Terms of Engagement

Employee engagement is becoming top of mind for CEOs and boards at the nation's largest companies, but just what it is -- and how best to measure it has many HR executives scratching their heads.

Tuesday, January 1, 2008
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For an HR executive, getting a handle on employee engagement can be like trying to catch a greased pig at a country fair. Just when you think you've got it, it slides right out of your hands.

Despite a burgeoning industry devoted to measuring engagement, there's no established definition of what it actually means. And among consulting firms, business groups, academics and other experts, there's widespread disagreement over nearly everything else about engagement: whether it's really a new concept, how it should be measured, whether it can be tied to the bottom line -- even whether employee engagement surveys, in the end, are truly valuable.

Everyone, it seems, takes a different approach, though no one knows for sure which one is best.

"When you do a search on the Internet of employee engagement, you get 2 million hits, but there's only a handful of articles in the academic literature," says Alan Saks, a University of Toronto professor who studies engagement. "That kind of tells you something."

All this makes it tough for the HR executive to be an informed consumer of employee engagement surveys, says John Gibbons, a senior research adviser for The Conference Board, a New York-based business think tank.

Gibbons, who has been analyzing the various types and brands of engagement surveys, searching for common ground, says that, too often, HR jumps on the employee-engagement bandwagon without looking at it with a critical eye.

"They think, 'engagement good, puppies good,' " he says with a laugh.

But what many HR leaders don't realize, says Gibbons, is that different approaches -- and even different definitions of engagement -- can yield a wide variety of results.

"The definition that a consultant chooses to use," he says, "will determine the kinds of survey tools that it uses and, subsequently, the kinds of engagement solutions it can recommend. It's like the old axiom, 'When all you have is a hammer, everything looks like a nail.' "

HR itself, in its quest to become more strategic, may bear part of the blame.

Employee surveys aren't new -- HR has been measuring employee satisfaction and commitment for years. But many CEOs and boards are now increasingly focused on how the thoughts and behaviors of employees affect the bottom line, notes Patrick Kulesa, the global research director for the employee survey and research arm of Stamford, Conn.-based Towers Perrin.

As a result of this growing interest in the power of people to drive business success, many of America's largest employers are turning to engagement surveys to measure and harness that power. (See the chart showing this year's Top 100 largest companies.) At the same time, CEOs and other executives have been pushing HR to justify various employee initiatives -- such as employee training and performance management -- and HR has been clamoring for surveys that will help make its case, Kulesa says.

Numerous consulting firms have stepped forward to fill the brisk demand, and they all tend to do it a little differently, says Gibbons.

"Each one of the vendors," he says, "needs to have a brandable approach to employee engagement that distinguishes them from the competition and gives them a strategic advantage."

Not all companies, however, make the best use of the information they get. Some CEOs claim they want engaged employees, but are really only interested in a survey score to put in their annual reports, and to use to win awards and get on lists of best companies to work for, says Jeffrey Saltzman, a practice leader at Kenexa, the Wayne, Pa.-based talent acquisition and retention firm.

"They say, 'Look at us, we're engaged,' " he says.

It's called "scoreboarding" -- using survey scores or employee-participation rates to justify whatever executives want justified -- including their own salaries.

According to Gibbons, 78 percent of Fortune 100 CEOs are evaluated -- and their pay increases and bonuses are calculated -- through some kind of "people measure," in addition to other factors.

"So what?" he asks. "How do we know these people measures are creating shareholder value?"

That's the concern of Ian V. Ziskin, corporate vice president and chief HR and administrative officer at Northrop Grumman, the giant defense and aerospace contractor. Ziskin's Los Angeles-based company gives engagement surveys to about one-third of its 122,000 employees.

"I've found over time," says Ziskin, "that the single biggest thing to focus on is not the actual scores or the response rates -- that's a means to an end. The end is, do you really understand what the issues are in your business, and what are the actions you're taking to improve them?"

Pliable Concept

Years ago, companies measured employee satisfaction, asking workers how much they liked their jobs. Executives had a vague belief that happier employees were good for the company, but there was no real effort made to establish that relationship, says Ray Baumruk, the employee research and engagement practice leader at Hewitt Associates, based in Lincolnshire, Ill.

In the late '80s, companies began asking employees to rate their "organizational commitment" -- essentially, whether they cared enough about their companies to stay.

Employee engagement, and a more scientific approach to connecting survey responses to the bottom line, emerged in the mid-to-late '90s.

Though each firm has its own definition of engagement, the experts interviewed for this story agree that a truly engaged worker will go above and beyond what is expected and, in so doing, will help make the company successful.

Says Baumruk, explaining what's new, "You can have people who are wholly committed, but not engaged in the types of behaviors that businesses need to succeed."

Going above and beyond is the mantra of the employee-engagement movement -- but how do you measure that? How do you know whether an employee is willing to go above and beyond? And of all the employee initiatives that HR has at its disposal, how do you know which ones will encourage an employee to do more than you ask?

Consulting firms generally attack the problem by asking two kinds of questions in their surveys. One type, often referred to as a definition, outcome or measure (there's even disparity over the terminology) determines whether an employee is engaged. For example, an employee will be asked to rate a statement such as, "I am proud to work for my company."

The other type, often called a driver, looks at job conditions that might lead to engagement. Some consulting firms believe that the single most important driver of engagement is the worker's relationship with his or her direct manager.

Baumruk uses a health analogy to describe the difference between the two types of questions: A person's blood pressure and pulse are measures of his or her health, and the person's medical history, exercise patterns and diet are drivers.

When measuring engagement, both types of questions have to be asked. If you only look at definitions, you might learn how engaged your workforce is, but not why. If you only look at drivers, you might find out what leads to engagement, but not whether your employees are actually engaged.

So you ask both kinds of questions, and look for the patterns that emerge. If your survey works, you'll learn what makes a particular group of employees more or less engaged. And you'll get a sense of how various combinations of drivers work in tandem.

If it all sounds pretty scientific, that's exactly what the consulting firms say it is. In fact, Jim Harter is "chief scientist" for workplace management at Washington-based Gallup, the polling and consulting firm that helped pioneer the employee-engagement movement.

Gallup takes a somewhat unusual approach in its surveys. The firm asks 12 basic "driver" questions -- but no definition questions. Harter says there's no need. If an employee gives positive responses to the 12 questions, he or she is engaged. Taken together, he says, the 12 form a definition of engagement.

Harter says the 12 were narrowed down from thousands that were tested, and are effective in measuring engagement because "all have some element of human nature."

For example, employees are asked to rate the statement, "I have the materials and equipment I need to do my work right."

Throughout human evolution, says Harter, "we probably had to have and protect our materials and equipment just to survive. If it's taken away, it stings a lot more." That explains, he says, why a seemingly minor problem in the workplace -- such as a retail employee who doesn't have a stapler to staple receipts together -- might be a serious cause of disengagement.

"All Over the Map"

Given that consulting firms apply this level of scrutiny to engagement, you might think they'd all pretty much agree on what drives it, and how it should be measured. You would be wrong.

A new study by Gibbons and The Conference Board, to be released this spring, does a side-by-side comparison of various surveys used by client companies.

About 2,400 employees from 13 multinational companies in 11 countries were given a kind of mega-survey, with questions based on the approaches of all the major consulting companies.

In sifting through the other surveys, Gibbons was astonished to find 45 "distinctly separate" questions used to define engagement. "It was all over the map," he says. There were also 28 different drivers of engagement, which Gibbons says is also frustrating.

"You're saying that everything and anything can drive my employee engagement," he says, adding, "It is really dependent on which consulting firm you go to for your measuring."

When Gibbons analyzed the results of The Conference Board's combined survey, he concluded that there were four measures of engagement and four drivers that were "universal" from company to company, and from country to country.

The measures: Employees who are engaged say that their jobs are satisfying, interesting and give them a sense of accomplishment, and that they're motivated to contribute more than what's expected.

The drivers: whether the work has variety and is challenging, whether the employee has a good interpersonal relationship with his or her manager, whether the company's values are shared by the employee and whether the employee has career-growth opportunities.

But will those drivers actually lead to a company's business success? That's less clear.

A number of studies have found that high-performing companies tend to have high rates of employee engagement. And, engagement is lower at companies where the operating margin and net profit are dropping.

Critics of employee-engagement surveys, such as Cornell University HR professor Christopher Collins, say such studies are misleading because they don't show which came first -- the engagement or the company's success.

"When a company is performing at a really high level, it gets written up in the press, the employees get excited and it turns into engagement," he says. And if a company is doing poorly -- "like a team in the middle of a 20-game losing streak," he says -- employees become less engaged.

"So what drives what?" he asks.

Says Saks, the University of Toronto professor, "If you measure enough good things and call it what you want, it's going to be related to positive outcomes."

This chicken-or-the-egg debate shows no signs of being settled anytime soon.

Several consulting firms, including Gallup and Towers Perrin-ISR, say they have clear evidence that engagement does boost the bottom line.

Kulesa, of Towers Perrin-ISR, says "it works both ways" -- that while success does breed engagement, engagement also leads to success. And his firm focuses on that second part. "We want to jump in there," he says.

Some companies, such as Richfield, Minn.-based Best Buy, say they're able to track their survey scores to profits. If a store's engagement score increases by a tenth of a point (on a five-point scale), that store's profits will increase $100,000 for the year, says Joe Kalkman, the company's vice president of human resource capabilities.

Survey critics also say the abundance of engagement definitions and drivers is not a minor matter. With so many different approaches to engagement, companies can never be sure what they're measuring, they can't transfer their knowledge to other companies or industries, and there's no wider body of knowledge that's being built in the corporate and academic worlds.

And then there's the issue of whether employee engagement is really new. Saks notes that many survey questions about engagement are remarkably similar to earlier questions about employee satisfaction and organizational commitment. And he wonders whether consulting firms are simply selling companies "old wine in a new bottle."

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"How come we're only discovering employee engagement now?" he asks.

While some consultants insist that engagement is significantly different from commitment, Kenexa's Saltzman acknowledges that the questions "are about 95 percent the same."

"How many times do you buy Colgate or Crest and find 'new and improved' on the box?" he asks. "We're always looking for something better."

Says Saltzman, "I feel in some respects engagement is a marketing tool -- but who cares? If that's what it takes to get organizations to actually view employees as more valuable, I don't care whether you call it engagement, commitment, loyalty or whatever you want to call it."

Proper Administration

Even companies that are serious about their employees -- and engagement -- fall into traps that can undermine the entire engagement process, experts say. For example, companies often falter when they administer surveys without first telling employees why they're being asked the questions in the first place.

"We see a lot of organizations, the day or the week before, tell employees, 'We want you to take a survey' -- but there's no context," says Linda Dulye, president and founder of L.M. Dulye & Co., a consulting firm based in Warwick, N.Y. "You need to say, 'Here's why we need the data, and here's what we're going to do with it.' "

As Tom Royal, a principal at Gallup, puts it, "You need to get their buy-in to the process."

The danger, he says, is that employees won't take the survey, or they will fill it out but not take it seriously.

Equally damaging is when a company doesn't show the survey results to its employees, or only shows the good news. Royal calls that "the biggest mistake a company can make," because it tells employees that they can't be trusted, and their vote doesn't count.

Says Dulye, "If you take a survey, and never hear anything about it, that's what disconnects most employees."

Workers tend to get disillusioned, particularly when the next survey rolls around. "You might have a 92 percent participation rate," she says, "but what if only 30 percent of your data reflects reality?"

That can also happen if the survey results aren't acted upon, says Tom Rath, Gallup's global practice leader for its Workplace and Leadership Consulting group. "If nothing is done, a survey can do more harm than good," he says. Employees wonder, "Why are you asking questions if you're not going to do anything about them?"

Says Northrop Grumman's Ziskin, "If you ask people's thoughts and do nothing with the information, it will be very difficult to get them to answer the next time." And that will be a problem not just during surveys, but whenever managers ask employees what they think. "Eventually," he says, "they'll stop telling you."

Ziskin offers this advice for HR leaders who are considering using employee engagement surveys: "Don't even start unless you are committed to following up on the results."

That includes focusing on the low scores, not just the high ones, and developing an action plan, he says.

"The single thing that's important here is not the score," says Ziskin "It's the truth."

Rich Baird, global managing partner of people at PricewaterhouseCoopers, says it's essential that companies ask tough questions in their surveys -- even if that means lower scores.

The New York-based professional services firm, which works with Kenexa, surveys all 147,000 of its employees. And it doesn't simply ask whether workers are motivated to give their best to the company, says Baird, who is the chief HR officer. Instead, the survey question asks whether workers will give their best every day. That gets a far more honest assessment of employee attitudes, he says.

Baird urges corporate leaders not to give in to fears of poor survey scores. Questions must be "appropriately aggressive," he says. "You can't be afraid to have your people tell you what they really think."

Just as each consultant has its own approach to engagement, each company will look at its survey scores in a unique way.

At agribusiness giant Cargill, for example, an engagement survey can reveal a lot about leaders in the company's dozens of business units, says Peter Vrijsen, the corporate vice president of HR.

The Minneapolis-based company, which surveys its 158,000 workers in 66 countries, uses the results to "understand the temperature in the business units," says Vrijsen. And, he says, "nine out of 10 times, if something stands out, it's because of the leadership."

At General Motors, employee engagement has taken on a particular urgency as the domestic automobile industry has continued to lose market share to imports, and the company has been forced to shed jobs and reduce benefits.

It's more important than ever to understand how employs are feeling, says Bill Tate, the vice president of HR for North America for GM, which is headquartered in Detroit.

"You can attempt to manage intuitively, but getting data to confirm your intuition is always good," says Tate.

The road to engagement is clearly not a simple one for the HR executive. That's why it's so important to be the kind of informed consumer that Gibbons, of the Conference Boards, says is crucial.

He offers three basic suggestions:

* Be clear on what you want out of employee engagement. Do you want to use it as a retention tool, a productivity tool or an internal communications tool? Or perhaps your goal is to improve employee morale. How does engagement align with your corporate and workforce strategies?

"You really need to know yourself before you start entertaining the pitches from the vendors," he says. "Not, 'What is engagement?' but 'What is engagement to us?' Unless you know that, you're going to be out there shooting in the dark when selecting vendors."

* Ask consulting firms the hard questions. "You need to ask about the research they've done showing that their strategies have had impact," Gibbons says.

"Put them on the hot seat," he says, "and ask, 'How can you show me there is a causal relationship between employee engagement and anything else that's important to my business?' "

Says Gibbons, "Most HR people aren't trained in analytics and don't know to ask those questions."

* Find a consultant that already understands the uniqueness of your industry, your organization and your culture. That knowledge is essential if the consultant is to help develop and execute a strategy for improving employee engagement. Otherwise, says Gibbons, "all they're doing is administering a survey."

In the end, engagement for engagement's sake gets the HR executive nowhere.

As Kenexa's Saltzman puts it, "Engagement is not the goal. In and of itself, it gets you nothing. CEOs and HR people assume that engagement is the end state, but when you hit a specific number, all it does is create potential. It's what you do with an engaged population that counts."

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