High employee engagement leads to 4x higher earnings per share

Strategy = Execution

High employee engagement leads to 4x higher earnings per share

There’s a strong business case for engagement. Engagement is fuel.

No fences, but an attractive source

There’s a strong business case for engagement. Engagement is fuel. Engaged employees contribute significantly to all of an organization’s strategic goals: profitability, customer and employee satisfaction, productivity, retention of talent and lower absenteeism. Engagement affects your customers and your results. However, putting too much effort into fostering generic engagement can be counterproductive, as the research of Strategy = Execution written by Jacques Pijl shows.

In a 2015 poll, Gallup found that 68% of employees are not engaged. Just over 50% were passively unengaged: neither hostile nor disruptive. Such employees get to work on time but do the absolute minimum expected of them. They are not committed to the organization’s goals and ambitions. Another 17.2% were actively disengaged: these employees were hostile and disruptive.

The behavior of disengaged employees not only leads to waste and demotivation, it lowers productivity too. Fortunately, the tide is relatively easy to turn. What you pay to retain an employee is a fraction of the cost of recruiting, training and onboarding a new one.

Engagement increases profitability

Organizations with an excellent ratio of actively engaged to actively disengaged employees show growth in profitability. Their Earnings Per Share (EPS) is almost 4 times higher than that of organizations with lower employee engagement, as Keller & Price showed in Beyond Performance. Engagement also leads to significantly higher customer satisfaction. In these organizations, more than 60% of employees are actively engaged. All of this, aside from what the normal motivations of executives and leaders should be, and fortunately usually are: enabling people to truly and effectively connect with the organization’s objectives, to feel engaged. This goes to show that employee engagement benefits everyone. But how do these organizations motivate their employees? Our research has highlighted some important motivational factors:

First of all, be like an Australian pasture: not fenced in, but with an alluring source of water. If your products, day-to-day work, leadership, co-workers and customers are attractive, your organization will be too. Make sure your vision for the future is inspirational, explain to your people why their work is meaningful and why the various initiatives are necessary. In short, explain the real, basic why.
Good leadership is service-minded rather than charismatic. It is predictable, generous, caring and challenging. Be as compassionate as you are tough. Recruit rigorously, manage with a light touch! And most importantly, dare to get personal.
Make staffing one of the main issues in setting up projects and programs. Find the right people to help set up new initiatives and give them personal responsibilities. This motivates and engages them.
Be a “Rhine-Saxon”: social and positive. Many Rhineland capitalists are hesitant to embrace Anglo-Saxon, American positivism, but you should learn to emphasize the positive. Never underestimate the power of real attention and a sincere compliment.
Put time and effort into maintaining relationships. Few things harm your credibility more than seeking engagement, putting in the effort once and then neglecting the person you have given a key role in execution.
Develop HR’s role in recruitment, remuneration, organizational development, and most of all, in talent management. Ask your HR department today for a single sheet of paper listing the most important people to retain, and have them include a cafeteria menu of personal development options.
When you assess and reward your employees, do not limit yourself to the quantitative and financial. Money is the most expensive way to motivate people. Obviously, remuneration should match performance, but personal development opportunities, personal attention, coaching, feedback, respect, equality, inspiration and compliments make much more of a difference. Make sure that your employees’ goals and passions serve your organization’s collective ambition, because engagement without alignment is meaningless. Engaged, but insufficiently aligned employees will work hard, but will end up frustrated because they won’t see what impact their efforts have.

Maximum freedom and self-organization

I didn’t include ‘Empowering people’ in the above list. That’s because I think it’s self-evident that you should give your employees and teams maximum freedom within the right framework. The number of books published in the last decade on the topic of self-organizing and self-directed teams and the importance of autonomy to individuals in organizations could fill half a library. I consider the need for autonomy simply good hygiene, or pointing out the obvious. That is not to say that every organization always get it right. Buurtzorg got it right when it successfully introduced a new business model in which autonomous care professionals organize themselves at the community level without any management layers on top. But this is not a model that can be copy-pasted onto any situation regardless. If too hastily adopted, teams of employees will be expected to start operating autonomously, without having been adequately trained to make that change.

Two dogmas that need addressing

Dogma No. 1: a clear strategic framework seems taboo. Don’t underestimate the importance of behavior in relation to engagement; not all high engagement is functional. This is a delicate matter. Obviously, you should always encourage bottom-up input, but you do not have to accept and implement every bottom-up suggestion for strategic change. As a leader, you must set, explain and adhere to a clear strategic framework. Yet within this framework, you need to leave maximum room for bottom-up interpretation and freedom. It’s almost as if it’s taboo to set clear boundaries.

Dogma No. 2: any type of employee engagement is good. That’s nonsense. A lot of money is spent on increasing motivation and engagement. I say, spend more time on fewer but better quality initiatives in this area. For example, let employees write a personal commitment statement. This popular and very effective HR tool is a great way to avoid formalistic HR processes while stimulating a more down-to-earth dialogue about what drives and motivates professionals.

With friends like these, who needs enemies?

Not all high engagement is functional. To prevent the wrong type of engagement we need to stop using employee satisfaction as the only engagement metric. Let’s look at people’s behavior too. Someone may claim to be very satisfied, but does the walk match the talk?

Sean Graber, CEO of training firm Virtuali, identifies negative, indifferent and positive employee perceptions and plots these against destructive, neutral and constructive behaviors (see figure 1). The resulting matrix shows the all-star employee diametrically opposed to the saboteur, the brat to the martyr and the drifter, the underachiever, the cynic, the delinquent and the workhorse in between. They can all be equally engaged, but that engagement does not necessarily translate into a positive contribution to the organization. Clearly, you want to avoid destructive engagement. With friends like these, who needs enemies? Each type of employee requires a different kind of leadership and coaching, both to encourage employee development and to let go of people.

Strategy = Execution. Improve, Renew and Innovate Faster

How can organizations make strategy execution their number one priority? And improve, renew and innovate faster? This I describe in my book Strategy = Execution. Strategy = execution is based on the research that Turner started years ago into the success factors of strategy execution and innovation. We interviewed 60 directors and professionals and analyzed more than 75 cases, 300 relevant books and articles.

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More about Jacques Pijl (author) and Turner Consultancy.
The most popular interventions based on Strategy = Execution
24 endorsements from organizational leaders
American management book of the year 2021, no. 1 in the category of strategic management, in the top 100 bestseller, seventh edition, translated into: English, German, Spanish, Russian and Bahasa.
Selection of the most important management books according to CEOs of innovative organizations (FD New Champions). Included in library of classics (mb.nl).
Nominated for Management Book of the Year.
Countless articles and interviews in FD, Emerce, Frankwatching and CFO.
Numerous Ted Talks and in-company workshops at the top 25-50 organizations, average rating 8.7.