Looking for one transformational idea for Employee Engagement in 2016? kfit: the Employee Health and Wellness platform from Kwench might be just what you are looking for!
I have always dreaded the last week of December. Christmas and New Year get-together and cake eating binges aside, there is always the dreaded mental review of another year gone by.
Ever since I landed up on the wrong side of 30, “Loose Weight” and “Exercise Regularly” have been on top or near top of my New Year Resolutions list and are always the items with a red cross against them in my year-end review. And somewhere along the year I would have inevitably invested in exercise gear that cost way more than I could afford, gym memberships that cost even more than the above mentioned exercise gear, and last year even a high-end water-proof watch – you know, for when I do the 25 laps in the pool. Several consecutive years of this pattern, and tens of thousands of Rupees later – I was fed up.
So I did what was seemed most obvious thing to do – I headed to the café and discussed my problem with others! (With a large latte and a chocolate donut on the side). Now what is interesting is that the story seemed to be pretty common across people I talked to. With all the stresses of just barely balancing daily work and family life, exercise and diet more often than not takes a back seat. Even drinking adequate amounts of water can be a challenge and the sugar in all the cups of coffee reflects pretty quickly on the waistline – if not worse! My colleagues at Kwench pretty much confirmed the challenges and so did a lot of our friends, family and even clients to whom we posed the question.
There is no doubt about it. The more we asked around the more it seemed that India Inc. has a serious health problem. We dug around for some data and this is what we found.
Well that’s just one part of the problem. You see from an organizational perspective, there is a lot at stake when the wellbeing of its workforce is not quite up to the mark. Loss of productivity due to more sick days, absenteeism and worse presenteeism.
If there is so much at stake for both the employee and the employer, why don’t Workplace Wellness programs work? Research on enterprise wellness programs by Guidespark reveals the top reasons why these programs don’t achieve the required results. While ~70% of employees feel that wellness is important, less than 10% actually take full advantage of such programs. Employees don’t participate or the end results are not as expected because they are too busy with work, the programs don’t suit their lifestyle or that they are not fully aware of what is on offer. Almost half of them felt that their biggest wellness challenge was insufficient activity followed by stress and poor nutrition.
Clearly any wellness initiative that hopes to succeed in the workplace must have a solution to all if not most of these issues.
One of the really cool things of working at Kwench is that problems are not left unattended for too long. Anything that touches on Employee Engagement obviously piques our interest. And if we think we can use technology to fix that problem them it excites us to no end.
We took the problem, pondered over it, did our homework, drew the sketches, put the engineers and designers into one big room to do their magic and created kfit – a comprehensive employee health and wellness platform that leverages the magic of social, gamification and mobility to help companies raise the health quotient of their workforce. kfit uses micro interventions coupled with technology to bring about positive and long lasting behavioral change.
Excited? We sure hope so, because we are very excited about the possibilities this platform holds in transforming the health and wellness landscape of Corporate India.
If you are looking for one BIG idea for your Employee Engagement program for 2016, then look no further.
If you want us to get in touch and explain more about how kfit can help transform your company’s wellness, please send us an enquiry.
The Architect – Precisely. As you are undoubtedly gathering, the anomaly is systemic, creating fluctuations in even the most simplistic equations.
Neo – Choice. The problem is choice. (Matrix Reloaded, 2003)
On this blog and in quite a few conversations, I have pointed out the risks of overtly relying on cohorts or grouping of employees to formulate an employee engagement strategy. Using segments and cohorts to understand broad behavior and drivers of engagement is okay, but trying to engage the individual based only on those conclusions is not the best approach.
As ‘Neo’ puts it in the movie Matrix Reloaded , the ‘problem’ is Choice or to be more accurate, in this case – individuality. Every employee is an individual with her own priorities, preferences, fears and responsibilities.
Work, forms an important part of an employees life – and the emphasis I place is on ‘part’ and not on ‘important’ because that aspect is the one that often gets missed out when employee engagement strategies or initiatives are designed. As an individual with family, friends, interests, hobbies, ambitions and aspirations – responsibilities at work represent just a fraction of the things that matter to the employee.
There are a bunch of things that are important to the employee (health, financial well being, spending time with family, a social life, learning new things, new experiences) and there are things are important to the organization (employee well being, profits, playing an important role in the society, innovation).
When an employee is at work, he is operating in the intersection of these two spheres – there are things that matter to him which align with what matters to the organization. When this overlap is driven by the correct factors (alignment on the larger picture, the direction the company is taking, quality of work, the work culture etc.), there is a zone of alignment that is sustaining (and empowering).
When what matters to the organization (as perceived by the employee) starts to drift away from what matters to the employee as an individual, this overlap reduces, the zone of alignment starts to shrink and becomes unsustainable. This is when disillusionment sets in eventually leading to Disengagement if corrective measures are not taken.
Too much of something:
The logical question that follows is what when there is perfect alignment – shouldn’t that be the ideal state? To borrow (somewhat incorrectly) from that age-old adage, “Too much of anything isn’t good for you”
A situation where an individual is completely (and only) aligned with what matters for the organization makes him dysfunctional in other things that should matter to him. If the last line reminds you of the uptight, always-on-the-edge, hard driving, ranting and screaming executive, you are bang-on.
The other (unintended) consequence of such a situation is that individual then subsumes his discretion to what seems best for the organization. Being too focused on one aspect inevitably leads to a myopic vision of what is correct. It is the healthy balance of all aspects in ones life that helps drive a balanced approach towards challenges – both personal and at work.
A ‘super-mom’ I know uses negotiation skills learnt at work with her 1-year-old infant (works most of the time) and then takes the lessons learnt from handling the concerns of parents, her husband, siblings back to work to engage with her multi-generational team. Imagine what would happen if she tried a time-sheet driven approach with her infant or never took time out to spend time with her parents or spouse but focused only fixing “issues” at work (of which there never seems to be any dearth).
The Time Element:
Unlike organizations, what ‘matters’ to an individual is in a state of flux. I am not talking of value systems, or ambitions – those are (hopefully) rather fixed. I am referring to the drivers of what is a priority. Companies and Institutions have stated goals at time of creation and (usually) those drive everything they do. People on the other hand have changing preferences and changing events and these affect the overlap and consequently the alignment they have with the organization.
If the organization stays rigid on how it interacts with the employee, then the extent of alignment is bound to change. Again an increased degree of alignment is not necessarily a good thing.
A few years ago I got chatting with a senior executive at a party. He was really good what he did, and totally disengaged. He was so efficient at what he did that the organization was reluctant to consider what his own personal aspirations were and had kept him doing the same thing for years on end. “The Gap of Disengagement” was very clear and he was looking to quit because he realized that by staying on he was damaging himself and the organization through his disengagement. I ran into him two years later in a busy airport and was surprised that he was still with the same organization in the same role. When I quizzed him, he confessed that he was still disillusioned but a personal crisis had made it impossible for him to look for other possibilities. His efficiency gave him more time at home and so he compromised his ambitions to stay on with his employer. The executive’s alignment with his employer had increased, but it was driven purely by convenience.
Smart organizations would avoid this situation by being aware of various dimensions of what drives each employee. DIY Pulse surveys are a good way; Managers who listen to their team members and do something about their concerns are even better.
A static employee engagement program is not enough neither is a “one-size-fits-all” approach. Like ‘generically designed’ antibiotics can have unexpected nasty side-effects in patients, employee engagement strategies designed for ‘masses’, ‘cohorts’ or ‘segments’ can induce the reverse effect. The pharmaceutical industry has woken up to the importance of pharmacogenomics to counter the ill effects of ‘universal-design’ for medicines – its time for HR professionals to follow suit.
Post title inspired by the Twilight Zone series (1958)
Every hour and every day I’m learning more/The more I learn, the less I know about before/The less I know, the more I want to look around/Digging deep for clues on higher ground (Higher Ground, UB40)
In my post yesterday I talked about the ABC Drivers of Intrinsic Motivation. (Achievement, Belief and Camaraderie). A sense of achievement is something you derive by, among other things, being in the job/role that is right for you and then being very good at it.
The 2×2 grid (yes, blame it on the B-school stint) below shows how where you lie on the Role-Relevance and Role-Competency axes will determine your sense of achievement.
Relevance:Low, Competence:Low – Disengaged Employee: If an employee is in the third quadrant i.e he is placed in a role that he doesn’t like and also does not have the skills to perform then he is effectively being setup for failure and will be highly disengaged as he has little motivation to do a good job. If an employee finds himself in this situation then it is a failure of the organization and specially his immediate supervisors more than his own.
Relevance:Low, Competence:High – Efficient Employee: If an employee finds that he has a role that he doesn’t like but is good at then he is efficient at his job but is not engaged. He will do assigned tasks well and deliver on time, but will not be motivated to put in discretionary effort. Good managers can make a difference by listening and understanding what truly motivates their team members and finding a way to move them from Q1 to Q2 or Q3
Relevance:High, Competence:Low – Motivated Employee: When an employee is in a role or team which he wants to be in but is not trained for then he is motivated (but not competent). By providing the right training and support, employees who are in this quadrant can be easily moved into the ideal situation – into Q2.
Relevance:High, Competence:High – Engaged Employee: This is when employees are motivated to give their best to the job. They are in a role they want to be in and have the required training and competence to deliver results. When employees are in this quadrant, their sense of achievement is the maximum.
Companies on the 2013 list of Fortune 100 Best Companies to Work for, offered 66.5 hours of training annually for salaried employees, with around 70% of those hours devoted to employees’ current roles and nearly 40% focused on growth and development.
Organizations that are not bound by rigid hierarchies and siloed org-structures have the flexibility to, better engage their employees by investing in training and having the opportunity to move them to roles they prefer. These are exactly the kind of facts that a good Employee Engagement Survey should throw up.
It is not a coincidence that a majority of the top rated employers also have the highest investments in learning. These organizations know that investing in engaging employees with the right role and competency fit, also prevents a ‘brain-drain.’ Employees in all age-groups and roles need continuous support to expand their skills. Investing in skills and knowledge training, of employees communicates a sense of commitment by the organizations in the future of its employees and goes a long way towards fostering a sense of achievement.
“It can’t be bargained with. It can’t be reasoned with. It doesn’t feel pity, or remorse, or fear. And it absolutely will not stop, ever, until you are dead.” from the Terminator (1984)
Analytics is the hottest, absolutely-must-have corporate buzzword these days. Out with the fuzzy and in with hard data. Leaders and Managers have been known to repeat Deming’s quip (and wrongly get credit for it at times) “In God we trust; all others must bring data” when faced with business proposals that are based on ‘intuition and gut-feel.’ Finance and Operations have been using advanced modeling techniques for years, fine tuning the art of showing that big revenue spike (or cost saving) just around the corner. (Hasn’t happened in the last 10 years, but next two quarters are going to be huge!) And now it’s the turn of HR. People Analytics is the next big frontier and machines are being primed to crunch numbers on human attributes and ‘go where no machine has gone before.’
Correct Data is good, Intelligent Analytics is even better. I have had enough experience with gut-feel and arbitrary extrapolation driven disasters in my life to have a deep respect for both Data and Analytics (with the qualifiers firmly in place). I also know that modeling human behavior (or worse projecting it into the future) is something best left to Ethan Hunt.
‘Let’s collect all possible behaviors about employees, get a bunch of statisticians and lock them in a room till they come up with a formula to predict who is good and who is not,’ sounds like a good idea. Only problem – seems people don’t like it. And not just any people – top notch engineers at Google who live and breathe data and analytics.
“Not only must Justice be done; it must also be seen to be done.”
Promotions are a big deal at any organization. It represents an acknowledgement of the company’s belief that you have done an excellent job in your current role and so are ready to take up further or different responsibilities. Nominating the wrong person for a role can be one of the most disengaging acts in an organization. The person(s) who lose out in the race often choose to leave the company and walk right next door to the competitors HQ.
Google has a rather elaborate process involving self-nominations, committees and appeal process for promotions of engineers. As you can imagine this process is costly, time consuming and can be tedious at times. With the rather noble intention of saving a bit of effort for everyone, the People Analytics team decided to explore the possibility of getting an algorithm, which they can use instead.
They did come up with one. And statistically it was awesome!
No possibility of bias, absolute transparency, much less effort, very accurate (based on fitment with past data). One might expect everyone (especially engineers) to love the ultimate solution to getting promotions right. All the disengagement rising from favoritism, bias, perception et.al. out of the window in one masterstroke.
Guess what happened.
The Engineers hated it!
“They didn’t want to hide behind a black box, they wanted to own the decisions they made, and they didn’t want to use a model.”
At the end of all the research, the ultimate takeaway for Google was that ‘people need to make people decisions’ Analytics serves an important role in providing the decision makers with data points and insights, but it can never replace them. It is highly unlikely that we will ever reach (or accept) a situation where algorithms and black boxes are seen as taking decisions (even if you put a human face on the screen). [See Prasad Setty talk about it in the video at the end of this post]
Speaking of algorithms and disasters: Remember the Black-Scholes Equation and 19 October 1987 (Black Monday)? And for those with shorter memories there is the Gaussian Copula function and the 2008 meltdown. And those are failures when modeling movement of financial instruments (and therefore indirectly just one aspect of human behavior which ultimately drives price of those instruments).
It has taken us decades finally realize the tyranny of the “Bell Curve” in performance evaluation though most organizations still are stuck to using what is essentially a convenient misuse of statistical formulation.
Hopefully business leaders will appreciate the pitfalls in giving into the lure of expecting everything to be boiled down to an algorithm. (Elon Musk is rumored to have referred to AI as “summoning the demon”) Even if I don’t quite share Elon’s assessment of the scenario of doom (yet), in my opinion hoping to click a button to decide people’s career path is bit of science fiction, wishful thinking and lazy management all rolled into one.
But if you are a math wiz, don’t care about what old geezers like me have to say about “free will” and social cognition, then your mission, should you choose to accept it …
(Unfortunately this blog post will not self-destruct in 5 seconds)
Acknowledgements and References for this post:
Image courtesy of FreeDigitalPhotos.net
Google came up with a formula for deciding who gets promoted—here’s what happened, Analyze This, QZ India, Max Nisen, November 20, 2014
Recipe for Disaster: The Formula That Killed Wall Street, Tech Biz, Wired Magazine, Felix Salmon, February 23, 2009
The mathematical equation that caused the banks to crash, Mathematics, The Observer, Ian Stewart, February 12, 2012.
Will the machines take over? Why Elon Musk thinks so, Science, The Christian Science Monitor, Anne Steele, October 27, 2014
“It’s a very personal, a very important thing. Hell, it’s a family motto. Are you ready, Jerry?
I wanna make sure you’re ready, brother. Here it is: Show me the money. Oh-ho-ho! SHOW! ME! THE! MONEY! A-ha-ha! Jerry, doesn’t it make you feel good just to say that! Say it with me one time, Jerry. ” (Jerry Macquire, 1996)
You might be forgiven for assuming the dialogue I picked up from the movie Jerry Macquire was a conversation between a CEO candidate and the board member sounding him or her out. The increasing disparity in compensation packages commanded by CEOs to that of, the average employee has been a source of much debate and frustration.
Ben & Jerry’s Ice-Cream Company made a social pact with their employees when the company was founded. The company put a cap on the pay ratio between the top paid executive to the lowest-earning worker at 5:1. They held on to that ratio for 16 years. Then when it was time for Ben Cohen (the Ben in Ben and Jerry’s) to retire, they went hunting for a successor. They couldn’t find a single executive willing to accept the cap. The cap was raised to 7:1. Nada. The cap continued to be raised till it reached 17:1 over the next six years. Finally the company was acquired by Unilever USA in 2000 and nothing more was heard. The shroud of corporate secrecy descended on compensation details.
All that is about to change.
A few days back the Securities and Exchange Commission finally voted (with a narrow majority) to bring into effect a rule that will require companies to state their CEO pay as a ratio of the average worker’s pay. The hotly debated Dodd-Frank Wall Street Reform and Consumer Protection Act, is making a lot of senior executives very uncomfortable. Under the section, “Investor Protections and Improvements to the Regulation of Securities”, subtitle E refers to “Accountability and Executive Compensation.” The clause in question is as follows:
Shareholders must be informed of the relationship between executive compensation actually paid and the financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions as well as:
the median of the annual total compensation of all employees of the issuer, except the chief executive officer (or any equivalent position)
the annual total compensation of the chief executive officer, or any equivalent position
the ratio of the amount of the median of the annual total with the total CEO compensation
India is a bit ahead on the curve on this one. Under the new Companies Act 2013, the provision which had been incorporated by SEBI, for Listed Companies already requires them to start disclosing this information. Reporting on this, BusinessLine states that “Under the Companies Act, 2013, every listed company shall disclose in the board’s report, the ratio of the remuneration of each director to the median employee’s remuneration and such other details as may be prescribed.”
So, why have governments decided to wake up and start tracking compensation paid to top executives? The financial collapse of 2008 and the subsequent fallout did seem to have a lot of influence on getting governments to finally act. The ‘Occupy Wall Street’ movement with its emphasis on the remaining ‘99%’ forced lawmakers to sit up and take notice. The increasing disparity in compensation between a select few and the vast majority seemed to be boiling over into a social flashpoint – any government’s nightmare!
So, how exactly do the numbers really stack up?
To get a sense of how good or bad the compensation ratio is currently; let us first try to understand what an ideal ratio in people’s minds is. The late Peter Drucker, believed that the ratio should be 20:1 (a downgrade from his earlier number of 25:1). During the time of the Dodd-Frank Law debate, Rick Wartzman wrote to the then SEC Chairperson Schapiro. He pointed out Peter Drucker’s opinion on the issue:
“I have often advised managers that a 20 to1 salary ratio is the limit beyond which they can not go if they don’t want resentment and falling morale to hit their companies,”
In a 2004 interview, Drucker elaborated further: “I’m not talking about the bitter feelings of the people on the plant floor… It’s the mid level management that is incredibly disillusioned” by king-size CEO compensation.
At the World Economic Forum, in 2010, UNI Global Union General Secretary Philip Jennings warned of ‘gathering storms’ if the CEO gravy trains are not derailed. He said that the bloated pay packets are a source of ‘systemic risk’ and added that he supported the ‘Drucker Principle’ of 20:1 pay ratio.
In this context, let us take a look at what reality is.
In their paper titled “How Much (More) Should CEO’s Make? A Universal Desire for More Equal Pay”, Kiatpongsan and Norton state that their references point that the ratio of CEO compensation to that of the average employee increased from 20:1 in 1965 to a whopping 354:1 in 2012! The ILO has a ‘slightly’ different number they arrived at from studying the ratio in the largest firms. They say that the ratio was 508:1. The corresponding ratios in Germany – the European business powerhouse was 190:1 and 150:1 in Hong Kong, China.
Closer home, global management consultancy, Hay Group released the ‘Top Executive Compensation Report 2013-2014,’ which analyzed 2524 jobs across 176 organizations and found that CEO’s in India earn around 78 times the salary of an entry-level professional. And as companies show an increased preference to recruit CEO’s from outside the internal senior management pool; this number seems bound to rise even further.
But if you pay peanuts you get monkeys!
But do you really?
Writing in the New Yorker, James Surowiecki states that, executive compensation rose 876% or nearly 9 times between 1978 and 2011 in the US. By extension one would assume that, it is 9 times more difficult to do business now than it was four decades ago!
Then, what could possibly explain this exorbitant rise in pay? According to Surowiecki it’s a combination of factors. The first is a shocking side-effect of increase transparency. With increased transparency required by law and amplified by the business press, boards at companies fall for ‘peer-benchmarking’ to determine executive compensation. And boards which are too ‘cozy’ with the CEOs, are reduced to being rubber stamps who approve pretty much anything the CEO tells them – including the justification for an outrageous compensation package. To make matters worse, this system gets played by the ‘leapfroggers’ – the CEO’s who are either extraordinarily brilliant or just plain lucky to earn huge salaries. These, then become the benchmark for others and the spiral just goes on growing!
Just how bad can it get? Roger Martin, former dean of University of Toronto’s Rotman School of Management, in an interview to Bloomberg said “When CEOs switched from asking the question of ‘how much is enough’ to ‘how much can I get,’ investor capital and executive talent started scrapping like hyenas for every morsel. It’s not that either hates labor, or wants to crush their lives. They just don’t care.”
Hmm..How’s that for employee engagement?
But CEO’s also increase investor wealth! Surely they deserve the cut?
If the financial collapse and the bonuses handed out to top executives in ‘too-big-to-fail’ is anything to go by, the assumption that bonuses and pay are necessarily linked to performance is not true. Studies published in the Economist and by others state that there is no clear correlation between CEO pay and company performance. Quite a few studies seem to have concluded that the correlation is in-fact negative!
A paper by Bebchuk, Cremers and Peyer, in the Journal of Financial Economics, titled ‘The CEO Pay Slice’, analysed the performance of companies, in relation to the proportion of what the CEO took, as a ratio of the total pay of the top five executives. It seems that the more the CEO took compared to the executives pay, the worse the company did!
In the report by Hay Group, they found that MD/CEO’s in India take close to 3 times the pay of those in Business Enabler Roles (HR Head, CIO, R&D Head etc) and Business Core Roles (Head – Sales & Marketing, Head – Manufacturing/Operations, BU heads etc)
Just when you think things couldn’t look worse, here is one final data point. It seems CEO pay is in fact strongly correlated with one metric – the number of people they fire!
Long Term vs Short Term!
SEBI in the discussion paper on CEO compensation had stated “… on an average, the remuneration paid to CEOs in certain Indian companies is far higher than the remuneration received by their foreign counterparts and there is no justification available to that effect,”
In addition to the quantum of payment, there has been much discussion around the way executive pay is structured. The incentive structure holds the key to actions taken by CEOs. Organizations in mature markets are increasingly moving away from basic incentives like, stock options and restricted stocks to performance-linked long term incentives like performance equity, performance-based restricted stock among others.
The Hay Group finds that, Indian companies unfortunately lag far behind their global peers in this aspect. The chart below on CEO Compensation mix points out the stark difference in the structuring of pay in India versus their peers in US or Europe. (The mix is fractionally better than, that for Asia on average)
With companies being now required by law to state compensation for top executives, and the ratio of that compensation to the average pay, the fallout on engagement levels will depend on how responsible (or otherwise) the top management is.
CEO’s who have taken over 100% pay increases in years where they have given zero or minimal pay increase to the average employee who is battling runaway inflation at home and increased pressure at work (because the company has not met its performance targets!) will find it increasingly difficult to justify their stand.
There is enough research (an visible social backlash) to clearly establish that there is widespread consensus that, the gap between the top executive pay and entry level pay in an organization has to reduce – substantially so, if the current trends are to be believed. Compensation forms an important component of the need for ‘Safety’ in Maslow’s Hierarchy of Needs but, it should not become the ultimate goal.
As Jack Ma, puts it succinctly – “We only eat three meals a day, we only sleep on one bed, how can you spend money? Where’s the opportunity?”
So if you are wondering why your team is looking despondent despite of all the effort you put into motivating them, the answer just might lie buried in your company’s annual report.
References and Acknowledgements:
Image in beginning of post courtesy of FreeDigitalPhotos.net.
Graphs data/image sourced from sources mentioned against the images.
A Sweet Solution to the Sticky Wage Disparity Problem, Aug. 10, 2013, Mitchell Weiss, ABC News
What Jack Ma plans to do with his Alibaba billions, Svati Kristen Narula, September 23, 2014, Quartz India
UNI: In Davos, UNI warns of risks from Private Equity, CEO pay, 28 Jan 2010, ITUC CSI IGB
Dodd–Frank Wall Street Reform and Consumer Protection Act, Wikipedia
Executive Excess 2010: CEO Pay and the Great Recession, By Kevin Shih, Sam Pizzigati, Chuck Collins and Sarah Anderson, September 1, 2010, Institute for Policy Studies.
What’s the best way to set CEO pay?, 03 June 2013, ILO
Study: Tech CEO Pay Doesn’t Match Performance, Baseline, 17 Jul 2006
Executive pay and performance, Feb 7th 2012, Economist
Open Season, James Surowiecki, October 21, 2013 Issue New Yorker,
CEO Pay 1,795-to-1 Multiple of Wages Skirts U.S. Law, By Elliot Blair Smith and Phil Kuntz, Apr 30, 2013, Bloomberg
Why CEO Pay Will Keep Rising to Even More Insanely Unjustified Levels While Ordinary Workers Get Squeezed, October 14, 2013, Yves Smith, Naked Capitalism
Top Executive Compensation Report 2013-2014, global management consultancy, Hay Group
US follows India on disclosure of CEO-staff pay ratio, Sept 19, 2014, BusinessLine
CEOs in India earn ’78 times the salary of an entry-level professional’, January 27, 2014, NDTV Profit
What’s the right ratio for CEO-to-worker pay?, By Jena McGregor September 19, 2013, Washington Post
The CEO pay slice, Lucian A. Bebchuk,J. Martijn Cremers, Urs C. Peyer, Journal of Financial Economics, Volume 102, Issue 1, October 2011
Joseph Wilson is an unlikely name to be associated with Employee Engagement. Yet the founder of the Xerox Corporation is often credited with having founded the first Employee Resource Group (of sorts).
Back in 1968, when violent race riots were tearing apart parts of America, Wilson wrote a letter to his managers, calling for an increased hiring of African-Americans. This move, which led to the establishment of BABE (Bay Area Black Employees), was a ground breaking approach towards addressing the issue of discrimination and achieving equality in the workforce. You can imagine how inspired people would have been to work at Xerox after this!
While ERGs were an excellent tool to help employees find a voice in large organizations, they were often seen as threatening by managers. Over time with changing demographics and the evolution of technology used in the workplace, ERGs (also known as affinity groups or employee networks) seem to be undergoing a resurrection of sorts.
So what’s with the renewed interest in ERGs?
ERGs require commitment of both time and money of the workforce to be successful, in addition to being aligned with the overall company goals. A study by Mercer in 2011, states that companies are spending well into six figures every year, not including the cost of the technology that enables collaboration between employees across the organization, including those in remote locations.
Research, surveys and studies attribute the renewed interest in ERGs to a combination of factors.
The investment in technology and communication (and the rise of social networking): Considerable investment in the technology and platforms to enable collaboration between the members of ERGs and the increased acceptance of social networks in the enterprise has improved communication and reach of ERGs. Coupled with dedicated efforts of HR team to make new recruits and teams aware of ERGs over the years , the workforce is now more aware of ERGs and this has contributed to increased memberships.
Changing Demographics in the Global Workforce: With Gen-Y now becoming a substantial component of the workforce distribution; their work choices and preferences are contributing to the success of ERGs. Unlike the generations that preceded them, Gen-Y is digitally native and are comfortable working collaboratively and using social media tools – both of which are critical to the success of employee networks.
Evolution in the focus and activities of ERGs: Over the years, ERGs have evolved from just being groups focussing on mutual support for members to those making substantial contribution to the bottom line of the organization. ERG’s are now providing insights into the market place, teaching employees located in the remote locations nuances of doing business, acting as brand ambassadors for the organization and improving the company’s reputation through community contribution.
The 3P’s of ERGs
People: ERGs provide organizations with access to talent that is relevant and more engaged. For talent acquisition, evolved organizations put their ERGs to good use by consulting with them to recruit new hires. When ERG members connect with their alma-maters, provide testimonials and use their network, talk about the culture and prospects at the company, it helps to attract high quality talent. ERGs thus can be used for extremely targeted recruitment to hire like minded and high quality candidates who will be a good fit for the organization. In a survey conducted by Software Advice in the US, among the respondents, almost 70 percent of 18- to 24-year-olds noted that ERGs would positively impact their decision to apply, while over half (52 percent) of 25- to 34-year-olds said the same. The substantial difference between this age group and the others is an indication of the shifting winds in priorities of the future managers and leaders.
From talent retention stand-point, affinity networks provide a powerful medium to help employees stay connected, and overcome gaps by providing mentorship and guidance – lack of which is a key reason why employees leave organizations.
In the same survey, the data showed that well over half of respondents under the age of 44 noted they would be more likely to stay at a company offering ERGs.
Productivity: ERGs are an excellent way to keep employees engaged. By connecting people who share the same concerns, passions, and interests, ERGs help form employee networks that span the silos usually get created with the departmental hierarchy.
ERGs formed around topics/domains, help provide training and provide access to mentors to their members – an invaluable means of engaging and motivating employees who might otherwise find navigating the complex fabric of organizational hierarchy for information and advice, a daunting task. ERGs can also act as great tools for HR to help spot the ‘right’ talent required for various positions. For example, Air Products and Chemicals’ Asian American group developed the Building Bridges program to help Asian colleagues expatriated to the US make the transition and become more productive.
By providing members an alternative to the formal hierarchical system, ERGs can help employees to understand business nuances, organizational culture, provide mentoring to perform better at current tasks and also help prepare members to move up the corporate ladder to other roles – a matter understandably of substantial interest to the Gen-Y constituent of the workforce.
All of these advantages go a long way to help address engagement challenges and increase motivation and productivity of the members.
Profitability: At many organizations, resource groups have an important role as focus groups and innovators in understanding the market-place dynamics and providing insights which help the company launch new and successful products. Mattel used their African-American ERG to conceptualize and advice their product and marketing teams to launch a line of dolls specifically designed for African-American girls. Pharma major Merck created global-constituency groups in 2008 to connect with their local markets. McDonalds’s women leadership network had a major influence on the introduction of healthy menus in their restaurants.
ERGs ahoy then, is it?
Not quite. While ERGs do clearly have the potential to engage and motivate your workforce, it isn’t for everybody. Companies that are working with or planning to recruit and engage a younger workforce will find ERGs useful, not so much organizations that are formal, hierarchical and have an overwhelmingly older work force.
Companies with the most dynamic and successful ERGs attribute their success aligning the mission of the ERGs with the interests of employees and the executives. In addition these organizations are sensitive to the need for new ERGs that address multigenerational, multicultural, and other constituencies and work hard to actively market the ERGs to their employees and new hires.
ERGs succeed when they are adequately funded and held responsible for those funds. The leaders of these groups need to receive training and other support to manage the groups in a professional manner.
Glenn Llopis (subject matter expert and chairman of the Glenn Lopis group) underlines the importance of supporting an ERG in the company by having a senior executive who is fully invested in its success of the mission, lead the group.
Llopis goes on to say that the success of the ERG depends on a clear articulation of the mission:
“Our objective is to help our organization to best understand and leverage the unique talent, gender and/or cultural insights we bring to increase recruitment efforts by [X] percent, talent retention by [Y] percent and our employee community’s overall workplace engagement by [Z] percent.”
If clear and measurable objectives aren’t defined, Llopis says, the ERG “just becomes a social gathering that doesn’t add real value and makes it difficult to sustain participation.”
And it also depends where in the world you are:
Mercer in its study found that there are differences in the practices of ERGs depending on the location of the company. Companies located in or having its headquarters in the US tend to have a higher probability of having ERGs, while it’s a very new/non-existent practice in Asian countries.
The proliferation of social networks and other collaborative platforms in the enterprise environment coupled with the increase in presence of Gen-Y in the workforce will no doubt change the way ERGs communicate and recruit new members.
The best ERGs are those that create a safe environment where employees can discuss challenges, voice concerns and work on self improvement, career progression and self-actualization through community contribution. ERG’s are now evolving to help attract, empower, motivate and engage a diverse and younger workforce from diverse backgrounds and cultures, which has a direct and quantifiable impact on the bottom line in the increasingly global arena where boundaries are blurred and geographical locations are starting to hold lesser and lesser significance.
As Lopis says, “It’s about embracing the special skills and characteristics that may be attributed to one’s culture or to one’s ethnicity or to one’s gender that a company could be much more mindful of [while utilizing the] special intelligence … that particular group can deliver to the company’s overall strategy or business model.”
Acknowledgements and References for this post:
Image courtesy of FreeDigitalPhotos.net, Graphs courtesy of HR & talent management technology resource Software Advice.
ERGs Come of Age:The Evolution of Employee Resource Groups, Mercer; Employee Resource Groups, Joseph C. Wilson, Wikipedia; Who Made America, Joseph Wilson, pbs.org, The business benefits of Resource Groups, Diversity Inc; Your Secret Weapon: Employee Resource Groups, Linkage Leadership Blog, Xerox diversity timeline, Xerox.com; Survey: Employee Resource Groups help engage Gen-Y Workers, (Erin Osterhaus), New Talent Times.
You drag it around like a ball and chain/ You wallow in the guilt/ you wallow in the pain/ You wave it like a flag / You wear it like a crown/ …The more I think about it/ Old Billy was right /Let’s kill all the lawyers managers / kill ’em tonight : Get Over It, Eagles.
‘Get Over It’ was a song that Don Henley, lead singer of the Eagles wrote to vent his frustration over people blaming their failures, frustrations, mental breakdowns and financial problems on others, and believing that the world owes them a favour. (Trivia: The song references Shakespeare’s Henry VI, Part II. And the line that I used with creative freedom “Old Billy was right: let’s kill all the lawyers – kill ’em tonight”, echoes Shakespeare’s line “The first thing we do, let’s kill all the lawyers”.)
If you read most of the popular literature on how to engage employees, you would most likely be tempted to conclude that managers seem to be the cause of all the employee engagement problems in organizations. It would almost seem the world is full of leaders who know what they want and depend on managers to communicate it down to the teams (read workers and engineers depending on which industry you are in), and then there are employees who know how to do things, but depend on managers to tell them what the leaders want them to do. Therefore there has to be a problem with the middle layer called managers, who are incompetent in bridging the gap between the leaders vision and employee action. As the foul tempered character from Alice in Wonderland, the Queen of Hearts is fond of saying: “Off with their heads!”
And it’s not that companies haven’t tried or aren’t trying. Google is – as one of the engineers puts it – “a company built by engineers for engineers.” So understandably, the definition of “real” work in the organization focuses more on designing products and writing code rather than effective communication and supervising others. In 2002, Page and Brin actually experimented with a flat org-structure. They just got rid of all the engineering managers. Goodbye bureaucratic fools, hello perfect giant company that works like a start-up. Erm..not really. That experiment apparently lasted a few months and once Page was inundated with questions on expense reports, interpersonal conflicts and all those things that used to be taken care of auto-magically, the managers were brought right back in!
Managers typically act as bridges between the teams and the rest of the organization. Since the days of the Hawthorne studies, where Elton Mayo stated that the “industrial world at the beginning of the twentieth century was more technologically advanced than ever before while being more socially incompetent than ever (Bendix & Fisher, 1949)”, interpersonal relations and group structure have been a matter of much debate, study and now in the twenty-first century a matter of concern. Mayo noticed in his studies that managers who had an understanding of social factors like group solidarity among the workers, had a greater ability to control and influence worker behaviour.
“In God we trust: All others bring data!”
William Edwards Deming.
Google, being Google, had the ability and the inclination to use data to decide what works best for the company. The company set up a people analytics team to tackle questions on employee well-being and productivity. One question stood out among all the others – “Do Managers matter?”
Enter Project Oxygen ,a multiyear research initiative to find answers to the questions that Google was asking itself. Instead of ending up being the usual MIS spewing team, the researchers in project Oxygen were “hypothesis-driven and wanted to help solve the company’s problems and questions with data”. The team was looking for evidence that better management mattered when all managers seemed so similar. The solution, arrived at using sophisticated multivariate analysis, showed that even “the smallest incremental increases in manager quality were quite powerful”.
High-scoring managers in the organization in 2008, saw less attrition than the others. The retention was strongly related to manager-quality than seniority, performance, tenure or promotions. The data also seemed to suggest a strong correlation between manager quality and workers happiness. Employees, whose bosses scored high on the ranking, consistently reported greater satisfaction in areas like innovation, work-life balance and career development.
So what’s the “happily ever-after” story?
They boiled down all the data and research into eight key behaviours demonstrated by Google’s most effective managers.
A good (Google) manager:
Is a good coach
Empowers the team and does not micromanage
Expresses interest in and concern for team members’ success and personal well-being
Is productive and results-oriented
Is a good communicator—listens and shares information
Helps with career development
Has a clear vision and strategy for the team
Has key technical skills that help him or her advice the team
Remember these are managers who have to deal with extremely smart engineers who are out to change the world – not an easy task. The interesting part is that, the data corroborated “the obvious”. When one looks at the list there is a bit of disappointment, a “duh!” moment. All that data, research, advanced stats and this is it? No magical formula or maybe an insight that the most effective managers are, only the ones who attended Ivy League B-schools in the US?
Well, thank God for Occam’s Razor. Good managers who have to manage complex projects with smart team members have to achieve a balance between managing the day-to-day operations and supporting them with their personal needs, professional development and career planning (All areas of major concern when employee engagement surveys come in). It might be an overkill (or practically impossible) for most organizations to devote time and resources to do the kind of advanced research that Google has done but there is nothing to prevent them from taking advantage of the results and improving the quality of their managers.
Of course in lots of organizations, the appointment of managers is based on their excellent performance in other domains (brilliant engineer, star salesman, great accountant) – a recipe for disaster. This often leads to the rise of frustration and informal networks form, which bypasses the formal hierarchy in order to get things done. There is considerable existing and evolving research in (Social) Network Analysis that studies this phenomenon. The key takeaway from studies like project Oxygen is that, managers can be trained to be better at their jobs and it’s not rocket science.
And then there is Zappos
Obviously not everyone agrees. Zappos, that customer-service and employee focussed company, which works very hard to keep both customers and employees happy is also doing it. The company, in Jan of 2014, decided to do away with the traditional managers and will “replace the traditional corporate with a series of overlapping, self-governing ‘circles.’” The reorganization is based on the concept of ‘holacracy’, developed by management consultant Brian Robertson.
But the organization is careful to note that “while a holacracy may get rid of traditional managers there is still structure and employees’ work is still watched. Poor performers, Robertson says, stand out when they don’t have enough “roles” to fill their time, or when a group of employees charged with monitoring the company’s culture decide they’re not a good fit.””
Elizabeth Kampf, a consultant at Gallup has weighed in with her opinion on the topic that, Zappos might be better off replacing bad managers with great ones. (In the article, she does mention that Gallup hasn’t studied the holacracy model specifically) The article mentions that “Only about one in 10 people naturally have the traits to be a truly great manager … contributing about 48% higher profits to his or her company than average managers do. Great managers create a substantial business advantage for their companies — one that Zappos and other like-minded businesses stand to lose, if they drastically cut back on the ranks of their managers instead of focusing on hiring and developing the right people for the job.”
Zappos’ John Bunch, the person leading the transition to the new way of working says “says that while people have latched on to the idea that Zappos is getting rid of managers, what the company is actually doing is “decoupling the professional development side of the business from the technical getting-the-work-done side.””
Whatever is the real modus operandi, the fact remains that Zappos is the largest organization that has attempted something as drastic as this (but then Zappos has always done things differently) and the world will be watching with much interest on what happens – indeed the future of how organizations perceive the value of managers, depends on it.
References for the post:
Zappos says goodbye to bosses, Jena McGregor, Washington Post; How Google sold its managers on management, David A. Garvin, Harvard Business Review; Google’s quest to build a better boss, Adam Bryant, The New York Times, Can you really manage engagement without managers?, Elizabeth Kampf, Gallup Business Journal; “Get Over It”, Trivia – source Wikipedia.
Examination of a Witch (1853), by T.H.Matteson, inspired by the Salem Trials, source: Wikimedia Commons.