H RESEARCH BRIEF Employee Engagement Higher at Double-Digit Growth Companies Double-Digit Growth and Engagement People are a key component of any company s ability to execute its strategies and achieve its goals. Companies who are able to better engage their people also deliver better business performance and return to shareholders. This holds true even more so for companies achieving double-digit growth (DDG). In fact, employee engagement at DDG companies (63%) exceeds average employee engagement at single-digit growth (SDG) companies by over 20%. Hewitt Associates has been conducting a multifaceted research study, in partnership with Michael Treacy, author of Double-Digit Growth How Great Companies Achieve it No Matter What, to better understand the organizational drivers of double-digit growth. This is one in a series of research papers highlighting the distinctive people practices of double-digit growth companies. In reviewing research on employee engagement at DDG companies, we find that DDG companies generate higher levels of employee and executive engagement than SDG companies. Key Findings Leaders at DDG companies more effectively instill pride and engender a growth mindset in employees; DDG companies are passionate about creating a positive working environment and culture; DDG companies provide greater opportunities and support for development; and Senior leaders at DDG companies have a higher level of engagement than leaders at SDG organizations. One in a series highlighting the distinctive people practices of double-digit growth companies.
Background on Engagement Hewitt Associates pioneered the measurement of employee engagement in the early 1990s. Over the past ten, Hewitt has conducted significant research with its clients to determine what drives employee and executive engagement, and how companies can sustain and improve it. Engagement is measured through a composite of survey items and is represented by a percentage of employees who are engaged. Engagement levels have consistently been found to highly correlate to business results, including total shareholder return. Engagement is defined by the state in which individuals are emotionally and intellectually committed to the organization or group, as measured by three primary behaviors: Say The employee consistently speaks positively about the organization to coworkers and refers potential employees and customers; Stay The employee has an intense desire to be a member of the organization, despite opportunities to work elsewhere; and Strive The employee exerts extra effort and exhibits behaviors that contribute to business success. By understanding what drives engagement and the relative impact each factor has on improving (or lowering) the current engagement level, organizations can plan how to best allocate resources to motivate talent to continually excel. Background on Double-Digit Growth Research Hewitt Associates is conducting a multifaceted research study, in partnership with Michael Treacy, author of Double-Digit Growth How Great Companies Achieve it No Matter What, to better understand the organizational drivers of double-digit growth. Treacy believes that double-digit growth is about execution: getting the right people doing the right things to manage a portfolio of separate, clear, and achievable growth strategies. Having a clear focus on where your company expects to achieve growth provides a powerful organizing principal, the business strategy, and the people practices that are crucial to making it happen. The current study examines employee engagement for DDG companies versus SDG companies. The current research utilizes data from U.S.-based, publicly traded companies in Hewitt Associates 2003 engagement database representing four million employees. The engagement database yielded ten DDG companies on which this analysis is based. We examine the relationship between employee engagement, employee attitudes, and double-digit growth, using Treacy s definition of growth to determine which companies qualify as DDG companies versus SDG companies. DDG Means Sustained Profitability DDG companies publicly traded companies that have achieved a CAGR five-year average growth in profitability (revenue cost of goods sold) of 10% or more, and hit that DDG target in at least three of the past five. SDG companies any other survey respondents from companies with profitability growth of less than 10% (includes companies with zero or negative growth). Based on Double-Digit Growth: How Great Companies Achieve it No Matter What, by Michael Treacy Hewitt Associates 2 DDGEngagementHi04/01Rsjg 4/04
Key Findings DDG companies have leaders who more effectively instill pride and engender a growth mind-set in employees. Leaders at DDG companies achieve this by building confidence in employees through emphasizing and clarifying the connection between what employees do, and the business results achieved. The research illustrates that employee engagement is more directly driven by employees perceptions of senior and location leaders at DDG companies, as compared to SDG companies. This is illustrated by the stronger correlation between employees perceptions of leaders and employee engagement in DDG companies versus SDG companies. Not surprisingly, then, leaders at DDG companies are also more likely to be engaged than leaders at other companies. Employees at DDG companies are more connected to the business, its performance, and its leadership. Employees at DDG companies are more likely to have confidence in their organization s future business direction, and to feel that the company is positioning itself for future growth (28% more employees at DDG companies hold this view than those at SDG companies). Employees receive the information they need to do their job well, and they understand the company s goals and how they can contribute to those goals. They are proud to work for the company, proud of the products they make, and express a high level of trust in their company s leadership. They are more likely to feel that their company s products and services provide value and benefit to customers, and are more likely to recommend the company s products to potential customers. Survey Item I feel confident this company is positioning itself well for future success Percentage DDG Companies Exceed SDG Companies by 28% I am confident this company is making appropriate changes to be successful in the future 27% I have a clear understanding of what I can do to help the company become more successful I have a good understanding of the company s goals I know what the company expects from me I trust senior leaders to appropriately balance employee interests with those of the company I have the information I need to do my job well I am proud to tell others I am part of this company Given the opportunity, I would recommend our products/services to customers I feel our products/services provide real value/benefits to our customers 18% 17% 17% 13% 12% 10% 6% 6% DDG companies have more engaged leaders. Executives at DDG companies exhibit a much higher level of engagement in the organization relative to their employees, which helps drive engagement in the organizations. When looking across all companies, we find that executives engagement levels are 25% higher than for other employees. In DDG companies, however, executive engagement levels are Hewitt Associates 3 DDGEngagementHi04/01Rsjg 4/04
33% higher than for other employees. Behaviorally, this difference manifests itself in how leaders speak about the company and their confidence in the future. This reduces anxiety among employees and, thus, produces higher levels of employee engagement. When this is not as prevalent (as we have found in SDG companies), uncertainty tends to rise and employee engagement is often negatively affected. Leaders at DDG companies have a more direct impact on employee engagement. Our analysis of the interrelationship of engagement drivers indicates that leaders at DDG organizations have a more direct impact on employee engagement. They take a more active role and are more visible to their employees. The graph below shows the interrelationship between drivers of employee engagement (represented by the lines and arrows) for the set of DDG companies. Some drivers (e.g., senior leadership and opportunities) have a direct impact on engagement, while others (e.g., manager) have a more indirect impact on employee engagement. This demonstrates that managers in DDG companies will be most successful in improving engagement through recognizing their employees achievements, and showing how those achievements lead to greater opportunities for the employee. In SDG companies, we do not see the direct impact on engagement from leaders as consistently as we do in DDG companies. In our observations, this may be due to reduced interaction between leaders and employees. Senior Leadership Engagement Drivers Linkage Interrelationship Display Example: for DDG DDG Company Companies Location Leadership Engagement Manager Recognition Opportunities Work Activities Pay Hewitt Associates 4 DDGEngagementHi04/01Rsjg 4/04
DDG companies are passionate about creating a positive working environment and culture. Employees at DDG growth companies express a strong feeling of fitting in at their organization, and they have a sense that they can be themselves at work. These employees speak highly of the organization and its culture, and think it s an exceptional place to work. In addition, there is a higher level of trust and mutual respect among colleagues at DDG companies. Survey Item I think this company is an exceptional place to work I feel I can be myself around here I see trust and mutual respect in the workforce I would not hesitate to recommend this company to a friend seeking employment Percentage DDG Companies Exceed SDG Companies by 24% 15% 14% 11% DDG companies provide greater opportunities and support for development. DDG organizations encourage and provide mechanisms for employee growth. Not only can employees improve the skills needed to do their current job better, but they can develop skills to assume greater responsibilities. In addition, there is good communication about opportunities at DDG companies, and employees know what skills they need to develop. Managers are more focused on helping their employees to meet their career goals. Survey Item Percentage DDG Companies Exceed SDG Companies by There are sufficient opportunities to: Obtain skills necessary to assume greater responsibility Improve my skills in my current job I know what skills I need to focus on to develop further My manager provides the support I need to meet my career goals 18% 16% 16% 15% DDG companies have a higher ratio of highly engaged employees and a lower ratio of highly disengaged employees. We have already demonstrated that engagement is 21% higher in DDG companies. It is not just the overall engagement level that distinguishes DDG companies; it is also the ratio of highly engaged and highly disengaged employees. Examining the distribution of engagement in more detail, we learn that DDG companies have 39% more employees who are highly engaged, thus contributing even more to the company s success. Conversely, DDG companies also have 45% fewer highly disengaged employees who often drain the company s ability to perform effectively. Hewitt Associates 5 DDGEngagementHi04/01Rsjg 4/04
DDG companies demonstrate higher levels of engagement as tenure increases. DDG companies more successfully maintain employee engagement levels than SDG companies. At most companies, we find that employee engagement declines after two, and then, gradually increases after six to nine. This decline is much less pronounced among DDG companies and the increase in engagement more dramatic for longer-service employees. The result is an increased ability to achieve and sustain greater value creation through an organization s people. DDG companies do a much better job of focusing their effort on maintaining and improving employee engagement through the employee lifecycle. DDG companies are more likely to solicit feedback from employees, and they do so more frequently than SDG companies. DDG companies solicit input and feedback from employees nearly twice as often, on average, than SDG companies. As a result, actions taken based on the feedback are more immediate and connected in employees minds. This allows companies to understand their employees, what drives their engagement, and permits them to measure the impact of their peoplerelated efforts more effectively. This results in higher levels of engagement across tenure, as shown in the chart below. Employee Engagement By Tenure 80% Employee Engagement 70% 60% 50% 40% 30% 20% 10% Double-Digit Growth Employee Engagement Other Companies' Em pl oye e Engagement 0% Less than 2 2 5 6 9 10 14 15 19 20 or more Tenure Conclusion Engaged Employees Drive Business Results in DDG Companies Past research has shown that companies who are better able to engage their people also deliver better business results. Our study of DDG and SDG companies corroborates these findings. DDG companies effectively measure and reward contribution and employee engagement. Effective leaders who are committed to growth and success are at the helm of DDG companies. These leaders are engaged, motivating and inspiring their employees toward a growth mind-set. For more information on the double-digit growth research series, visit www.hewitt.com/doubledigitgrowth. www.hewitt.com 6 DDGEngagementHi04/01Rsjg 4/04 Copyright 2004 Hewitt Associates LLC SR-0127-001-EN 4/04