What leaders in growing companies are getting wrong about employee engagement
Once upon a time, not so long ago, there was a one-location, family-run business in the Western US that had been around for generations. The company tweaked its approach, made changes to its products and services and since this worked out well enough for them, some investors poured in their money.
The influx of funds resulted in new people coming in to occupy decision-making roles in the company. And within a span of five years, the company grew from 100 employees to well over 2,000 employees. Its growth wasn’t restricted to its home location but the company branched into 100 locations all over the country in that time period.
Within a span of five years, this company grew from 100 employees to well over 2,000 employees. Its growth wasn’t restricted to its home location but the company branched into 100 locations all over the country in that time period.
So far, so good, right? Well, this is what we usually hear about companies that scale up from the outside. But ask the leaders and employees of an organization that is scaling up or has scaled up, they would tell you there is a lot more than what meets the eye. Scaling up is tough and you need to do a lot more to appear more than just a success story. There’s a lot of pain involved.
It was particularly so for this company given that it was a family-run business, says Dr Jonathan H Westover, Managing Partner and Principal at Human Capital Innovations, and Associate/Professor Chair – Organizational Leadership at Utah Valley University. As Part of Freshteam’s Leadership Series, Dr Westover spoke to us about the importance of employee engagement and satisfaction, especially in the context of an organization that is in the process of going from the start-up to the scale-up phase. Dr Westover worked with the company whose story I began the post with, as a consultant.
In this session titled “Implementing and Measuring Employee Engagement and Satisfaction While Scaling Up Your Business”, Dr Westover talks about:
- Why all managers must be trained in HR functions
- Variables or factors that determine Employee Engagement and Satisfaction
- Ways to measure Employee Engagement and Satisfaction
- Two main factors that are important to create an employee-centric organization
- Lessons from a company that transitioned from a startup company to a scale-up company
1. HR functions are not limited to the HR department
So, one of the key challenges the family-run business (for convenience’s sake, let’s call it ABC) whose scale-up was fuelled by investors’ money, was bringing in people in key leadership positions and decision-making positions. Due to the rapid nature of the scale-up, the organization went from a basic management structure with two layers where everyone knew everyone (most of them were family members) to a multi-layered, hierarchical structure.
Dr Westover says in any organization, anybody who has any sort of a leadership role, from the executive-level roles to all the way down to a supervisor, performs HR functions. They help in:
- Defining the nature of the job
- Forecasting future labor needs
- Providing training
- Interview and selection processes for new hires
- Performance evaluations and performance management
- Provide meaningful coaching and feedback to employees in their teams
- Recommending pay increases and promotions
- Communicating corporate policies
- Motivating employees
“Unfortunately, a lot of people who are in those roles are never trained in HR, they are never trained in these functional areas and they don’t actually know how to do these things. And this is particularly relevant within the startup space and within organizations that are rapidly scaling,” says Dr Westover.
Often, founders of companies start off with a great idea of a product or a service addressing some consumer need that takes off that leads to rapid ramp-up and they suddenly realize their company has grown 10-20 times the original size. Most of the time, the founders have a technical specialty and may not have any background in management or leadership.
“They don’t have any background in how to do all of these things that every person that manages people has to be able to do for an organization to be successful,” says Dr Westover.
It’s tough if you have founders that don’t understand the necessity for ensuring that all those in leadership positions need to be trained to perform HR functions. “Even if they don’t have the expertise, they recognize the importance that then they can advocate for investing in it. Getting that buy-in early is important and it’s hard when you don’t have it represented in the founders,” says Dr Westover.
If the founders do not have the expertise to ensure all their managers are trained in leadership or HR functions, they could hire an expert or bring in a consultant. If not, they could explore various online avenues such as LinkedIn Learning, Society for Human Resource Management, HR Certification Institute or the World of Work, besides other free resources.
2. Why aligning with mission is a make-or-break situation
When ABC was in the transition phase, they went from being spread across a metropolitan area in a single state to all over the country. They were trying to maintain the core of their organizational culture. “Any organization would have to work really hard in that situation to try to maintain and have a sustainable positive culture,” says Dr Westover.
This was especially difficult for ABC to keep their core intact and maintain their organizational culture as the dynamics are totally different in a family-run setup.
“What is the driving purpose of this organization, what value are you going to add into the world and that needs to be reflected in your mission statement. And when you have a powerful mission statement and there’s a clear reflection of the internalization of that mission statement within the broader organizational culture, that then drives higher levels of organizational commitment of employees within the organization,” says Dr Westover.
This results in higher levels of personal engagement from employees in the organization, which leads to better performance outcomes for the organization. Do remember that having a mission statement alone doesn’t do anything but embedding that into the organization’s culture and helping employees internalize that in the way they work would make a world of difference.
There are a couple of factors by which organizations can approach mission statements:
- Designing a high-performance work system
- Getting person-organization and person-job fits right
Designing a high-performance work system
“It’s not that warm, fuzzy fluffy type of stuff that we’re talking about… an employee-centric culture that directly also hits the bottom line of the company. If you invest in the human capital, just like investing in other forms of capital, you will drive higher profits and there’s so much research to demonstrate that,” says Dr Westover.
“On the other side of the equation, when you have a really positive workplace culture, where people feel safe, they feel valued, they feel like they can contribute and they want to contribute, and they’re not worried to fail, but they’re going to try new things. When you have that kind of an innovative, knowledge-sharing type of a culture, it drives innovation, it drives creativity, it drives higher quality which leads to better customer satisfaction, greater productivity and higher profits,” explains Dr Westover.
Getting person-organization and person-job fits right
Both person-organization and person-job fits are of a similar construct in value congruence (when employees feel that their jobs require behaviors inconsistent with the values they think make their self-image), says Dr Westover. He says when you bring people into your organization, they bring with them all of their collective experience and background and worldview and perspective. They bring along their values to the table and they also have a driving purpose as to why they want to be part of the organization.
“When there is alignment between the person and their values and the organization and its values, we say there’s a high person-organization fit. When there’s a close alignment with the specific job that they’re performing, we would say there’s a high person-job fit,” says Dr Westover.
If organizations aim to achieve both person-organization and person-job fits along with value congruence, this leads to:
- Higher job performance
- Stronger future job choices
- Lower rates of intent to leave and turnover
- Higher job satisfaction
- Higher organizational commitment
When organizations are scaling up, they cannot think only for the next quarter or two but they need to have sustainable systems, processes, policies and structures that will help them to manage that growth and to mature as an organization. “And that will only happen if we have good people within the organization to help that growth occur,” says Dr Westover.
3. There’s no one-size-fits-all formula to improve employee engagement and satisfaction
ABC was trying to morph into a national organization with distributed geographic presence and a much more complex structure from a small, family-owned company with limited resources. With new leaders and employees coming in, there was a lot of headbutting, politics and backstabbing. The leadership demonstrated quite a bit of passive aggressive behavior where what you were told to your face would be completely different from what was said behind your back.
If you look at this company, it is a unique case with its unique set of challenges and they couldn’t really borrow templates to create an employee-centric organization from other firms and plonk it to solve all their problems.
In a model developed by Dr Westover with respect to work quality characteristics, employee engagement and job satisfaction, his research demonstrates factors such as work relations, intrinsic and extrinsic rewards and work-life balance are critical in designing an effective employee-centric workplace.
“I’ve done a lot of comparative international research where I’ve looked at how this model plays out across the globe, across dozens of countries, finding out the similarities and differences in those countries about which of these factors are more important in particular sectors and particular types of organizations have different levels of jobs and so forth, because there’s what I hope will come across here is that there’s not an easy fix. There’s not a one size fits all to employee engagement and job satisfaction,” says Dr Westover.
When all these variables are in place, then organizations can start the hard work of designing engagement evaluation systems that would help one to see where the employees are at in relation to these variables. “This way we can ensure a really meaningful and powerful organizational experience for them where they feel valued, they feel supported and they can continue to help the organization to succeed,” says Dr Westover.
4. How to go about measuring employee engagement, organizational culture and engagement
At ABC, there were high levels of employee turnover, which outstripped industry norms. They were about 10 times the industry average, partly due to problems with the workplace culture, organization and leadership. Besides leadership, there were legal and policy issues.
Even for the lowest level in the organization (which really needed just high school education) coming into the organization, they had to go through 2,500 hires. And for each hire, it cost the company $5,000! The financial costs were much higher, given that there was high turnover at all levels.
To complicate matters, different people were voicing different opinions and there was no consistency in terms of communication. There was no consistency in terms of how policies were interpreted and implemented. There was no consistency in all the institutional mechanisms that help to reinforce the culture.
Some of the ways to measure employee engagement and satisfaction are:
a. Determine engagement outcomes: The basis for creating an engagement strategy for any organization begins by determining its engagement outcomes. Each organization, its founders, its values, its culture and even its definition of employee engagement and job satisfaction is different.
“If you don’t have clear alignment between the outcomes that you’re going to try to achieve and the metrics you’re using to measure, then you’re never going to get to where you want to be,” says Dr Westover.
b. Convene focus groups: “The C-suite says we were going to use this survey, now everyone go do it and managers make sure your employees do this – If that’s the approach, it’s not going to be particularly meaningful or helpful for your organization,” says Dr Westover.
You need to put together focus groups for interviews and create employee buy-in and while this definitely takes up more time, energy and resources, this would lead you to the desired outcomes.
c. Identify what’s important to your employees: Just because the executive leadership values certain things, it doesn’t necessarily mean that all the employees value those things as well. Understanding what they truly value will help you leverage their capacity and help increase their motivation and engagement levels.
“If there’s a misalignment between what you’re offering and what they want, then you’re not going to have the desired outcomes. Plain and simple. And organizations miss this point all the time,” says Dr Westover.
d. Perform a drivers’ analysis: You can use data analytics and statistical analyses to figure out what is important to your employees. But the accuracy of the analyses would depend on what the drivers and how they are defined.
“So sometimes employees say something’s really important to them. But when you actually do the analysis, you realize, oh, that doesn’t actually play out in the data. You realize that it’s not actually as important as they say it is, especially in terms of how it influences their motivation and performance,” says Dr Westover. It’s prudent to revisit the core drivers at least once a year.
e. Use pulse surveys and single-click polls: These can be an additional way of getting some the data that throws light on what your employees want.
f. Develop a continuous listening strategy: As clichéd as it sounds, an open door policy helps but make sure the leaders/managers are approachable and give them the confidence that they want to listen to their colleagues and that their inputs are valuable.
g. Hold stay and exit interviews, conduct employee recognition activities: When an employee is leaving, you need to know what they see as a better opportunity. Though there’s a lot of emphasis on exit interviews, there’s not much so on stay interviews. You don’t want to know why your employees are leaving for greener pastures when they are leaving because you don’t want them to leave. So, having regular stay interviews with all the employees, especially the best ones, on what they value about being in the organization and what will it take for them to stay there would not only motivate them to do better but also, to not leave the organization in the first place.
Organizations must ensure that all the employees know that their contributions are valuable and that they are acknowledged for the work they do.
h. Measure retention rate and track productivity metrics: While you would want to know about the overall retention rate in the organization, it makes sense to find out the rates by division, by department and under specific leaders (to identify if there are any leadership problems). Again, start with the outcomes in mind and devise the metrics that you need to track productivity.
“Some types of productivity metrics may not actually be all that relevant to the type of engagement you’re trying to drive and the types of outcomes that you’re trying to drive. So, just make sure that you’re thinking about those metrics always,” says Dr Westover. This is especially important when you have limited resources.
Measuring Organizational Engagement
Though it’s extremely important to measure individual engagement, sometimes, organizations often overlook measuring engagement across the organization, across groups and teams, the institutional, vertical and horizontal relationships.
“We know that a lot of people leave jobs because of their manager, for example. Everything else about the organization could be great. There could be great alignment between the values of the employee and the organization’s really powerful engaging mission/great purpose. Everything else about the job could be wonderful. People might still leave and so we need to make sure that we’re monitoring those relationships and have mechanisms in place for that,” says Dr Westover.
A simple tool Dr Westover recommends that can be used by any organization is Gallup’s Q12 employee engagement. You could go formally through Gallup where the information collected from your organization goes into a large pool of data and you can see how your company stacks up against others. Or you can still use these questions to measure key areas of engagement.
“You don’t need any special software, you could use a Google form, put these questions into it, send it out to your team, get their inputs, aggregate the data and track it over time. And that would be a powerful mechanism for you to have a general sense of engagement within your organization and it wouldn’t cost you any money and you could do it immediately,” says Dr Westover. “Every organization could do this tomorrow, and it would be super simple, right?”
5. How leadership style and breaking free from silos will help your organization become employee-centric
The family members in the organization were finding it difficult to manage all the complexities the transition brought on. Though there were efforts to raise people from within to leadership positions, it was extremely difficult to develop organizational leadership amidst chaos.
Along with fostering organizational culture of knowledge-sharing and innovation, there are two other main factors that can help create employee-centric organizations that will lead to long-term, sustainable growth within the company. Dr Westover says servant-leadership (the intersection of leadership and service) and breaking free from functional silos would enable creating an organization that is employee-centric.
When leadership meets service
“Servant-leadership is where a founder managers, C-suite executives don’t see themselves above the other employees but recognize the innate value of every employee, the unique value they bring to the table and then they support and help them so they can leverage that value to help the organization. And when that’s the mentality, it leads to really greater things,” says Dr Westover.
While leaders need to have intellectual humility and constantly self-reflect and better understand their own motivations and drivers but cannot assume others want what they want or they would have similar perspectives on different things as themselves. Leaders and managers need to break down their personal biases – both implicit and explicit – to understand the employees they lead and serve.
“And when we do that, it’s this feedback loop, right, the more I understand about others, the more I understand about myself. The more I understand about myself, the more I understand about others, and that helps me lead better,” he says. These feedback loops, along with continuous life-long learning and applying it, being committed to their employees and wanting to help every employee fulfill their potential, is how great leaders run their organizations.
Breaking free from functional silos
Dr Westover strongly believes that teams, particularly those that make up rapidly scaling startups, should be built of people “who have a combination of an interdisciplinary approach breaking free of functional silos”. Or, in other words, teams that can understand the holistic nature of the business – all the core different functional areas – and also have enough functional expertise that they can make good decisions.
“They’re a 100 yards wide and a 100 yards deep rather than a mile wide and an inch deep,” he says. The bottom line is while expertise is important and you do need certain experts to drive innovation, you also need collaboration and when people get stuck in their silos, collaboration isn’t happening and people aren’t talking,” says Dr Westover.
Most of the innovations happen not because somebody is a genius and comes up with something that changes the world but because two smart, intelligent people from different areas of expertise talk to each other and see a connection that nobody has previously seen.
Lessons from ABC’s scaling up story
Dr Westover and his team worked with ABC for around 18 months and put together some really good measurement tools and implemented them consistently and holistically across the organization, which started giving some good outcomes. They helped the company develop measurement tools to understand its engagement and satisfaction that was influencing the turnover issues that it was facing.
“We were getting really positive feedback, especially from supervisors and middle management level people within the hierarchy. They were really loving the types of insights they were getting and the types of analytics we were providing them. We were helping them make better hiring decisions and retain their people. There was a lot of good positive movement,” says Dr Westover.
Unfortunately, Dr Westover’s team did not receive the same kind of excitement from the executive level leadership, who became defensive as they felt the new approaches were putting them in harm’s way. All the issues culminated into their finances going out of control. Ultimately, ABC filed for bankruptcy. They laid off most of the employees in an emergency meeting by the board held over a weekend.
Some of the things that ABC could have done to avoid this outcome:
- They shouldn’t have waited until they had 2,000 employees to address issues arising out of inadequate employee engagement and satisfaction measures. Even if you have five employees, you should be looking at engagement and satisfaction metrics, you should be measuring them and you should be addressing the issues arising out of those. “So, certainly as you grow, if you get up to 20, 50 or 100 employees, you absolutely should be doing that. And when you get to the point where you have hundreds and thousands of employees, if you’re not doing that, I can almost guarantee you’re going to have major problems,” says Dr Westover.
- When a company is going through a churn or a transition, the employees have high levels of concerns regarding the situation and the constant changes they need to undergo. The leaders must take really proactive measures to develop trust among the employees and to maintain it.
- “If you’re going to err in terms of your communication strategy, if you’re going to err, err on the side of over communication,” says Dr Westover. If adequate information is not provided or if the employees perceive that there’s not enough information, people would fill in the vacuum or the void with gossip and conspiracy theories. People would try to fill in those gaps that they perceive to be there with information that is not usually positive. “So communicate, over-communicate, be transparent, engender and foster trust. These are all just really core elements that any organization is going to face, but particularly as a rapidly scaling organization. There’s just so much uncertainty,” says Dr Westover.
- The company was trying to address some “super-deep problems too late in the game”.
- Despite bringing in an external advisor to sort out the issues, there was no common commitment among the leaders at ABC in working towards their goals.
Dr Westover says, “There were key leaders that were bought in and then there was a lot of buy-in down the line, but there were too many key stakeholders at the senior level who were secretly undermining things that ultimately, it wasn’t successful. And it’s a cautionary tale for organizations.”
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