Company Culture & Employee Engagement

photo by stuttermonkey

In a recent post about boosting employee morale, David Irvine sites a number of compelling and depressing stats about the disengaged state of the workforce amidst this global recession.

If you are a stats person and would like to see the damage, I recommend you visit last week’s RoundPegg post on the Modern Survey results. Today, however, I would rather focus on the solution – CULTURE.

David Irvine would agree and listed culture as one of his three solutions.

The reason?  Culture is the one of the main reasons employees thrive and stay engaged. It is the alignment of unique individuals through shared values, and a well-aligned culture is one of the biggest drivers of a company’s success.

Person-Environment Fit research shows that when people fit their work environment they perform better, turn over less and are more committed to the company.

Another way of putting this is that when people can go to work and be themselves then they have a lot more energy to apply to the challenges the company requires solving.

When your computer is asked to process multiple programs at once you often see the spinning beach ball or the hourglass, right?

Well, as complex as the human brain is, it too only has so much processing power.  When we ask people to conform to an unnatural (for them) behavior it requires a chunk of that processing power.  They are no longer 100% free to process work challenges.

You are probably wondering if this is the case, then why aren’t all companies quantifying their culture and hiring for cultural fit?

Culture initiatives are hard because they are typically conducted by the senior leadership team, a high-priced outside consultant, several flip charts and a lot of debate about which values (e.g. respect, integrity, communication, excellence)* matter.  Nothing ever changes.

What nobody does is ask all of their employees what they value.  It’s no wonder employees are disengaged because they’re being asked to live by somebody else’s values.  And probably pretty vanilla ones that are only occasionally followed at that.

Active culture management can’t happen if you don’t know what you’re dealing with already.   If you’re lost in the woods a new map isn’t going to do you any good.  The most helpful thing is knowing where on that map you are at the moment you’re lost.

Culture matters in getting your people to perform.  If you want to make a difference, then you need to know what your culture is from the bottom-up.  Because the values pasted on your lobby wall are probably nothing more than very cheap decoration.

*Sound like your company?  Those were Enron’s. 

Employee Engagement – Bored Cubed

photo by nicholas t

The latest employment numbers are bad.  Not for those who don’t have a job, but for those who do.

A recent Modern Survey study pegged the number of engaged employees at a mere 8%.  Since their numbers didn’t quite add up I re-opened a more credible source, Blessing White’s 2011 engagement report.  They note only 1 in 3 employees are engaged and barely half (56%) of all employees say they will definitely stay with their current employer for the next 12-months.

This doesn’t bode well for companies now or when the economy improves.  An avalanche of voluntary turnover awaits as soon as these folks can find other pastures, green or not.  Meanwhile a huge chunk of your personnel is quite content to do only enough to not get fired…indefinitely.

Intuitively, none of this is good.  But you can find any number of ways around the web to ‘improve’ your engagement levels (we’ve also been known to push our agenda).

You’re most difficult job, however, likely isn’t figuring out what to do as it is convincing those around you that this matters.  Disengagement would take on more meaning if we had better ways to quantify its effects.  Nobody likes to lose money.

While there are data aplenty to show the relationship with business performance the data are generally based on stock market results which seems too nebulous for those of us managing business unit budgets.  Instead, let’s take the available research to put some dollar numbers to the cost of disengagement at a more granular level.

To make the math easier, let’s use a couple of conservative, round assumptions:

• Business unit size:  100
• Average salary:  $50,000
• Disengaged Employees: 18 (18% of unit)
• Turnover: 20%

Top line performance differences

According to Gallup the top quartile of engaged business units generate 16% more profit than those in the bottom quartile.

You wouldn’t be in business if you weren’t getting a positive ROI on your employees so let’s assume a 10% ROI on an employee.  A $50,000 employee creates $55,000 in value on average.

The difference, therefore, is $8,800 in lost profitability per disengaged employee.

Total costs: $158,400

Replacement costs

Every company will have different costs to replace, but most don’t count enough of the soft costs.  The time spent interviewing, training costs, lost productivity, etc.  Estimates range between 30% of annual salary (for hourly workers) to 400% (for senior executives).

For most mid-level knowledge workers the number will be roughly 150%.

Thus, every employee who leaves will cost $75,000 to replace.  Since disengaged employees turn over 49% more often, a quick goal seek in Excel shows that we could save 1.5 employees from turning over by lessening our disengagement level.

Total cost:  $112,500 (rounded down since most companies don’t have any half people)

Bottom line rule of thumb:  The disengaged folks cost you an extra $15,050 each (given the assumptions).  To figure out what the lack of engagement costs your company, take the number of total employees and multiply by $2,709.

This is incredibly conservative, but even so, it’s not chump change.  It’s time to focus on re-engaging.

The Dependability Quotient (DQ)

Sometimes the best mentors are your peers.

While cutting my teeth at my first ‘real job,’ I had a friend who constantly dwelled upon his Dependability Quotient (DQ).  His take was that he was only as good an employee as his word.  He was a freelance consultant so the need for a high DQ was more obvious than for all of us securely employed at Big Co., USA.

But, the need for a high DQ is the same regardless.

Work is all about trust.

Every interaction, even those with people with whom you are (supposedly) on the same team, is about trust.

In his case, the more people trusted him the more work he would get, the more money he would make and the more often he’d be recommended to others.

Even so, it holds true for all of us corporate monkeys as well.  The more often we successfully follow through on our word the more access to big opportunities we get.  The more we can be leaned upon to help senior executives.  And the more we are entrusted to do what’s right for the organization and we don’t waste as much time being mired in office ‘politics.’

While my friend and I never explicitly talked about how to quantify DQ, I’d guess his mental equation went something like this:

DQ = 0.75*(# of completed commitments) – 1,000*(# of failed commitments)

While that’s likely overstating it, you’ve heard the old pearls of wisdom that say it takes 10 happy customers to make up for one pissed off one.  Or ten positive remarks to cover the sting on one negative.  DQ would follow an amplified form of those.

We work interdependently these days.  There are very few things that one person accomplishes solo.  So in order for you to look good you need your manager, peers or subordinates to follow through on the items they committed to do for you.  And vice versa.

To get ahead, take the long view.  Worry less about the petty politics and work on establishing your DQ.  Only one of those will follow you for your entire career.

Think about who you’d love to work with again.  My guess is that they were the ones you trusted implicitly after hundreds of repeated actions where they followed through and made you look good.

Thanks for reading.  I’m off to tackle something I’ve promised to do for our team.  Chalk another 3/4 of a point up to my DQ.

How To Develop Great Cultures

RoundPegg has created the third webinar in a series on organizational fit. In this edition Dr. Natalie runs through the benefits of aligning a company culture as well as providing some solid how-tos in order to identify and align your own culture. While it’s not easy, it’s worth the energy expenditure.

Please enjoy and, as always, contact us at info@roundpegg.com if you’d like to learn more.