with heavy workloads, volunteering for additional duties, and looking for ways to perform their jobs more effectively.

Performance

Intent to Stay An employee’s desire to stay with the organization, based on whether they intend to look for a new job within a year, whether they frequently think of quitting, whether they are actively looking for a job or have begun to take tangible steps like placing phone calls or sending out résumés.

Attrition

Source: Corporate Leadership Council 2004 Employee Engagement Survey. © 2004 Corporate Executive Board

3

The 2004 Employee Engagement Survey

Measuring Employee Engagement Assessment Methodology The Council assessed the engagement level of employees through 47 questions that measured the strength of rational and emotional commitment to day-to-day work, direct manager, team, and organization, along with the level of discretionary effort and intent to stay.

Sample Emotional Commitment Questions • I believe in what I do every day at work Strongly Disagree

Strongly Agree

• I enjoy working with my team Strongly Disagree

Strongly Agree

• When speaking to others, I speak highly of my supervisor Strongly Disagree

Strongly Agree

• I am proud to work for my organization Strongly Disagree

Strongly Agree

Sample Rational Commitment Questions* • The best way for me to develop my skills in my organization right now is to stay with my current team Strongly Disagree

Strongly Agree

• The best way for me to advance in this organization is to stay with my current supervisor

Sample Discretionary Effort Questions • I frequently try to help others who have heavy workloads Strongly Disagree

• There are days when I don’t put much effort into my job Strongly Disagree

Strongly Disagree

Strongly Agree

• The best way for me to advance my career is to stay with my current organization Strongly Disagree

Strongly Agree

• My performance would suffer if I worked with any other team in my organization

Strongly Disagree

Strongly Agree

• When needed, I am willing to put in the extra effort to get a job done Strongly Agree

• I intend to look for a new job with another organization within the next year Strongly Disagree

Strongly Agree

• I frequently think about quitting my job and leaving this organization Strongly Disagree

Strongly Agree

• I am actively looking for a job with another organization Strongly Disagree

Strongly Agree

• I have recently made phone calls or sent out my résumé in order to find a job with another organization Strongly Disagree

Strongly Agree

Strongly Agree

* Rational commitment to day-to-day work was not measured due to its similarity to rational commitment to the team, direct manager, and organization. © 2004 Corporate Executive Board

Strongly Agree

• I am constantly looking for ways to do my job better

Strongly Disagree Strongly Disagree

Strongly Agree

Sample Intent to Stay Questions

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

4

With Sincere Thanks… More than 50,000 employees from 59 organizations, 30 countries, and 14 industries participated in the 2004 survey

Source: Corporate Leadership Council 2004 Employee Engagement Survey. © 2004 Corporate Executive Board

5

Survey Demographics Organizational Level, Function, and Geography of the Survey Participants Management Level

Work Function

Division Senior Executive Head/VP

Department/ Unit Manager/ Director

< 1%

2%

Sales 6%

Geography

Corporate Admin

4%

17% Other1

13%

15%

9%

South Africa

Other2

2% 5% 4%

14% 75%

Finance/Accounting

9%

North America

5%

Operations Non-Management

Customer Services

6% Engineering and Design 8%

31%

68%

Supervisor/ Administrator

Australia/ Europe New Zealand

IT

Human Resources

4% 3%

Marketing

Manufacturing

Age, Gender, and Tenure of Survey Participants Age

Gender

Tenure with Company 31 Years or More

61 Years or Older

2%

51–60 Years Old

19%

3%

18–30 Years Old

21–30 Years

14%

16% Female

32%

31%

31–40 Years Old

46%

54%

Male

11–20 Years

22%

10 Years or Less

61%

41–50 Years Old

1

Retail (2%), Strategy/Planning (2%), Research and Development (1%), Quality Control (3%), Purchasing (2%), Legal (2%), Communications (3%), Actuaries (3%), Pharmacists (1%), and Miscellaneous (12%). 2 Includes Asia (1%), South America (1%), and Pacific Rim (<1%). Note: Percentage totals may not equal 100 percent due to rounding. © 2004 Corporate Executive Board

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

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State of Workforce Engagement

Good News, Bad News Approximately 13 percent of the overall workforce is highly uncommitted…

…76 percent are “up for grabs,” neither fully committed or uncommitted…

…and the remaining 11 percent are highly committed

The “Disaffected”

The “Agnostics”

The “True Believers”

20%

29%

27% 11%

13%

Strongly Disagree

Strongly Agree

Characteristics • Exhibit very strong emotional and rational noncommitment to day-to-day work, the manager, the team, and the organization

Strongly Disagree

Strongly Agree

Characteristics • Exhibit strong emotional or rational commitment to one focus, but only moderate commitment to remaining foci

Strongly Disagree

Strongly Agree

Characteristics • Exhibit very strong emotional and rational commitment to day-to-day work, the manager, the team, and the organization

• Twenty percent lean toward non-commitment, twenty-seven percent lean toward strong commitment, while twenty-nine percent are truly ambivalent • Poorer performers who frequently put in minimal effort

• Employees neither go to great lengths in their jobs, nor do they shirk their work

• Four times more likely to leave the organization than the average employee

• Significant variation in intent to stay

• Nine times more likely to leave the organization than the “true believers”

• Higher performers who frequently help others with heavy workloads, volunteer for other duties, and are constantly looking for ways to do their jobs better • Half as likely to leave the organization as the average employee • Nine times more likely to stay with the organization as the “disaffected” Source: Corporate Leadership Council 2004 Employee Engagement Survey.

© 2004 Corporate Executive Board

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Engagement Is Not Segment-Specific

No Easy Litmus Tests Quick “rules of thumb” will prove inadequate as a means of identifying the committed and uncommitted Generation X “Slackers”? 12.0%

“Overworked” Managers?

Single Parents with Children?

11.7%

12.0%

10.6%

Percentage of Employees with Highest 6.0% Commitment Levels

Percentage of Employees with Highest Commitment Levels

0.0%

11.4%

10.8%

12.0%

Percentage of Employees with Lowest Commitment Levels

6.0%

Employees Under 40

6.0%

0.0%

0.0% Employees Over 40

10.8% 9.9%

Single Parents with Three Children

Managers Managers Working Working Fewer Than More Than 60 Hours per 60 Hours per Week Week

Single People with No Children

Percentage of Highly Committed and Uncommitted by Employee Demographic Group Demographic/Group

Highly Committed

Highly Uncommitted

Married Single

10.8% 11.7%

12.2% 13.0%

Three Years of Tenure Ten Years of Tenure

11.5% 10.5%

12.9% 13.7%

Sales Function Corporate Administration

13.4% 12.8%

10.8% 10.6%

Telecommunications Industry Financial Services Industry

10.7% 11.5%

13.3% 12.1%

Management Non-Management

11.1% 11.2%

10.7% 12.5% Source: Corporate Leadership Council 2004 Employee Engagement Survey.

© 2004 Corporate Executive Board

8

Engagement Is Company-Specific

The Real Litmus Test: Companies While minimal differences in engagement exist among demographic segments, dramatic differences exist across organizations Percentage of Company Workforce in “True Believer” Category*

23.8%

2.9%

Highest Scoring Company

* The analysis above is based on the percentage of each organization’s workforce that demonstrates the highest level of both emotional and rational commitment to day-to-day work, the manager, the team, and the organization (termed “True Believers” on page 14b). © 2004 Corporate Executive Board

Lowest Scoring Company

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

9

Engagement Is Company-Specific

Some Work (Much) Harder Organizations exhibit drastic differences in the discretionary effort of their employees Percentage of Workforce Exhibiting Highest Effort Levels, by Company

25.0%

Nearly 25 percent of the workforce in this organization exert maximum effort… …while in this organization, less than three percent of the workforce is willing to do the same.

Percentage of Company Workforce 12.5% Exhibiting Highest Level of Discretionary Effort

0.0%

Company

Source: Corporate Leadership Council 2004 Employee Engagement Survey. © 2004 Corporate Executive Board

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The Corporate Leadership Council’s Model of Engagement Commitment…

Rational Commitment • Team • Manager • Organization

Emotional Commitment • Job • Team • Manager • Organization

…drives effort and intent to stay…

Discretionary Effort

Performance

Intent to Stay

Retention

* Rational commitment to day-to-day work was not measured due to its similarity to rational commitment to the team, direct manager, and organization. © 2004 Corporate Executive Board

…resulting in improved performance and retention

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

11

A Note of Caution: Engagement Is Not a Cure-All A high- performing workforce first depends on the recruitment of high-quality talent…

…once in place, engagement accounts for roughly 40 percent of observed performance improvements

Recruiting High Quality Talent

Percentage of Observable Performance Improvement by Category1

100%

e hir 43%

Recruiting for High Performance • Intelligence • Right Skill Set

Total Percentage 50% Improvement

Understanding Direct Performance Inflectors Direct performance inflectors include • Job-relevant information (e.g., training) • Experiences (e.g., on-the-job development) • Resources (e.g., a better computer).2 o s to D u rce Reso our Job Y

• Strong Work Ethic

1. 2. 3.

57%

0% Performance Improvement Through Employee Commitment and Effort Performance Improvement Through Direct Performance Inflectors 1

2

Using structural equation models, the total effect of more than 100 levers for increasing performance was decomposed into two components: the direct effect of the lever on performance (consisting of job relevant information, experiences, or resources) and the indirect effect of the lever on performance through emotional and rational commitment. The numbers presented are the average across the top 100 levers. The Council’s recent study Building the High Performance Workforce presents an extensive treatment of direct performance inflectors.

© 2004 Corporate Executive Board

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

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Commitment Drives Effort and Performance Organizations that improve commitment will see significant returns in discretionary effort…

…resulting in higher performance across the workforce

Maximum Impact of Commitment on Discretionary Effort*

Maximum Impact of Discretionary Effort on Performance Percentile*

Moving employees from strong noncommitment to strong commitment can result in a 57 percent increase in discretionary effort.

Moving from low to high effort levels can result in a 20 percent improvement in employee performance. 1.57

Change in Discretionary Effort

1.0

Strongly NonCommitted

Number of Employees

Strongly Committed

50th Percentile

70th Percentile

The “10:6:2” Rule • Every 10 percent improvement in commitment can increase an employee’s effort level by 6 percent. • Every 6 percent improvement in effort can increase an employee’s performance by 2 percent.

* The analysis above presents a statistical estimate of the maximum total impact on discretionary effort and performance emotional commitment will produce. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort or performance rank for an employee who scores “high” in emotional commitment, and the predicted discretionary effort or performance rank for an employee who scores “low” in emotional commitment. © 2004 Corporate Executive Board

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

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Commitment Drives Retention Employees with high levels of commitment are significantly less likely to leave Maximum Impact of Commitment on the Probability of Departure

10%

Moving from strong non-commitment to strong commitment decreases the probability of departure by 87 percent.

9.2%

Probability of Departure in Next 12 5% Months

1.2% 0%

Strongly Non-Committed

Strongly Committed

The “10:9” Rule Every 10 percent improvement in commitment can decrease an employee’s probability of departure by 9 percent.

* Analyzing data from the Council’s 2004 employee engagement data and attrition models from CLC Solutions, non-linear regression was used to estimate the rate of departure for employees according to commitment level. © 2004 Corporate Executive Board

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

14

What a Difference Engagement Can Make A tale of two companies from the 2004 Employee Engagement Survey

Rational Commitment

Discretionary Effort

22.9% Percentage of Workforce Strongly Rationally Committed

4.9% Organization A

Percentage of Workforce in Highest Category of Discretionary Effort

Organization B

15.8% 7.8%

Organization A

Organization B

Intent to Stay`

Emotional Commitment

42.9%

20.8% Percentage of Workforce Strongly Emotionally Committed

4.9% Organization A

Organization B

Percentage of Workforce in Highest Category of Intent to Stay

13.7%

Organization A

Organization B

Source: Corporate Leadership Council 2004 Employee Engagement Survey. © 2004 Corporate Executive Board

15

The Connection Between Engagement and Company Performance Companies with above average employee commitment had greater one-year revenue growth relative to their industry than those with below-average employee commitment. Percentage of Companies by Economic Performance and Employee Commitment

Below Average Company Performance

Above Average Company Performance

29% 38% 71%

62%

Above Average Company Performance

Companies with Above Average Employee Commitment

* Company performance is determined by above or below average one-year revenue growth relative to industry peer group. Above average employee commitment is defined as having more than 11 percent of an organization’s workforce fall into the highly committed category. Below average employee commitment is defined as having less than 11 percent of an organization’s workforce fall into the highly committed category. © 2004 Corporate Executive Board

Below Average Company Performance

Companies with Below Average Employee Commitment

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

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Road Map for the Discussion

A Unique Point in Time

Sizing the Opportunity

The Voice of the Workforce

Reframing the Organization’s Response

The Evolving Employment Contract

© 2004 Corporate Executive Board

17

The Corporate Leadership Council’s Model of Engagement Commitment…

Rational Commitment • Team • Manager • Organization

…drives effort and intent to leave…

…resulting in improved performance and reduced attrition

Discretionary Effort

Performance

Intent to Stay

Retention

Engagement Levers

Emotional Commitment • Job • Team • Manager • Organization

* Rational commitment to day-to-day work was not measured due to its similarity to rational commitment to the team, direct manager, and organization. © 2004 Corporate Executive Board

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

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Assessing the Impact of Engagement Levers

A Four-Step Approach to Testing Levers of Effort Assessing the impact of general training on employee engagement Step #1: Measure Presence and Effectiveness of “Engagement Levers”

Step #2: Measure Attitudes of Engagement

In the last 12 months, about how many hours of general training have you received from your organization?

Example: I believe in what I do every day at work. Question 4 of Engagement Assessment: I believe in what I do every day at work.

I received no general skills training in the last 12 months Less than 1 hour 1 to 5 hours … 61 to 70 hours More than 70 hours of training

Strongly Agree

Disagree

Agree

Strongly Disagree

Somewhat Agree Somewhat Disagree

Step #4: Calculate the Lever’s Total Impact on Discretionary Effort and Intent to Stay

Step #3: Apply a Structural Equation Model to Estimate Impact of Lever Rational Commitment • Team • Manager • Organization

Change in Effort and Intent to Leave Due to Amount of General Training Received

Discretionary Effort

Engagement Levers

Effort

Intent to Stay

• • • •

Emotional Commitment Job Team Manager Organization

Intent to Stay

Source: Corporate Leadership Council 2004 Employee Engagement Survey. © 2004 Corporate Executive Board

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Emotional Commitment Drives Discretionary Effort

Feel Like Trying Hard? Employees try (or don’t try) as a result of emotional commitment, not rational commitment Maximum Impact of Commitment Type on Discretionary Effort*

Emotional Commitment

A strong emotional commitment to one’s job and organization has the greatest impact on discretionary effort. 60%

Rational Commitment

55.9% The impact of rational commitment is much smaller.

43.2% 38.9% Change in Discretionary Effort

34.0% 30%

18.4% 13.8% 7.6% 0% Emotional— Job

Emotional— Organization

Emotional— Team

* Each bar represents a statistical estimate of the maximum total impact on discretionary effort each type of commitment will produce. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who is strongly committed, and the predicted discretionary effort level for an employee who is strongly uncommitted. The impact of each commitment type is modeled separately. © 2004 Corporate Executive Board

Emotional— Manager

Rational— Organization

Rational— Team

Rational— Manager

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

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Retention Problems Are Problems of Rational Commitment

Meet Employee Needs to Battle Attrition Employees leave organizations largely out of self-interest, but emotions still play a pivotal role Maximum Impact of Commitment Type on Intent to Stay*

60%

50.0%

Emotional Commitment

A strong rational commitment to the organization leads to the strongest reduction in intent to stay.

38.8%

Rational Commitment

38.6% 33.7%

Improvements in Intent to Stay 30%

33.2% 30.0% 25.4%

0% Rational— Organization

Rational— Team

Emotional— Organization

* Each bar represents a statistical estimate of the maximum total impact on intent to stay each type of commitment will produce. The maximum total impact is calculated by comparing two statistical estimates: the predicted intent to stay for an employee who is strongly committed, and the predicted intent to stay for an employee who is strongly uncommitted. The impact of each commitment type is modeled separately. © 2004 Corporate Executive Board

Emotional— Manager

Emotional— Job

Rational— Manager

Emotional— Team

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

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Identifying Engagement Levers

How Do We Build Commitment? A wide variety of levers influence the degree to which employees commit to the organization The Corporate Leadership Council’s Model of Engagement

Rational Commitment • Team • Manager • Organization

Discretionary Effort

Performance

Intent to Stay

Retention

Engagement Levers

Emotional Commitment • Job • Team • Manager • Organization

* Rational commitment to day-to-day work was not measured due to its similarity to rational commitment to the team, direct manager, and organization. © 2004 Corporate Executive Board

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

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Potential Levers for Driving Engagement The 2004 Council survey examined more than 300 potential levers, the top 160 of which are listed below • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

401(k) Plan Ability to Obtain Necessary Information Manager: Accepts Responsibility for Successes and Failures Manager: Accurately Evaluates Employee Performance Manager: Accurately Evaluates Employee Potential Manager: Adapts to Changing Circumstances Amount of General Skills Training Received Amount of Job-Specific Training Received Amount of Travel (Actual Versus Desired) Manager: Analytical Thinking Manager: Appropriately Handles Crises Manager: Articulates a Long-Term Vision for the Future Manager: Attains Information, Resources, and Technology Base Pay External Equity Base Pay Internal Equity Base Pay Satisfaction Manager: Breaks Down Projects into Manageable Components Manager: Cares About Employees Cash Bonus External Equity Cash Bonus Internal Equity Cash Bonus Satisfaction Manager: Clearly Articulates Organizational Goals Manager: Clearly Communicates Performance Expectations Onboarding: Clearly Explains Job Importance Onboarding: Clearly Explains Job Responsibilities Manager: Clearly Explains Performance Objectives Commission External Equity Development Plan: Emphasis on General Skills Training, JobSpecific Training, Skills and Behaviors, Job Experiences, Leadership Training, and Management Training Development Plan: Employee Influence in Creating Development Plan: Sufficient Time to Complete Development Plan: Use Manager: Differential Treatment of Best and Worst Performers Diffuse Decision-making Authority Senior Executive Team Diversity Domestic Partner Education Assistance Effectiveness of Career Advisor Onboarding: Teaches About Organizational Vision and Strategy Telecommuting Manager: Values Work–Life Balance of Employees Manager: Sets Realistic Performance Expectations Manager: Treats Direct Reports Equally Manager: Trusts Employees to Do Their Job Opportunity to Work with the Senior Executive Team

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

Commission Internal Equity Commission Satisfaction Manager: Commitment to Diversity Community Involvement Company Performance Connection Between Work and Organizational Strategy Manager: Creates Clear Work Plans and Timetables Culture of Flexibility Culture of Innovation Culture of Risk Taking Customer Focus Day-Care Manager: Deeply Cares about Employees Manager: Defends Direct Reports Manager: Demonstrates Honesty and Integrity Manager: Demonstrates Passion to Succeed Development Plan: Challenge Development Plan: Effectiveness Manager: Has a Good Reputation within the Organization Health Benefits Information Manager: Helps Find Solutions to Problems Manager: Holds People Accountable Importance of Job to Organizational Success Importance of Projects to Employees’ Personal Development Importance of Projects to Employees’ Long-term Career Manager: Inspires Others Internal Communication Onboarding: Introduces New Hires to Other New Employees Senior Executive Team: Is Committed to Creating New Jobs Manager: Is Friendly and Approachable Manager: Is Intelligent Manager: Is Open to New Ideas Senior Executive Team: Is Open to New Ideas Job Challenge Manager: Encourages and Manages Innovation Manager: Encourages Employee Development Equity and Recognition Fitness Program Flexible Work Schedule Freedom from Harassment in the Workplace Future Orientation Understanding of How to Successfully Complete Work Projects Vacation Perceived Rewards: Opportunity for Promotion Short-Term Disability Health Benefits

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

© 2004 Corporate Executive Board

Job Fit—Better Suited for Another Position Job Fit—Type of Work Job Freedom Job Influence Leave Benefits Information Manager: Lets Upper Management Know of Employee Effectiveness Manager: Listens Carefully to Views and Opinions Long-Term Disability Senior Executive Team: Makes Efforts to Avoid Layoffs Senior Executive Team: Makes Employee Development a Priority Manager: Makes Sacrifices for Direct Reports Maternity Leave Opportunity Culture Opportunity to be Promoted Opportunity to Help Launch a New Business, Initiative, or Program Opportunity to Help Turn Around a Struggling Business Opportunity to Spend Time with a Professional Coach Opportunity to Take Breaks Opportunity to Work in a Different Country Opportunity to Work in a Variety of Jobs/ Roles Opportunity to Work in New Divisions or Business Units Opportunity to Work in New Functional Areas Opportunity to Work on Things You Do Best Opportunity to Work with a Mentor Effectiveness of General Skills Training Effectiveness of Job-Specific Training Employee Assistance Program Employee Stock Ownership Program Manager: Encourages and Manages Innovation Perceived Rewards: Size of Annual Bonus Perceived Rewards: Size of Annual Raise Manager: Persuades Employees to Move in a Desired Direction Manager: Places Employee Interests First Task Variety Onboarding: Teaches About Group or Division Work-Life Balance Information Manager: Works Harder Than Expects Employees to Work Total Compensation External Equity Total Compensation Internal Equity Total Compensation Satisfaction Senior Executive Team: Strong in Leading and Managing People Senior Executive Team: Strong in Personal Characteristics

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

Manager: Possesses Job Skills Prescription Drug Benefit Profit Sharing External Equity Profit Sharing Internal Equity Profit Sharing Satisfaction Provides Job Freedom Provides Necessary Tools and Resources Onboarding: Provides Work Immediately Quality of Informal Feedback Manager: Recognizes and Rewards Achievement Organization’s Reputation of Integrity Manager: Respects Employees as Individuals Retirement Information Senior Executive Team: Strong in Strategy Selection and Implementation Sufficient People to Complete Tasks Sufficient Time to Complete Tasks Sufficient Tools and Resources Manager: Respects Employees as Individuals Retirement Information Safe Workspace Sick Leave Stock Bonus External Equity Stock Bonus Internal Equity Stock Bonus Satisfaction Senior Executive Team: Strong in Day-to-Day Process Management Retirement Medical Group Plan Paid Time-Off Bank Pension Manager: Puts People in the Right Roles at the Right Time Safety of Tasks

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The Universality of Engagement Levers

Not So Different After All Most levers impact all employees to the same degree Average Difference in Impact of Levers on Discretionary Effort Between Segment and Aggregate Workforce

Segment Type

Average Difference in Impact of Lever Across Segments

Managers

5.04%

Regional

4.33%

Organizations

2.93%

Hourly Workers

2.70%

Front-Line Employees

2.42%

Sales People

2.03% Gen X

Generations X and Y

1.69%

R&D and Engineering

1.68%

* Using structural equation models, the total effect of more than 100 levers for increasing discretionary effort was measured for the aggregate population and the subsets outlined above. The average difference is found by subtracting the total effect for the aggregate dataset from the total effect for the subset and averaging over the 100 levers. The absolute value of the difference is presented. © 2004 Corporate Executive Board

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

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Some Engagement Levers Much More Effective Than Others

The Power of Focus on High-Impact Levers While the majority of levers will improve discretionary effort, a select group of levers produce significantly higher returns Maximum Impact of Engagement Levers on Discretionary Effort*

40%

The top 50 levers of discretionary effort are 40 times as powerful as the bottom 150 levers.

Change in Discretionary 20% Effort

0% 50

* Each bar represents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately. © 2004 Corporate Executive Board

100

150

300

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

25

Potential Engagement Levers Manager

Manager (Continued)

Senior Executive Team

Compensation

Benefits

• Accepts Responsibility for Successes

• • • • • • •

• Deeply Cares About Employees • Is Committed to Creating New

• Total Compensation Satisfaction • Total Compensation External Equity • Total Compensation • Internal Equity • Base Pay Satisfaction • Base Pay External Equity • Base Pay Internal Equity • Cash Bonus Satisfaction • Cash Bonus External Equity • Cash Bonus Internal Equity • Commission Satisfaction • Commission External Equity • Commission Internal Equity • Profit Sharing Satisfaction • Profit Sharing External Equity • Profit Sharing Internal Equity • Stock Bonus Satisfaction • Stock Bonus External • Equity Stock Bonus • Internal Equity

Health Benefits: • Health Benefits Plan • Health Benefits Information • Prescription Drug Benefit

• • • • • • • • • • • • • • • • • • •

and Failures Accurately Evaluates Employee Performance Accurately Evaluates Employee Potential Adapts to Changing Circumstances Analytical Thinking Appropriately Handles Crises Articulates a Long-Term Vision for the Future Attains Information, Resources, and Technology Breaks Down Projects into Manageable Components Cares About Employees Clearly Articulates Organizational Goals Clearly Communicates Performance Expectations Commitment to Diversity Creates Clear Work Plans and Timetables Defends Direct Reports Demonstrates Honesty and Integrity Demonstrates Passion to Succeed Encourages and Manages Innovation Encourages Employee Development Has a Good Reputation Within the Organization

• • • • • • • • • • • • • • •

Helps Find Solutions to Problems Holds People Accountable Inspires Others Is Friendly and Approachable Is Intelligent Is Open to New Ideas Lets Upper Management Know of Employee Effectiveness Listens Carefully to Views and Opinions Makes Sacrifices for Direct Reports People in the Right Roles at the Right Time Persuades Employees to Move in a Desired Direction Places Employee Interests First Possesses Job Skills Provides Job Freedom Quality of Informal Feedback Recognizes and Rewards Achievement Respects Employees as Individuals Sets Realistic Performance Expectations Treats Direct Reports Equally Trusts Employees to Do Their Job Values Work–Life Balance of Employees Works Harder Than Expects Employees to Work

Jobs

• Is Open to New Ideas • Makes Employee Development a Priority

• Provides Necessary Tools and Resources

• Strong in Day-to-Day Process Management

• Strong in Leading and Managing People • Strong in Personal Characteristics • Strong in Strategy Selection and Implementation • Teaches About Organizational Vision and Strategy

Leave Benefits: • Leave Benefits Information • Long-Term Disability • Maternity Leave • Paid Time-Off Bank • Short-Term Disability • Sick Leave • Vacation Retirement Benefits: • Retirement information • 401(k) Plan • Employee Stock Ownership Program • Pension • Retirement Medical Group Plan Work–Life Benefits: • Work–Life Balance Information • Day-Care • Domestic Partner • Employee Assistance Program • Education Assistance • Fitness Program • Flexible Work Schedule • Telecommuting

Source: Corporate Leadership Council 2004 Employee Engagement Survey. © 2004 Corporate Executive Board

26

Potential Engagement Levers (Continued) Onboarding

Day-to-Day Work

Learning and Development

Organizational Culture

• Clearly Explains Job Importance • Clearly Explains Job Responsibilities • Clearly Explains Performance Objectives • Introduces New Hires to Other New Employees • Provides Necessary Tools and Resources • Provides Work Immediately • Teaches About Group or Division • Teaches About Organizational Vision and Strategy

• Ability to Obtain Necessary Information • Amount of Travel (Actual Versus Desired) • Connection Between Work and Organizational Strategy • Understanding of How to Successfully Complete Work Projects • Freedom from Harassment in the Workplace • Importance of Job to Organizational Success • Importance of Projects to Employees’ Long-Term Career • Importance of Projects to Employees’ Personal Development • Job Challenge • Job Fit—Better Suited for Another Position • Job Fit—Type of Work • Job Freedom • Job Influence • Opportunity to Take Breaks • Opportunity to Work on Things You Do Best • Perceived Rewards: Opportunity for Promotion • Perceived Rewards: Size of Annual Bonus • Perceived Rewards: Size of Annual Raise • Safe Workspace • Safety of Tasks • Sufficient People to Complete Tasks • Sufficient Time to Complete Tasks • Sufficient Tools and Resources • Task Variety

• Development Plan: Challenge • Development Plan: Effectiveness • Development Plan: Emphasis on General Skills

• • • • • • •

• • • • • • • • • • • • • • • • •

Training, Job-Specific Training, Skills and Behaviors, Job Experiences, Leadership Training, and Management Training Development Plan: Employee Influence in Creating Development Plan: Sufficient Time to Complete Development Plan: Use Amount of General Skills Training Received Amount of Job-Specific Training Received Effectiveness of General Skills Training Effectiveness of Job-Specific Training Effectiveness of Career Advisor Opportunity to Be Promoted Opportunity to Help Launch a New Business, Initiative, or Program Opportunity to Help Turn Around a Struggling Business Opportunity to Spend Time with a Professional Coach Opportunity to Work in a Different Country Opportunity to Work in a Variety of Jobs/ Roles Opportunity to Work in New Divisions or Business Units Opportunity to Work in New Functional Areas Opportunity to Work with a Mentor Opportunity to Work with the Senior Executive Team

• • • • • • •

Community Involvement Company Performance Customer Focus Diffuse Decision-Making Authority Diversity Culture of Flexibility Differential Treatment of Best and Worst Performers Equity and Recognition Future Orientation Culture of Innovation Communication Opportunity Culture Culture of Risk Taking Reputation of Integrity

Source: Corporate Leadership Council 2004 Employee Engagement Survey. © 2004 Corporate Executive Board

27

Reevaluating Our Tools Direct Manager: The Rule of Three and the challenge of scale

Senior Executive Team: The importance of reciprocity

Compensation Plans: The power and limitations of financial rewards

Benefits Plans: The value of information

Onboarding: An important job from day one

Day to Day Work: Connecting employees to something larger

Learning and Development: Tangible commitment to a personalized approach

Organizational Culture: Connection, contribution, and credibility

© 2004 Corporate Executive Board

28

Many Things—and No One Thing Almost all manager activities drive employee effort Maximum Impact on Discretionary Effort from Manager Characteristics* Commitment to Diversity

© 2004 Corporate Executive Board

28.5%

Demonstrates Honesty and Integrity

27.9%

Adapts to Changing Circumstances

27.6%

Clearly Articulates Organizational Goals

27.6%

Possesses Job Skills

27.2%

Sets Realistic Performance Expectations

27.1%

Puts People in the Right Roles at the Right Time

26.9%

Helps Find Solutions to Problems

26.8%

Breaks Down Projects into Manageable Components

26.7%

Accepts Responsibility for Successes and Failures

26.6%

Encourages and Manages Innovation

26.5%

Accurately Evaluates Employee Potential

26.3%

Respects Employees as Individuals

26.1%

Demonstrates Passion to Succeed

26.0%

Cares About Employees

26.0%

Has a Good Reputation Within the Organization

26.0%

Is Open to New Ideas

25.9%

Defends Direct Reports

25.8%

Analytical Thinking

25.7%

Attains Information, Resources, and Technology

25.7%

29

Maximum Impact on Discretionary Effort from Manager Characteristics (Continued)

Makes Sacrifices for Direct Reports Quality of Informal Feedback Encourages Employee Development Persuades Employees to Move in a Desired Direction Accurately Evaluates Employee Performance Articulates a Long-term Vision for the Future Inspires Others Places Employee Interests First Provides Job Freedom Is Intelligent Clearly Communicates Performance Expectations Appropriately Handles Crises Creates Clear Work Plans and Timetables Trusts Employees to do their Job Advertises Employee Effectiveness Listens Carefully to Views and Opinions Recognizes and Rewards Achievement Holds People Accountable Is Friendly and Approachable Treats Direct Reports Equally Values Work-life Balance of Employees Works Harder than Expects Employees to Work

* Each bar represents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately. © 2004 Corporate Executive Board

25.6% 25.6% 25.5% 25.4% 25.3% 25.3% 25.2% 24.8% 24.7% 24.6% 24.6% 24.4% 24.1% 23.8% 23.0% 23.0% 22.7% 22.6% 22.2% 22.0% 21.7% 20.7%

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

30

The Bad News: Limited Manager Scalability The organizational impact of good managers is limited by narrow spans of control Manager Spans of Control

Forty-Six Percent of Managers: 1 to 5 Direct Reports

* This group is made up of 17 percent of managers who manage 11 to 20 people, and 21 percent of managers who manage 21 or more people. © 2004 Corporate Executive Board

Twenty-Five Percent of Managers: 6 to 10 Direct Reports

Twenty-Nine Percent of Managers: 11 to 100 Direct Reports*

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

31

Senior Executive Team Levers

An “Open Door” Senior Team Inspires Effort “Commit to me, and I’ll commit to you” Maximum Impact of Senior Executive Team Qualities on Discretionary Effort* Reciprocity pays: Senior executives who are open to input and commit to their employees receive heightened effort in return.

30%

22.9% 20.7%

19.7% 15.9%

Change in Discretionary 15% Effort

15.6%

14.4%

15.6%

15.3%

14.0%

to -D M ay an P ag r o em ce en ss t

ac Per te so r is na tic l s D

ay -

ar Ch

te gy Im Se pl lec em ti e n on t a an t io d n

St

ra

a n Le ag ad i ng i n Pe g an op d le M

ak Av es E o i f fo d rt La s yo t o f fs

M

D

ev

Cr Is ea Co tin m g N mi t ew te d J o to bs

e lo M p m a ke en s E t a mp Pr loy io e e r it y

ar Em es A pl bo oy u ee t s

yC

D

ee

pl

Is N Op ew e I d n to ea s

0%

* Each bar represents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately. © 2004 Corporate Executive Board

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

32

Compensation Levers

Connect Total Compensation to Performance Tying compensation to performance is the most influential lever of discretionary effort Maximum Impact of Compensation Levers on Discretionary Effort* Connection

Satisfaction

Equity

12%

10.8%

Connecting pay to performance has the greatest impact on discretionary effort…

9.9% 9.1%

…while overall satisfaction with total compensation is the next most influential.

7.6% 7.0% Change in Discretionary 6% Effort

5.5% 5.4%

5.1%

2.8%

2.5%

2.1% 1.9% 1.8% 1.3% 1.3% 1.1% 1.0% 0.9% 0.8% 0.8%

Pe Co r fo n n r m ec t a io Pe Co nce n B r fo n n a n e t w r m ec d R e an tio ai e n s To ce a n Be e t a nd t w lC B e om on e n u B a Sa pe n s s e t is s a Pa f a c t io Ca y S t io n sh at n is f Bo ac nu t io sS St n oc at is f kB a ct on io Pr us n ofi Sa tt is Sh fac ar tio i ng Co n Sa m t is m is s fac Ca io t io n sh n Sa Bo t is fac nu C sI t io as nt n h er Bo n a nu lE Pr sE qu ofi x it y tte Sh rn ar al i ng Eq ui In ty t er To n al ta lC Eq ui o ty B a E x t mp se e r n e n Pa a l s a y I Eq t io nt u n Ba er i t y se na P Pr lE ay ofi qu Ex tit y te Sh rn ar a i ng lE qu Ex it y te To rn a ta lE lC qu St oc it y I n om k B te p e r n o n na s a St l E ti u oc k B s I n qui on t er t y on na us lE Co Ex qu te m it y rn m is s al io Eq Co n ui In ty m t er m na is s lE io n qu Ex it y te rn al Eq ui ty

0%

* Each bar represents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately. © 2004 Corporate Executive Board

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

33

Compensation Levers

Some More Motivated by Money than Others The salesforce is consistently more motivated by compensation levers than the aggregate workforce Maximum Impact of Compensation Levers on Discretionary Effort*

14%

12.9% Aggregate Workforce Sales Workforce

10.9% 9.5%

9.1% Change in Discretionary Effort

8.1%

7.6%

7.1%

7.0%

7%

5.5%

6.8% 5.4%

5.1%

0% Total Compensation Satisfaction

Base Pay Satisfaction

Cash Bonus Satisfaction

* Each bar represents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately. © 2004 Corporate Executive Board

Stock Bonus Satisfaction

Profi t-Sharing Satisfaction

Commission Satisfaction

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

34

Benefits Levers

Understanding the Benefits Plans That Matters Most “Brand” your benefits program Maximum Impact on Discretionary Effort Due to Benefits Programs* Benefit Communications

Health Benefits

Retirement Benefits

Leave Benefits

Work–Life Balance Benefits

18.0%

16.4% 15.1%

11.7%

Change in Discretionary 9.0% Effort

Other programs have “signal value” of company commitment to employees.

Largest impact comes from clearly conveying benefits information to employees.

11.8% 11.7%

11.5% 10.6% 10.4%

9.8% 9.6%

Ancillary benefits do not necessarily pay off in heightened effort.

10.5% 10.5% 9.1%

9.1% 8.2%

7.8%

7.6%

6.5%

7.0% 7.0% 5.8%

5.6%

5.3%

ne rt Pa

ta s is es

tic

As D

om

n io at uc

r

nc e

e ar

P

ay C

EA

Ed

tir Re

* Each bar represents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately. © 2004 Corporate Executive Board

D

e E SO G nt M P Pa r ou e d p ic id Pl al Ti an m e Lo O ng ff -T Ba er nk m D is a bi li t y Sh V or ac t -T at er io n m D is a bi li t y S ic kL M ea at Fle ve er x ib ni t yL le W ea or ve kS ch ed Te ul lec e om m Fi t ut ne i ng ss Pr og ra m

)

em

40 1( k

Le

av W I nf e B e or or m ne k– a fi L ti t s I n i fe B o n fo a H r m la n ea a c l t ti e Re I n h B on fo e n tir em r m e at fits en io tI n nf or m at H Pr io ea es n l th cr ip B tio en n efi D ts ru gB en efi t Pe ns io n

0.0%

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

35

Onboarding Levers

An Important Job from Day One “Tell me why my job matters as soon as I walk in the door” Maximum Impact of Onboarding Levers on Discretionary Effort*

New hires will try much harder when they understand and believe in their jobs’ importance to the organization. 30.0%

23.4% 21.9%

21.5%

20.9%

20.3%

19.2%

18.8%

17.9%

Change in Discretionary 15.0% Effort

0.0% Clearly Explains Job Importance

Teaches About Organizational Vision and Strategy

Teaches About Group or Division

Clearly Explains Performance Objectives

Clearly Explains Job Responsibilities

* Each bar presents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately. © 2004 Corporate Executive Board

Introduces New Hires to Other New Employees

Provides Work Immediately

Provides Necessary Tools and Resources

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

36

Day-to-Day Work Levers

A Purposeful, Informed Connection “I need to understand not only how to do my job, but why it matters” Maximum Impact of Job Design Levers on Discretionary Effort* Understanding how to do one’s job and a belief in the importance of it are most critical…

Job Importance and Understanding = 31%

…job fit and job quality are notably less important…

Job Fit and Personal Goals = 17%

…as are access to necessary resources and even safety.

Job Quality = 17%

Resources = 15%

Safety = 13%

40%

Change in Discretionary Effort

32.8% 30.3%

29.8% 23.9%

23.8% 22.0% 20%

21.9% 19.2%

18.8%

20.5%

18.9% 16.9%

16.5%

16.5% 14.0%

11.0%

10.5%

13.0%

9.4%

8.2%

6.9%

5.0%

C an onn d ec O ti r g on an B iz a e t t i o we O I m na l e n r g po S W an r t tr a o Su cc U i z a t a n c t e g r k y es nd i e s f u e r o n a of lly s t a l S J ob Em C o n d u cc t o pl es oy I m i ng s p ee mp s’ o r l e t e o f H Pe ta o P r s nc ro w on e j e to I m a l D of P c t s po ev r o j rt a n e lop ec t s c Lo e m to e n g of -T P r n t e r oj m ec W C a r t s to ee or Yo k on r Jo u b D Th Fi t o i ng Be s — st O Ty pp p e or of tu W ni ty or fo k rP Jo ro b m fo F i t ot rA — io n B no e t h t te er r S Po ui s i t te d io n Ta sk Va r ie ty Jo b Ch a ll en ge Jo b Fr ee do m Jo b I nfl N ue ec A nc es b Su e s a ili t f fi ry y ci e t In o nt fo O Su To r m bt f fi ol at ain ci e sa io n nd nt Ti Re Su m s f fi e ou ci e to rc nt Co es Pe m op pl et le e to Ta Co sk s m pl (A et e ct A Ta ua m sk lV o s u er n su t o sD fT e s r av ir e el Sa fe d) Fr W ee or do kS m pa fr o ce m H ar as sm en O Sa t pp fe ty or of tu ni Ta ty sk to s Ta ke Br ea ks

0%

* Each bar presents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately. © 2004 Corporate Executive Board

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

37

Learning and Development Levers

Individualized Development Pays Off in Effort “Help me build skills to become more effective in my job” Maximum Impact of Learning and Development on Discretionary Effort* An effective mentor helps employees feel personally connected to the organization. Career Advisor and Development Plan

30%

On-the-Job Learning Opportunities

Training Programs

25.5%

Quality development plans help employees feel rationally and emotionally committed.

22.4% 21.0%

20.1%

Change in 15% Discretionary Effort

General skills training sends a message of “credible commitment” to employees.

17.8% 17.8%

17.1% 16.6% 14.3% 13.8%

13.1% 13.0% 11.0%

10.3%

9.7%

9.4% 9.2% 9.0% 8.6% 8.5% 8.0% 7.7% 7.5%

4.6% 4.1% 2.5%

nt

ci e

f fi

Su

D

Ch

all

en

ge

Ef

fe

of

ct

D

i ve

ev

el

ne

ss

op

of

M

en

to r m e T ev n i m tP el De e op la n v t m e lo o C en pm om tP la n e nt ple E f Pla te Em n fe pl ct oy i ve ee ne I ss Em Cre nflu B e ph atin enc ha a s g ei U v ior is o P l a n n se n st S of o k il D l D Em ev ev s a n e el ph op lop d as m is en on tP Jo la n b Ex E p Em m e p h to r i e ph n as as i s H a ce is S k o n ve on J o ills G e Em bT n ph S p r ain er a as e i l c is ifi ng on cT Le ra in ad in er g sh ip Tr M an ain a in E f ge m E m g fe c t en ph i ve t T a s i ne r a s o s in n S s o in Ef k ill f G g fe s T e n ct i ra e A m S p ve n i n i n r a l e ou cifi ess g c o n Am T t of Tr a f Jo b ou r ain G e inin nt in ne g of g R r a l e S Jo Tr b - ceiv k ills O ain S p e pp i n e ci d or g R fic tu ni ec S k ty e i ill ve s to d be O pp P ro or m tu Ar O ot p w ni t ed O ou n po r i t h y to pp d tu a M Wo or a S ni en r tu t r u t y t k t ni t y g gl o H or i to ng e l N O ew p W Bu p T or sin ur B u po ki e n sin r tu s e s n i t of J n a s s , y ob Va t O I ni t o H s / R r ie t h pp ia t i v e lp ole t y e or e L s S t O , pp e ni uni or aun o r o r t y P r o ch E x to tu je a ni t y ecu Wo c t tiv r k to O aP S e w pp r pe Te ith o D o r t fe s n d a m ivi un sio T i m s i O i o ns t y t na l e w o C pp or or B Wo oac ith tu h ni usin r k i ty e n to s s U N e w F O un Wo nits pp c ti r k or on in a D tu al N A if f ni t y r e ew e r to a s en W tC o ou r k nt in ry

0%

* Each bar presents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately. © 2004 Corporate Executive Board

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

38

Organizational Culture Levers

A Culture of Communication, Integrity, and Innovation “Give me job-relevant information, the opportunity to innovate, and a sense of pride” Maximum Impact of Cultural and Performance Traits on Discretionary Effort Cultures of information-sharing, integrity, and innovation drive effort.

Success invites greater effort while the perception of failure risks employee shirking.

29.2%

30%

27.6% 26.0% 24.7% 23.2%

23.1% 21.5%

21.5%

21.1%

20.6% 18.7%

18.5%

18.3%

Change in Discretionary 15% Effort

5.5%

vo In it y un

m m Co

Be D D s t i f fe i ve an r e rs it y d nt W ia l or Tr s t ea Pe tm D r fo e n if f us rm t o e er f D s ec is i on Au - M t h a k in or g it y

t en l ve

m

Ta k sk Ri

Cu ty ni tu

or pp O

* Each bar presents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately. © 2004 Corporate Executive Board

i ng

re l tu

ce s uc ny S pa m

Co

ty ui

Fu

s

n Re

an

d

re

s to

O

m

r ie

co g

nt

ni

at

io

t io

n

s er

x ib

Fo

ili t

cu

y

n t io va no In

F le Cu

tu Eq

Re

pu

ta

Co

t io

n

m

m

of

un

In

te

ica

gr

tio

it y

n

0%

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

39

Revaluing Your Organizational Culture

Your Culture Is a (Very Valuable) Economic Public Good Culture offers scale and impact across thousands of employees A New Typology for Human Capital Strategies Examples: Cash Bonus

Private Good Strategies

• Subtractable—each employee’s use of the strategy reduces the quantity available for others

On-the-Job Development $

Mentoring

Job Rotation

• Excludable—strategy can be administered to some employees and withheld from others

Examples:

Public Good Strategies

• Non-Subtractable— strategy is never “used up” • Non-Excludable— strategy affects all employees simultaneously

Risk-Taking Culture

Culture of Internal Communication

NEW RISKS

Differential Treatment of Best and Worst Performers

Culture of Flexibility

Average Impact of Public Good Versus Private Good Strategies on Discretionary Effort* Pure Private Good Strategies

Mixed Strategies

Pure Public Good Strategies 25% 21%

20% 17% Change in Discretionary Effort

10%

17%

12%

2% Compensation Strategies

Benefi ts

Learning and Development Opportunities

Day-to-Day Work Senior Executive Characteristics Team Qualities

* Each bar presents an average of the maximum total impact of all the strategies within a category. The maximum total impact for any given strategy is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the strategy, and the predicted discretionary effort level for an employee who scores “low” on the strategy. The impact of each strategy is modeled separately. © 2004 Corporate Executive Board

Areas of Onboarding Focus

Direct Manager Characteristics

Organizational Culture Traits Source: Corporate Leadership Council 2004 Employee Engagement Survey.

40

Summary of Top 50 Levers

The Top 50 Levers of Engagement Top 50 Most Effective Levers of Effort Lever

Impact

Category

Lever

Impact

Category

1.

Connection Between Work and Organizational Strategy

32.8

D

26.

Helps Attain Necessary Information, Resources, and Technology

25.7

M

2.

Importance of Job to Organizational Success

30.3

D

27.

Makes Sacrifices for Direct Reports

25.6

M

3.

Understanding of How to Complete Work Projects

29.8

D

28.

Quality of Informal Feedback

25.6

M

4.

Internal Communication

29.2

O

29.

Career Advisor Effectiveness

25.5

L&D

5.

Demonstrates Strong Commitment to Diversity

28.5

M

30.

Encourages Employee Development

25.4

M

6.

Demonstrates Honesty and Integrity

27.9

M

31.

Persuades Employees to Move in a Desired Direction

25.4

M

7.

Reputation of Integrity

27.6

O

32.

Accurately Evaluates Employee Performance

25.3

M

8.

Adapts to Changing Circumstances

27.6

M

33.

Identifies and Articulates a Long-Term Vision for the Future

25.3

M

9.

Clearly Articulates Organizational Goals

27.6

M

34.

Inspires Others

25.2

M

10.

Possesses Job Skills

27.2

M

35.

Places Employee Interests First

24.8

M

11.

Sets Realistic Performance Expectations

27.1

M

36.

Flexibility

24.7

O

12.

Puts the Right People in the Right Roles at the Right Time

26.9

M

37.

Provides Job Freedom

24.7

M

13.

Helps Find Solutions to Problems

26.8

M

38.

Is Intelligent

24.6

M

14

Breaks Down Projects into Manageable Components

26.7

M

39.

Clearly Communicates Performance Expectations

24.6

M

15.

Accepts Responsibility for Successes and Failures

26.6

M

40.

Appropriately Handles Crisis

24.4

M

16.

Encourages and Manages Innovation

26.5

M

41.

Creates Clear Work Plans and Timetables

24.1

M

17.

Accurately Evaluates Employee Potential

26.3

M

42.

Ability to Obtain Necessary Information

23.9

D

18.

Respects Employees as Individuals

26.1

M

43.

Importance of Projects to Employees’ Personal Development

23.8

D

19.

Demonstrates Passion to Succeed

26.0

M

44.

Trusts Employees to do Their Job

23.8

M

20.

Cares About Employees

26.0

M

45.

Clearly Explains Job Importance

23.4

Onb

21.

Has a Good Reputation Within the Organization

26.0

M

46.

Customer Focus

23.2

O

22.

Innovation

26.0

O

47.

Future Orientation

23.1

O

23.

Is Open to New Ideas

25.9

M

48.

Lets Upper Management Know of Employee Effectiveness

23.0

M

24.

Defends Direct Reports

25.8

M

49.

Listens Carefully to Views and Options

23.0

M

25.

Analytical Thinking

25.7

M

50.

Is Open to New Ideas

22.9

Exec

O

Organizational Culture and Performance Traits

D

Day-to-Day Work Characteristics

L&D

Learning and Development Opportunities

M

Manager Characteristics

Onb

Areas of Onboarding Focus

Exec

Senior Executive Team Qualities

Source: Corporate Leadership Council 2004 Employee Engagement Survey. © 2004 Corporate Executive Board

41

Executive Summary

Insights into Employee Engagement 1

Taking a business-outcome approach to measuring employee engagement. Engagement is the extent to which employees commit- rationally or emotionally- to something or someone in the organization, how hard they work as a result of this commitment, and how long they intend to stay.

2

Segment-specific “rules of thumb” do not apply. Employee commitment is not a characteristic of group membership but is instead a characteristic of individual employees to be won or lost, created or destroyed by their organizations.

3

Dramatic differences between companies. Engagement is a source of competitive advantage. Some organizations have ten times as many highly committed, high-effort employees as others.

4

Engagement is the key to performance and retention. Highly committed employees try 57 percent harder, perform 20 percent better, and are 87 percent less like to leave than employees with low levels of commitment.

5

Not a cure-all, but still a business imperative. Employee commitment must be managed alongside other important drivers of performance, most importantly the recruitment of high quality talent and providing that talent with the information, experiences and resources they need to perform at their best.

6

Emotional commitment drives effort. Emotional commitment is four times as valuable as rational commitment in producing discretionary effort. Indeed, the search for a high-performing workforce in synonymous with the search for emotional commitment.

7

Rational commitment drives retention. Employees leave organizations when they conclude that the organization no longer meets their self-interest

8

The “Maslow’s Hierarchy” of engagement. Secure rational commitment from employees first. Employees are more likely to commit emotionally if their self-interested needs are met.

9

Focus on high-impact levers. The top 50 drivers of discretionary effort are 40 times as powerful as the bottom 150 levers.

10

Take a common approach to engaging employees. Most strategies have a common impact on employee segments. Most employees, most of the time, need the same things to commit, exert effort and perform at their best.

11

A means, not an end. The most important role of managers is to serve as a conduit for other, more valuable, forms of employee commitment: organizational, job and team.

12

The Rule of Three. The impact of excellence in additional manager skills diminishes quickly. Build on a limited number of existing manager strengths to maximize ROI. Source: Corporate Leadership Council 2004 Employee Engagement Survey.

© 2004 Corporate Executive Board

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Executive Summary

Insights into Employee Engagement (Continued) 13

The problem of scale. Most managers have very limited spans of control, an inherent limitation which reduces their appeal as an organization-wide engagement lever.

14

Communicate senior team openness and commitment to development. Employees try harder when they believe that the senior executive team has committed to them in the form of openness to new ideas and employee development.

15

Publicize leadership strength. While less important than employee perception of senior executive commitment, specific executive skill areas—such as leading and managing people and day-to-day process management—still have significant impact on discretionary effort.

16

You can’t buy (much) effort. Compensation attracts talent into the organization and plays an important role in retention but has limited impact on employee effort.

17

Connect pay to performance. The most important element of a compensation strategy for driving effort is its connection to employee performance.

18

Brand your benefits programs. Distributing clear, compelling, actionable information about your benefits programs can have an impact on employee effort and retention that is commensurate with the programs themselves.

19

Do not overspend on benefits programs. The impact of benefits programs on effort and retention fall precipitously after a select group of “basic need” (e.g., health, retirement) and “niche” (e.g., domestic partner) programs are implemented.

20

Start early. The first priority of onboarding programs should be to instill an understanding of, and a belief in, the job’s importance.

21

Get two things right about jobs. Understanding how to do one’s job, and a belief in the importance of it, are more critical in driving effort than access to necessary resources, an opportunity for promotion, or even safety. Employees need to feel connected to be at their best.

22

Personalize the connection. Providing sound career advice, a customized development plan, and general training provide a “credible commitment” to the employee.

23

Create public goods. The most effective levers of employee effort are organizational public goods, notably cultures of communication, integrity and innovation. Infinitely scalable, non-excludable and non-subtractable, they are capable of (simultaneously) driving effort and retention for thousands of employees at a time. Source: Corporate Leadership Council 2004 Employee Engagement Survey.

© 2004 Corporate Executive Board

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