Note to readers: I am pleased to welcome Mark Hirschfeld as co-author of this report. Mark, a former colleague of mine at Right Management, and I have been conducting employee engagement research in cooperation with Quantum Workplace in Omaha, Nebraska. For the past five years, Quantum has collected the Best-Places-to-Work employee survey data through competitions sponsored by American Cities Business Journals in 40 U.S. cities. We are grateful to Quantum Workplace for allowing us to analyze this data and share our conclusions with you. Good news has been hard to come by this year. We are happy to have some to share with you, as you will see as you read on...
By Leigh Branham and Mark Hirschfeld
We have only begun suffering the effects of a severe economic crisis brought on by business and economic practices that have sent many companies to their demise, thousands to the unemployment lines, and governments struggling to head off a depression.
Just how bad is this economic meltdown? A few sobering facts:
- At the beginning of 2008, the Dow-Jones was over 12,400. By December, it had dropped below 8,200, a net loss of over thirty percent for the year.
- National unemployment rates for November of 2008 reached 6.7 percent, the highest in years. More than 533,000 American workers lost their jobs in November alone, the largest number of jobs lost in a single month since 1974.
- Some industries, such as domestic automobiles, are facing collapse. The National Automobile Dealers Association predicts that roughly 900 of the nation's 20,770 new-car dealers will go out of business this year, and automobile analysts say the number of failed dealerships could rise into the thousands next year.
- American stores are dropping prices for holiday shopping, reducing profit margins and threatening the survival of some stores.
It occurred to us that in the five years that Best-Places-to-Work contests have been held, nothing of this magnitude had happened with the potential of impacting levels of employee engagement across industries. The Best-Places-to-Work research data clearly shows that employers can significantly influence, if not control, how motivated and satisfied their employees are. Still, we couldn't help but wonder what effect such a significant event beyond employers' control--the economic crisis--might have on employee feelings and perceptions about their workplaces. Several other questions came immediately to mind:
- If employees were concerned about their economic futures, would that impact how they felt about the future of their employers?
- If employees were concerned about maintaining their standard of living, would they be more (or less) willing to look for another job?
- Would increased feelings of insecurity make employees more critical of their employers' health care and retirement benefits?
- If external factors such as a severe economic recession could have an impact on employee engagement, what could employers do to mitigate that impact?
Can Employee Engagement Withstand A Recession?
One of the unique aspects of the Best-Places-to-Work competitions is that the annual awards events are conducted in 40 different cities at different times of the year, but at the same time of the year in each location. In Omaha, Nebraska, for example, Best-Places-to-Work polling begins each February, while in Kansas City, Missouri survey responses are collected in August. We had access to year-over-year survey results for hundreds of employers, allowing us to compare what they said about their employers this year, in the midst of an economic "perfect storm", to their responses in previous, calmer years.
In November of 2008 Quantum Workforce collected data from Best-Places-to-Work employers whose employees had completed surveys in the fall of both 2007 and 2008. Of the hundreds of participating U.S. employers, we identified 210 that participated in both years. Among those 210 a sufficient percentage of their employee populations completed the engagement survey to establish that overall results were reliable within a margin of error of plus or minus three percent.
The chart below shows how the 210 employers fared from 2007 to 2008:
By an almost two-to-one margin (134 to 76), more employers had lower overall employee engagement scores in the fall of 2008 than in the fall of 2007. This result is certainly out of the ordinary from our trends for the last five years, and strongly suggests that outside economic circumstances may well be influencing employees' attitudes about their jobs and workplaces.
Evaluating Losers and Gainers-Getting Through Tough Times
To explore this issue further we conducted a data analysis of the surveys collected from employees of the 210 companies, both those that had higher engagement scores (gainers) and those whose scores had dropped off (losers). The analysis revealed several cultural factors and management practices where companies that lost ground were performing poorly. Conversely, we found areas where the gainers--those employers that were still positively engaging their associates--were doing exceptionally well on these same factors.
It has been said: "For a tree to become tall it must grow tough roots among the rocks." Our analysis of survey data and verbatim comments uncovered five key differentiators that reveal how some employers (the gainers) are growing "tough roots" and where others (the losers) may be losing their hold.
We believe a review of these areas is useful in determining how employers can proactively and more effectively manage in these difficult economic times.
Which Way Are You Heading?
Based on our analysis, it appears that employers are heading in opposite directions based largely on how they are treating and managing employees during changing conditions. Many of those with already high and rising engagement scores are simply continuing with their existing positive management practices despite the downturn. Regarding the five differentiators above, we observe:
Differentiator #1: While the future might look grim in the eyes of some employees, employees at other companies are working hand-in-hand with their supervisors to create a positive future for the company.
Our studies tell us that in the best of times employees are more highly engaged when they see where the company is going and understand their roles in helping the company go there. This is largely a function of senior leaders and line managers clearly and frequently communicating where the company is headed and how each person makes a contribution. As a colleague of ours advises: "Leaders need to make sure employees are in the boat, know where it's going, have an oar in the water, and are pulling in rhythm!" We need to make sure we are helping our associates understand the organization's strategy, why it make sense, and how each member of the team makes a positive and meaningful contribution to the success of that effort.
In more difficult times, this charge becomes even more important. The results of that effort to help employees see where the company is going, how it plans to survive its current challenges, and how each person has a line-of-sight contribution to the success of the business, can be seen in the verbatim survey comments of more engaged employees. One supervisor described how he felt about the current direction of his company: "Even in these uncertain times, I feel very good about working (here). They have made the right financial decisions to make the company strong and I love the products we sell."
Differentiator #2: While some employers are hiding bad news from their employees, others are keeping their employees informed and updated, even if the news isn't always good.
Our studies of winning Best-Places-to-Work employers show that leaders who are maintaining or improving employee engagement are doing a better job of keeping communication open and robust. Company leaders may be hesitant to communicate when there's not as much good news to share. The exact opposite is called for. One executive told us that, in dealing with changes that affect employees: "We communicate early and often. We even tell people when there is no news that 'there is no news. They appreciate the candor."
We know that when employees don't get enough information, they make up their own "information" by spreading rumors that are often far worse than the reality. Employees need a constant stream of information, reinforced in different ways by different parties using different media. When a fast-food restaurant advertises a new menu item, they don't just run the ad once-you see it again and again. Take a page from product marketing as you think about communicating with your employees. An open, ongoing effort to encourage two-way communication, particularly right now, can reap significant benefits.
Differentiator #3: While some employers are cutting jobs or scaling back on promotions, other employers are helping their associates see opportunity for growth and development in the midst of the crisis.
Job satisfaction is still an important contributor to employee engagement. We encourage employers to continue efforts to help associates stay positive and excited about their work. Most of us would like our associates to feel way this survey respondent does: "I love my job and enjoy the sales process. It's been the toughest year of my 26-year career in sales. I hope to continue as I know the economy will get back to normal and we will succeed" (telecommunications company employee).
Part of the concern employees have about the future in a recession is not only their current job security, but whether there will be chances for them to grow. If employers can continue to make investments in the development of their employees, we believe employees will respond in kind. One technology employee stated: "I have been impressed with the training they invest in their workers, the money they spend to keep us up to date technologically so we are competitive, and the way they keep us informed."
Differentiator #4: While some employers may be instituting hiring freezes and cutting back on perks, others continue to find ways to reward those who are taking care of customers and keep them coming back.
Companies who are maintaining or increasing workforce engagement right now are getting significantly better scores related to fair pay and recognition. We know that hiring/pay freezes are often necessary tools to deal with rising expenses and reduced revenues. But now more than ever employers need to actively seek monetary and non-monetary opportunities to reward employees who are making outstanding contributions to the success of the enterprise.
Although pay is not generally found to be the prime motivator for most employees, if your company's pay system is broken, engaging your workforce will be like swimming upstream. Remember that "fair pay" is defined in two ways--employee perceptions about "external pay equity" (compared to a similar job at another employer), and "internal pay equity (compared to a similar job inside the company).
You can be sure that employees are carefully watching the actions of leadership regarding recognition. As one employee from a company whose engagement scores declined from 2007 to 2008 complained: "Recognize us, but provide incentives, not just lip service! Stop taking advantage of workers with long hours and continued promises of more pay!
Differentiator #5: While some employers are scaling back employee benefits, others are committed to helping maintain the health and vitality of those who work for them.
Companies that enjoyed higher engagement scores in 2008 did markedly better on items related to employee perceptions about benefits. In difficult economic times employees need to feel like their security needs are being met. Having quality, affordable benefits positively impacts overall employee engagement. A survey respondent at a marketing and public relations firm remarked: "In the last three years (our company) has made vast improvements in employee benefits and company culture."
Employees are naturally concerned about benefits, particularly given that many are paying an ever-increasing burden of health insurance premiums. We encourage employers to reinforce employee benefits when they can and, at a minimum, continue to communicate what benefits are available and how employees can easily access them.
What You Can Do To Beat the Bear Market?
Having a highly engaged workforce certainly doesn't guarantee that a firm can ride out a serious event such as the current economic recession. In fact, an economic downturn can erode a company's customer base, thus tipping employee morale and engagement in a downward direction which can be difficult to reverse. But, given the right prospects for recovery and a clear direction, a more engaged workforce can act as insulation, a buffer if you will, from the effects of the economic downturn.
It may be difficult to implement the lessons described above, but as Sir Winston Churchill admonished: "Kites rise highest against the wind - not with it." The additional efforts to engage your employees, in spite of the blustery currents, can yield significant returns. Consider the comments of one employee who still feels so engaged that being lured away to a competitor doesn't interest him:
"In spite of economic conditions, (our company) consistently sets into place a plan for growth. Not only for the company, but for our clients and associates. I'm lured by competitors frequently and the offers are enviable and give me pause in my career; however, I feel like time and again, this is still the place to be."
Another employee sang the praises of her supervisor, who shows a strong commitment to employee development. Read his comments carefully, as they provide a compelling insight into how every senior leader and line manager can engage a higher percentage of their employees:
"My supervisor is very supportive of me on a personal and professional level. She shows genuine caring and readily acknowledges team members for their contributions. When there is an issue, I can trust her to come to me privately to discuss ways a situation could have been handled better. She trusts me to do the job effectively."
Although a majority of the employers we have studied suffered lower levels of engagement in the midst of the current recession, many are forging ahead and, in doing so, retaining and developing their best and brightest. Will your kite rise with the prevailing wind?