News and Articles—Employee Engagement

People Power — The Value of Engagement

By Rick Dandes
Appears in Premium Incentive Products

Fully engaged and satisfied employees are persistent, proactive and consistently make decisions that are in line with their company’s strategic goals and objectives. This can be a crucial factor in an organization’s survival, particularly during tough economic times. And when conditions improve, engaged employees are even more valuable, making their company stronger and better prepared to take advantage of future opportunities.

“When we consider an engaged employee, we think of an inspired individual with a strong desire to be part of the values their organization creates,” said Deanna Baker, vice president, human resources and employee development, InteliSpend Prepaid Solutions (formerly American Express Incentive Solutions), of St. Louis. “It’s the term ‘above and beyond’ personified through a profound connection to the company and constantly thinking about how their role can make things better.”

No question, there is great power in a fully engaged employee. And, the more fully engaged employees you have on board, the more powerful your organization’s performance will be. But, over the past few years, layoffs and cutbacks have taken a toll on the workforce. The cost-cutting, belt-tightening measures used by some employers to deal with the recession have left many businesses with disengaged, rather than engaged employees.

An article in The Economist (“Overstretched,” May 22, 2010) painted an even darker picture: Disengagement as an employee condition is growing rapidly, particularly among high-potential top performers. “That is an alarming trend,” said Mike Ryan, senior vice president, marketing and client strategy for New York City-based Madison Performance Group and president of the Performance Improvement Council.

“The reason for the disengagement is that employers are looking to get more with less,” Ryan added. “Top performers are getting to the point where they are feeling overstretched and underappreciated.”If engaged employees bring peak performance to your organization, what happens when they become disengaged? What does it mean for an employee to be disengaged?

“A disengaged employee,” Baker explained, “is going through the motions without energy. The motivation switch in them has ’turned off,’ so to speak.”Finding ways to power up employee engagement is critical if you want to remain competitive and keep your business running smoothly. So, what can be done?

Effectively structured incentive programs can play a key role in powering up employee engagement. Motivation experts generally agree that engagement improves when employees and customers are recognized and rewarded. But how do employers really know when an employee is fully and psychologically engaged? In one case, an employee might be totally motivated and not achieve as much as another employee, who achieves good results, but is not completely engaged.

Understanding Engagement
One key to measuring engagement, Baker contends, is having a system in place to begin with, or taking the time to create one. A critical component of this system, she said, should be the specific factors your organization needs to monitor. With these tools, you’ll have a foundation for determining engagement levels against company metrics. Return on investment is a common measure, but so is ROE or return on engagement.

“At InteliSpend, we take that approach,” Baker continued. “We use our employee engagement survey as the starting point, and follow it up with focus groups and other avenues to gather ongoing feedback. Other means for measuring alignment would be metrics like absenteeism, improving processes or even who wins the company awards. While every employee is an individual and motivated by different drivers, intrinsically you can tell who’s motivated and who isn’t.”

Two other highly respected organizations, Gallup and BlessingWhite, also employ specific tools to find out if workers are engaged. Washington D.C.-based Gallup uses a survey, which asks a variety of questions, ranging from “Do I know what is expected of me?” and “I have the equipment and materials to do my work right,” all the way on down to, “Do I have a best friend at work?”

BlessingWhite, a Princeton, N.J.-based organization very much involved in engagement measurement, takes a different approach. Gallup has three categories. Either you are engaged, you’re not engaged, or you’re disengaged. BlessingWhite breaks engagement down into more categories. From their perspective, you’re either engaged, you’re almost engaged, then as a new or older employee, you can be a “honeymooner,” a “hamster” or a “crash and burner,” and finally you have the disengaged.

Gallup and BlessingWhite’s methodology are the two principal diagnostic mechanisms that employers use to determine if employees are engaged, Ryan said. “But quite frankly, I think the manager is a real good source of understanding that as well. Managers are able to look at an employee and see if he or she is not only doing the work that is given to them, but also is an advocate of the firm’s vision.”

Managers are able to look not just at an employee’s work in terms of the processes that they have to follow, but also the ways they are innovating “I really believe that innovation is a key way to measure whether or not an employee is engaged,” Ryan said. Innovation right now is critical for organizations to maintain their competitive advantage in a challenging marketplace. A manager can see that. A manager can observe an employee’s behavior, either visually or just through the interactions they have. Do they behave like an engaged employee?

An engaged employee is somebody who not only performs above and beyond what you are asking for, from a metric point of view, but also is an advocate of the firm’s vision internally. “I think we need to look at the human dynamic,” Ryan continued. “How people handle stress and anxiety.”

These days there is considerable stress in the workplace. Top-level performers, for example, feel anxiety as they are not only being asked to do more, but also not succeeding like they used to as a result of the recession; the business world has become much more complex and demanding. Top performers, like anybody else, begin to rationalize that level of failure. They may begin to think their company is not as good in marketing as they used to be. Or that the company’s customer service is not as effective as it once was.

The combination of having less confidence in leadership, and the feeling that leadership is asking them to work longer and harder might be making some top performers think, “You know what? I question whether or not this is the place I want to be for the long term.”

“The bottom line is a lot of people don’t feel appreciated,” Ryan said. “They feel like they have to perform at a high level right now, or else. It is an employer’s market these days. There aren’t any jobs out there, relatively speaking. Employers know it. The fear factor is what they are leveraging, and I think employees resent it.”

Doing it Right
Louise Anderson of Anderson Performance Improvement cites Scottrade, a leading branch-supported online investment firm that has made FORTUNE Magazine's "100 Best Companies to Work For" list for the past three years as an example of the power of electronic recognition. It's a company, she contends, "that is doing things right." The firm uses an online, points-based recognition program to support its cultural values. Associates are encouraged to recognize one another for demonstrating the core values of customer service, trust and integrity, individual development, open communication and teamwork. Scottrade, Anderson said, "sees recognition as a way to cultivate development; rewarding others for their efforts encourages associates to find even more ways to excel, fostering their growth." Through the rewards Web site, Scottrade associates can:

  • Send "thank you" e-cards acknowledging their peers' efforts or assistance.
  • Nominate individual co-workers or teams for awards with various point values, recognizing special accomplishments.
  • Print award certificates received from co-workers.
  • Redeem "On-the-Spot" scratch-off cards received from managers by entering the card's code online.
  • Spend recognition points on prizes ranging from gift cards to electronics.

The Scottrade Web site makes recognition methods easily accessible so associates are more likely to be highly engaged.

Driving Engagement
When devising a program to inspire the very best levels of performance by employees, you should ensure that the plan is in alignment with your company goals and objectives. “Clearly broadcast not only the program, but the winners, on an ongoing basis,” Baker said. “You should also include a variety of types of recognition, such as formal and informal, into the mix. Employees aren’t cookie-cutter, and the incentive program shouldn’t be either. When you respect and recognize the individuality of each employee, you’ll have a program that resonates across the board.”

Louise Anderson, founder and president of Anderson Performance Improvement, of Hastings, Minn., takes another tack. “I think we make things way too complex,” she suggested. When a company is considering using incentives to drive engagement, “We go to a large organization and look at those that are improving at the fastest rate. Then, we copy what they are doing. What do you think you get? You get significant acceleration. If there isn’t a wide gap between those companies that are improving and those that are staying the same, then you don’t need incentives, it’s not something that you can motivate.”

Anderson is not necessarily concerned that one company has sold more than the other so much as what was done to achieve their success. Do they use different knowledge? Do they engage with the customer via telesales before their sales people put their feet on the street? Are they doing more phone follow-ups? Or perhaps providing instant Web-based information to potential customers so they can see possible new solutions to their problems?

When it comes to incentive programs, organizations would be smart now to recognize and acknowledge employees for the ways they go about their behavior every day, and the way they go about their jobs, which in the long run might be just as important as their outcomes, suggested Ryan.

It’s the corporate culture that has the largest influence on an employee’s sense of engagement. Is it a cooperative culture, where an employee is willing to share insights and information, is willing to train and mentor others, and recognize the agenda of multiple stakeholders internally and externally?

“That’s the kind of innovative corporate mindset you want to have,” Ryan explained. Those are the types of employees you want to recognize and reward. But if a company is just concerned about outcomes, then that’s a business environment that is at risk of losing true innovation and cooperation.

Of course, business leaders have to do everything they can to drive results — and they should. Shareholders demand it. But at the same time, employers should not ignore the behaviors of people along the way. If they do, they risk creating an environment that becomes overly competitive and run into a workplace where people are just the opposite of what they should be — a workplace where employees don’t share information. Where people worry about themselves instead of others, and where they have a sense of values that is more internally focused instead of company-focused.

The Effectiveness of Non-Cash Rewards
With sales, rewards are all about competition, recognition and that driving spirit to succeed, Baker said. And, while cash is often king, there are other drivers that will resonate more with your sales force.

For the salesperson motivated by competition, a program revolving around a ranking report will motivate and incent them to reach beyond their quota, she said. If recognition is a factor, try to have the annual trip include your CEO. Face time with executives is a huge motivator and a great goal to aspire toward.

Anderson, meanwhile, pointed out that in a sales force, there is almost always an established base pay and variable compensation plan — and that’s a cash reward. “If that incentive alone was working,” she said, “then why wouldn’t they just do more because they’d get more cash?”

Where it’s not working, something else is needed. Here, non-cash rewards are ideally used as a stimulator and short-term fix. Focus the non-cash rewards on the behavior and activities that would raise an employee’s compensation significantly, because they’ll earn more variable pay. “And they’ll stay there, once they actually learn how to do it,” Anderson said.

Some of the desired engagement behavior is observable. When, for example, employees do things the right way, even if it doesn’t directly result in a sale. Other times, people might be rewarded for collaborating well in a team environment. “When I say teams,” Anderson explained, “I’m talking about a sales and a service person that work together. Or employees who might not be working on the same customer or project together, but they are willing to share their techniques and knowledge so that others can engage better with the customer.”

Ryan agrees with both Baker and Anderson. “Absolutely, non-cash awards can be extremely effective in driving engagement,” he said.

Non-cash awards can range from non-funded awards, which are a simple thank you, or you did a good job, to some type of an award mechanism. But ultimately — in this particular case — the non-cash award is more effective because it does not necessarily need to be as closely regulated and structured and scrutinized as cash awards.

“What the non-cash award does,” Ryan continued, “is to reinforce a sense of shared values and shared mission. It’s a great communication mechanism, because if you recognize a particular individual for the way they went about a task, you can share that recognition with others.”

Sharing the fact that someone got a $500 bonus is not really going to help a company in terms of creating an environment of mutuality, he said. “But if you can share the story of how somebody went about a task and it’s something everyone can learn from, it becomes not only a recognition component but a communication component. It’s also inherently more affordable for an organization, and it is effective, in terms of creating a campaign-style tool internally, where you can really reinforce desired behaviors.”

Soft Benefits, Big Returns
Everyone chants “ROI, ROI,” but when employees are fully engaged, there are a number of soft benefits that might not be monetary based, but are still important to an organization.

In a sales organization, Anderson explained, incremental margin over trend is a very good way to get to ROI. But in a service organization, there is a value associated with satisfied customers or an improvement in their level of satisfaction. Soft benefits can be defined by qualitative success metrics, and those qualitatives are often a manager’s perception that people are more engaged.

“From my perspective,” Anderson said, “after the first 30 days of an incentive program, we’re looking for management’s perceptions. Do you believe the program is working? We do this not after the program is over, but during the program, and if there is a perception that they do not believe it’s working, we have to dig in deeper because the data usually shows that early indicators are working. So, why don’t the managers perceive it? That’s what we need to find out.”

In Anderson’s view, it is extremely important to look at those soft metrics, such as innovation, which cannot be captured without somebody making suggestions on how to change things. “That’s the kind of company I like to deal with. Companies that respond quickly and are innovative. “It may sound strange,” Anderson said, “but depending on the job, innovation and problem solving are exactly the same thing.”

Innovation is all about risk taking, and looking at a particular function differently; how it could be done better for the benefit of the customer and the organization.

“Organizations right now are creating an environment where employees are fearful of going outside of the expected norm,” Ryan noted. “There is nothing wrong with following process. But, if an employee finds a way to do something more efficient and effective, they should be encouraged to do that and congratulated for doing that.”

The other side of this is the leadership aspect: it’s a big plus when you have an enlightened, engaged manager who not only recognizes their role in motivating an employee to take that chance, but also will then help reward the employee through recognition.

“I think the need to innovate and the idea of innovation as a soft benefit of employee engagement is something a lot of organizations don’t look at when they examine their ROI,” Ryan said. “ROI now, when it comes to engagement, is principally a function of attrition and productivity. But that productivity can be measured in terms of finding new ways to do things. And you should always be looking at things like customer satisfaction, customer equity.”

There are, of course, other ways to measure top levels of performance, including decreased absenteeism, increased productivity, reduced turnover and taking on a leadership role.

What Can Go Wrong
It’s significant when someone in your organization is disengaged, because with the right engagement, many employees can be top performers and have the highest potential. That said, there are factors aside from the incentive program that should be addressed when you see disengagement.

Organizations need to uncover the root cause of the lack of engagement. For a program to motivate employees toward full engagement, Baker said, “it must be designed for the entire organization, not just a subset. It must also be embedded in the company culture so employees, managers and executives alike know, understand and actively use the program to its fullest potential. A big part of that is ensuring that you have buy-in from your executive team. They must be behind the program 100 percent and illustrate that commitment in a way that’s visible to employees, so its importance resonates across the board.”

“If you’re missing one these factors,” she said, “you’ll have challenges with having the program reach its potential to motivate.”

One mistake incentive program designers make is not refreshing the program, Baker continued. “What worked five years ago may not be the best solution with new employees or a new corporate direction. Get that feedback on an ongoing basis and use it to improve your program.”

Another challenge is having a program that’s out of alignment with company goals. And lack of communication can also be a pitfall. You can have the best program in the world, but you have to let employees know about it often. Awareness goes a long way in making a program successful.

Another factor is making sure the program is not the be-all and end-all. “Have a good enough pulse of your employee population to know what else will inspire them and drive them to be great ambassadors of your organization,” Baker said. “At InteliSpend, for example, our employees gain fulfillment around charitable work and company activities like sporting events and family outings. We then established committees and programs to fill those needs because our employees let us know it’s important to them to work for a company that values these activities.”

In today’s economy, you cannot overlook the need for an executive-level presence associated with your program because in so many programs today, there is a disconnect between programs being put out there for recognition and management being reluctant to use it because they feel it runs contrary to some of the other measures that they are getting hit with, which is basically, don’t spend money.

“The other thing that is important,” Ryan said, “is to pay attention to your data. Many organizations now look at recognition and they track the utilization of recognition, in terms of budget, in terms of who is being recognized, or what they are being recognized for. They track the program on a transactional level, but it’s also important to integrate other metrics into the equation.”

Ryan believes companies can use recognition as a way to help a particular manager accelerate and drive a more desired outcome. Look at how certain units are doing, he said. Recognize and duplicate the actions and hopefully the performance of successful individuals.

In general, Ryan concluded, companies that are “doing it right,” are very purposely taking recognition and integrating it with their branding parameters. So, if their brand stands for things like teamwork and customer service, what they are doing is translating those attributes into behavior that individuals can understand. It becomes very actionable for the employee to know where they fit in, in the context of that brand.

“Making the connection between what is expected of you and what you do every day, and using segmentation strategies and direct marketing communication approaches is really how I define how organization’s are getting it right,” Ryan said.