Engaging Your Employees:
Six Keys to Understanding the New Workplace

James K. Clifton
Chairman & CEO, The Gallup Organization
2002 SHRM Foundation Thought Leaders Remarks

• Introduction
• Overview: "Check Your Premises"
• 6 Keys to the New Workplace
• Final Thoughts

• About the SHRM Foundation
• About the Thought Leaders Retreat
• About James Clifton

Change is discontinuous. No longer is change a straight projection of past trends into the future. The future belongs to the ones who look forward not backward, who are certain only of uncertainty, and who have the ability and confidence to think completely differently.

Introduction

The Thought Leaders retreat is an ideal time to "think outside the box." As you explore the issues shaping the future of your HR profession, you need to get into the right frame of mind. You have to come up with premises. And these premises must be right or all your guiding of the HR future will be wrong.

So, I would like to offer you some "food for thought" as you explore strategic HR leadership in these rapidly changing times.

Overview: "Check Your Premises"

I often hear politicians say: "If you vote for me, I will always vote my values and not the Gallup Poll." I say: "Do me a favor. Change the phrase, "Gallup Poll" to "people". Do vote your values. But you better listen to what people say. And don't try to second guess them because you will almost always be wrong.

Let me share some examples of disconnects between what leaders say, and what Gallup has discovered when we asked people about the same issue:

Support of Muslims in Arab Countries after 9/11 Attacks

• Premise: President Bush reports strong support of the United States by Arab countries, based on conversations with leaders. They said: "everything is fine, it's just a few crazies out there."
• Fact: Gallup survey of 10,000 Muslims in nine Arab countries reveals 33%-50% think 9/11 attacks were justified. Major reason cited was not Palestinian issue or support of Israel. It was the lack of respect. Interestingly, Muslims in countries that had never met Americans had more positive attitudes. I wonder if to know us is to hate us.
• Reality: Major gap between the Arab leaders' statements of support and Muslim public opinion. That means the Administration had it exactly backwards.

• Premise: Public education is a failure and needs corrective action.
• Fact: Gallup survey of parents with children in public schools reveals highest rating of public schools since Dr. Gallup launched this survey three and half decades ago. Interestingly, the general public views public school education as failing and at an all time low. But they are not the customers of public school education. The parents of children in public schools are!
• Reality: Public school education nationwide is doing the job, though problems do exist in major urban areas such as Chicago, New York, Washington D.C., Cincinnati and Cleveland.

• Premise: Black/white relationship is worse than ever.
• Fact: Gallup survey reveals African Americans rate their quality of life as higher than ever, and it is increasing faster than whites. So civil rights, affirmative action and other initiatives have probably worked very well.
• Reality: Biggest discrimination is not in the workplace or with police, but in retail stores, where blacks and Hispanics, to a lesser degree, feel singled out. If we want to make the biggest advance in knocking out prejudice, focus on retail stores. And get the retail staff to treat African Americans and Hispanics like they are worth a million dollars.

• Premise: Americans voted for Bill Clinton as president.
• Fact: Gallup surveys prior to the 1992 election showed Americans had a favorable opinion of President George Bush on defense. But when we asked people if they or a family member or friend was out of a job, the disapproval rating jumped significantly. The issue was really a vote about jobs. As a result, our polls showed President Bush losing to whoever ran against him, whether it was Bill Clinton, Colin Powell or General Schwarzkopf.
• Reality: Americans did not so much vote for Bill Clinton in 1992 as they voted against President George Bush and his handling of the economy. The popular campaign slogan said it best: "It's the economy, Stupid."

6 Keys to the New Workplace

So, let's take a closer look at some of these premises and assumptions underlying business and people management today and see their implications.

1. Premise: CEOs Care About People.
   How often have you heard a CEO say: "People are our most important asset." Don't believe it! It is a wrong premise. Most CEO's do not care about people in the workplace. They care about results.

   Implications:

   • HR must build the business case for the strategic importance of people investments on the basis of hard data.
   • HR professionals must become far more financially literate. They must focus on research rather than instinct and assumptions as the basis for their recommendations regarding people management. HR must bring a hard analytical approach to soft people issues.

2. Premise: Our Identity is Found in Family and Community.
   Here's another wrong premise. Most Americans define themselves by their family and community. Not anymore. According to Gallup research, a major sociological shift has taken place in the past decade. Today, most people define themselves by their job, on the basis of their job title and the brand image of their employer.

   Implications:

   • Layoffs are now seen as much more "personal" than they have ever been in our past. Layoffs are likely to engender huge anger on the part of those affected. This has profound implications not only for employers and HR professionals but also for politicians, particularly as the unemployment rate rises.
   • The great new American dream is having a good job. That's how we define ourselves today. It is also what makes our country very different from Europe where one's identity is not as rooted in work.

3. Premise: Most Employees in U.S. Organizations are Engaged in Their Work.
   The United States has the most productive workforce in the world. But we wanted to know how many were engaged in their work. So we interviewed over one million employees. Guess the percentage of U.S. employees who are passionate about their work?

   Gallup research found only one in every four Americans is truly engaged. Twenty-five per cent (25%) have a strong commitment to what they do in their job.

   We found that fifty five percent (55%) are not engaged. There's nothing really wrong with this group. They get to work. But something is lacking. This comment best characterizes employees who are not engaged: "We all had a good idea. We are going to lunch early again today."

   Finally, we discovered twenty percent (20%) -two in ten American workers --are "actively disengaged." They're the chronic complainers. They find fault with everything in the organization. They are the negative people who roam the halls, going door to door saying, "the company has lost its direction," "the leadership is unethical," "we've got to get out of here, etc."

   Implications:

   • The 25 percent of the workforce that is engaged creates all of the customer satisfaction that a company may enjoy. They also drive the financial success of the company.
   • The disengaged employees don't satisfy customers. They cost a lot more to manage. They miss two and half times more days at work than the engaged. They have much higher levels of sick leave and greater health problems. When we tracked "shrinkage" in retail stores, we found much of the shrinkage took place within this 20% group. "Shrinkage" is the country club word for stealing.
   • HR has an enormous opportunity to provide organizational leadership by increasing the number of engaged workers. By motivating disengaged workers to become engaged, an organization can significantly increase productivity and profits. For example, Toyota has about 10% more engaged workers than the average company. Consequently, it runs one of the most efficient and productive operations in the world.

4. Premise: Compensation and Benefits are Key Motivators for an Engaged Workforce.
   What is the key to an engaged workforce? If you said higher compensation and benefits or more training and development, you are wrong.

   Gallup has found over and over again that the manager is the key to an engaged workforce.

   Implications:

   • The essence of effective people management is managing emotions. For example, the response to the following question is an accurate predictor of a company's employment costs and financial success: "My manager cares about me as an individual."
   • Based on extensive workforce research, Gallup has identified 12 key questions that managers can use to determine the engagement level of their employees. The instrument is called Q12, and is very effective. For example, one question focuses on friendships at work. We found that employees who have close friendships at work are more engaged workers.
   • Managers need to know their own strengths and the strengths of their employees. Gallup believes that every person has innate strengths. We believe you should build the role around a person's strengths rather than trying to fit the person into the role. Gallup research has identified 34 individual signature strengths, and has developed the StrengthFinders questionnaire to assist organizations in building strengths-based workforce.
   • Most training and development programs and performance management practices focus on improving an individual's weak areas rather than building on strengths. We believe that's wrong. In fact, positive psychology reveals that a chemical change takes place when someone reviews and reinforces your strengths as opposed to dwelling on your weaknesses or limitations.

5. Premise: Most Managers are Effective.
   What percentage of managers is effective? Most people would say one out of four managers. That's too high.

   There are 100 million real jobs in the country, if you count full-time equivalent and benefits. We estimate that each manager has about 10 reports. That works out to a need for 10 million managers. Guess what? Mother Nature has played a horrible trick on us. She only created one million managers. That's what our Gallup research shows when we asked employees about the effectiveness of their managers. So, one of the biggest reasons why employees are not engaged is because they have lousy managers!

   Implications:

   • The decisions about who gets to become a manager are the most important decisions for a company's long-term financial success.
   • Gallup believes strong and caring managers are born, and not made. They have an innate ability to manage or strength to lead. HR must provide leadership in identifying employees with management talent. HR can also assist mediocre managers to become more effective by giving them the tools they need and by telling them things not to do.
   • Managers are very important for establishing organizational culture through their interactions and communications with employees. The beliefs and values of an organization are determined by its managers through their interactions with each other and with employees. This may explain the predilection for groupthink in many companies.

6. Premise: Our Economy is Stronger Than Ever, Thanks to Visionary CEOs and Innovative Business Practices.
   The stock market, despite the recent downturn, is at an all-time high. There are more millionaires than ever before in our history. And America has the highest GNP and most robust economy in the world. So the future is bright? Not so!

   Through misguided public policy, and incompetent management of corporations, we have witnessed the death of "convenient monopolies". For example, AT&T used to make a lot of money because they had a monopoly. MCI came along and offered the same long distance service for half off. Then the guy from Mississippi creates WorldCom and cuts the price even more. Gallup used to buy telephone lines at 30 cents a minute. Now we buy them for about 3 cents a minute. We are seeing some of the worst CEOs in the world. All they are doing is cost cutting!

   Do you realize that corporate profits have fallen steadily over the past 50 years as a percentage of GNP? In 2000, corporate profits were only 6 percent of GNP.

   Implications:

   • It's been fifty years of magnificent cost cutting. Companies have relentlessly driven down their cost curves to remain competitive. TQM and reengineering were ways to cut prices in order to take share away from competitors. To protect their market share, these competitors, however, applied the same methodologies to reduce their costs and match the price cuts.
   • Gallup's research finds margin pressures are the biggest problem for CEOs. Look at General Motors. You can buy a GM car today at zero percent finance, no interest. Your first payment is not until a year from now. You know what that is to the average American? "A free car!" Great cost cutters are never great executives.
   • The hope for the U.S. economy over the long run is to encourage inventors and entrepreneurs who are the foundation for economic growth. Additionally, we need to develop a more "spirited" (i.e., engaged) workforce through improved people management.
   • The long-term trend in the U.S. economy underscores the importance of intangibles management. Specifically, intangibles, which provide the capabilities and environment for innovation and entrepreneurism, are the key sources of value creation needed to stem the malaise created by continuous cost cutting. Superb managers of intangible assets, especially human capital, are the model for future CEOs.

Final Thoughts

• First, continually check your premises and assumptions about business and people management. Listen to your employees and your customers. HR policies and practices built on the wrong premises are a waste of time and resources.
• Second, understand that many CEOs don't fully appreciate the importance of human resources. So, you will need to build a business case for the strategic importance of people investment. This means bringing a hard analytical approach to soft people issues. Your recommendations regarding people management need to be based on research rather than instinct and assumptions. And as a profession, HR must become much more financially literate.
• Third, American companies can no longer build a relationship with customers based on price-cutting. Otherwise, our industries and economy will eventually go broke. A recent study by Lexus found that when employees are in an engaged, positive environment and have a relationship with the customer, the company could charge $400 more per car. Customers are willing to pay more for value and for that trusting relationship. The secret to competitive advantage is not price cutting but building a positive relationship with the customer based on an engaged workforce.

HR is the only one with the answers to increased worker engagement. The question is whether companies and organizations will now turn to HR for their strategic leadership in this area.

That is the question that you, as HR Thought Leaders, will need to address and answer. I wish you well in your exploration of this question and your discussion of how SHRM Foundation research can help you make it happen.

About the SHRM Foundation

About the Thought Leaders Retreat

The Thought Leaders retreat brings together a select group of leading edge thinkers and doers in business and human resource management. The Foundation board of directors and invited guests meet to discuss the issues shaping the future of the HR profession and their implications for research and practice. The invited thought leaders donate their services as a way to give back to the profession.

In August 2002, James K. Clifton, chairman and CEO of the Gallup Organization, was the opening speaker at the fourth annual Thought Leaders retreat. We believe his remarks will challenge you to, in the words of Charles Handy, "look forward and think completely differently" about the opportunities and challenges ahead for sound people management.

About James Clifton

Jim is probably best know in the business world as the creator of "The Gallup Path," a metric-based economic model that establishes the linkages between human nature in the workplace, customer loyalty and business outcomes. More than a thousand companies worldwide use "The Gallup Path." Jim has been the visionary behind the Gallup business books, both best sellers: First, Break All the Rules by Marcus Buckingham and Curt Coffman, and Now, Discover Your Strengths by Marcus Buckingham and Donald O. Clifton, Ph.D., as well as the newly-released Follow This Path by Curt Coffman and Gabriel Gonzalez-Molina, Ph.D.