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Employee Experiences, NOT Engagement, Found to Impact Outcomes 100% of the Time

If your organization is solely focused on employee engagement, you’ll want to read on. If you aren’t focused on management, job fit, or senior leadership, you’ll want to read on. If you want to find the secret to improving your organization’s bottom line (e.g., sales revenue, percent to budget metrics, and customer and patient satisfaction), you’ll want to read on. Spoiler alert: it’s NOT by having tunnel vision on just employee engagement.

In a nutshell, SMD conducted a study to examine key drivers of busi­ness outcomes, as well as highlight which types of out­comes are most influenced by employee experiences. Key findings are below:

  • The top drivers of outcomes were Management, Job Fit, and Senior Leadership – with Management being the most consistent driver of outcomes.
  • Engagement was not a strong driver of customer satisfaction nor Employee Performance measures.
  • While Engagement was predictive of outcomes 32% of the time in this analysis, this was largely driven by the connection with Voluntary Turnover (67%). When turnover is removed from the equation, Engagement was a driver on average only 21% of the time. The connection to turnover is not surprising given that the Engagement metric consists of items that rate the employees’ level of commitment to the organization (e.g., I would like to be working here three years from now). Commitment (or lack of) has long been found to be linked to subsequent turnover.
  • These results highlight the fallacy of the common notion that Engagement equals performance, be that at the organizational level or even the individual employee level.

The results are in table 1. Read all about the study here.

criterion table

Engagement’s Role & Best Use

Are we saying Employee Engagement doesn’t matter? No. SMD strongly recommends clients use Engagement in a realistic and appropriate way though. Cer­tainly, measure it in an employee survey, but use it as a leading indicator of potential turnover, or as an outcome that can provide a good gauge of employee morale. However, SMD highly encourages clients to utilize key business metrics that matter to the organization as the focus of their survey analytic work. This allows for an accurate and business-focused approach to priori­tizing the follow-up from an employee survey in a way that will benefit not only the employee experience, but also the whole organization (i.e., improve your organization’s bottom line, don’t just check the employee-survey box).

healthcare image new

Actionable Tips for Improving the Employee Experience, Turnover & Patient Satisfaction

We recently conducted a study that focused on uncovering the key factors that impact two healthcare metrics – employee turnover and patient satisfaction (HCAHPS). Why? Because these factors are critical to healthcare organizations functioning effectively. Spoiler alert – the approach we outline in this blog works. Two recent examples of clients following this strategy resulted in significant return on investment. In one instance, the client reduced their Registered Nurse (RN) turnover from 19.8% to 11.8%, 8 full percentage points. In another example, the client reduced their turnover rate from 28% to 24% across the organization, resulting in a savings of more than $8 million.

If you still need an impetus to pay attention, take a look at the scary stats below that underscore the importance of healthcare facilities taking strategic aim at reduc­ing employee turnover, as well as providing an employee experience that links to improving the patient experience and HCAHPS scores.

  • Reimbursement Rates: HCAHPS scores are a factor in the reimbursement rates from the Centers for Medicare and Medicaid. Thus, poor performance on a hospital’s HCAHPS is tied directly to the bottom line.
  • Money, Money, & More Money: Turnover for patient-facing employees can have direct impact on the costs to the organization, increases in patient care ratios, increases to workload for remaining clinical staff, as well as negative impacts to patient care outcomes. Specifically, it has been found that RNs have an average turnover rate of 14.2%. Loss of one RN costs a hospital between $44,000 and $64,000, equating to an estimated loss of $4M to $6M a year1. Finally, because of the increased patient load on the remaining staff, it has been found that there is a 7% increased likelihood for failure to rescue or patient death for each additional patient2.

So, you now know why you must act; how do you take action? By the way, get all the details on the study in our recent white paper.

  • Focus on Senior Leadership, Job Fit, & Management: These are the strongest and most consistent drivers of both voluntary turnover and HCAHPS scores, based on the study. Get descriptions on these drivers here. Caveat: while these areas consistently relate to outcomes for SMD’s clients, it is still important to validate drivers of outcomes in your own organization. While these areas may come up as drivers, other nuanced drivers may be found in other organizations depending on the survey focus, organizational culture, and employ­ee makeup.
  • Directly assess the connections between the employee experience and subsequent turnover: You can pull a page from our book and do this – we revisit client survey data a few months after the survey administration. Using a file of employees who have since voluntarily exited the organization, we can flag employees in the survey data as turned over or still employed. This allows for an analysis of the direct drivers from the employee experience that are related to turnover. From here, you would know exactly what to focus on improving to reduce the likelihood that employees will exit. You also can review survey scores of those employees who remain with the organization by supervisor or department and know exactly where in the organization there is the most near-term risk of high turnover, based on the key drivers that are identified. Organizations are then equipped to make targeted, strategic steps to intervene and get in front of turnover.

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References

1. Nursing Solutions, Inc. (2014). 2014 National Healthcare and RN Retention Report. www.nsinursingsolutions.com

2. Aiken LH, Clarke SP, Sloane DM, Sochalski J, Silber JH. Hospital nurse staffing and patient mortality, nurse burnout, and job dissatisfaction. JAMA 2002; 288(16): 1987–93. doi:10.1001/jama.288.16.1987

Reports

Groundhog Day: A Comment on Gallup and Other “Annual Employee Engagement Reports”

It’s that time of year again—when we get Gallup’s Annual Report on Employee Engagement—and many others too. At this point, you can pretty much predict what the key themes are going to be:

  • Engagement scores aren’t very good
  • Engagement is pretty much flat again this year
  • Engagement hasn’t moved in the past 16 years
  • Gallup tells us what the key drivers of engagement are
  • Companies with high engagement scores happen to have decent business outcomes

Let’s start with the last bullet first. It is getting harder to believe that engagement is a key metric for organizations to focus on and strategize about. Studies that say that “companies with high engagement scores have higher business outcomes” amounts to fake analytics. There, we said it. Did you know that companies with taller buildings also make more money? That’s another example of fake analytics. Real analytics (see SMD’s study that uses cause-effect, longitudinal data) shows that engagement is a key driver of business outcomes less than 30% of the time.

It has to be getting frustrating for HR leaders (and all leaders for that matter) to hear about all the time, money and effort that has been put into driving engagement, knowing that the only thing that has happened is stagnation for the past 16 years. When will a CEO ask HR, “We’ve spent lots of money on engagement surveys and engagement consulting—when is this going to pay off?”

A few rapid-fire questions:

  • If Gallup knows what the key drivers of engagement are—then why don’t the scores ever move up?
  • What exactly is a “good” engagement score? What number do we need to hit when money starts falling out of the sky?
  • Have we hit critical mass on engagement? Maybe this is as high as the scores can get?
  • Isn’t it time we started looking at which employee attitudes drive actual business outcomes instead of chasing this suboptimal metric?

What are your thoughts on the topic?

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How Thought Leaders Kill HR Credibility

HR fads have been around a long time. Snake oil vendors have peddled everything from empowerment to job loyalty, to employee engagement, and just wait for the next one … agility! These have all been breathlessly presented as must-haves for the HR department to chase around. Consider this comparison:

ACTUAL SNAKE OIL:
• Claims to cure everything
• No real cause-effect evidence of actual impact
• Repackaged to basically sell the same thing over and over
• Appeals to mystical powers
• No refunds/no guarantees

LATEST HR FAD:
• Claims to cure everything
• No real cause-effect evidence of actual impact
• Repackaged to basically sell the same thing over and over (engagement, empowerment, loyalty, agility)
• Appeals to mystical powers: One firm actually calls it MAGIC Engagement!!
• Have you ever received a refund if your survey didn’t drive business outcomes?

The problem comes down to self-described “thought leaders” who come up with a new (repackaged) concept that sounds good from a marketing perspective, they write a book about it, market the heck out of it, and make numerous assumptions and claims based on ZERO research or analytics. Patient-zero is “First, Break All the Rules” which introduced the world to “I have a best friend at work.” Do you realize how much that one item has hurt HR’s credibility? Have you ever implemented a “find a best friend at work” program? Moreover, do you realize the paradox of Gallup telling us every year that employee engagement is flat among their clients but yet they also claim to know exactly what drives employee engagement?

These thought leaders don’t actually work in organizations that face serious business issues every day and after they introduce these new topics—no one ever bothers to ask them “did you actually test this out to see if it drives real business results?” The truth is, every book that comes out with a new fad or term will end up being a step backward for HR’s credibility unless there is real proof that it actually works. Do these thought leaders/vendors ever put their money where their mouth is and offer to refund their gigantic fees if their pet theory doesn’t work? Never!

If thought leaders were medical doctors, their approach to diagnosis would be “well the last two people who came in with abdominal pain needed their appendix out, so that must be your problem/solution too.” Wrong! The solution to this is to ignore the thought leaders and diagnose your own business problems with your own people data. Run tests on your organizations’ data, don’t rely on an assumption that what is happening in other companies will apply in yours. Implementing the next fad is expensive, and if it isn’t the right fit for your organization, is the thought leader going to come fix it for you and refund the money? Don’t hold your breath. So, stop reading the latest article that “Facebook installed free candy machines so you should too” and start implementing fact-based HR initiatives that will work in your culture and impact your business metrics. SMD has even implemented a guarantee for its services with its new results-based pricing model. Ask us how we can deliver guaranteed results to you.

leadership character

Leadership Character & the Bottom Line- A Comment on SMD Research by the Turknett Leadership Group

Last month we discussed the goal of our recent research – to assess how often each of the most commonly measured employee attitudes was found to be a statistically significant driver of business outcomes – and we highlighted the reaction of John Sumser of HR Examiner. This month’s post provides the perspective of Turknett Leadership Group.

Turknett Leadership Group, founded in 1987, has assessed and coached senior leaders since the dark ages – at least long before the term “executive coaching” became common parlance. They have seen the power of character in leadership anecdotally for years. And they’ve followed the research linking character and trust in leadership to the bottom line.

A few excerpts from their recent paper, “Leadership Character & the Bottom Line,” may be found below. The full version may be found here.

“They [SMD] have presented what may be the best evidence to date that character in leadership doesn’t just correlate with high profits – it drives them.”

“SMD just completed a study looking at employee surveys in their database for which they had solid outcome measures – nearly 30 companies and over half a million employees. The results were astounding. The Engagement scale (category) on the surveys was a key driver of only one outcome in over four organizations – that outcome was Voluntary Turnover. Engagement drove outcomes only 28% of the time – other drivers were much more powerful.”

“And here’s the highlight for us – the two survey categories that drove financial performance in the most organizations were two that are near and dear to us – Management and Senior Management.”

“For Senior Management the most powerful questions – those most predictive of bottom line results – were: “Senior management’s actions support this organization’s mission and values” and “I have confidence in senior management’s leadership.” Integrity can be defined as the match between values and behavior. People in organizations are watching senior leaders and looking for that match. There may not simply be a “return on character” – it’s likely essential for sustained success.”

“In the Management category the most predictive and powerful items on the scale were “The person I report to creates an environment of trust” and “I receive useful feedback from the person to whom I report.” Trust in leadership is essential at all levels.”

“Engagement may be a good measure to track – along with financial performance, quality, customer sat, and turnover – but it may be more of an outcome measure than a driver of outcomes. We heard someone say years ago – we’ve attributed it to Ken Blanchard – that you wouldn’t play tennis looking at the scoreboard – you have to watch the ball. SMD would advise you that Engagement may be, like financial performance, a good scoreboard, but it’s not the ball.”

“SMD helps you find the balls – the specific drivers of performance – in your organization. But this research tells us that those balls are much more likely to be senior management, management at all levels, and job fit.”

As we mentioned last month, there is no silver bullet that works for every organization. Each organization should use analytics to determine which aspects of their employee experiences are most critical to their business outcomes. SMD, with its patented technology SMD Link is here to help you impact the bottom line via analytics.

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Turknett logoTurknett Leadership GroupTurknett Leadership Group (TLG): With over 25 years’ experience, we are the premiere resource for Character-based and Business-focused Leadership and Organization Development. We provide services such as Executive Coaching, Culture Assessment and Change, Selection Assessments, Succession Planning, Surveys, Talent Management, and Leadership Development. Through an approach grounded in science and guided by the Leadership Character Model™, TLG has built a reputation for results and client satisfaction by helping organizations hire the best people, identify and develop high potentials, and create high performing ethical cultures for long term business success. Learn more at www.turknett.com.

Carolyn Turknett is co-founder and President of Turknett Leadership Group, an Atlanta-based consulting firm providing leadership and organization development services to companies in a variety of industries. She has more than 20 years of experience in management and leadership consulting. The focus of her work is character in leadership, organization assessment and change, women in leadership, and executive team development. Ms Turknett was named the “2015 Woman of Purpose” at United Way of Greater Atlanta’s Leading a Life of Purpose event. She was also selected as a recipient of the 2015 “Women Who Mean Business Award” by the Atlanta Business Chronicle’s program to honor Atlanta’s most influential business women who’ve made a difference in their communities, blazed a trail for others, and are leaving an incredible mark on business in Atlanta.

employee turnover

And the Survey Says …Study Examines Impact of Engagement on Business Results

Employee engagement is, without a doubt, one of the top buzz phrases in the world of HR. Has anyone stopped to look at the actual research to see if this singular focus on engagement is warranted though? We set out to determine, through a comprehensive examination, which employee attitudes and experiences, as measured on employee surveys, are connected to business metrics that matter to our clients. The goal of this research was to assess how often each of the most commonly measured employee attitudes was found to be a statistically significant driver of business outcomes. In a two-part post, we’ll outline the research and the reaction of others to it. Check out what John Sumser of HR Examiner has to say about it.

WHY

When considering the lack of consistent results connecting engagement to business outcomes, organizational leaders would be remiss to blindly trust that engagement will certainly lead to better business outcomes. Further investigation is critical in determining whether engagement is a driver of business outcomes across various organizations.

HOW

We compiled the results of our structural equation models for each client and determined which survey categories were found to be key drivers of their business outcomes.

WHO

The clients included in this study represent a variety of industries including healthcare, non-profit, retail, manufacturing, and professional services. The organizations also range in size from less than 100 employees to several hundred thousand employees. We examined data across nearly 30 organizations and over a half a million employees.

RESULTS

Across a large subset of our clients who have administered employee surveys in the past 18 months, engagement was a key driver of their business outcomes only 28% of the time (less than a third!). That means if these organizations had solely focused on improving engagement, they would have put forth time, effort, and resources to something that would not provide any bottom-line improvement 72% of the time.

study table updated

KEY TAKEAWAY

One of the most important findings is that none of these categories matter all of the time for every outcome across all organizations – there is no silver bullet that works for every organization. Each organization should use analytics to determine which aspects of their employee experiences are most critical to their business outcomes.

CONCLUSION

In general, we do not disagree with the measurement of engagement in an employee survey, or its use as a gauge of overall employee morale. Its position, based on objective, advanced analysis, is simply that focusing so narrowly on one metric as the end-all-be-all of employee experiences could be a huge misstep for organizations.

Employee engagement bubble

Bursting the Employee Engagement Bubble

How many of you spend countless hours chasing employee engagement scores, and a ton of money on employee surveys? Are you demonstrating the bottom-line impact of this time and money? Maybe you’re now wondering why you started focusing so much on employee engagement in the first place.

I’d like to give you a little background on why employee engagement became such a fad. Back in the 1990s, a book was published called “First, Break All the Rules” from Gallup that introduced the concept of employee engagement. Unfortunately, it was based on flawed research and purported to show that 12 magical things were all that any company – of any size and industry – needed to be successful. The research was flawed because companies that were already successful were examined and common themes emerged. Discovering that companies that make a lot of money and are well-run also have happy employees is not surprising. The problem is that HR leaders (and Gallup) jumped to the conclusion that making people happy or engaged is what caused those companies to be successful. Wrong! Actual cause-effect research/analytics that we conducted showed that the employees were engaged because those companies were successful. Bottom line: employee engagement is not a business outcome and it is not a driver of business outcomes.

Many consulting firms have made it their sole business to sell surveys and services based around employee engagement and you may very well be working with some as we speak. Have they ever shown whether engagement provides bottom-line impact? What I propose instead is shifting the focus from typical HR outcomes of interest such as employee engagement or job satisfaction, to business outcomes such as sales, customer satisfaction, financial performance, and employee performance. Isn’t that what your c-suite is measuring, and the metrics that actually move the needle?

Consider focusing on solid business outcomes (instead of the latest consultant’s fad) that can provide actionable information and demonstrate greater impact in driving business results than employee engagement. You need to go beyond slicing and dicing HR data and start demonstrating direct connections to business metrics that matter most to executives. How? Advanced analytics and strategically targeted HR initiatives. If you’d like to learn how to do so, feel free to contact us for a demo of SMD Link or learn more in our white paper.