Business Journal

What the Big Picture Doesn’t Show

A close look at one company’s rosy performance results reveals many hidden costs -- and untapped opportunities

When assessing how engaged your employees are, looking at company-wide data can be revealing -- and comforting too, if the numbers look good. But executives, beware: It's easy to draw the wrong conclusions from a series of consistently high overall company engagement scores. Your company's overall score may be stable and high, but that doesn't mean the work environment is uniformly productive.

That's because every workgroup environment is unique and dynamic. Workgroup engagement levels fluctuate; with every interaction every day, employees become either more engaged or less engaged. If the interactions in a given workgroup are more negative than positive, that group may produce a pocket of "disengaged workers" who are profoundly disconnected from their work -- and those workers may be costing your company a lot of money. (See "The Impact of Positive Leadership" and "The High Cost of Disengaged Employees" in See Also.)

To better understand this problem, let's look closely at a company that The Gallup Organization recently studied. This business conducted four annual administrations of Gallup's Q12 -- a 12-item survey that measures employee engagement -- and provided training on the fundamentals of engagement for all managers following the first three administrations.

Through hard work, the company's overall Q12 score steadily improved. In the program's third year, the overall score climbed past the 75th percentile in Gallup's database -- the threshold to world-class performance -- and maintained that position in year four.

The company's senior managers concluded that they'd done an outstanding job of improving their employees' work environment. A casual glance at the company's high, stable overall Q12 score seemed to show that they'd solved their employee engagement problems and could start focusing on other matters.

A closer look, though, produced less comfortable insights. As expected, employees with higher engagement levels during the fourth administration (at the beginning of 2003) were more productive, and they made more money for the company that year. However, absolute engagement levels aren't the only factors that influence job performance. Another key factor is whether an individual employee has become more engaged or less engaged over the previous year. When both the level of employee engagement and its direction are considered -- regardless of whether engagement is increasing or decreasing -- a remarkable story emerges.

In-depth analysis revealed that at the individual level, little was stable. Most employees were either gaining or losing in their engagement levels; only a few stayed constant. However, the number of gainers and losers overall was roughly balanced, so the company-wide score stayed about the same.

In fact, it's not unusual for a stable company-wide score to mask a wide variation in employee-level scores on a metric such as the Q12. That variation, though, has important implications for the company's financial performance.

Let's look at a simple matrix that sorts employees into groups based on whether they initially had low or high engagement scores in 2002 (using the 50th percentile from Gallup's Q12 database to separate "low" from "high"). The matrix then further sorts the groups based on whether their 2003 scores showed a gain or loss compared to their 2002 scores.

CHART: Benefits of Growing Engagement Levels


The data above clearly show that if employees are not gaining in their engagement levels, they're costing the company money. Both groups that showed a gain in their 2003 scores produced better financial results than the groups that lost ground. And not surprisingly, the employee group that posted high scores in 2002 but lost ground in 2003 showed the worst financial performance in 2003. They were demoralized, and their financial performance showed it. If the engagement of the 55 employees in the High → Loss group had increased instead of deteriorated, their job performance would have added more than $8 million dollars per quarter to company revenue. That is quite a costly mistake for management complacency.

In response to these insights, the company has renewed its commitment to employee engagement. It is developing a program that supports individual workgroups as they strive to improve their work environment.

But what's the larger lesson here? Employees are part of a company's financial assets. If employees are to have maximum performance, executives must focus on creating and sustaining a great work environment -- one that fosters employee engagement. The difference in financial performance between the employees in the High → Loss group and the High  Gain group exceeds 75%.

This disparity in workgroup environment and its impact on company financials spark many interesting questions:

  • What is the difference between these groups of employees?
  • How is one workplace different from the other?
  • What did their managers do differently?
  • How can we keep an employee's work environment from degrading?
  • How can we improve the work environment for those who have become demoralized?

Finding the answers to these questions will have a profound impact on a company's financial performance. But these key questions will never be posed -- or addressed -- if managers think that high, stable company-level scores mean that all is rosy.

Glenn Phelps, Ph.D., is a Senior Consultant with Gallup.
Gallup http://www.gallup.com/businessjournal/11947/What-Big-Picture-Doesnt-Show.aspx Gallup World Headquarters, 901 F Street, Washington, D.C., 20001, U.S.A +1 202.715.3030