Toward a New Employee Engagement Paradigm McLean & Company All Rights Reserved McLean & Company 1

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1 Toward a New Employee Engagement Paradigm McLean & Company 1

2 Agenda 5 Minutes Introduction to Engagement Minutes Group Exercise 20 Minutes Engagement 3.0 in-depth exploration 10 Minutes Q&A Period 10 Minutes Swaying Neutrals & Resistant Stakeholders McLean & Company 2

3 Introduction to Engagement Minutes McLean & Company 3

4 Contributors We interviewed and worked with over 200 firms to produce this research. The cohort below was the most dedicated and determined to help contribute ideas and insights to defining Engagement 3.0. McLean & Company 4

5 What Brought Us Together: A Mixed Story on Engagement Strategies The Good The Bad The Ugly 3.4 times more productive 7 times more likely to recommend organization 147% higher earnings per share compared to competition (Gallup) CEO s least satisfied with engagement, of core HR services Engagement effectiveness scores below 40% for both HR and Non-HR In medium and large organizations, engagement action planning rated as least effective HR area 75% have no engagement strategy (Dale Carnegie) Turnover costs $11 Billion annually (Dale Carnegie) Active disengagement costs the US $370 Billion annually (Gallup) Voluntary turnover increasing since the recession McLean & Company 5

6 To date, engagement initiatives have remained largely reactive in the future, effective engagement will? Engagement 1.0 Engagement 2.0 Engagement 3.0 Focus Employee satisfaction Survey score Business results Measurement Satisfaction survey Annual point-in-time survey Real-time measures Action Fragmented and reactive Formal and reactive Agile and customized Ownership Personnel Human Resources Leader-driven The evolution in the definition of engagement Employee Satisfaction: Satisfied Employee Engagement: emotionally connected and committed Leader-Based Engagement: Effective leadership practices. McLean & Company 6

7 Group Activity 10 Minutes McLean & Company 7

8 Group Exercise At your table discuss one of the categories below: Table 1: Linking Engagement to Business Results Table 2: Mechanisms of Tracking and Measuring Engagement Table 3: Action Planning & Executing Engagement Strategies Table 4: Who should be Accountable for Engagement? Table 5: Who has the most Impact? McLean & Company 8

9 Moving Beyond Traditional Engagement 20 Minutes McLean & Company 9

10 To date, engagement initiatives have remained largely reactive in the future, effective engagement will? Engagement 1.0 Engagement 2.0 Engagement 3.0 Focus Employee satisfaction Survey score Business results Measurement Satisfaction survey Annual point-in-time survey Real-time measures Action Fragmented and reactive Formal and reactive Agile and customized Ownership Personnel Human Resources Leader-driven The evolution in the definition of engagement Employee Satisfaction: Satisfied Employee Engagement: emotionally connected and committed Leader-Based Engagement: Effective leadership practices. McLean & Company 10

11 Five key insights define the new era of engagement and the move to integrated leadership empowerment FROM EMPLOYEE ENGAGEMENT TO A LEADERSHIP EMPOWERMENT STRATEGY Escape the Employee Satisfaction Mindset Focus on Direct Business Drivers Match Assessment and Management Cadence Recalibrate for Multi-Level Intervention Don t Just Engage, Lead McLean & Company 11

12 A traditional satisfaction state of mind approach won t lead to meaningful benefits for your people and organization 1 Escape the Employee Satisfaction Mindset Even though we apply much greater analytical rigor today, our framework hasn t changed significantly from the 1990s when we assessed employee satisfaction. McLean & Company 12

13 Satisfied Chickens & Engaged Pigs The American Breakfast McLean & Company 13

14 Incremental improvements in engagement are common in organizations with a satisfaction state of mind focus A widespread focus on the employee satisfaction framework has caused incrementalism Most organizations experience very little fluctuation in engagement score year-over-year; they see only incremental improvement. Given the minimal variation, whether fluctuations represent true change is up for debate. Despite some real improvements in our scores and even retention, it just feels like a lot of effort for relatively little return. Head of HR, Fortune 500 Company McLean & Company 14

15 Leading-edge companies have produced innovations to drive engagement, avoiding victimhood Tailored Survey Strategies by Employee Type Data-Centric HR Decision Making Social Media Metrics Replace Employee Surveying Brand Ambassadors Employee Swaps to Exchange Ideas Escalating Voluntary Exit Bonuses Gamification of Product Knowledge Engagement Council Customer Experience Analog Stop Work Authority Continuous Employee Sentiment Assessment Employee-Owned Individual Engagement Strategies McLean & Company 15

16 A focus on direct business drivers helps transition engagement from intangible fluff to tangible strategic impact 2 Focus on Direct Business Drivers While the traditional targets of employee engagement retention and discretionary effort are important, progressive companies focus engagement directly on agility, cost, quality, and revenues. Tie engagement to the vision and mission of the company, and to business goals. Connect engagement with business results, proving that it s not HR fluff. Move away from a cookie-cutter approach to manifest tangible results. McLean & Company 16

17 Move Up The Employee Measurement Value Ladder While targeting engagement as a leading indicator may be possible for some business results, progression to the state of pattern recognition is at the heart of Engagement 3.0. High Predicting Prescriptive Behavioral Change Understanding Pattern Recognition Comparing Benchmarking Relating Links to Core Goals Low Recording Activity Data Source: Jac Fitz-enz, 2010 McLean & Company 17

18 Predict behaviors that drive desired business results through the right engagement question Three common approaches to selecting the right engagement question(s) to drive business results: Openness & Agility Awareness Endorsement Past Present Future McLean & Company 18

19 Employee engagement impacts business results Organizational Strategy Employee Engagement Business Results The engagement connection: Examples: Engaged employees are 3.4 times more productive than employees who are not engaged (McLean & Company, 2015, N=17,367). Best Buy found that the value of a 0.1% increase in engagement was $100,000 in a store s annual operating income (Davenport, Harris and Shapiro, 2010). Molson Coors found that highly engaged employees were 5 times less likely to have a safety incident and 7 times less likely to have a lost-time safety incident than their disengaged counterparts. By strengthening employee engagement, the company saved $1,721,760 in safety costs in one year (SHRM Foundation Executive Briefing, 2012). McLean & Company 19

20 Aligning assessment cadence and management cadence optimizes engagement and drives business results 3 Match Assessment and Management Cadence Align the timing of engagement assessments and engagement-affective decisions. For some employees, this may be infrequent, but for others such as customer service, it may be daily. Create more valid, reliable links with business data (consistent tracking). Increase manager investment and accountability. Reduce the risk of biased data due to managers gaming the results. McLean & Company 20

21 % Engagement % Engagement Lead people instead of managing averages by tracking fluctuations in engagement Important fluctuations in engagement happen across a day, week, or month that are not captured in the annual measure. More frequent engagement tracking gives a better understanding of why changes happen and helps managers better lead their people. 100% Annual Assessment 100% Quarterly Assessment 40% Engaged 40% Engaged 30% Engaged 30% Engaged 0% FY 2014 FY % FY 2014 FY 2015 Remember that engagement itself is an average concept; an engagement score is an average of a variety of different engagement factors (e.g. collaborative posture, mood, autonomy) all of which can fluctuate differently. McLean & Company 21

22 Match real-time engagement measures with frequent and relevant actions 4 Recalibrate for Multi-Level Intervention Employee engagement happens at the individual level. Deploy engagement tools that enable action anywhere from the enterprise-level all the way down to mass-customized solutions for individual employees. Create opportunities for rich discussions between leaders and employees. Leaders can tailor engagement efforts most suitable for their team. Help you not lose sight of the employee. McLean & Company 22

23 Levels of Analysis Matter Enterprise Region Business Unit Teams Employee Engagement Index While the business is looking for a silver bullet that will solve all engagement problems for all time, we must learn to fine tune engagement tactics to map against strategic inflection points in the business. We must find ways to capture fluctuations and variance in engagement at various levels; ultimately getting an N of 1 and mass customized empowerment strategies/tactics. McLean & Company 23

24 Employee engagement is fundamentally about leadership 5 Don t Just Engage, Lead The litmus test for an effective engagement program is whether or not the output routinely changes how managers interact with their employees, and even more importantly, how it affects the daily dialog among the firm s leaders. Engagement needs to be a way of life for leaders, not an add-on. Leaders have the single greatest impact on engagement. Engagement happens every day, through every interaction. Leaders should tailor engagement to individual team members. McLean & Company 24

25 At its core, employee engagement is fundamentally about leadership: people leadership The litmus test for effective engagement focus is whether or not the data routinely changes how managers interact with their employees. This requires two main shifts: HR Owned: Reflection of effective HR practices. Leader-Driven: Reflection of effective day-to-day management practices and behaviors. Engagement Score: where aggregate year-over-year results. Engaging Behavior: ongoing dialog focused on energizing and connecting employees to business results linked to organizational strategy. It s the decisions, behaviors, and actions of leaders that actually contribute to developing true engagement in the workforce. - Kenneth A. Finneran, Chief Human Resources Officer National Beverage Corp. Business Results Engagement can t be delegated. - Denny Dotson, Chairman, People Driven Performance McLean & Company 25

26 Summary: Move to integrated leadership empowerment using McLean & Company s five Engagement 3.0 insights Escape the Employee Satisfaction Mindset Focus on Direct Business Drivers Match Assessment and Management Cadence Recalibrate for Multi-Level Intervention Don t Just Engage, Lead Abandon fragmented employee engagement activity. Redefine engagement s purpose from driving an index metric to driving business results: Shift cadence from static annual surveys and scheduled pulses to just in time sensing and responding Adjust focus from organizational-level metrics to multilevel views of engagement. Embrace integrated leadership empowerment. FROM EMPLOYEE ENGAGEMENT TO A LEADERSHIP EMPOWERMENT STRATEGY McLean & Company 26

27 Follow McLean & Company s 4-step process to support integrated leadership empowerment in your organization Sustainable execution on organizational strategy to deliver on business results can only be optimized through integrated leadership empowerment. Leaders who demonstrate they are invested in their people drive investment by their people. Step 4 Prepare to launch Organizational Strategy Step 1 Introduce a more dynamic engagement measurement Step 3 Reinforce leaders role in the new engagement paradigm Leader-Driven Employee Engagement Business Results Step 2 Make the connection between engagement and business results Follow these process steps to reinforce leader-driven employee engagement in your organization. McLean & Company 27

28 Q&A 10 Minutes McLean & Company 28

29 Stakeholder Buy-in: Neutral and Resistant Managers 10 Minutes McLean & Company 29

30 Engagement is a means to an end, not an end in itself Organizations that obsess over engagement scores are focused on the percentage of engaged employees, rather than the associated business outcomes that make engagement a worthy focus area. Focus on the reasons why engagement is a priority in an organization, and prepare to make the connection to: Organizational agility Product quality Revenue Profitability Market share/growth Customer retention Engage so often means a survey. - Derek Irvine, Globalforce At a micro-level, it s time to stop trusting and time to start testing. - David Zinger, Employee Engagement Expert and Speaker McLean & Co. Insight While linking engagement to customer satisfaction is a powerful start, the measurable connection needs to go further and link to other business outcomes that translate to profitability and ultimately sustainable business growth. McLean & Company 30

31 Debunk myths and avoid pitfalls to make the links to business results Myths Engagement initiatives that boost attraction and retention will naturally translate into a more productive workforce. While summer hours and cool offices address some engagement drivers, they don t address the job engagement drivers required to drive productivity. Engagement is impossible to measure beyond correlation. Best practice companies are measuring and monitoring the cause and effect of engagement on key business metrics. One size engagement fits all. Each team and individual has unique engagement needs. Engagement interventions must empower managers to address these needs in a way that is aligned with the organization s overall mission, vision, and values. High performers are more engaged. While we know engagement drives performance, research demonstrates the reverse isn t necessarily accurate. Managers cannot assume high performers are naturally more engaged (HBR). Pitfalls Lack of support for employee engagement initiatives at the senior level. Senior leadership sets the tone and purpose for engagement. Support must start from the most senior levels of management and cascade down. Celebrating the engagement score as the end result. Improved business results are the goal, with engagement as the means to an end. Focus on how engagement is measured, rather than why it is measured. Engagement initiatives should focus on the actions, activities, and leadership behaviors that support it. HR has been responsible for employee engagement and may be reluctant to give up this control. For engagement to meet business results, it needs to be driven and owned by people managers (Aon Hewitt, 2014) - HR is a support mechanism (Aon Hewitt, 2015). McLean & Company 31

32 Leaders may have concerns about their new role in engagement, so prepare to address them Engagement is an HR thing. Why should I be responsible for it? Having an impact on my team s engagement seems overwhelming. I don t know where to start. I don t have control over the factors affecting my team s engagement. If I do something different with my team that no one else does with their team, it will be perceived as unfair. I have a lot of things on my plate and engagement is not one of them. No, engagement is a reflection of effective management practices, which makes it a leader as people manager thing HR is there as a support mechanism. Actually, it s not very complicated at all. The first step is to begin the dialog with your employees to identify what can be done to improve their engagement on the team. Engagement is a relationship, not a project, and an employee s relationship with their leader is among the most important factors affecting engagement. Effective interventions recognize that one size does not fit all when aiming for engagement at the personal level. It should be engagement impacts pretty much every aspect of employment and your ability to achieve your business goals. How can I keep my employees engaged when I m feeling disengaged myself? Leaders are employees too so begin by talking to your leader. You re right; you won t be able to engage your employees if you are not engaged. McLean & Company 32

33 Follow McLean & Company s 4-step process to support integrated leadership empowerment in your organization Sustainable execution on organizational strategy to deliver on business results can only be optimized through integrated leadership empowerment. Leaders who demonstrate they are invested in their people drive investment by their people. Step 4 Prepare to launch Organizational Strategy Step 1 Introduce a more dynamic engagement measurement Step 3 Reinforce leaders role in the new engagement paradigm Leader-Driven Employee Engagement Business Results Step 2 Make the connection between engagement and business results Follow these process steps to reinforce leader-driven employee engagement in your organization. McLean & Company 33

34 Whats Next? Please Contact me at if you d like additional insights. I am happy to trade ideas, and discuss the paradigm shift in engagement. Thank You! Brad Markis Product Manager McLean & Company McLean & Company 34