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Employee Engagement document sample
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Employee Engagement: Business
Buzz or Serious Business?
IABC International Conference
June 28, 2005
Susan M. Suver
VP, Global Human Resources
Arrow Electronics, Inc.
Employee Engagement Defined
► Two components:
► Rational Engagement: the involvement, understanding
and motivation an employee has in his/her job
► Emotional Engagement: the attitudinal attachment an
employee has to his/her company; source of pride
► Excelling at only one is not sufficient to drive engagement
► Must measure and understand both aspects to produce most
actionable performance indicators
1
Why Is Employee Engagement Important?
Emotional Engagement Rational Engagement
► I am proud to tell ► I am willing to put in a
others I work for my great deal of effort beyond
company what is normally expected
Rational
Engagement to help my company be
► The work I have to do is
successful
reasonable
► I understand how my work
► I am unlikely to look for
Emotional group contributes to the
a job in another Engagement success of my company
company in the next 12
months ► I understand how my role
is related to my company’s
► I would recommend my
overall goals, objectives,
company to a close
and direction
friend as a good place
to work ► My job provides me with a
sense of personal
► My company inspires
accomplishment
me to do my best work
2
Does Engagement Matter?
Yes. Just Look At Motivation...
Highly engaged 45% more motivated than those disengaged
Individual Motivation Score
Overall U.S. sample*
92
78
48
Source: Towers Perrin 2003
Disengaged Moderately Highly
Talent Report: New Realities
in Today’s Workforce.
Engaged Engaged
3
Engagement And Retention Risk Are Linked…
Highly Engaged Moderately Engaged Disengaged
4% 7%
3%
2% 6% 8% 12%
6%
8%
36%
25% 23%
66% 51%
47%
Moving from moderate to high engagement makes 80% of disengaged would
employees almost twice as likely to stay (and invest their actively (29%) or passively
discretionary effort)! (51%) leave company
I have no plans to leave I am not looking for another job, I am actively looking for
but would consider another job another job
I have made plans to leave I plan to retire in the next few years
my current job
Source: Towers Perrin 2003 Talent Report: New Realities in Today’s Workforce.
4
Strong Correlation Between High Engagement And
Financial Performance
Revenue Growth
30%
26% Operating Margin With
22% 5%, 10%, 15% Change in Engagement
18% 14.5%
13.7%
14% 12.9%
12.1%
10%
LOW HIGH
Engagement Index Score
For a $10B company,
that’s $80,000,000
SG&A
27%
25%
23%
21%
Current 5% 10% 15%
19% % Change in Employee Engagement
LOW HIGH
Intent to Stay
NOTE: Employee engagement strongly correlated to intention to stay
Source: Towers Perrin 2003 Talent Report:
New Realities in Today’s Workforce.
5
Takeaway #1: The real
business impact of The Business Case for Engagement
employee engagement Employee engagement drives employee performance and workforce retention
• The Corporate Leadership Maximum Impact of Discretionary Maximum Impact of Engagement
Council’s research has found Effort on Performance Percentile on the Probability of Departure
that organizations are (rightly)
turning their attention to their 9.2%
employees’ level of
engagement.
Number
of Probability 87%
• A Council survey of more Employees of Departure
in Next 12
than 50,000 employees at 59 Months
member organizations in 27 1.2%
countries and 10 industries
demonstrates the real bottom- 50th 70th
Strong Strong
Percentile Percentile
Disengagement Engagement
line impact of employee
engagement. Highly
committed employees perform
up to 20 percentile points
better and are 87% less likely
to leave the organization than The “10:6:2” Rule The “10:9” Rule
employees with low levels of
commitment. • Every 10% improvement in Every 10% improvement in commitment
commitment can increase an employee’s can decrease an employee’s probability
• The Council’s analysis has effort level by 6%. of departure by 9%.
yielded the two “rules” • Every 6% improvement in commitment
appearing at the bottom of this can improve an employee’s performance
slide, which further convey the by 2 percentile points.
significant impact of employee
engagement on the business.
Source: Corporate Leadership Council 2004 Employee
Engagement Survey.
6
Takeaway #2: Most
employees are not The Risk of Workforce Disengagement
highly committed to The majority of employees are “up for grabs”—neither fully committed nor
their organizations uncommitted
• Of concern, given this
potential impact of
engagement, the Council’s
The State of Workforce Engagement
2004 Employee Engagement
Survey identified significant
employee ambivalence about
their organizations. These employees exhibit
moderate commitment to their
work, teams, managers, and
organizations
• The Council’s research found High performers with low retention
risk, who exhibit very strong
Poor performers putting in
that only 11% of employees minimal effort and exhibiting
emotional and rational commitment
to their jobs, teams, managers, and
demonstrate very strong strong noncommitment to their
organizations
organizations, jobs, managers,
commitment to their and teams
organizations, while 13% are
actively disengaged.
20% 29% 27%
• This examination further Leaning Toward Leaning Toward
13% Neutral 11%
revealed, however, a real Disengagement Engagement
opportunity: 76% of The “Disaffected” The “Agnostics” The “True Believers”
employees are only
moderately committed to their
organizations. Organizations
seeking to reap the benefits of
a highly engaged workforce
should therefore seek to sway
these “agnostic” employees
towards the “true believer”
level of engagement.
Source: Corporate Leadership Council 2004 Employee
Engagement Survey.
7
Takeaway #3: There is a
significant range in The True Difference Engagement Can Make
employee commitment The example of two organizations participating in the 2004 Employee
between organizations Engagement Survey
• Also worthy of attention, the
Council has identified a
The “True Believers” Discretionary Effort
significant variation in
engagement levels between 24%
surveyed organizations. 15.8%
The “True Percentage of
Believers” Workforce in
• On this slide, you will observe a Percentage of Highest Category
3%
meaningful distinction in the Workforce of Discretionary
3%
engagement levels (and the Effort
Organization Organization
related impact on discretionary A B
Organization Organization
effort and intent to stay) of A B
employees at two participating
organizations at either end of the
workforce commitment scale.
The “Disaffected” Intent to Stay
• The Council’s research 17%
42.9%
indicates, in fact, that
organizational differences are “Disaffected” Percentage of
Percentage of Workforce in
the only major demographic Workforce Highest Category
category accounting for variation 5% of Intent to Stay 15.3%
in workforce commitment,
suggesting that organizations
Organization Organization
cannot simply “write off” certain A B Organization Organization
employee segments (such as A B
Generation X) as being likely to
be disengaged.
Source: Corporate Leadership Council 2004 Employee
Engagement Survey.
8
Takeaway #4: A list of Checklist for Driving Workforce Performance and
top commitment drivers
promoting discretionary Retention Through Engagement
effort and retention
Select Levers of Employee Commitment, Listed with Maximum
Potential Percentage Impact on Employee Discretionary Effort and
• The chart at right provides a Intent to Stay
“checklist” of levers that
organizations seeking to Lever Percentage Percentage
improve workforce Impact— Impact—Intent to
commitment—and thereby to Discretionary Stay
increase employee discretionary Effort
effort and intent to stay—might
seek to employ. Employees understand connection 32.8 36.4
between work and organizational
• You will observe the strategy
importance of clarity about how Employees understand importance of 30.3 34.1
to do one’s job, and a belief in their jobs to organizational success
the importance to it, to
employee discretionary effort Internal communication 29.2 37.5
and intent to stay. Manager demonstrates strong 28.5 36.5
commitment to diversity
• Further, prominent among
these top levers of engagement Manager demonstrates honesty and 27.9 35.1
are managerial attributes, integrity
including excellence in people Manager adapts to changing 27.6 36.1
and process management. circumstances
Manager clearly articulates 27.6 35.7
organizational goals
Manager possesses needed job skills 27.2 35.8
Source: Corporate Leadership Council 2004 Employee Engagement Survey.
9
Takeaway #4: A list of Checklist for Driving Workforce Performance and
top commitment drivers
promoting discretionary Retention Through Engagement
effort and retention Select Levers of Employee Commitment, Listed with Maximum Potential
Percentage Impact on Employee Discretionary Effort and Intent to Stay
• The chart at right provides a
“checklist” of levers that
organizations seeking to
improve workforce Lever Percentage Percentage
commitment—and thereby to Impact— Impact—Intent to
increase employee discretionary Discretionary Stay
effort and intent to stay—might Effort
seek to employ.
• You will observe the
importance of clarity about how Manager sets realistic performance 27.1 35.6
to do one’s job, and a belief in expectations
the importance to it, to
employee discretionary effort
Manager puts the right people in the 26.9 36.8
and intent to stay.
right roles at the right time
• Further, prominent among
these top levers of engagement Manager helps find solutions to 26.8 35.4
are managerial attributes, problems on the job
including excellence in people
and process management. Manager breaks down projects into 26.7 35.6
manageable components
Source: Corporate Leadership Council 2004 Employee Engagement Survey.
10
The Journey to High-Performance
Through Leadership Involvement
and Employee Engagement
Arrow Electronics, Inc.
Key Factors in Decision to Drive Engagement
► 2000 bust in the dot com, high tech and telecom sectors left
electronics manufacturers and distributors overbuilt
► New CEO Bill Mitchell arrives 1Q03 with 3 areas of focus: grow the
business, return to profitability, build a winning team
► Shift from 20 years of M&A to organic growth a fundamental strategic
and operating shift
► Legacy leaders were entrepreneurial, patriarchal, autocratic.
Businesses operate in silos
► Unwritten lifetime employment “contract” with employees created
high company loyalty, high entitlement, high pay vs high-
performance, high accountability
► Success in high-performing, organic growth strategy would require
substantial re-orientation of the leaders and workforce. A top-down,
high involvement strategy in order.
► Employee involvement would be required to execute, and to resume
prior high levels of employee morale and confidence in management.
► Alignment of business acumen, processes and performance
standards required to rebuild “DNA” of gene pool
12
Arrow’s Culture Change Strategy: Convert to
high-performance, accountability using Shared
Leadership and Employee Engagement
Define the competencies, skills, behaviors and practices necessary to
create a common, unified culture capable of driving global strategy
execution and supporting Arrow’s values.
Design and deploy change management methods and new internal
communication processes that will power the new Arrow culture.
13
The Architecture Of Culture
Element E Culture
The Exhibition And Aggregation Of Employee Behavioral Norms
And Values
Element D Employee Behaviors
Conduct And Actions Of Company Employees; Beliefs Turned
Into Action
Element C Company Practices, Policies, Programs, Structures,
Systems, Processes, Ceremonies, And Routines
Framework For Driving Desired Employee Behaviors; Hardware For
Building Culture
Element B Values
Deeply Held Beliefs Of Company; Principals That Guide The Way
The Company Operates; Software For Building Culture
Element A Vision
Vivid Description About Desired Future State Of Company
14
2003: What was our Operating Culture? Could it get
us to new strategy successfully?
Culture Assessment
►2003 Towers-Perrin quantitative web-based culture assessment
survey (4,000 employees, 77% response, 8 languages, all regions)
►20 focus groups (300 employees), 16 executive interviews
External Benchmarking
►7 leading companies
►Extensive secondary research
Evaluate Communication Capabilities
►Management capability
►Vehicle inventory
►Culture survey inputs
15
High-Performance Cultural Attributes
► Communicating/Involving
► Employee Engagement High-performing
companies typically
► Cost Focused
score better on these
► Collaborative
attributes
► Customer Focused
► Innovative Arrow survey also
► Empowering/Decision- indicates these as
Making Authority critical gaps
► Performance/Results
Oriented
► Trusting
► Change Readiness/Action Source: Towers Perrin 2003 Talent Management
Oriented/Process Discipline study
► Accountable
16
From Today to Tomorrow
Engaged
Today Workforce Tomorrow
Strengths Strengths
► Cost-focus ► Cost-focus
► Customer service mentality ► Customer service execution
► Loyalty ► Loyalty
Areas for Improvement ► Shared leadership
► Separate ► Performance-based team
► Family ► Empowered employees
► Hierarchy ► Sustained performance
► Crisis-focused ► Continuous improvement
17
Change Drivers that Produce Business
Results…
► Leadership Alignment with Strategy, Financial and Operating
Models
► Employee Engagement
► Communication Environment, Tools, and Processes
► Continuous Improvement Mindset and Processes
18
Aligning Leadership with Vision, Values,
Strategy
Our Vision
To be the Clear #1 worldwide provider of products, services and
solutions that connects technology with customers, powers the supply
chain and delivers premium investment results.
Our Values
►Ethical
►Open and Courageous
►High-Performing, Accountable Teams
►Working Effectively with No Barriers
►Innovate and Execute
►Passion for Service Excellence
19
The Arrow Strategy
Clear #1
Growth Operational Financial Shared
Excellence Stability Leadership
Strategy for the future - Strengthen Arrow – Build the team
Strategy Execution Leadership
20
The Road to High-Performance
Enablers Embedders
Getting started Making it stick
Desired Culture and
Communicating/Involving
Intended Leadership Engaged Workforce
Change/Action/Process
Strategy Communication that Executes
Performance/Results Oriented/
Involvement Intended Strategy
Customer Focused
Effectively
Measurement
Recommendation #1 Recommendation #2 Recommendation #3 Recommendation #4
Establish continuous
Embed Arrow values into Create a communication Improve business improvement culture to
daily behavior of all infrastructure and performance by increasing drive operational
leaders/employees to drive environment that enables high-performance, effectiveness, customer
successful execution of job understanding, employee engagement satisfaction and
business strategy involvement, motivation sustainable competitive
advantage
21
The Tools, Process and Discipline
► Upgraded Employee Communications
► New talent and vehicles
► The “value creators”:
— Managers as dialogue leaders
— On-boarding, Benefits, Development, Performance Differentiation
► Continuous Process Improvement – Lean Sigma
► Voice of the Customer
► Shared Leadership Model
► Top 375 = Performance Leadership: Executive teams build new strategy
► All managers = Leadership Inspires Full Engagement (LIFE): learn new strategy, plan
and manage execution in regional/local markets
► Leader Performance Criteria (financial, operating, individual and team
leadership, talent-related, change agility, org savvy, strategic thinking)
► Rewards
► Pay for Performance, Introduction of Non-financial goals, Discretionary bonuses
► Recognition
► High profile assignments; access to senior leaders
► Mentoring, executive education, public and private kudos on performance, invest time
to know what’s on the mind of your key employees
22
Measuring & Monitoring Progress
What we have:
► Financial metrics
► Operating metrics
What we are (re)building:
Key Performance Metrics
► Annual Employee Engagement & Culture Assessment
— Understanding Strategy; Aligned Goal-Setting
— Seeking & implementing ideas from all levels
► Leadership Success Model
— Redefining High Performers and High Potentials
— Retention
— Readiness for new roles
— Assimilation success
► Productivity
► Customer Satisfaction
23
Year 1 Progress
► Nov 2004 survey: 11,200 employees, 84% participation rate, hundreds of focus
groups
► Two clear strengths: Ethics and Passion for Service Excellence
► Company-wide efforts (e.g., Shared Leadership) are beginning to have a positive
impact
► Higher scores on involvement, confidence in senior leadership
► More employees understand the business strategy
► Percent of highly engaged Executives increased in 2004
► Engagement of recent hires up
► Asia showed significant overall improvement
► Degree of engagement impacted by many changes (e.g., restructuring, downsizing,
leadership changes)
24
Early Results and Some Lessons Learned…
1) Focus on targeted, manageable results
2) Accept that you cannot change everything at once
without creating chaos
3) Don’t underestimate the impact of organizational
change to undercut your progress
4) Engagement is a continuous process –
management’s credibility requires constant
discipline and determination over time
25
Summary
► Driving to Higher Levels of Engagement is a Journey
► Engagement begins with the end in mind and requires a road
map to get there
► Alignment of practices, intent, process and discipline are must
haves.
► Communication is a fundamental driver of understanding the
work and its relationship to strategy
► Leaders using high degrees of involvement, coaching,
recognition drive higher levels of engagement
► When understanding and involvement are high, discretionary
effort increases and retention risk decreases
26
QUESTIONS?
27
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