Book review – We: How to Increase Performance and Profits Through Full Engagement

Rudy Karsan and Kevin Kruse’s book is pragmatic and of use to anyone looking to improve employee engagement. The book is organised into four parts. The first two deal with the individual and I will get my objections to them out of the way before discussing the gems to be found in parts three and four.

In parts one and two the focus on the individual is understandable – as engagement happens from heart to heart. We know that globally, the rates of disengagement are too high and too many people are disconnected from their work. I also accept that people will feel more fulfilled if they find meaning and purpose in their work – but after reading the first few chapters I was left with an impression that we are Homo economicus – we are one dimensional and our primary function is our work. Through our work we will find fulfilment and happiness. But it feels like a rationale to get people to work harder.

As a New Zealander one bad habit my fellow Kiwis share with the people of the United States (the home of the authors) is that we work long hours – we work too hard. Work-life balance is seriously out of balance. In this context I get concerned when I encounter an evangelistic approach towards the virtue and necessity of hard work.

The positives

Having got that out of the way, this book has many gems. The authors have obviously rolled their sleeves up and got involved with engagement processes. They share the three questions they use to gauge engagement (you will find them in the book). I am a fan of short and open survey questions and intend to incorporate these into my work.

The authors make a beautiful distinction: harmonisation = engagement + alignment.

Engagement is the catalyst to get you to that extra edge in performance, while alignment ensures everyone is heading in the same direction. (page 145)

They raise the bar for us here. Some organisations struggle to get to the point of surveying staff about engagement. They may or may not do anything with the information gleaned. To ensure the material issues blocking greater engagement are addressed, and then to go on to align people across the various structural and ideological barriers in an organisation is a worthy aspiration.

Another concept that resonates with me is their management prescription, embodied in chapter eight – “great managers focus on growth, recognition and trust”. This chapter atones for the issues outlined earlier. The authors prefer valuing employees to recognising employees. To survey your employees, survey them to see to what extent they agree with the statement “I feel valued as an employee of this company.” They prefer it to “I receive recognition when I do good work”.

Valuing is about appreciating the worth of something (someone) and of esteeming something (someone) highly. When we value employees, we appreciate them for who they are and what they bring to the organization. We acknowledge them not merely for tasks, but to the deeper intrinsic worth they add to the organization by just being there. (page 177)

When authors apply concepts about qualities of character, such as trust and trustworthiness, they reveal to me a deeper understanding of the human condition than encountered in many business books. Rudy Karsan and Kevin Kruse highlight trust as an important driver of employee engagement. To understand this better they suggest questions such as: “How can our leadership team foster greater trust among employees?” The three qualities that inspire trust are competence, caring and commitment.

It is hard to find books that focus on engagement – so this one is well worth the purchase price. If you know of others you would recommend, please comment.

We: How to Increase Performance and Profits Through Full Engagement by Rudy Karsan and Kevin Kruse (2011) New Jersey: John Wiley

website: www.wethebook.com

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Learning as a foundation for engagement, part 3: Tools

Earlier posts in this series introduced organisational learning and explored why the practice hasn’t had much traction in organisations. This post offers tools for learning processes.

1. Suggestion box blog

In this cartoon by Harvey Schwadron – an employee outside the boss’s office drops a suggestion into the suggestion box. Unfortunately, the suggestion box has no bottom and the suggestion falls into the resignation box directly underneath it. In organisations that don’t learn well, suggestions are ignored or, worse, those offering them are treated as troublemakers. Try a suggestion box blog – the blog administrator can receive suggestions and publish them, or enable the person making the suggestion to post directly. If there is an open culture, the blog can be open so others can comment. Responses or contributions from the company’s leader will add to its credibility.

2. After action review

Richard Pascale describes the after action review (AAR) in a HBR article Changing the Way We Change. The practice emerged in the US military and is used after military action or exercises to enable learning. Suspending rank is the key feature of the AAR as it encourages participants to review events in order to learn. The process is based around four questions that can be adapted to any organisation and is especially useful on completion of events or projects.

  • What did we set out to do?
  • What actually happened?
  • Why was there a difference?
  • What activities do we sustain and what activities do we improve?

3. Stupid hour

Learning doesn’t come easy when we take ourselves too seriously, or we are driven by the need to look good. Dorothy Marcic, in her ground-breaking book Managing with the Wisdom of Love, advocates a ”stupid hour” where staff get together, perhaps at the end of the week and ask “what are we doing that is really stupid?”

4. Lean thinking

Lean thinking, modelled on Toyota’s processes, provides scaffolding for learning by creating multifunctional teams to surface opportunities for improvements (OFIs). Here is more detail from a post by Alex Twigg.

5. Incentives

Some years ago Portland Cement near Whangarei changed their remuneration system from an over-time based system to a total remuneration system. Overtime hours were annualised and employees were expected to work up to 51 hours for their annualised salary, but could go home if they finished the work. This changed employee behaviour – under the overtime system, they would welcome breakdowns, as they would have to work longer, and therefore make more money. But under the annualised system, they were incentivised to work more smartly. As an example, loader tyres used to be frequently damaged by limestone rock. Employees wanting to get home quicker, welded wings onto the loader buckets to clear rocks away from the tyres. The employees got to go home earlier and the company saved money. Annualisation effectively opened up avenues for learning.

6. Appreciation

Appreciation is arguably the noblest form of communication. Too often, workplace communication focuses on fault-finding – concentrating on what is wrong, rather than what is right. When people are frequently criticised, over time they cease any meaningful communication with those who are criticising. This creates the antithesis of learning. In an environment of appreciation, people feel safe to make suggestions. Here is a link to an earlier post that elaborates on appreciation.

the communication spectrum

7. Undercover boss

The TV show Undercover Boss features businesses in the U.K., the U.S. and Australia. Across diverse businesses in these three settings, a consistent experience emerges – when the “boss” gets to know the people on the front line, they typically learn to appreciate what the workers do and return to their C.E. role much better for the experience. The C.E.s often enact employee suggestions, or include the employee in a project team. Here is Directv’s C.E. Mike White, talking about his undercover boss experience.

8. Learning from customers with social media

When I wrote this post about social media in February, this year, Stabucks Facebook page had almost 20 million likes. Now, 11 months later it has more than 26 million. Not all will provide useful insights for Starbucks, but any complaints can be quickly identified. Twitter serves the same purpose.

9. Values for learning

As with any other sustainable development in businesses and communities, better learning processes are underpinned by enabling values. Values that align well with learning include openness, honesty, integrity and appreciation. They are also the antidotes for defensiveness. You can probably think of others.

Do you consider your organisation is skilled at organisational learning?

Leadership for our fragile oasis

Last week the NASA astronaut Ron Garan, and the great Muhammad Yunus addressed the Global Social Business Summit. They conveyed a similar message, but from totally different perspectives. Ron Garan is one of those elite who have seen the planet from the outside, and as with several of his peers, the experience had a transformational impact. They see things from a new perspective – the “orbital perspective”. Svetlana Savitskaya, the first woman to walk in space expressed it this way:

When in orbit, one thinks of the whole of the earth rather than one’s country, as one’s home.

At the conclusion of his talk, Ron Garan presented a spectacular video of the return to earth of his spacecraft, Soyez TMA-21 in September this year. Here is a short segment from YouTube. (The music is Peter Gabriel’s Down to Earth).

Soyez TMA-21 re-entry 

Muhummad Yunus connected back to Ron’s talk beautifully stating how it is an “unfortunate thing that we can’t keep this home as a home for a happy family”. He then spoke about the worm’s eye perspective. When he returned to Bangladesh from study in the United States, his country was experiencing warfare and famine. He found his economic theories hollow and impotent in the face of human tragedy. When he went to the neighbouring village he learned about life from the ground level – the worm’s eye view. Here he is explaining the concept.

The bigger you grow – the more distant you get away from the ground level.

Muhammad Yunus’s strength is his ability to operate from both perspectives.

Following Ron Garan’s space experiences he has dedicated his efforts to improving life back here on earth. He is a member of Engineers Without Borders, the founder of both the Manna Energy Foundation and Fragile Oasis.

Although Ron Garan adopted the posture of a student before the master (Muhammad Yunus), both men epitomise the quality of leadership required for our “fragile oasis”.

The higher ambition leader

On reading Harvard Business Review’s September 2011 article, The Higher Ambition Leader, I am struck with the parallels to the concepts championed by Muhammad Yunus and Ron Garan. The article extols the leadership by CEOs of companies such as Standard Chartered, an international bank. The bank’s vision is to be “the world’s best international bank” by “combining global reach with deep local knowledge to become the ‘right partner’ for its customers”.

The article is centred on studies of three companies whose CEOs manifest higher ambition:

to create long-term economic value, generate wider benefits for society, and build robust social capital within their organizations all at once.

These lofty ideals are achieved through creating powerful strategic visions, world class levels of engagement and a constant leadership focus on achieving the strategy.

The link to engagement

The examples of Ron Garan and Muhammad Yunus, alongside the three companies featured in the HBR article illustrate the importance of engagement. Campbell Soup’s CEO “relentlessly drove progress on two measures: total shareholder returns and the level of employee engagement”. Employee engagement levels at Campbell Soup exceeded Gallup’s benchmark of 10:1 for world-class engagement. By 2010 the company achieved “a ratio of 17 engaged employees for every actively disengaged one”. Is it a coincidence that, for the six years up to 2010 Campbell Soup achieved a cumulative total shareholder return of 64% (S&P packaged food index return is 38% and the S&P 500 return is 13%)? I don’t think so.

The leadership described here is becoming the default standard of leadership. We need leaders with both the worm’s eye view and the orbital perspective – those who can focus on the needs of their communities and companies, while also committing to sustaining our fragile oasis and its communities.

Stakeholder engagement pays – indirect benefits

With the new year looming, smart companies are considering their development options for the coming year. The smartest will be looking to further develop their engagement capacity. In an earlier post, we looked at the direct benefits of engagement. Here is a sample of some of the indirect benefits of engagement for each of the main stakeholder groups.

I emphasise that this is just a sample of the increasing evidence of the efficacy of stakeholder engagement. These indirect benefits are those that aren’t immediately visible in the bottom line, but over time provide tangible benefits for the organisation and its stakeholders.

Indirect benefits – financiers

The seismic financial shocks that rocked the world in the latter years of the first decade of this century have been devastating for financiers. And it looks like they will continue for some time. According to the Daily Mail, in a week in August 2011, three trillion dollars was wiped off the value of global sharemarkets.

While engagement itself, will not remedy the volatility of investments, it has huge potential to soften future impacts – if you factor in the ethos underpinning engagement. For example, the U.S., banks that gorged on cheap finance, distributed it with insufficient due diligence and then on-sold them to other banks. Banks with an engagement ethos would balance their profit motive with the interests of all stakeholders. Our recent experience demonstrates how a singular focus on profit creates a series of compounding negative consequences.

New McMansions are demolished in Victorville, CA earlier this year to free the city from liability resulting from possible vandalism, crime and fire danger. (LA Times photo)from Sprawled Out.

Indirect benefits – employees

Rudy Karsen and Kevin Kruse’s book We, reveals strong links between effective employee engagement and benefits to employee health and family life. They cite a study from Iowa that found that job stresses on one partner in a relationship creates a similar level of stress for their spouse. Similar effects were found for children. The British medical journal found that dissatisfied workers were 2.4 times more likely to die from a cardiac event.

Indirect benefits – customers

The most obvious benefit from customer engagement is that engaged front line staff generate better ambiance and customer experience. And brand loyalty is built through engagement. According to Tom Peters, women don’t just buy brands, they join them. If a company is able to facilitate connections between female consumers it also connects them to the brand.  Tom claims that women tend to be more relational in their purchasing, and he stresses that the purchasing power of women continues to climb.

Indirect benefits – suppliers

Over the last few decades, the attention of consumers and NGOs has shone light into the dark places of the global supply chain, often revealing shocking abuses. Engagement has enabled consumers to learn more about the conditions people suffer when growing, harvesting or extracting resources and processing them for wealthier markets. Initiatives such as Fair Trade and Sustainability Standards have generated huge benefits for disadvantaged communities. Participating companies benefit from enhanced reputation. Technology such as the Internet and satellites makes it difficult to hide. Satellite images revealed the true extent of the gulf oil spill, debunking the claims of those who sought to minimise it.

Indirect benefits – community

All of the above impacts on the community.

Pepsico have recently partnered with USAID, the United Nations Food Programme and 10,000 Ethiopian farmers to grow chickpeas. They will be used for food supplements for the starving, for the local Ethiopian market and for Pepsico’s humus. Multiple community benefits will accrue. For example, the health of Pepsico’s range of brands will be improved with the greater use of chickpeas. This aligns with another initiative from the company to reduce levels of saturated fat, sugar and sodium in their food. There are anticipated flow on effects to the health of consumers.

I welcome any comments about indirect benefits of engagement that you have encountered.

Stakeholder engagement pays – a silver bullet?

Effective stakeholder engagement contributes both directly and indirectly to the bottom line. This post provides a sample of some proven benefits of stakeholder engagement for the major stakeholder groups. What is exciting, is that the generic communication skills at the heart of engagement are effective in diverse stakeholder settings. Surely engagement capability has to be a top priority for organisational development.

Some of the examples here have been in other posts – they are assembled here to demonstrate the multiple benefits of stakeholder engagement.

Financiers

Companies with better CSR performance “face significantly lower capital constraints”. Beiting Cheng, Ioannis Ioannou and George Serafin’s research, Corporate Social Responsibility and Access to Finance, confirms their hypothesis that:

…better access to finance can be attributed to reduced agency costs, due to enhanced stakeholder engagement through CSR and reduced informational asymmetries, due to increased transparency through non-financial reporting.

Employees

An impressive array of research and anecdotal reporting evidences the vital importance of effective employee engagement. Here are a couple of examples:

  • David McLeod, in a report to the British government in 2008 estimated the cost to the UK economy of their low levels of engagement to be between £59 and £65 billion pounds.
  • Recent Gallup research identified a high correlation between effective engagement and high earnings per share (eps). Companies with “exceptional employee engagement” achieved eps more than four times that of their industry competitors.

By engaging employers, companies are engaging their engagers.

Customers

Gallup also provide impressive figures for those companies that engage effectively with customers.

Our studies reveal that customers who are fully engaged represent an average 23% premium in terms of share of wallet, profitability, revenue, and relationship growth than the average customer. Actively disengaged customers represent a 13% discount in those same measures.

Suppliers

This video from Walmart reveals efficiencies generated by the partnership between the company and Peterbilt, who supply trucks. The partnership is helping Walmart to achieve its target of a 100% increase in transport efficiency by 2015 from a 2005 baseline.

While I can’t support this anecdotal evidence with figures, the director of a local company attributes an effective relationship with suppliers with the survival of his company. When the company was experiencing difficulties, several suppliers extended credit to help the company through.

Community

Witold Henisz led a major Wharton School research project delivering evidence of the financial benefits of effective stakeholder engagement in gold mines in Spinning Gold: The Financial Returns to External Stakeholder Engagement. The research team studied the impact of stakeholder engagement on the financial performance of gold mines and gold mining companies. They created an index based on 50,000 stakeholder events from the activity of 26 gold mines.

By incorporating this index in a market capitalization analysis, we reduce the discount placed by financial markets on the net present value of the gold controlled by these firms from 72 to between 33 and 12 percent.

Increased productivity of the effective engagers where able to start mining earlier than poor engagers. You can read more about this here.

This is just a sample of the increasing evidence of the efficacy of stakeholder engagement. Please add any others as a comment.

Engagement and change: part 2 – lean thinking

This post by guest blogger Alex Twigg is the second part of a two-part post.

Much of the change in workplaces over the last few decades has been predicated on notions of economic efficiency and have been known variously as “downsizing”, “rightsizing”, “outsourcing” and more recently as “mergers and acquisitions” – and as the Kotter and McKinsey studies mentioned in part one shows – not much of it successful. In the February / March edition of the Harvard Business Review, an article on mergers and acquisitions quotes the following – “Companies spend more than $2 trillion on acquisitions every year, yet the M&A failure rate is between 70% and 90%.”

By contrast, an alternative model of change – one that is intrinsically engaging of employees, that is about “learning to do things with others” is a workplace transformation process known as Lean Thinking – a western lens on the Toyota Production System.

The ‘lean” or “less” of Lean Thinking is often misunderstood. It is not about cost cutting (the old traditional focus of change) and it is certainly not about retrenching – i.e. less staff. Rather Lean Thinking is based on two values: continuous improvement and respect for people. The system of “lean thinking” is the mutual reinforcing of these twin values through a structured process of principles and actions – that in its essence is fundamentally engaging of employees.

Reducing waste

Lean Thinking is not premised on the assumptions of “economies of scale” and its twin “resource optimisation” – the assumptions that shape traditional approaches to organisational change. Rather it focuses on a notion called “flow” and the removal of waste. It is primarily focussed on process efficiency rather than economic efficiency.

The traditional approaches to change and Lean Thinking depend on very different primary sources of data to inform change. In the former the data derives from an abstraction of the productive process – namely the organisation’s statements of account. The primary question in this approach is “how do we make the economic equation of this organisation work?” This is the question that has shaped all the “”downsizing” “rightsizing and “mergers and acquisitions” activity of the past. In “lean” the primary source of data for change is from the organisation’s productive processes themselves – through the identification and removal of waste to answer the primary question of “how do we make value flow?”

Lean Thinking identifies 7 forms of waste, namely motion, waiting, transportation, storage, defect waste, over producing and excessive processing. Space precludes a discussion of each of them me so for present purposes a description of the first will have to suffice as a sense of the thinking behind waste generally.

Motion waste consists of all unnecessary movement and searching. Searching is the biggest form of motion waste – searching for information, looking for the correct person, tool or document. It is estimated that between 20 – 50% of time in a physical workplace is spent looking for people, tools, specifications, patient information … and in an office environment, some 15% of our time is spent looking for information that is within an arm’s length! In addition to searching, motion waste includes all unnecessary bending, lifting, reaching and walking. 

To systematically remove waste from an organisation’s processes requires the active involvement of the employees who are uniquely positioned to see the waste. Managers cannot see deep enough into the processes to really identify the waste that the employees see and experience daily.

This creates a dilemma for organisations – managers have the authority to effect change but not the complete awareness required on which to base this change; and employees by contrast have the awareness but not the authority.

The employee engagement strategy to Lean Thinking is to structure a process that seeks to resolve this dilemma. It requires 2 guarantees to give it meaning – one procedural, namely participation by all in identifying waste – the other substantive – no redundancies as a result of lean initiatives. The former is essential to identify and remove waste. And the latter is required otherwise employees won’t participate. Clearly no-one will participate in identifying waste if their jobs are put on the line as a result – and flow cannot be improved if employees do not participate in identifying waste.

The central component of a change process premised on employee engagement is a closed loop feedback system for responding to and implementing employee generated suggestions for improvement based on identifying and reducing waste. This is nothing like the good old suggestion box though on the surface it may appear similar.

This system is built on a structured process of organisational learning that teaches the organisation the following:

  • value stream mapping skills that allows everyone to see the organisation’s current end to end process to providing its services or manufacturing its goods, as well as imagine an improved future state. This creates a framework for employees to think about and identify the effects of waste that they experience everyday at work.
  • root cause analysis skills that allows everyone to identify the causes behind the effects of waste that they experience everyday at work as frustrations, irritations, inefficiencies etc.
  • developing the systems and processes – the architecture if you will – of this transparent, closed loop system that allows people to see that the individual opportunities for improvement they have raised have been captured, and how and who is able to participate in addressing them.

Removing waste reduces lead time enabling more resources to be
dedicated to adding value

When this process is introduced in workplaces it results in literally hundreds of employee identified “Opportunities for Improvement” or OFIs.

If one is looking for a measure of employee engagement, how good is this one? Surely this is a direct expression of an employee’s commitment to an organisation? And very importantly it is a measure that arises directly from every employees work – i.e. their involvement in the organisation’s processes rather than arising indirectly – i.e. from something external to their everyday work – like completing a survey that creates a new bureaucratic structure that adds little or nothing to either the flow of goods and services through an organisation or the flow of problem solving in the organisation.

Lean thinking is an example of the sort of workplace improvement strategy that the Department of Labour is supporting through its High Performance Working Initiative.  You can find out more about this at www.dol.govt.nz/er/bestpractice/hpwi/index.asp

Guest blogger: Alex Twigg

Alex Twigg presented at the recent HRINZ National Conference in 2011. He has extensive experience in employment relations (ER) in a variety of roles including mediation, arbitration, advocacy, facilitator and process consultant. Over the last four years he shifted from operational to strategic ER – focusing on the link between people, process and organisational performance.

Alexander is currently employed by the Department of Labour’s Partnership Resource Centre.  He works with unionised workplaces helping the parties improve their workplace relationships and then help them put those relationships to work using frameworks such as ‘Lean Thinking’ to help both parties achieve their mutual and separate interests.

Employee engagement and change – part one

When thinking about employee engagement I am struck by the how similar the employee engagement scores are from around the English speaking world. The results are all similarly low – around the 25 – 30 % mark. And it seems little really changes year after year.

The costs of low engagement and ineffective change management

David McLeod, in a report to the British government in 2008 estimated the cost to the UK economy of their low levels of engagement to be between £59 and £65 billion pounds. But low levels of engagement not only have an economic cost; it also deprives employees an opportunity to find meaning, dignity and community in work. This is the social cost; as yet unmeasured but equally important and perhaps even larger than the economic cost.

But these costs say nothing about the cause or the solution to these perennially low levels of employee engagement. I believe the cause of the problem is hinted at by another well known workplace statistic. Many will be familiar with John Kotter’s research findings in 1996 that 70% of organisational change fails to achieve its objective. Fewer might be familiar with McKinsey & Co’s study in 2008. It showed little improvement over the 12 years between the 2 pieces of research notwithstanding the focus change management skills and practice has received over this period.

What’s going on here? Is there something about the way we effect organisational change that inhibits or undermines employee engagement? If we shift our focus from trying to change employee engagement scores to changing the way we effect organisational change might we improve both?

I think that if we want to see employee engagement scores increase we need to turn our attention to focussing on an approach to managing change that is intrinsically engaging of employees.  In short I think we need to change the way we think about and give effect to organisational change.

Effective change

So what’s wrong with the traditional approach and what does an alternative model of change look like? We seem to be currently addicted to an approach to change that is predicated on notions of expert knowledge and its association with management control, what Marvin Weisbord calls “learning to do things to or for others” as opposed to “learning to do things with others”.

The traditional model of change is typically one of a few people, mostly managers (at times working with consultants), who generate change proposals and consult with employees affected by the proposal. A common feature of this sort of change is the short period of time employees and their representatives are given to comment on the proposals relative to the time taken by managers and their representatives, to develop the proposals. If the adage Kathleen Dannemiller and her colleagues articulate in their thinking about workplace change is correct – namely that “we commit to the things we help to create” is true –then its little wonder that our levels of employee engagement – a measure of our employees commitment to their organisation, is so low.

This article was first published in the August/September issue of the Human Resources magazine. Part two explores practical means of improving engagement and adaptive capacity for change.

Guest blogger: Alex Twigg

Alex Twigg presented at the recent HRINZ National Conference in 2011. He has extensive experience in employment relations (ER) in a variety of roles including mediation, arbitration, advocacy, facilitator and process consultant. Over the last four years he shifted from operational to strategic ER – focusing on the link between people, process and organisational performance.

Alexander is currently employed by the Department of Labour’s Partnership Resource Centre.  He works with unionised workplaces helping the parties improve their workplace relationships and then help them put those relationships to work using frameworks such as ‘Lean Thinking’ to help both parties achieve their mutual and separate interests.