Organizational Excellence

People and Process Improvement

The Business Case for Alignment and Engagement

with 3 comments

Satisfied, committed and aligned employees are good for business. This is more than a hunch, so let’s play it safe and cite a few experts, to make you feel more comfortable that this stuff is for real. This section includes more sources, research and reports than the rest of the material combined. If you can’t buy into the importance of alignment and engagement after all this expert testimony, this stuff is just not for you.

 

In 1998, the Gallup organization conducted a workplace study to determine if there was a relationship between responses to twelve statements which became known as Q12, and productivity, profitability, and retention. In true Gallup fashion, the sample was large: 24 companies, 2,500 business units, 105,000 employees.

The findings showed that businesses scoring higher on what Gallup called the Power Statements also realized 50% higher Productivity; 44% more Profit; 13% higher Retention. The Power Statements are:

·         I know what is expected of me at work.

·         The mission / purpose of my company makes me feel my job is important.

·         I have the opportunity to do what I do best every day.

·         Someone at work cares about me as a person.

·         There is someone at work who encourages my development.

 

The key themes of these Power Statements include personal alignment with the company’s mission, vision, values; positional alignment or clear job expectations; and engagement which springs from making a meaningful contribution, relationships and job satisfaction.

 

More data has been gathered since 1998 that validates these early Gallup findings:

  • A study by Towers Perrin showed that companies with high engagement levels showed an Earning Per Share growth rate of 28% opposed to low engagement companies which showed an 11.2% decline in EPS in the same period. (The Global Workforce Study, Towers-Perrin 2007. www.towersperrin.com )
  • Later Gallup research indicates that companies with engagement scores in the top 25% had an EPS growth rate of 2.6 times greater than those companies that scored below average. Further, an ongoing Gallup study estimates the cost of disengagement for U.S. companies to be as much as $3.5billion in lost productivity (2006 estimate).
  • BlessingWhite’s study of engagement in North America found that 29% of the workforce is fully engaged, while 19% are actively disengaged. The State of Employee Engagement 2008, shows a strong correlation between engagement levels and retention. 85% of engaged employees indicated they planned to stick with their employer, compared to only 27% of disengaged employees. 

 

Right Management is the talent and career management function within Manpower, of the employment services industry. Right conducted a survey the winter of 2009 to identify top concerns about the growing economic crisis. Respondents, primarily senior leaders, indicated that their top two most important leadership practices for tough times are:

  • 51% – Engaging employees to ensure organizational alignment and commitment
  • 21% – Clearly defining roles and expectations

 

The numbers show that alignment and engagement are clearly critical to the bottom line, especially in a brutal business environment. Now let’s look at a few key areas, and hear a little more about what the experts have to say.

 

The Experts Weigh In

Following is a small cross-section sampler of what is fast becoming a huge body of work on the relationship between strategy execution and engagement. In addition to the studies and surveys noted above, the following Harvard Business Review articles are referenced. These are noted when quoted by (HBR-n).

  1. The Secrets to Successful Strategy Execution. By: Neilson, Gary L., Martin, Karla L., Powers, Elizabeth, Harvard Business Review, 00178012, Jun2008, Vol. 86, Issue 6
  2. Can You Say What Your Strategy Is? By: Collis, David J., Rukstad, Michael G., Harvard Business Review, 00178012, Apr2008, Vol. 86, Issue 4
  3. How to Have an Honest Conversation About Your Business Strategy. By: Beer, Michael, Eisenstat, Russell A., Harvard Business Review, 00178012, Feb2004, Vol. 82, Issue 2
  4. The Chief Strategy Officer. By: Breene, R. Timothy S., Nunes, Paul F., Shill, Walter E., Harvard Business Review, 00178012, Oct2007, Vol. 85, Issue 10

 

Strategy Execution Hinges on Engagement

Towers Perrin has this to say about strategy and engagement:

Businesses, government and other institutions invest $80 billion to $145 billion annually in strategic initiatives — and failures. With 90% of organizations often underestimating the size and complexity of these initiatives, it’s not surprising that more than 70% of all projects either experience severe problems or get terminated.

While many factors can trigger failure, the most critical is often overlooked: people. Lack of support, buy-in, and readiness at all levels — your employees, frontline managers and CEO — makes the difference between an abandoned initiative and one that contributes to your company’s growth.

 

Owen Sullivan, CEO of Right Management, said “It’s in times of hardship and uncertainty that leaders are investing more in engaging and aligning their employees to reap the utmost commitment, productivity and focus.” (www.right.com press release, February 26, 2009)

 

And more from Towers Perrin “…barely one in five employees (21%) is fully engaged on the job. And 8% are fully disengaged. This means that an overwhelming 71% of employees fall into what we’ve termed the “massive middle” …..employees who could go either way on the engagement continuum — either becoming more engaged and contributing more to the company, or growing more disengaged and contributing nothing or, worse, actively disrupting the efforts of others in their work environment.”

 

The need for engagement and alignment has elevated recently to “essential”.

Now you need employees to stay focused and productive despite taking on the ghost work of laid-off colleagues, paused pet projects, eliminated perks, ever-shifting priorities, and the distraction of the latest market headlines telling them their 401k’s have been crushed again. Employee engagement is essential.

(Uncertainty’s Antidote: Three Leadership Imperatives c BlessingWhite 2009)

Engagement: Head, Hands, and Heart

BlessingWhite describes highly engaged employees as those who are at a maximum level of job satisfaction, and a maximum level of contribution. BlessingWhite identifies this as one of the essential keys to achieving high levels of engagement: “aligning employees’ values, goals and aspirations with those of the organization is the best method for achieving the sustainable employee engagement required for an organization to reach its goals.”

 

Engagement taps the power of the total package. Julie Gebauer, Towers Perrin Managing Director, explains “Head, Hands, Heart:

The “head” refers to the rational part of the engagement equation, how employees connect with their company’s goals and values. The “hands” refer to the employee’s willingness to put in a great deal of extra effort to help the company succeed. And the “heart” is the emotional connection between employee and employer, such as the employee’s pride in the organization. The sum total of these three elements is what we used to measure overall employee engagement levels.”

 

Engagement is critical to strategy execution because highly engaged employees contribute a greater level of discretionary effort to delivering on their accountabilities. It is the difference between complying to marching orders and being committed to achieving the company’s mission and goals.

 

I am a native Iowan. It doesn’t take an Animal Science degree from Iowa State University to understand that contented cows give more milk. But you must have perfect alignment and clarity around what the company’s mission and goals are, or the employees will be engaging in the wrong battles. Involvement drives commitment, which drives engagement, which drives execution.

 

Involvement à Commitment à Engagement à Execution

Alignment begins with clarity, and there is no better clarifier than the acid test from those who must understand and execute strategy. This is not to advocate every employee being engaged in setting the course for the company for years to come. But once strategy has been formulated, it should be all hands on deck to determine strategy’s actual meaning, and what needs to be done to support it.

 

The process of developing the strategy and then crafting the statement that captures its essence in a readily communicable manner should involve employees in all parts of the company and at all levels of the hierarchy. The wording of the strategy statement should be worked through in painstaking detail. In fact, that can be the most powerful part of the strategy development process. It is usually in heated discussions over the choice of a single word that a strategy is crystallized and executives truly understand what it will involve. (HBR-2)

 

This raises an interesting question…how early in the strategy formulation process should the do-ers be brought in? We’ll look at that question in another place and time. What really needs to be clear right now is the importance of clarity and alignment. The more involvement, the better.

 

The CEO and the leadership team create the company’s strategic vision and set its course. But…that vision may be opaque to many, which can create resistance or confusion among senior managers and frontline employees and can thwart execution and change. “No strategy can just be handed down to an organization,” says Kirk Klasson, former vice president of strategy for Novell. “Without achieving real understanding and agreement, there will be lots of grinning and backslapping over the strategy but zero change when people get back to their offices.” (HBR-4)

 

Involvement drives commitment, which drives engagement, which drives execution.

 

Planning is a Snap, But Execution Will Kill You

A brilliant strategy…can put you on the competitive map, but only solid execution can keep you there. You have to be able to deliver on your intent. Unfortunately, the majority of companies aren’t very good at it, by their own admission. Over the past five years, we have invited many thousands of employees (about 25% of whom came from executive ranks) to complete an online assessment of their organizations’ capabilities, a process that’s generated a database of 125,000 profiles representing more than 1,000 companies, government agencies, and not-for-profits in over 50 countries. Employees at three out of every five companies rated their organization weak at execution — that is, when asked if they agreed with the statement “Important strategic and operational decisions are quickly translated into action,” the majority answered no. (HBR-1)

 

“We can have the best plan in the world, but if we can’t execute,

we won’t be able to pay the bills.”

 

One of the key stumbling blocks to execution is lack of alignment fueled by low levels of awareness, and lack of understanding of just what the strategy is, and what the individual’s accountabilities are. Who “Gets It”? And, Who Doesn’t?

 

Leaders are mystified when what they thought was a beautifully crafted strategy is never implemented. They assume that the initiatives described in the voluminous documentation that emerges from an annual budget or a strategic-planning process will ensure competitive success. They fail to appreciate the necessity of having a simple, clear, succinct strategy statement that everyone can internalize and use as a guiding light for making difficult choices.

It is a dirty little secret that most executives don’t actually know what all the elements of a strategy statement are, which makes it impossible for them to develop one. With a clear definition, though, two things happen: First, formulation becomes infinitely easier because executives know what they are trying to create. Second, implementation becomes much simpler because the strategy’s essence can be readily communicated and easily internalized by everyone in the organization. (HBR-2)

 

Here’s a sneak preview of what is covered in detail later. Establishing and communicating a clear strategy is, understandably, one of the most important topics to cover. The Harvard Business Review source noted above asks the simple question: Can you summarize your company’s strategy in 35 words or less? If so, would your colleagues put it the same way? The elements of a strategy statement that need to be clearly and concisely communicated are: objective, scope, and advantage.

 

Objective: define the goal line and the time frame for reaching it. Don’t forget the old standby acronym, S.M.A.R.T….Specific, Measurable, Actionable, Realistic, Time-based.

 

Scope: define the boundaries within which the business operates…put a fence around the playground. This not only provides a sense of identity, but also helps people understand how far they should go with their planning and daily activities.

 

Advantage: what makes your company so hot? Why should customers choose your products or services? Your competitive advantage, or value proposition, is that which keeps you in business because it distinguishes you from the competition.

 

Defining the value proposition helps to more clearly frame the specific elements of the plan, which must be clearly in support of your value proposition…what do you need to do to stay in business? Including this element in a strategy statement connects peoples’ daily tasks to the reason the company is in business, and to what must be done to stay in business.

 

Defining competitive advantage requires trade-offs. You can’t be everything to every customer, and you can’t afford to send mixed messages to employees. Customers come your way because your branding grabs their attention–it targets their needs. Employees make decisions (or are supposed to!) based on supporting the value proposition.

 

·        You can’t produce a premium (high end) brand, and compete as a low cost provider. If I work at a factory that produces a high-end product that customers expect perfection and minor miracles from, I operate under a different set of standards than if I was working for a low-cost, high volume producer.

·        If I am a gourmet diner (it’s my book, I can pretend) I will not risk trying a new restaurant that promises a gourmet dining experience from a fast food-ish drive up window.

 

So much of what is written about strategy execution is targeted at the highest level: what is the overall mission, vision and strategy of the entire company? The concept of cascading (a.k.a. “stuff rolls downhill”) implies that what is good for the pinnacle of the pyramid is also good for the first level. A single department’s mission, vision and strategy should also be able to be communicated in a clear, concise strategy statement consisting of objective, scope, and advantage. And to go just a bit further downhill, wouldn’t an individual also benefit from having a clear, concise strategy statement?

 

Also critical is how well individuals connect to the strategy: what is my role, what are my accountabilities? How will I deliver on those accountabilities?

 

Expectations and Accountabilities

“The top (survey item) determinant of effective strategy execution is: Everyone has a good idea of the decisions and actions for which he or she is responsible. In companies strong on execution, 71% of individuals agree with this statement; that figure drops to 32% in organizations weak on execution.” (HBR-1)

 

“Do your employees know their three most important priorities out of all the items on their to-do lists? Are employees clear on how their work supports the organization’s goals?”

(BlessingWhite: Uncertainty’s Antidote)

 

How can it be that people are unclear about what exactly they are supposed to do on the job? It shouldn’t be that difficult to look at your daily list of to-do’s and say “these are my top three priorities, because they support our company objectives to _____ and to _____ and to _____”.

What this highlights is the need to establish clear expectations and accountability. And we’ve already looked at the importance of alignment and engagement to execution. A quick refresher on engagement …the 1998 Gallup study showed companies that scored higher on the Power Statements also realized 50% higher productivity; 44% more profit; 13% higher retention. Two of the Power Statements are key elements in achieving a high engagement culture:

·         I know what is expected of me at work.

·         The mission / purpose of my company makes me feel my job is important.

 

Back in 1998, engagement was not yet a hot topic. It wasn’t even an underground buzz word. But the 1998 Gallup study, along with research and training materials from forward-thinking companies like BlessingWhite, signaled the birth of the engagement movement.

Written by Craig

March 31, 2009 at 12:56 am

3 Responses

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  1. […] The Business Case for Alignment and Engagement  is a lengthier piece that details a good amount of data and estimates for how engagement impacts execution and productivity.  […]

  2. […] as Towers Perrin puts it, or we’re spinning wheels. And it is becoming more clear that there is a bottom line benefit in doing […]


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