In the world’s 12 largest economies, more than 50 percent of companies with at least 100 employees are now surveying their workforce. When it comes to the largest organizations — those with more than 10,000 employees — the figure increases to 66 percent. With their use expanding every year, the discussion is no longer whether to undertake employee surveys, but how to maximize their effectiveness. Senior management is increasingly aware of the benefits but wants to see more connection with an organization’s strategy and goals. This point is highlighted by a recent survey of survey practitioners in which 94 percent said their survey programs supported their organization’s overall business strategy. However, only 54 percent said their actual survey instrument reflected their specific business strategy (Wiley and Brooks, 2010). This article, which draws on Kenexa’s ongoing and comprehensive WorkTrends survey of the global workforce (see About WorkTrends sidebar on p. 21), examines six essential factors for ensuring future employee surveys are both strategic and effective.
1. Employee Engagement Isn’t Everything — Measuring the Characteristics of the High Performance Organization along with Employee Engagement is Critical
For more than 10 years, companies conducting surveys have focused intensely on measuring employee engagement. In many corporate settings, this focus on engagement has been to the exclusion of almost all other measurement constructs. Yet employee engagement only tells part of a company’s story. There is incredibly strong evidence that the best measurement of corporate success lies in examining both engagement and the characteristics of the “high-performance” organization.
Building employee engagement is based on leadership and managerial behaviors that generate confidence and trust, demonstrate dignity and respect, and ensure employees are in jobs that match their current and future interests. Achieving higher performance is based on the leadership and organizational practices of customer orientation, quality emphasis, employee training and involvement in decision making (Wiley and Brooks, 2000; Wiley, Brooks and Lundby, 2006).
The value of measuring both constructs in combination far surpasses the value of measuring employee engagement alone. This view of organizational performance, and how it is measured, is expressed in the High Performance- Engagement Model.
Both performance excellence and employee engagement are significantly and positively related to financial performance metrics such as three-year total shareholder return (TSR) and diluted earnings per share (DEPS). Companies that excel at both performance excellence and employee engagement outperform their competition.
Higher Performance Excellence and Employee Engagement Index Scores Equal Improved Total Financial Performance
One way to explore the combined impact of performance excellence and employee engagement on fiscal business metrics is to examine TSR. Specifically, TSR is a measure of the change in companies’ stock price plus dividends paid. In one analysis, we correlated publicly reported TSR data for 158 organizations with employee survey results for those same organizations. The organizations in this analysis represent all major industries including retail, financial services and banking, health care products and services in all major geographies. Eighty-five percent are multinational and have locations and employees in more than 100 countries. The majority of these organizations (80 percent) have more than 10,000 employees. Approximately 30 percent of the studied companies are Fortune 500 organizations.
Many factors contribute to an organization’s three-year TSR, including market forces and investor perceptions — two elements not entirely under the control of organizational leaders. Nevertheless, the Performance Excellence Index (PEI) and the Employee Engagement Index (EEI) proved positively and significantly related to three-year TSR.
The analyses further indicated that the combined contribution of performance excellence and employee engagement accounted for almost 4 percent of an organization’s threeyear TSR. This is a notably greater contribution to understanding the influencers of three-year TSR than could be provided by a simple focus on performance excellence or employee engagement alone. Further, while this percent may seem small, it is actually a significant contribution to understanding what influences shareholder returns.
In a second analysis of the same 158 companies, we examined diluted earnings per share (DEPS). This financial metric takes into account standard earnings per share (income divide by outstanding shares), but it also accounts for what earnings would be if all outstanding stock options and warrants were exercised. Many view it as more accurate assessment of businesses health and profitability. After first establishing that the PEI and the EEI were positively and significantly related to DEPS, we then explored their combined impact. The analysis revealed that together, the constructs of performance excellence and employee engagement accounted for nearly 8 percent of the variance in DEPS.
Exhibit 2 expresses the relationship between the PEI plus EEI combination and DEPS. The average DEPS for two groups was calculated: those organizations with PEI and EEI scores placing them in the top 25 percent of the study group and those with respective index scores placing them in the bottom 25 percent. The comparison of these two groups reveals that the higher the PEI and EEI scores, the stronger the DEPS. The bottom line is that organizations with employees reporting combined high PEI and EEI scores achieve more than two and a half times greater DEPS than organizations whose employees report combined low PEI and EEI scores.
Employee surveying alone, of course, won’t improve the actual performance metrics of an organization, but by measuring and targeting improvements for both the fundamental constructs depicted in the HPEM — performance excellence and employee engagement — organizations can positively affect individual and unit productivity, customer satisfaction and loyalty, and financial results.
2. Content is King
Every organization is unique, with specific strategic goals and requirements. Tailoring survey content to measure those precise goals, and being clear with employees about the goals, leads to surveys that are easier to conduct and results that are significantly more valuable. The four principal survey types — starting from the defensive and progressing to the offensive end of the continuum — are those used as warning indicators, surveys as program evaluation measures, surveys as measures of “employer of choice” and surveys as leading indicators of business success. These surveys are illustrated in the Strategic Survey Model (Wiley, 2006) depicted in Exhibit 3.
All four types of surveys have important strategic value. While they may overlap at times, human resource professionals often grapple with two dangers: a) failing to clarify survey purpose prior to survey design, and b) trying to create a single survey that addresses all purposes at once but does not adequately address any in depth. Warning indicators is the most “defensive” of employee survey types and provides a useful example for deeper exploration of developing sophisticated and targeted survey content.
Warning Indicators: Union Vulnerability
There are several types of warning indicator surveys, but assessing for union vulnerability is one of the most appealing applications. In fact, this use of employee surveys dates all the way back to “nonunionization” efforts in the 1930s (Higgs and Ashworth, 1996). Today, most businesses in North America continue to resist unions, viewing them as a third-party impediment to communications between workers and managers.
In many geopolitical regions, the drive for unionization is typically based on worker dissatisfaction over issues such as pay, benefits, job security and working conditions. Inherent in such worker disgruntlement are two underlying concerns: the perception of a lack of fair treatment and a lack of respect. When properly designed, surveys can be important tools in identifying locations, worker groups, work shifts, specific management practices and “hot button” issues that stoke a desire for third-party representation.
The Union Vulnerability Index (UVI) is a set of nine items that summarizes employee opinions on a range of critical issues. Past research, much of it conducted by internal corporate research departments — and thus not publicly available — indicates the UVI is a useful predictor of worker discontent and relative vulnerability to unionization. The UVI items measure worker opinions of:
The UVI is calculated as the composite score of these nine items and is reported as percent unfavorable. Most typically, survey results are evaluated to identify those units within the organization whose UVI scores place them at high, moderate or low risk.
To place these rules of interpretation into context, consider Exhibit 4, which presents a ranking of United States industries based on their UVI scores.
It is important to note that these data are drawn from workers who are not currently represented by a union. The highest UVI scores are found in heavy manufacturing, restaurant, communication services, retail and hotel industries, while the industries with the lowest UVI scores are accounting/legal, financial services, health care products and high-tech manufacturing.
Exhibit 5 displays the ranking of the UVI scores for major U.S. job types — also drawn from workers who are not currently represented by a union. Those job types with the highest UVI scores are laborers (production workers, assemblers, packers, etc.), operatives (equipment operators, drivers, deliverers, etc.) and service workers. Those with the lowest UVI scores are executives and those in technical/professional and managerial roles. These are national averages, and job type scores will vary significantly by specific organizational conditions.
Exhibits 4 and 5 show how those in different circumstances characterize their work environments along the continuum of union vulnerability. To see how the UVI is applied in practice, let’s consider a brief case study.
A survey was conducted for a large retailer in Canada that had recently acquired a new chain of stores. Union avoidance was an important factor in both this organization’s labor relations and its overall business strategies. Using the nine-item UVI, the retailer surveyed its storefront outlets, seeking to identify those with the highest susceptibility to union organizing campaigns. Of the retailer’s 90 outlets, three stores categorized at “high risk” and 18 stores at “moderate risk.” Based on the UVI results, leadership sent employee relations teams to each of “high risk” locations and to several of the other higher scoring “moderate risk” locations to directly address the sources of employee concerns and disgruntlement. To this day, all of this chain’s stores remain union free.
3. Drivers of Employee Retention Have Been Fundamentally the Same For the Last 15 Years
Being an employer of choice is about being an organization where people are excited to come to work and excited to stay. Hiring executives are acutely aware of a looming talent shortage driven by Western culture demographics: baby boomers retiring and fewer younger workers entering the workforce. Coupled with this is a focus on retention due to the high turnover costs associated with recruitment, orientation and training. Productivity also suffers in the short term until new workers achieve an acceptable level of performance. Conventional wisdom in the HR field places turnover costs at between 100 and 200 percent of the exiting employee’s annual compensation (Fitz-enz, 1997).
As organizations emerge from the recession and look to hire, human resource leaders are re-emphasizing their focus on corporate reputation because doing so can greatly influence their ability to compete in the war for talent (Wiley, 2006).
The good news is that more than 15 years of WorkTrends surveys strongly indicate that the principal drivers of employee retention are consistent over time. This means we can identify reliable exemplar questions that can be used to measure whether an employee is considering staying or leaving.
Our research has identified the five elements that most influence an employee’s decisions to stay or leave:
Just how impactful are these drivers? Exhibit 6 displays stated turnover intention rates for two segments of the U.S. workforce: those who rate these five retention drivers favorably and those who do not. If employees rate these aspects of their current employment favorably, their intent to stay averages 42 percentage points higher. In other words, organizations that can provide employees with confidence, recognition, career development, a job matched well to their skills, and support for work and life balance will be dramatically more successful in their employee retention efforts.
These analyses and their historical reliability can greatly help human resource managers understand employee turnover and aid other senior executives in understanding the underlying factors that cause workers to seek employment elsewhere. The real benefit accrues from taking corrective actions that can reduce unwanted turnover and its negative impact on business strategy. However, in order to take such focused action, the organization needs to understand and properly measure the most potent drivers of turnover intent.
Exemplar items that validly and reliably measure these dimensions are shown in Table 1. Low scores on these retention drivers are a red flag and will help direct managers toward targeted solutions that can reduce unwanted turnover. If recognition scores are high but growth opportunities are viewed as limited, for example, managers can highlight existing (but apparently underappreciated) growth paths and also develop new ones.
4. Follow Up Is Critical and Often Overlooked
A common rule of thumb in the world of employee surveys is that 80 percent of the effort is expended during the follow-up period. While anecdotal, this underscores how extremely critical the follow-up process is. Perhaps the biggest obstacle to effective survey feedback and action planning is the failure to identify a short list of priorities, i.e., areas for action planning.
HR professionals are familiar with the common trap that many organizations fall into: trying to work on too many priorities in the wake of a survey. Yet what employees most want is their organization to focus on the most important issues.
Establishing priorities by choosing a strength to maintain and one or two opportunities to improve helps maintain balance by focusing on both positive and negative results. There are a number of successful ways to establish priorities:
Regardless of the technique employed, organizations that do this well will have successfully navigated around one of the biggest pitfalls in effective survey follow-up processes: too many priorities on which to work. When employees are faced with a list of priorities that outmatches the resources — or the resolve — of their organization, it almost always leads to cynicism and distrust of the process.
Engagement Levels and Survey Scores Improve when Managers are Held Accountable
Experience suggests that many managers lose the drive to follow through on surveys. In fact, in most organizations only 30 percent of managers will share survey results and take action on their own. Another 30 percent want to take action but need directive leadership, and the final 30 percent are resistant to the survey process and instead choose to focus on harder business metrics. One proven method for both holding managers accountable for survey follow-up and for increasing employee engagement levels is the Behavior Change Index (BCI).
Items in the BCI measure:
The more favorably employees answer these items, the greater the improvement will be in employee engagement.
Many businesses find the BCI methodology helpful because it raises levels of commitment and personal accountability for survey follow- up and action-plan implementation at both the executive and managerial levels. It is the reporting of results on the BCI that creates a feedback loop facilitating self-improvement. We have found that groups scoring the highest on the BCI demonstrate the largest improvements in basic measures such as the Employee Engagement Index (described in point one above). Exhibit 7 demonstrates the relationship between a belief that one’s manager acted on the previous set of survey results and the current level of employee engagement. The EEI for employees whose managers acted on survey results is more than twice that of those who believe their manager took no action.
The BCI methodology — and those like it — are about change management. Its value is in helping organizations and their executives and managers overcome obstacles to change. It positions organizations to recognize and to reward those who are effective in their survey feedback and follow-up practices. It contributes to the positive use of survey results as a platform for organizational development and helps organizations achieve their surveybased improvement goals.
6. Leadership That Sustains Improvement in Survey Results Year Over Year Possess Specific Characteristics
Taking survey results and turning them into business results can be a challenging process, yet there is a set of characteristics that typify teams that do it exceptionally well. Three of these characteristics are particularly critical. First, these teams have a clearly articulated vision, mission and value system (Becker and Gerhart, 1996). Second, these organizations measure what matters and share the results with staff. Finally, they are persistent.
A Clearly Articulated Mission and Value System
There are several benefits to a well-articulated vision, mission and value system: 1) It tells employees what is important to their employer, the behavior expected from employees and, in turn, what employees can expect from leadership; 2) It indicates the direction the organization is headed and why — how it will compete in the marketplace and differentiate itself from others; and 3) It helps create employee alignment and commitment to the organization.
These points underscore how critical it is to have a focused survey design. If the survey measures what is important to the organization, then the actual survey results will naturally point the leadership team to the right follow-up priorities.
Measuring and Sharing Results
A consistent measurement process is one that managers and employees come to expect and that has been explained in terms of the values it provides the organization. Most likely, this measurement occurs on a given cycle and organizational rhythm. This seasonality helps HR professionals project the process as an important part of “how we conduct our business,” not as an extra task heaped on the backs of already overburdened managers.
Successful executives and HR leaders are also dedicated to sharing results with the staff. These are not organizations where employees are left wondering whatever became of the survey they completed. Managers in these organizations have learned how to interpret results, feed them back to employees and inject employee input into the development of responsive action plans. In addition, they keep employees informed regarding the organization’s progress in implementing action plans. Not only does this build alignment and engagement, it also has the natural consequence of keeping employee survey participation rates high because employees have faith that their voice is being heard and that their input is valued.
Being persistent may be the most important lesson when it comes to sustaining change. It may also be the most obvious because sustained improvement demands persistence. One of my clients is the very model of persistence. More than 20 years ago, a survey measuring its articulated mission, vision, values and strategy was designed. Linkage research demonstrated that its employee survey results powerfully predicted customer satisfaction and retention, and this, in turn, predicted improvements in sales and net income. Not only did this validate the survey program, but it gave management a very clear agenda for the changes most needed to expand improvement.
The instrument and overall program have evolved throughout the years as the needs of the organization have changed, yet the program has survived the organization being sold as well as the acquisition of several competitors. For the last 10 years, this organization has dominated the North American market in which it competes. Every member of its current leadership team believes that the survey program, and the insight it provides, has been a key element in its achievement of market domination.
What are the major threats to persistence? They are twofold: distraction by external conditions and overconfidence. The first threat has to do with maintaining the resources necessary to sustain a survey program. Distractions may come from new competition, regulation, declines in demand or economic crises. The second threat typically comes about when an organization’s leadership decides current results are “OK,” perhaps comparable to available norms, and therefore don’t represent a “burning platform” or a mandate for change. The threat of being overly confident can also arise from having achieved improved results from “period one” to “period two,” and therefore leadership begins questioning the need for ongoing analysis.
The benefits of strategic employee surveys only multiply as their use is maintained year over year. For human resource executives, keeping their colleagues in the leadership team focused on sustaining this important employee-based measurement process can sometimes be a serious challenge, but the opportunities and the benefits are too great to forego.
For more than 25 years, Kenexa, a global provider of business solutions for human resources, has regularly conducted surveys among a representative sample of the U.S. workforce. The data from this survey program, known as WorkTrends, serve multiple purposes: They allow Kenexa to explore a number of important topics about work from the worker’s point of view and convert those conclusions into findings that can be broadly shared through press releases, technical reports and scientific articles. These data also allow Kenexa to compare the results of a given client’s survey to a county-level workforce as a whole, specific industry sectors or best practices organizations.
The primary data set used for the analyses presented in this article was collected in 2009 from workers in Brazil, Canada, China, France, Germany, India, Italy, Japan, Russia, Saudi Arabia, Spain, the United Arab Emirates, the United Kingdom and the United States. These 14 countries represent the 12 largest economies as measured by gross domestic product (GDP), accounting for 73 percent of the world’s GDP (International Monetary Fund, 2009), as well as two important Middle Eastern economies: Saudi Arabia and the United Arab Emirates.
WorkTrends is a multitopic survey completed online by a sample of workers screened to match a country’s worker population in terms of industry mix, job type, gender, age and other key organizational and demographic variables. Those who work full time in organizations of 100 employees or more are allowed to take the survey. The survey has 115 items that cover a wide range of workplace issues, such as managerial and leadership effectiveness, organizational values, policies and practices, and job satisfaction. In 2009, approximately 22,000 workers completed the survey.