The Power of Employee Engagement

By Yash Chitre and Dale Buss Jan 7, 2013
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During the fall in 2012, as part of its “Go Further” branding campaign, Ford found an innovative way to advance employee engagement: put actual workers in television ads for the new Ford Escape sport utility vehicle (SUV). One such worker was Vince Mahe, who helped design the Escape lift gate that opens when it senses a foot wagging beneath the rear bumper. After Mahe demonstrates his innovation, the ad concludes, “It’s what happens when you Go Further.”

The Go Further campaign is built around “people serving people” internally as well as externally, demonstrating ingenuity in all activities and striving for what’s “attainable” in “character, appeal and value,” as Jim Farley, Ford’s global chief marketing officer, puts it.

“We’re not trying to invent a new reality for Ford,” he said in an interview. Instead, the company is emphasizing and communicating internally “what Ford feels like on a good day” by further engaging employees and getting them all pulling in the same direction.

The strategy appears to be taking hold. “Our managers are starting to break it out in meetings now literally saying, ‘If you put your Go Further hats on, what decision will you make?’, said Sara Tatchio, Ford’s manager of internal branding. “And in every plant there’s been a real reframing [toward], ‘How do we work at the work that we do?’ ” she added.

Engagement Provides a Competitive Edge

By looking at Ford and other highly or increasingly “engaged” corporate cultures, many companies are recognizing a possible path out of their slow-growth mode. They are beginning to recognize the power of employee engagement to differentiate themselves from competitors.

Companies with engaged workforces demonstrate an average of 19 percent higher operating income and 28 percent higher growth in earnings per share (EPS) than the average employer, according to the Towers Watson 2012 Global Workforce Study. In stark contrast, companies with unengaged workforces average 34 percent less operating income and 11 percent lower EPS growth than average employers.

More than 70 percent of U.S. employees are actively disengaged, according to a 2011 study by the Corporate Executive Board, meaning lost productivity costs to the economy of $370 billion a year.

The potential impact on revenue by industry is significant, research suggests. For example, airlines that fail to engage their workforces in the corporate purpose are forgoing $590 million a year in potential revenue, according to a Forrester Cain Research study. In the hospitality industry, forfeited opportunities sacrifice a total of $1.2 billion.

Achieving an Engaged Workforce

Just because companies move toward engagement, however, doesn’t necessarily mean they’re doing it right. It’s one thing to launch an engagement program or strive to match “best practices”; it’s quite another to establish, nurture and succeed with a system that is meant to guarantee results for the long term.

“To ensure that an organization’s employees can become engaged in meaningful ways … employee engagement must be part of an integrated approach to improving the corporate culture in profound ways,” said Allan Steinmetz, founder and chief executive officer of Inward Strategic Consulting. It begins with corporate commitment to establishing meaningful employee engagement and broad experiential communications and includes training and learning techniques for employees and managers.

At that point, improvements generated by engagement can be measured, recognized, rewarded and built upon in a sort of virtuous cycle that can revolutionize how companies and brands do business. It is an integrated process that should be managed, just like any external branding effort. Added Steinmetz: “When it’s done well, people will be able to connect the dots and see the full picture of what the brand stands for and how their behavior and roles contribute to exceptional customer experiences.”

Six main drivers determine whether companies will be able to tap the benefits of engagement:

  • Work: How the employer organizes work tasks and processes, manages resources, and creates opportunities for employees to feel a genuine sense of accomplishment.
  • People: How senior leadership prioritizes engagement and drives it through all levels of management. This includes a focus on people and the selection of employees predisposed toward engagement.
  • Opportunities: How workers can avail themselves of career opportunities, including learning and development.
  • Total reward: How employees perceive their overall compensation, including recognition, pay and benefits.
  • Company practices: How practices such as performance management, brand alignment, reputation management, diversity and communication affect engagement.
  • Quality of life: What the company does to enhance the physical work environment and encourage work-life balance.

The best examples of employee engagement are found in companies that have woven the concept into their corporate cultures over decades.

Enterprise Rent-A-Car: Shared Commitment

Enterprise Rent-A-Car is besting many competitors in part because of its focus on employee engagement. “It’s central to us,” said Steve McCarty, vice president of training and talent development for Enterprise. “Focusing on employee development and promoting from within drives profit. And we have an engagement culture to make sure that happens.”

The local office is the focus of Enterprise Rent-A-Car’s engagement strategy. When someone joins the staff, a company representative and the new employee sign a “commitment success letter” that outlines their pledges and expectations for each other.

“So there is a high-level reporting system in place,” McCarty explained, “but the power of engagement is really in the one-on-one connections that folks have with the managers of the local entities. Each branch manager has lots of autonomy, and the one-on-one things they do to keep their employees engaged are less glamorous than some corporate policies—but more real. We basically trust them—but verify.”

UPS: Subtle, Incremental Changes

Recently, United Parcel Service (UPS) recognized the benefits of true employee engagement. When Joe Finamore, vice president of global employee relations, joined the Atlanta-based shipping giant in 2009, he saw that many drivers, sorters and other members of the company’s 400,000-strong nonunion workforce were loyal to the company and strived to make it better. Initially, he measured a 73-percent engagement rate overall.

Nevertheless, Finamore decided that UPS could do even better if he systematized the culture explicitly around the proactive notion of employee engagement. “Having a ‘good relationship’ with employees or a workplace that satisfies them doesn’t really help us in today’s business market” with such competitors as FedEx, another highly capable company with an engaged workforce. Finamore says of UPS, “We’re evolving as an organization to an engaged workforce, one that is apt to take what they do to the next level.”

Among measures he has instituted already is a program to encourage employees to suggest and spread innovations in best practices. “We take examples from our organization at all levels and try to emulate them across the company,” he said. One simple example is spreading some drivers’ practice of tapping the horn of their van when they pull up to a regular customer’s location, giving recipients advance notice that UPS is arriving at their door. This tip saves time and, therefore, money for driver and company.

Some of the changes are more subtle, such as tweaking the name of UPS’s “employee-satisfaction” survey to “employee engagement” survey and modifying about 40 percent of the questions to focus respondents on engagement. For instance, the questionnaire now asks whether UPS “demonstrates safe work practices” rather than simply asking, “Is UPS a safe place to work?”

“That may not seem dramatic,” Finamore explained, “but the subtle change of that question—where the ‘demonstrate’ aspect comes into play—tells people that the organization actually is concerned about actively demonstrating safety rather than just talking about it.”

Southwest Airlines: Relationship-Building

Southwest Airlines has led its industry in financial performance and avoided layoffs for its 40 year history, in part by institutionalizing employee engagement efforts, such as recognition programs, companywide surveys, special awards and a companywide Halloween celebration.

When it gathered about 4,000 of its employees from across the country at Coors Field in Denver late last summer, it was more than the annual party. As baggage handlers and flight attendants, accountants and mechanics took swings in the Colorado Rockies’ batting cages and mugged for the stadium’s massive scoreboard screen, they weren’t just playing around on the corporate dime. They were practicing employee engagement. At a company that has built much of its entire brand on the benefits of cultivating an enthusiastic and committed workforce, the companywide summer blowout is one way to renew that crucial tribal message and help it resonate for the rest of the year.

“We’re a culture of relationships, so bringing people together is a big part of building relationships, and it’s a big opportunity for the variety of generations we have in the workforce to be in a social environment,” explained Cheryl Hughey, director of culture services for Southwest. “We always need to boost who we are, what we do, and what it means to be living the Southwest way.”

That foundation helped when Southwest acquired AirTran Airways in 2011 and had to integrate 8,000 new employees. It was no stretch for Southwest to create its Wingmate program, under which Southwest employees volunteered to “adopt” AirTran employees via e-mail, guide them through the transition, and then meet personally with them as the merged airline’s employees moved through Southwest training at Dallas headquarters. “We avoided having that ‘takeover’ feel because of that program,” Southwest’s Hughey observed.

Audi: Culture of Trust

No luxury auto brand in the U.S. market has achieved greater relative gains in sales and market share during the period of the Great Recession than Audi. Desirable products, distinctive marketing and the overall leadership of former CEO Johan de Nysschen deserve much of the credit, but so does the early recognition by his team that Audi wasn’t going to turn around its long-term prospects in America without getting buy-in from its very disaffected dealers and employees.

In 2008, Mark Del Rosso was a general manager at Toyota, but left to become chief operating officer at Audi of America. He was stunned by several dysfunctional aspects of his new company, including vast distrust between dealers and management over sales practices and sour dealings between top Audi executives and field managers. Gradually, but forcefully, Del Rosso created a culture of trust, in part by requiring all headquarters employees to read Steven Covey’s book The Speed of Trust (Free Press, 2008).

Executives and staffers who couldn’t—or wouldn’t—engage in the new approach turned over. “Once a new culture becomes so strong, people who don’t get it will sit on the side, and then they’ll either leave—or you help them leave,” Del Rosso said. “We had some of both.”

Chrysler: Collaboration Rules

An even more surprising run at transforming a carmaker’s culture into one of engagement is being made by Chrysler. The company’s long history declares its almost permanent underdog status: always imperiled, always just getting by, always adapting and reinventing out of necessity rather than purpose.

After Fiat rescued the company from bankruptcy and a U.S.-government bailout in 2009, Fiat CEO Sergio Marchionne signaled that he intended to succeed with his new partner, rather than to manage Chrysler’s decline. With new products, new marketing, more investments in manufacturing and the creation of the American auto industry’s first true transatlantic alliance, Marchionne also committed to the creation of a genuine employee-engagement culture where there had never really been one.

Under the Fiat-Chrysler global manufacturing system, for example, there is an initiative to inculcate 10 crucial “pillars” of management that “really underlie the people side of our system now,” according to Mauro Pino, head of world-class manufacturing. “It has started out as a top-down system because without the commitment of top managers to it, we can’t apply the system and create the language necessary to encourage lower-level people to apply it.”

One goal of the new emphasis on engagement was to eliminate nonvalue-added activities in Chrysler’s manufacturing plants with the help of line workers. For example, in Chrysler’s Toledo, Ohio, plant, a woman was able to recommend ways to eliminate 30 of the 70 steps that she previously took to attach a fender to a Jeep. “If we are able to do that across a line, and then multiply this example by thousands of stations across the company, imagine how much we’re improving,” Pino said.

Georgette Borrego Dulworth joined Chrysler in 2011 as director of talent acquisition and global diversity, so she wasn’t influenced by Chrysler’s previous corporate culture. She noticed that Chrysler’s organizational structure, flattened due to the bailout, meant that “collaboration among people at all levels happens pretty often, so you have a real sense of employee engagement.”

The new corporate embrace includes dealers, also, who have sometimes been on the outs with Chrysler management. Thus, Chrysler staged an event that brought more than 100 minority-owned suppliers to a matchmaker fair with Chrysler dealers in California—an idea which sprang from an employee suggestion.

“The atmosphere in these halls is very engaged and very positive these days,” Borrego Dulworth said. “It’s a boat with a bunch of oars all moving in the same direction.”

Committing to Employee Engagement

Chrysler, Ford, Audi, Enterprise Rent-A-Car, UPS, Southwest Airlines all prove that employee engagement does matter and can make a significant difference in business productivity and operations. “It is a differentiator between mediocrity and exceptional customer experiences,” Inward’s Steinmetz declared. “It creates a sustainable workplace environment where people enjoy their work and their surroundings. People come to work eager and motivated to contribute. It all depends on leadership to have the commitment and the will to trust their people to do the right thing.”

Yash Chitre is vice president of consulting at Inward Strategic Consulting. During the last 10 years at Inward, Yash has advised in several consulting engagements and business development initiatives regarding branding, team alignment and social media.

Dale Buss is a veteran financial journalist based in Rochester Hills, Michigan. He has written about corporate culture and employee engagement for a variety of outlets, including Chief Executive, Edmunds.com and The Wall Street Journal. Dale was nominated for a Pulitzer Prize by the Journal when he reported for the newspaper.

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