Taking Feedback to the Bottom Line
Business Journal

Taking Feedback to the Bottom Line

Research involving 200,000 employees across 36 companies shows how engagement drives real business outcomes

"People are our most important product" is one of the oldest aphorisms in business. Words to that effect have been uttered by practically every CEO. But ask that CEO how his or her people differ from the competition's and the answer will come that they are just, well, better. Ask how worker psychology contributes to economic value and the response is likely to consist of bromides about loyalty, empowerment, creativity, motivation. Much of business is like this: We know in our bones that something is true but do not understand the particulars.

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Since the beginnings of "scientific management" a century ago, researchers have been struggling to understand how the many aspects of human relations in the workplace affect the bottom line. Advances in the past decade have been pretty dramatic. In the 1990s, Gallup accelerated its work in the field and began to study the effect of workers' attitudes, emotions and behaviors on performance.

Previous studies had suggested-in line with common sense-positive relationships between job satisfaction and achievement on the job. A more "satisfied" employee is likely to be more cooperative, more helpful to colleagues, more punctual. The satisfied employee makes better use of time, shows up for more days of work, has longer tenure and earns higher performance ratings. But the key question for business is, what conditions govern the increase and decline of satisfaction within a company and its workforce? If these can be identified, can they be influenced? Do workgroups with higher rates of satisfaction generate significantly higher performance outcomes? If linkage could be established, companies could work to increase satisfaction and generate profits that would otherwise be left on the table.

EFFECT OF ENGAGEMENT ON TURNOVER IN HIGH- AND LOW-TURNOVER COMPANIES
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These were the questions that Gallup addressed as we zeroed in on top-performing teams and individuals. At hundreds of focus groups across different industries, high-performance nonmanagers and managers discussed the things that caused them to experience wellbeing at work and, conversely, that made them angry and turned off and hurt productivity. As can be imagined, this yielded a rich soup of observations. Out of this often chaotic and contradictory input, we identified the major satisfaction generators, the key elements that supervisors might significantly influence and control, as distinct from those they might not have the power to do anything about-such as rates of pay, hours of work and the like. Finally we developed 12 simple questions (see below) to identify respondents' feelings about the key satisfaction elements. High scores around the 12 questions indicate the presence of deep worker "engagement," which is the condition that engenders satisfaction and other emotional outcomes like loyalty and pride. Engagement leads to measurable business outcomes, as our research shows.

The sources of worker engagement
Simple and straightforward on the surface, the questions are nonetheless freighted with psychological power. They reveal deep and eternal human needs. The human psyche's wants are constant, irreducible. Classical psychology has often looked through a morbid lens, identifying what is wrong with people and society. But lately a growing number of thinkers are studying the other end of the spectrum. These "positive psychologists" argue for a serious accounting of the elements that govern wellbeing and success-for the individual, the group and the organization.

EFFECT OF ENGAGEMENT ON LOYALTY, SALES & PROFITS
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Most of us crave meaning as well as money through work, and in a work-obsessed culture much of that craving will be persistently manifested in the office and factory. When emotional needs are met, worker attention, cognition and performance should increase. Conversely, an alienated or depressed state can eat away at memory function and the capacity to perform complex tasks. The moral is simple: If you satisfy their deep wants, employees become more cognitively and emotionally engaged and will perform better. And this is so across national and corporate cultures, in all occupations, regardless of rates of pay, because the underlying needs are universal.

Obviously the questions do not capture the full cause of a worker's sense of engagement. No survey could. But they do cover most of the factors behind a feeling of engagement that can vary with great sensitivity to changes in the workplace. As of the last iteration, 198,514 workers within 36 companies in 21 industries, such as finance, manufacturing, retail, services, transportation and public utilities, had answered these questions at least once, sometimes two or three times.

Robust links to the bottom line
We used a statistical technique called meta-analysis to combine the results of many diverse studies, because it provides the strongest test of true relationships and their consistency across organizations. We collected employee engagement scores and business unit outcome data (profitability, sales, employee retention, customer satisfaction) for 7,939 business units, teams or workgroups in 36 companies. We then correlated engagement results with business outcome data to assess whether business units with high scores on engagement had higher business outcomes and if those with low scores had lower outcomes. The correlation was positive and substantially meaningful to success across different businesses: Highly engaged individuals were most often found in the high-performance units.

This research points to but does not establish cause. (Gallup has conducted individual case studies that yield evidence of cause and effect.) Employee engagement is far from the only driver of desirable business outcomes. Management tactics, procedures, and human invention also contribute to improved revenues, customer loyalty, higher productivity, and so forth. What we claim is that this picture of the nexus between engagement and economic performance is robust, in part because of the huge research database and the different industries and work situations. It is new knowledge, a foundation on which to build a big advance in the understanding of the connection between human elements and economic outcomes.

The study found variability in degrees of engagement within companies from unit to unit, which tells us that the factors influencing employee engagement are mostly local and proximate to workers, not pan-corporate. It is true that manufacturing work teams and groups had lower engagement scores than professional or white-collar varieties. Yet within the manufacturing category there are many teams and workgroups with extraordinarily high engagement scores. They were high because these workers and managers had taken the initiative and modified practices and behaviors. And that, according to our meta-analysis, is positively linked to business outcomes. The bottom line: On the production line as at the shop counter, basic human needs for self-validation, whether they are satisfied or thwarted, determine degrees of engagement and hence the value that is created or destroyed for the company.


Jim Harter, Ph.D., is Chief Scientist, Workplace Management and Wellbeing for Gallup's workplace management practice. He is coauthor of the New York Times bestsellers 12: The Elements of Great Managing and Wellbeing: The Five Essential Elements.
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