Poor Employee Engagement Scores Contribute to Lower Rankings - WSJ 250 Management Ranking

Posted by Allan Steinmetz on 18 December 2018

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Recently, the Wall Street Journal released its top 250 management rankings.  The Management Top 250 ranking, developed by the Drucker Institute, measures corporate effectiveness by examining performance in five areas: customer satisfaction, employee engagement and development, innovation, social responsibility, and financial strength. The ranking is based on an analysis of 37 data inputs provided by 15 third-party sources.

It caught my attention because it seems the companies that rank the highest on the list are those who are performing exceptionally well (four-star out of five and above) on all five performance measures. The companies who seem to be at the bottom of the list are those who rank poorly (three stars or below) on employee engagement. My take away is this - if management would spend more time on employee engagement and promoting purpose, vision, and values, their employees would perform at higher levels and ultimately improve performance.

It is common knowledge that a highly engaged workforce means the difference between a company that outperforms its competitors and one that fails to grow. It seems like every year Gallup releases another study that indicates 87% OF EMPLOYEES WORLDWIDE ARE NOT ENGAGED AT WORK, and that COMPANIES WITH HIGHLY ENGAGED WORKFORCES OUTPERFORM THEIR PEERS BY  147% IN EARNINGS PER SHARE. For example, organizations that are the best in engaging their employees to achieve earnings-per-share growth that is more than four times that of their competitors. Compared with business units in the bottom quartile, those in the top quartile of engagement realize substantially better customer engagement, higher productivity, better retention, fewer accidents, and 21% higher profitability.

Of the Management Top 250 rankings, 12 companies had two stars (poor) for employee engagement and one company that only had one star (extremely poor). Four of the 12 were retailers who are challenged with engaging customer-facing employees who earn minimum wage or slightly higher with minimum benefits. Five of the 12 were technology/software companies. Three of the 12 were large industrial conglomerates.

What should the Drucker Institute companies on the Management Top 250 do to improve employee engagement and ultimately improve their overall ranking and scores? The first thing is recognizing that they have a problem and devoting time and energy and efforts to improve employee engagement. It is even more imperative when you have a growing millennial workforce who are motivated by different drivers than baby boomers of the past.

Here are my suggestions:

Find your purpose. Articulate your values, vision, and culture. Roll it up into a simple easy to comprehend purpose statement that is communicated across the organization. Use the words to live by and to execute the company's strategy if they reside in posters on walls and have no "substance or accountability" they will be viewed as meaningless. Your purpose should be the criterion for hiring the best talent, evaluating the performance of your strategy, peer to peer appraisals and feedback — innovation and marketing programs. It's time to engage "purpose" as the new business process for the next generation just like TQM, Reengineering and JIT was in the 80s/90s.

Realign your brand to become purpose driven. This is a hot topic that much has been written upon over the last few months. The Association of National Advertisers has recently surveyed their members and have identified "Brand Purpose" as the word of the year within the marketing and advertising community. In their report, it states, "it drives our brand. Purpose takes the word brand to a whole new level. It creates a greater partnership between consumers and marketers to be responsible to each other and shift the focus from selling engaging." The ANA even established a center for brand purpose to fuel business growth by helping marketers create purpose-driven, strategic programs and solutions for their products and services.

Put your money where your mouth is and start investing and employee engagement. I can't tell you how many times CEOs and CHRs ask me the question why their employee engagement numbers are not exceptional. I usually respond by asking how much time, and energy and budget do they allocate for HR experiential programs, onboarding and employee engagement. They are response generally is that they allocate minimal amounts of money and resources to internal employee communications, experiential programming, social media and employee engagement research. I usually respond with a question, "Well what did you expect to get with a minimal investment? Do you think employee engagement happens by osmosis?" If they had a public relations crisis would they stand and do nothing? If their IT infrastructure was out of date and slow, would they do nothing? Management stands ready to make investments in new technologies, innovation disruption, opening new markets, marketing, and public relations efforts, but for some reason unbeknownst to me, they are not prepared to make the financial commitment and adopt a rigorous business process to employee engagement through dedicated resources, budget, and applied processes. This must change!

As I said previously there is ample research that shows that companies who make a significant time energy and investment in employee engagement have higher PE ratios, shareholder value, stronger brands, higher customer engagement and more.

So, what is it going to take for a company to change?

Be transparent with your people by being truthful, ethical and moral. Adopt programming and procedures that promote diversity and inclusion, equal pay for equal work, environmental sustainability, wellness. With so much transparency in the digital age, employees and consumers can spot if companies are delivering on their promises are not. Companies must be authentic and walk the talk. If a senior executive transgresses their moral code as a result of sexual harassment or downplaying the #me to movement; get rid of them. If management made poor decisions that mislead customers such as Wells Fargo or Volkswagen; get rid of them. Act quickly, ask questions later.

The Drucker Institute and The Management 250 Ranking has shown five core components of improving business excellence and performance. In my opinion, one of the easiest ones that have a dramatic impact on performance immediately is focusing on employee engagement. If you would like to take a look at how your organization ranked among the 250 companies that were rated, please click here. https://www.wsj.com/news/collection/management-top-250-2018-0f2075f5

If you would like some guidance, support or just a conversation around this topic, please feel free to contact me. At the very least, I promise you a lively discussion on a fascinating question. Happy holidays.

Allan Steinmetz CEO - Inward Strategic Consulting 617-558-9770