Engagement is Economic Theory

I was having a recent conversation with John Sumser where we discussed my need to be an engaged employee. Indeed, I’m that guy who is almost always engaged because I honestly love my work. I’m one of those unique people who actually find the world of HR and HR technology interesting. In general, I’m the typical, highly engaged employee. I generally overachieve, I almost always exceed my goals, my clients love me because I execute great work, on time, and usually under budget. However, we all know that our companies and our direct managers are also major influencers of our engagement, and I believe that one can be completely engaged with the work, but not the company. I can overachieve on client projects, but completely underachieve on internal projects when things in management go wrong.

One of the things I love about Sumser is that he is always the skeptic. HR has been talking about employee engagement for years, and we truly believe that we can make both our organizations better and our employee’s lives better by getting high engagement from them. But here’s another take on it. Rather than making our employee’s lives better, what we are really trying to achieve is to suck the additional effort and work time from them, with nothing in return. We’re not going to pay them more. They will do more work than the person next to them, but not get more benefits or retirement money. We all know that the linkage between performance and incentive compensation is pretty much broken in almost all organizations. Most of us also know that the complete “schmuck” sitting at the manager’s desk in front of us had the same opportunity to advance as the great manager next door to him/her, so development and career progression does not always identify the right person either. The bottom line is that I can be a middling employee and reap all the same benefits as the great employee.

I have a nephew working in IT at a retail company who takes great pleasure in the free lunches that are provided. Many organizations have offered this type of service in the past, and while it’s nice to save everyone $10 that they don’t spend on a sandwich at the deli, every organization also realizes that at $40k per year, the organization is saving $20 by keeping the employee working at their desk over the lunch hour.

Perhaps being a great employee provides me a marginal enhancement to gaining better rewards, but that probability does not make up for the additional effort I’m going to provide as an engaged employee. For those of us who work 70 or 80 hour work weeks, most of us are not going to double our salaries. But we do this because we either believe there is something in it for us, or because we love something about what we do. I think it’s perfectly valid for us to “sell” employee engagement as something that benefits the organization and the employee. But perhaps we should be honest at least with ourselves: at the end of the day we really just want our employees to work that extra hour without having to pay them for it.

When Things Go Wrong

Over the last few months, we’ve been watching tremendously troubling images come out of BP’s Gulf oil spill. We often think that when things go wrong, they can usually be corrected, but sometimes something goes wrong and it’s just catastrophic.  At the time of writing, the oil spill had recently overtaken the amount of oil released into the environment, overpassing any prior oil spill.  It’s not that these oil spills are even infrequent.  We hear about the Exxon Valdeze, and of course this BP spill will be remembered for decades at least.  But smaller spills happen many times a year and other than local economies, most of the U.S. population doesn’t hear about it.  The fact is that oil spills are not rare events as the oil companies would like us to believe.

The sad thing, is this was probably predictable.  On an event by event basis, the probability of this type of outcome is very small indeed.  But as you look across time and volume, if there are 25 events that can be categrized as oil spills in the U.S. every year, every few years or decades, one of them is going to be huge.  Exxon and this BP one fall into those categories.

Perhaps when small things go wrong, we are correct in thinking that we can fix things.  Indeed, small mistakes are easy to either fix or cover up.  Impacts are limited and uually don’t spread to large populations.  But when something big happens, not only is it explosive, but it’s hard to contain.  In the example of the oil spill, sometimes events are predictable, and you can’t really stop the event from happening no matter what you do – at some point, there wil lbe another disaster of an oil spill in the future.  But you can evaluate what the cleanup process is going to be and what disaster recovery looks like.  In the case of the oil companies, it seems that hey have assumed that small events would happen periodically, but it was not worth the investment for the rare major events.  In the case of BP (at the time of writing) having committed $20B to fund cleanup and other payouts, research and development of better cleanup contingencies may have been worth it.  (IMO, $20B is not going to come close to what the final cost will be).  I suppose when you are not only killing off wildlife, but extincting species and altering the ecosystem for decades to come, that puts things in a hole new perspective.

I remember back in Hurricane Andrew when Florida was evacuated (no, not the whole state), and ADP was literally paying people when payolls had not been submitted.  Often the business was not even there anymore, but they got paid.  Same thing for 9/11.  Businesses were literally destroyed, never to come back and sadly many people were gone as well.  Payrolls were not submitted, but people got paid.

There are similar types of employee engagement issues.  Sometimes major events happen that adversely effect everyone else in the organziation – such as large layoffs or spinoffs in business.  These are quite predictable as the planning probably happened in advance, but we don’t often think about the effect on other parts of the organziation and other employees. 

HR is often a detailed, transactional business.  We don’t often think about changes and problems on a large scale – instead relying on our ability to deal with small scale problems, we have to expect and be ready for the large scale problems that happen.  I once worked with a large, global organiation that had a major project around the flu pandemic (that never happened).  They were prepared not only regarding how to get people vaccinated, but also had a map of every country and how to get in touch with people, how to replace people and over the orgnaizational requirements on a short term basis.  All this preparation was just for the contingency of half their population coming down with the flu.  Hopefully things don’t go wrong, but when major events happen in the workforce, it brings our businesses down with it.  A bit of preparation is warranted, and that does not usually mean scalability in how we treat smaller events, but a completely different approach.

The Shift to Engagement

I was reading a post on 2010 (originally attributed to Joyce Gioia, but without a link).  ((Quick note to my fellow bloggers, Even though I don’t always link, I do almost always footnote.  It’s a pain, but we live in an age where viral communications threaten the attribution of thought generation and innovative thinking.  People always deserve credit and appropriate attribution, and a link if possible.  Turns out I could not find this one, so I’m guessing it was in print or a newsletter somewhere.  Thanks!!))  I write this on the plane, so I can’t look it up.)  In it, there are a few 2010 predictions that keep the momentum of driving HR organizations to realize that it’s about engagement, not about retention.

6. Focus on Engagement will replace the Focus on Retention Recognizing that with engagement comes not only retention, but greater productivity and profitability, too, employers will change their focus. We will see Directors of Retention morph into Directors of Employee Engagement. The next step (coming much later than 2010) will be to recognize the importance of the total “Internal and External Customer Experience”.
10. Burned out Employees will begin Leaving Employers Over 80 percent of today’s employees feel overworked and under-appreciated. Too many organizations have survived and maintained some level of profitability by over-loading their long-term employees. Once we begin to see positive job growth in the second half of 2010, some employees will feel confident enough to leave their companies.

If I may write it mathematically (ok, I’m a geek), f(x)=(Employee Engagement)*(Compensation)*(Employer Brand)

If you want to drive employee retention, you really have to be looking at how your organization presents itself to your employees and the public market of candidates.  I have to throw compensation in there as part of the equation because even if you don’t have a philosophy of leading in the comp area, you still need to have a solid philosophy and execute it so that you have the right mix for your employees.  Lastly, employee engagement is the leading contributor to retention.  If employees are engaged to their work, managers and their environment, they will usually stay no matter what.  Leaving an employer for the sake of higher compensation is a great risk if you like your work, manager and peers.  There is probably an 80% or greater chance that you won’t love your job in your next employer if you already love your job in the current.

At the end of the day, if you can engage employees and make then love working for you, you have won the battle.  Having someone figure out how to improve retention does not address the issue because the reality is that in order to address retention, they need to address employee engagement.  All too often, people addressing retention end up having the wrong focus.  You go out with a survey and you’ll find out all the wrong things.  People want more pay, or they want to work from home, or they want more growth opportunities.  The truth of the matter is simple – they just don’t love their jobs, and when you increase their pay or whatever else, they are still going to leave anyway.

Survey Design 101 – Part 2: Which questions should I keep or drop?

Guest Author:  Stephen B. Jeong, Ph.D.

In Part 1 of Survey Design 101, we discussed two broad topics related to survey design – choosing the right topics and creating quality questions.  Survey design (or questionnaire development), however, is not complete until you can show that all or most of the redundant questions have been filtered out from the final set.  Moreover, this “redundancy” is often only visible through statistical analysis (i.e., factor analysis, discussed below) conducted after the data have been collected.  In other words, the initial draft of survey questions needs to be treated as just that – an initial draft. It’s only after the first data collection and subsequent revision that survey design can be said to be complete.  Beyond this, additional data should be used – collected on an annual or biennial basis – for continued refinement of the survey questions.

One common method used to refine survey questions is through factor analysis – a data reduction technique.

Factor analysis has been around for nearly a century (see Charles Spearman and intelligence testing); and although the mathematics involved – linear algebra – may seem intimidating, the concept is simple – it’s a technique used to reduce a large number of variables into a smaller set by examining the interrelationships among the variables. Fortunately for most of us, understanding how it can be used to improve the quality of our survey is all that’s necessary.

A key premise behind factor analysis is the idea that many can be reduced to few.  Imagine yourself in Munich for their annual Oktoberfest. You would undoubtedly see thousands people from all walks of life. Now, if I were to “group” these people based on some meaningful category – e.g., nationality, height, weight, or even the type of beer they are drinking – the resulting number of groups would be fewer than the thousands of individuals on which those groups are based. Factor analysis is very similar to this. Rather than people, however, we’re now talking about survey questions.

When you conduct a factor analysis on survey data collected from your employees, you’re asking the program “group” the survey questions in some conceptually meaningful way.  If you’re thinking to yourself that survey questions are already organized into meaningful groups or categories – e.g., training, benefits, supervision, and so on – you’re right.  In fact, if the survey was designed properly and the factor analysis done correctly, you may find that factor analysis results show a perfect match between your survey items and your survey categories.  Unfortunately, this will be rare. More often than not, you will find that a portion of the survey questions can be omitted, re-categorized or refined.

Bottom line here is that when it comes to employee surveys, factor analysis is an important tool that can be used to help answer the question – Which questions should I keep or drop?  It is an important step that will help to clarify the conclusions drawn from results of other advanced analyses typically conducted on survey data.

Stephen B. Jeong, is currently the Managing Director of Waypoint People Solutions – www.waypointps.com, a human capital consulting firm that focuses on high precision employee diagnostic surveys using cutting-edge measurement technology and methodologies. He holds Ph.D. in Industrial-Organizational psychology from the Ohio State University and has been advising private, public, and government organizations since 2000.  He can be reached at stephen.jeong@waypointps.com.