The retailer always believed its people made a bottom-line difference to the company. Now they have proof.
When executives say, "Our people are our most valuable asset," they're usually expressing an emotion, not citing evidence. That's why it's often difficult for them to justify spending time and money to develop and recognize employees.
But at B&Q, Europe's largest home improvement retailer, the importance of people is a matter of quantifiable fact. Since 2000, B&Q has used Q12, a 12-question survey designed by The Gallup Organization, on seven occasions to measure employee engagement -- the degree to which workers are emotionally committed to their jobs. Once the data are collected, Gallup consultants use a process called Business Impact Analysis to correlate engagement scores with customer feedback and with metrics such as turnover, absenteeism, shrinkage, and sales.
The result: B&Q has amassed statistically valid proof that engaged employees are key to greater productivity and customer engagement, and, by extension, higher profits.
Since 2001, B&Q has based manager bonuses in part on their success in raising employee engagement scores. And recently, the B&Q board allocated ₤500,000 (U.S. $750,000) to reward exemplary employees -- checkout operators, greeters, and the like -- with ₤10,000 (U.S. $15,000) toward a B&Q-sponsored home renovation.
"Four years ago, the Board would never have agreed to these bonus and recognition schemes," says Human Resources Director Mike Cutt, who is also a B&Q board member. "But Business Impact Analyses have proven and reinforced the intuition that people -- and people policies -- make a bottom-line difference to a company."
B&Q is a labor-intensive and customer-centric retail powerhouse. Yet B&Q's feat -- turning intuition into hard data and better business outcomes -- can be replicated by virtually any company. That's because it's based on principles and tools that Gallup has tested and applied at dozens of companies and in industries as varied as retail, hospitality, healthcare, and manufacturing. Here's how B&Q did it and how other companies can follow suit.
The B&Q story starts in 1969, in a defunct movie theater in Southampton, a historic port city south of London. Richard Block and David Quayle opened their first home improvement store with six employees and a business plan to provide value, longer hours, and a broader product range than had been typically available to do-it-yourselfers.
By the time B&Q joined forces with Gallup some 30 years later, it had 17,500 employees at 297 stores throughout the United Kingdom. Of the total number of stores, 249 were "Supercentres," essentially home-improvement convenience shops. The remaining 48 stores were huge "Warehouses," each with more than 40,000 products. In the past three years, the number of U.K.-based employees has doubled to the current headcount of 35,000, working in 321 B&Q stores -- 227 Supercentres and 94 Warehouses. (B&Q also has nearly 3,500 employees in more than 65 stores outside the United Kingdom, in China, France, Ireland, Poland, Taiwan, and Turkey. Currently, the B&Q/Gallup partnership is focused on operations in the United Kingdom and Ireland.) The company plans to open 10 additional Warehouses by the end of 2004 and 15 more each year after that.
Not surprisingly, managing growth is something of an obsession at B&Q. Throughout most of the 1990s, the company functioned according to "mini operating visions," says Crystal Richards, B&Q's Great Place to Work manager. Some of the strategies focused on the workforce, such as standardizing B&Q's recruitment process; others focused on the customer, such as building a database of each customer's purchases.
Among B&Q executives, the dual focus on employees and customers was generally accepted as correct. All of the strategies had their conceptual foundation in the "employee-customer profit chain," a business model popularized in the early 1990s that maintains that better employees make for happier customers, both of which drive profits.
But there was underlying doubt. Says Richards, "We had to ask ourselves, 'How do we get and give feedback so we'll know if we're doing the right things at the right time for our employees and customers? How do we measure success?'"
Around the time B&Q started wrestling with those questions, Gallup was putting the finishing touches on its Q12 survey. The product of a seven-year, global research effort involving hundreds of focus groups and interviews with thousands of employees, Q12 pinpoints 12 universal employee needs that, when met, evoke strong feelings of engagement (see "Discovering the Elements of Great Managing" in the "See Also" area on this page). Workers who take the survey respond to each question on a scale of 1 ("strongly disagree") to 5 ("strongly agree"). High Q12 scores indicate employees who have most of their needs met and are therefore fully engaged in improving workplace productivity. Middling scores indicate a workforce that is not engaged -- individuals whose needs are largely unmet and who are therefore less equipped, and less likely, to boost performance. Low scores indicate active disengagement -- workers whose needs are largely unmet and who can actually discourage productivity.
What sets Q12 apart from other surveys is that it's not merely a gauge of prevailing workplace sentiment. Rather, it's designed to further two broad management objectives. The first is ongoing improvement. To explain, Q12 asks about aspects of engagement that can be influenced by supervisors, such as recognition and communication. So if survey scores are high in specific areas, managers and employees can devise plans to build on their strengths; if scores are low, plans can be implemented to remedy the weaknesses.
The second objective is measurement. By translating the "soft" issues related to worker attitudes, emotions, and behaviors into a hard measure of engagement, Q12 yields a metric that can be reliably linked to business outcomes.
Strengthening the profit chain
Richards and other B&Q executives realized that Q12 could be a powerful tool for validating the employee-customer profit chain. After all, if the chain worked in practice and not just in theory, then strengthening the employee link should strengthen the entire chain. So in 1998, B&Q and Gallup launched a nine-month Q12 pilot program in 43 stores. Nearly 3,500 employees took the survey. The results were distributed in a detailed report to 595 managers who shared the results with their workers. The average Q12 score was 3.18, revealing that most workers were in the "not engaged" category. However, specific workgroup scores varied widely: the bottom quartile scores were 2.67 and lower, while the top quartile scores were 3.75 and higher.
Together, managers and employees devised action plans to boost engagement in specific areas. For example, survey results showed that some employees didn't feel they had the materials they needed to do their jobs well. This is a serious issue because as a component of engagement, having the right materials is second only to knowing what is expected at work. To raise the scores on the materials question, managers asked their staff to identify what was lacking and adopted ways to systematically ensure an adequate supply. The missing supplies often turned out to be simple items -- fresh aprons, staplers, pens, and the like -- but their absence could turn an everyday task into an exercise in frustration. When the survey was repeated six months later, the average score had increased to 3.31. But the workgroup scores were even more widely arrayed: the bottom quartile stayed at 2.67 and lower, while the top quartile increased to 4.17 and higher.
B&Q wanted to understand why active disengagement exists and what to do about it. But the increase in engagement in the top quartile also showed that with a few innovative changes aimed at meeting employee needs, significant improvement was possible.
The pilot program also gave B&Q executives an opportunity to defuse suspicion about Q12 before administering the survey company wide. "Some managers thought it was hocus-pocus," Richards says. But even managers who habitually stressed communication and teamwork were skeptical. "Q12 included questions that managers had never thought to ask and didn't know the significance of," Richards says.
For example, one of the Q12 questions is: "Do you have a best friend at work?" Until they were versed in the logic of Q12 , B&Q managers didn't know that in the hierarchy of employee needs, workplace friendship trumps motivators such as pay, benefits, frequent progress reports, and job-related growth opportunities. Even more important, across the myriad of companies that Gallup surveyed when developing Q12, having a best friend at work correlated most strongly with higher customer loyalty -- a B&Q priority.
The uneasiness about Q12 wasn't confined to B&Q managers. Some workers feared that the survey would be used to weed out malcontents. Others simply didn't believe that offering their feedback, via Q12 or in any other fashion, would lead to real change.
The anxieties were calmed by real-life experience. In fact, to capitalize on the learning that took place among the pilot participants, B&Q made a videotape of managers and employees explaining the Q12 process. They showed the tape to all B&Q employees before the first company-wide survey. "There was no preaching or cheerleading," Richards says. "The pilot participants said that at first they didn't trust Q12 , but that it does in fact drive improvement."
Impact of rising engagement
From 2000 through 2002, upwards of 80% of the B&Q workforce had participated in each of seven Q12 surveys. The first company-wide engagement score, from spring 2000, was 3.15, with a range of 4.51 at the top-scoring store to 2.41 at the bottom-scoring store. To compare, on the latest Q12 from December 2002, the overall score was 3.56, with a top score of 4.66 and a bottom score of 2.27.
To improve the scores, managers and employees realized they needed to change both their attitudes and their practices. For example, one store had a dismaying score on the Q12 question "At work, do my opinions seem to count?" To raise the score, the agenda of the morning staff meetings was altered to require managers to ask employees if they had any issues they wanted to raise. If an issue was raised, the agenda for subsequent meetings included requiring managers to report back to employees about how the issue was being addressed. By designating a time, place, and context for expressing opinions, neither managers nor employees needed to fear that raising an issue would be perceived as an unwarranted gripe. In effect, the process made the airing of issues and their resolution open and routine. "We learned that to improve our score on the 'opinions count' question, we needed to improve the environment to enable opinions to count," says one store manager.
Business Impact Analyses have consistently shown the direct and positive impact of rising engagement on key business indicators. The graph on page 1 shows the potential savings in terms of reduced shrinkage (₤35 million a year) and reduced labor turnover (₤23 million a year) if stores in the bottom quartile of engagement could be brought up to the engagement level of top-quartile stores.
To further test the employee-customer profit chain, B&Q's engagement scores are also correlated with responses to customer satisfaction and customer loyalty surveys. Gallup researchers conduct the surveys by phone, using names and numbers that are gathered from customers as they leave a B&Q store. The satisfaction portion of the survey measures a customer's opinions on such attributes as staff friendliness and product availability. The loyalty measures in the survey are quite predictive. The customer is asked to respond on a scale of 1 ("not at all") to 5 ("very") for the following three questions:
- Overall, how satisfied were you with your visit to the B&Q store?
- How likely would you be to recommend this B&Q store?
- If you have do-it-yourself needs in the future, how likely would you be to revisit B&Q?
To be considered loyal, a customer must answer "5" to each question.
Ongoing customer research shows that stores with engaged employees also earn consistently higher scores for customer satisfaction and loyalty than their lesser engaged counterparts. A positive customer experience, in turn, drives sales and profits. In 2001, for example, stores in the top half of customer loyalty generated ₤3.4 million more in sales each year, and ₤1 million more in profits than stores in the bottom half.
"Great managers make the difference"
Of course, B&Q wants to do even better. At some stores, engagement continues to climb, while in others, it has plateaued or decreased.
Why the variation? "Great managers make the difference," Richards says. B&Q is carefully identifying managerial situations that impede engagement. For instance, due to B&Q's rapid growth, managers from high-engagement stores are often moved to new stores. All too often, engagement slips at the old store as employees adjust to the replacement manager, who may not be as skilled as the previous one.
To help counter this situation, B&Q includes Q12 training in its management classes. In addition, each Q12 report details how other stores in a manager's area are doing and specifically instructs managers to share information with one another about what has worked to boost engagement in their stores. B&Q has also created a 23-minute video for managers, aptly titled "The Manager Makes the Difference," in which top managers explain their ideas and practices.
In any case, B&Q managers no longer ask why they should bother with engagement but how to best increase their employees' scores. The reason for the change is obvious, says Cutt: "What gets measured gets done."