Employee Engagement: A Long and Winding Road

In class, we learned about the importance of employee engagement for an organisation. Employees who are engaged and committed to their work tend to have better performance, are more innovative, take less sick absences and are less likely to quit their jobs (MacLeod, 2009). These are all very important factors for success, and impact the company’s bottom line directly in terms of productivity, costs and stability.

Since MacLeod’s report in 2009 on the importance of employee engagement and its benefits, this topic has gained much awareness and has now become an important consideration for the majority of business leaders – 70% of them believe that employee engagement is mission critical for their business (Corporate Leadership Council, 2011), and over 90% of medium to large sized organisations are planning to or are already conducting engagement surveys internally. However, for all the focus on employee engagement in recent years, employee engagement has not grown proportionally. In the U.S., less than one-third of employees were engaged in their jobs according to Gallup’s U.S. Employee Engagement monthly tracking index. Although employee engagement was at a 3-year high of 32.9% in February 2015, this number has not grown by much since 2011 when the survey began.

Globally, the percentage of engaged employees is even poorer, with a dismal 13% of employees reporting that they were being engaged at work (Gallup, 2013). This number drops even further to an alarming 9% when we look at employees surveyed in Singapore. In the figure below, we see that Gallup classifies responses into “Engaged” which refers to committed employees who are likely to make positive contributions to the organisation, “Not Engaged” which refers to employees who lack motivation and are unlikely to put in extra effort to benefit the organisation and “Actively Disengaged” which refers to employees who are unhappy and unproductive at work and may spread negativity in the workplace.

Source: Gallup Global Workplace Report 2013

What then could be the reason behind these poor performing metrics? Our class discussions have revolved around how companies can implement policies to increase employee engagement levels: leaders should make efforts to reach out to employees to listen to and get to know them, organisational culture should be aligned with employees, increase the level of autonomy given to employees, ensure the integrity of the organisation is upheld – these methods have been identified to theoretically help employees to be more committed to their work and the organisation. Yet, the increase in employee engagement has been marginal at best. Given the awareness and intent that has been generated, this speaks to problems in the implementation of these engagement measures.

According to Nita Clarke, the co-author of the employee engagement government report in 2009, a key factor in the failure in implementation comes from the fact that all too often the responsibility of increasing employee engagement in an organisation is simply passed on to human resources. Hence, engagement programmes are seldom launched beyond the paperwork stage and do not bring real improvements into the organisation. Clarke believes that employee engagement needs to occur at the manager-employee level and this is something that is overlooked by many organisations. She believes that the most effective method to increase employee engagement is to groom leaders out of current employees who exhibit the right leadership behaviours, who would then carry forward their mantra and spread it in the organisation. This however, would require leaders to groom their successors to take over their own positions, and may either lead to a conflict of interests or simply take a long time for results to show.

According to Gallup’s research, others fail at more advanced stages – despite changes to work environment such as remote work arrangements, creative benefits (snack bars come to mind) and hip office spaces, they fail to increase engagement meaningfully. Instead of these superficial changes, they point to seven key elements identified in companies with the best employee engagement scores that help to deepen employee ties to their managers and organisations:

1. Have involved and curious leaders who want to improve.
2. Have cracking HR functions.
3. Ensure the basic engagement requirements are met before expecting an inspiring mission to matter.
4. Never use a downturn as an excuse.
5. Trust, hold accountable, and relentlessly support their managers and teams.
6. Have a straightforward and decisive approach to performance management.
7. Do not pursue engagement for its own sake.
(Harvard Business Review, 2014)

Unfortunately, it seems that there is no shortcut and overnight solution to building a committed, motivated and thoroughly engaged workforce. Despite the substantial benefits that are so obvious to the organisation, reaping it takes a lot of hard work, time, commitment and change in entrenched mindsets.

References

MacLeod, D., & Clarke, N. (2009) Engaging for Success: enhancing performance through employee engagement. A Report to Government. London, Department for Business, Innovation and Skills.

Corporate Leadership Council (2011) Essay: Building Capital Engagement, 2011. Retrieved from http://www.executiveboard.com/exbd-resources/pdf/human-resources/corporate-leadership-council/building-engagement-capital.pdf

Adkins, A. (2015, March 9). U.S. Employee Engagement Reaches Three-Year High. Retrieved April 3, 2015.

Gallup (2013) State of the Global Workplace. Retrieved from http://ihrim.org/Pubonline/Wire/Dec13/GlobalWorkplaceReport_2013.pdf.

Uttley, H. (2014, June 19). London HR Connection: Why employee engagement programmes ‘suck’. Workplace Savings and Benefits. Retrieved April 3, 2015.

Flade, P., Harter, J., & Asplund, J. (2014, April 1). Seven Things Great Employers Do (that Others Don’t). Harvard Business Review. Retrieved April 3, 2015.

Extrinsic Motivation: How does it affect ambitious individuals?

As I watched Dan Pink’s TED talk on ‘The Puzzle of Motivation’, I was extremely struck by the idea that excessive monetary incentives can have the exact opposite effect on productivity that it is trying to achieve – in particular relating to tasks that require more complex and creative thinking. In traditional corporate governance literature, it says in no uncertain terms: align your managers with the company’s goals – incentivize them with pay rises, bonuses and stock options to boost productivity. The notion that this concept is wrong is something that is truly intriguing.

Pink offers that this is a robustly tested finding, yet so often ignored. Businesses are doing the exact opposite of what is predicted by using incentives as the primary motivator of work in so many cases. When we think about the upper management of a company, their responsibilities are exactly what Pink refers to as tasks that require motivation other than monetary rewards. By its very nature, corporate strategy is uncertain as it deals with the future, and hence the work of top executives are so often unstructured and complex. Yet, these are the very same people who are the most greatly incentivized – the highest paid CEO in the United States last year was Charif Souki of Cheniere Energy Inc., with a total remuneration package of $142 million! Out of this, $133 million came in the form of long-term stock awards (i.e. extrinsic motivators). To be fair, he earned this (well, the amount is perhaps debatable..) by leading the company to outperform the S&P 500 Index five-fold during the past financial year.

Yet, when we think about the types of people who are in these top end positions, one character trait that most likely all of them share is ambition. Using Judge & Kammeyer-Mueller’s definition of ambition as the persistent striving for success and accomplishment and focused on extrinsic rewards as motivation, one potential source of conflict comes to mind. For these extrinsically-motivated top executives, how can we reconcile Pink’s assertions that we should do away with if-then focused incentives which he claims destroy creativity? Is there any way to make them more intrinsically motivated, and give them simply a hygienic level of monetary reward? One far-fetched but potential course of action is to remove these incentives completely and allow those unmotivated by extrinsic rewards to rise to the top. In that case however, it becomes apparent that the pool of suitable candidates shrinks massively. When looking for the best talent to lead an organization, excluding a huge proportion of candidates seems like a counter-productive solution.

According to Ledford, Gerhard & Fang in their paper entitled ‘Negative Effects of Extrinsic Rewards on Intrinsic Motivation: More Smoke Than Fire’, focusing solely on intrinsic motivation is not a viable or practical strategy for corporations. They argue that contrary to what Pink asserts to be a well-documented phenomenon that extrinsic reward lowers or even ‘extinguishes intrinsic motivation’ and hence ‘diminish performance’, the relationship between extrinsic and intrinsic motivation is not so clear. The authors outline the major theories concerning the effects of extrinsic rewards on intrinsic motivation in the table below:

The study uses a review of reviews approach of over 100 studies on intrinsic vs extrinsic motivation to look for overall consensus and came up with the following 5 conclusions:

  1. Motivation is a sum of extrinsic and intrinsic motivation and it is clear that extrinsic rewards can be used as a means of increasing productivity
  2. It is possible for extrinsic rewards to result in increased and decreased intrinsic motivation, but are based on specific situations and should not be stated generally
  3. Rewards have no detrimental effect on routine work as these tasks have little to no intrinsic motivation to begin with (this agrees with Pink’s assertions)
  4. Certain types of rewards such as praise significantly increase intrinsic motivation, but rewards that do not reward competence have more neutral effects
  5. Rewards that are simply given tend to reduce intrinsic motivation – interestingly, this suggests that paying a salary is counter-productive to efficiency, but practical use of this information is limited as most jobs will never be filled without a salary

With that in mind, we note that the bonuses put in place for CEOs generally align with the overall literature on extrinsic and intrinsic motivations. Furthermore, extrinsic motivation has does not have a uniform effect on people. Especially for people who are driven by ambition, extrinsic rewards not only provide strong motivation to succeed, but also help to increase intrinsic motivation if they are well-designed and tied to the successes of the individual.

References:

Ledford, G. E., Gerhart, B., & Fang, M. (2013). Negative effects of extrinsic rewards on intrinsic motivation: More smoke than fire.

L. Marcinek, C. Melby & Z. Shauk, 30 April 2014. ‘Top-Paid U.S. CEO Emerges With $142 Million Pay Package’ Bloomberg.
<http://www.bloomberg.com/news/articles/2014-04-29/cheniere-s-souki-becomes-top-paid-ceo-with-142-million>