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Managing for Employee Engagement, Not Overtime

A while back, I was given financial oversight for a boutique restaurant and lounge that had recently opened in Los Angeles, California. Food and beverage operations were new to me, but I quickly discovered that two costs really mattered – costs of goods sold (e.g., the food and drinks we were selling) and of course labor. For months we tried to dial in our labor costs, and our knee-jerk reaction was to limit overtime. It made sense, right? Why pay someone 1.5 times their normal pay when you can hire a new person to do the same task at a standard hourly rate?

What I discovered, however, was that my “gut” was wrong, and I learned a few other things too. First, my best people were naturally hard workers. Second, they loved getting overtime pay. Third, the effort I saw from my star performers in hour 48 of the week was the same as what I saw in hour 15. Fourth, the better employees didn’t purposefully game the system to get overtime pay. Rather, they just wanted to help out, and if they made a little extra, they saw that as a win-win scenario for them and the restaurant.

Armed with these observations, we started deploying our employees differently. We managed them based on engagement, productivity, and value. If our engaged performers wanted overtime, we gave it to them. If our average and below-average performers wanted overtime, we limited it. Interestingly, the restaurant’s performance began to improve. My sense is that our engaged servers and bartenders sold more product, and they certainly created better customer experiences. So while it cost us extra to have them around for a few more hours during the week, they paid for themselves and more because they added value. Once we stopped focusing on cost cutting and started focusing on engagement, the needle on the financial dial started moving in the right direction. In financial terms, we became focused on what mattered above the line (sales and customer service) as opposed to only looking for savings below the line (labor costs). We also learned that you can run a restaurant with fewer employees if engagement is high. So, in the end, even though we paid overtime, total payroll costs went down.

This experience taught me the importance of managing for engagement, not overtime. I would recommend the same basic concept to you; don’t let performance problems, costs, delays, and other distractions keep you from focusing on those within your organization that are already engaged and ready to contribute more. It’s another way of gathering the proverbial “low hanging” fruit. Engagement and performance predictably aligns itself across a bell curve. No organization has within its ranks all top performers. Nor can any single company maintain a workforce that is entirely engaged. We try to improve engagement, but we will never eliminate the bell curve, we can only change its shape for the better. Consequently, you will always have a smattering of talent to work with. Savvy managers accept this fact and attempt to manage for engagement across the entire spectrum, and not just in the problem areas.

Consider this example. A company’s sales team has about 12 members, with two members that account for over 40% of the company’s top-line revenue. Their superb performance is not solely attributable to the nature of their accounts. Management has observed that these two employees simply seem to “get it.” This company might respond in a few different ways. First, it could try and help the other 10 sales team members. It might lay off the bottom quartile, which simply resets the bell curve. Or, it could implement stricter oversight for the entire team, which might lower engagement – even among the top performers.

While these options seem reasonable, they are primarily focused on the problems. When managing for engagement, successful leaders also consider ways to incentivize their top performers even more. Remembering to manage for engagement will help you to look through the distractions and realize that value can be harvested not only by helping those that need improvement, but by giving additional attention to those that are already engaged and ready to work. Don’t fall prey to the assumption that I had made about our top performers at the restaurant—that there was no way to get more from them or it was too costly to do so.

I also need to touch upon a hot-button issue for many companies. As the Affordable Care Act continues its rollout, many organizations are focused on keeping employees part-time so as to avoid having to pay increased healthcare benefits. This is a smart tactic, but it also presents the same issue that I dealt with in my overtime example. Thus, my advice is the same. Don’t automatically assume it will be too costly to utilize good people.

In the end, engagement is not just a “feel-good” goal for the HR department; engagement is a company asset. While it can’t be booked on the balance sheet, engagement can be used effectively—the same way you use name recognition, market share, or other intangible assets for an organization’s benefit. This was a key takeaway for me from my restaurant management days. Finally, I am not suggesting the only way to manage for engagement is by spending more or avoiding cost-cutting measures. Nonetheless, glaring financial metrics shouldn’t necessarily distract management from examining ways to maximize value from its best and brightest.

First Day Employee Engagement Killers

Unlike my father who worked for the same employer for over 40 years, I have been employed by 5 different organizations during the last 15 years alone. My winding career path may be similar to yours, which means you and I have experienced the dreaded “first day” too many times. An employee’s first day is naturally stressful. There are the human realities of trying to fit in, trying to make a good impression, and the constant effort to avoid saying something imprudent. On top of these worries, it’s like drinking from a fire hose as you learn new names, organizational charts, systems, and how to manage a phone that was built in the 1980s – all while keeping in mind where the bathroom is located. So, when I meet a new employee to handle his or her HR “paperwork,” it’s readily apparent from the eye twitches that it has been a rough day.

I generally live on the compliance side of things, which is to say I worry about intake forms, legal documents, and making sure the onboarding process meets the company’s objectives. In the past, we haven’t been too concerned about how the employee views this process. We are beginning to discover, however, that like viruses that infect the human body, your HR processes may be infecting your employees with “engagement killers.”

After an examination of your HR processes you might find a few lurking engagement killers, but I would like to focus on the very first one an employee encounters: paperwork during the onboarding process. With all that a new employee is trying manage on their first day, we compound matters with a regulatory bonanza of I-9s, W-4s, and plan descriptions (many of which I don’t even understand). This paperwork, rather than helping inform the new employee, often makes them feel like a cog in a machine waiting to be processed. Embedded within in this paperwork, are other latent engagement killers.

For example, how must it feel to a new employee when just after they’ve been to lunch with their future co-workers, they are told that the company has a 90-day probation policy? Alternatively, we are careful to make it clear that we can terminate the new employee at any time, and then we “lovingly” ask them to sign a lengthy legal document where they swear undying loyalty to their new employer (e.g., a standard non-competition agreement).

I am not suggesting we ditch our essential paperwork, but at DecisionWise we try to focus on the broader employee experience. Plus, we know that an employee’s first impression is important, if not critical, in nurturing their relationship with the company. So my pitch is that we need to decouple the compliance aspect of the onboarding process from the employee’s first day. That way, new employees will have the freedom to focus on the human stuff – the stuff that really fosters engagement.

Here are some suggestions on how to accomplish this goal. First, to make this process work, you will need to utilize formal offer letters. By utilizing formal offer letters, you can ask your new employees to return a signed acceptance to you. Once you have their signed acceptance, you can begin sending them your standard paperwork packet in advance of their first day. The U.S. Customs and Immigration Service has opined that employers may provide an employee their I-9 once the job offer has been accepted, even though the employee has not officially started. The employer then has three days from the employee’s first day on the job to complete the employer’s portion of the I-9. [1] This means there is no legal reason you have to complete the I-9 on the new hire’s first day. In addition, there is no specific date that has been mandated for completion of IRS Form W-4.[2] Finally, federal law requires that a New Hire Report for the New Hire Registries be completed within 20 days of the new hire.[3] All other internal paperwork may be dealt with shortly after the first day of employment, as those documents are technically private contracts.[4] Accordingly, as far as I can tell, there is no paperwork that must be completed and filed on the actual hire date.[5]

So, what’s the point? The point is that employers should consider giving new hires most of their paperwork before they start. This gives the new employee time to read the paperwork and to come prepared with questions that are important to them instead of having them try and think of questions in the moment. Time to think will increase engagement. Of course, your paperwork process should not languish for weeks. You will need to complete the process by the second or third day of the new employee coming onboard. With some planning, however, your new hire will experience his or her first day free from a visit to the HR office.

One last suggestion – you don’t have to spend a lot of money to change the way you do things. First, you can always mail your paperwork to new hires. But, since this is 2015, you might consider using Google® Forms or other software alternatives such as Adobe’s EchoSign® or DocuSign®. In addition to not costing all that much, these services provide paperless delivery along with an audit and tracking mechanism that ensures your documents are signed and filed for safekeeping. So, at the end of the day, not only will you have done something to grow employee engagement, but also your compliance processes will become a little tighter, which is always a good thing.

[1] USCIS Handbook for Employers, Guidance for Completing Form I-9; M-274 (Rev.04/30/13); Since E-Verify is based off of Form I-9, then compliance with Form I-9 should constitute compliance with E-Verify, including state mandates to use E-Verify.
[2] IRS Topic 753- Form W-4 – Employee’s Withholding Allowance Certificate.
[3] http://www.acf.hhs.gov/programs/css/resource/new-hire-reporting-answers-to-employer-questions; state laws may shorten the time frame so employers should verify their specific state requirements. In Utah, the time frame is still 20 days.
[4] A word of caution is warranted here. While you might be able to wait a few days, you would not want to give unfettered access to a new employee without having a confidentiality agreement in place. So, you will need to balance things. Thus, you might consider identifying any mandatory documents that should be completed and the corresponding due date.
[5] http://www.nolo.com/legal-encyclopedia/hiring-first-employee-13-things-29463.html

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3 Steps to Correctly Analyze Employee Engagement Survey Results

How much rigor do you use when analyzing your employee engagement survey results? The truth is, most organizations don’t dig deep enough.
Download: Sample Employee Engagement Survey

Let me share an example that will help clarify what I mean. The other day my seven-year-old came to me and told me he was sick and couldn’t go to school. Now, I love my kid, but let’s just say that when it comes to school attendance, he hasn’t earned my unadulterated trust just yet. So I check his throat and, wouldn’t you know it, it’s bright red. Flaming red. So, (a)I felt bad for questioning him, and (b) I immediately went to get a thermometer. His temperature was higher than normal, but nothing I would normally worry about. But coupled with how bad his throat looked, it was enough to put us on the road to an urgent care facility and the doctor running some strep tests.

So, back to your engagement survey. There are three basic steps when analyzing results of any kind (we’ll focus this article on differences in employee engagement scores). First, identify a difference. Second, determine if it’s a real difference. And third, if it is real, determine how meaningful it is.

In the example, my son came to me with a difference (he felt different from when he was healthy). I could have taken these results at face value, but I’m sure you can come up with a number of reasons why that would be inadequate parenting. So my next step was to determine whether or not that was a real difference. A visual check and a temperature check indicated that perhaps there was a difference from his normal functioning. At this point, it seemed likely that he should stay home from school. (OK, he’s starting to earn a bit of that academic trust back)

Likewise, most organizations stop at step one or two and make the mistake of drawing conclusions and taking actions without understanding whether their engagement results are real and meaningful.
Let’s look at each step in more detail.

Step 1: Identify Changes in Scores “Differences”

A typical employee engagement survey consists of participants answering questions along some sort of scale. This is your basic quantitative survey. Reporting generally falls along the lines of taking the percentage of respondents who answered a certain way, and ranking those numbers against the other questions or comparing them to past years or to industry norms. “We see a 5% increase in item X as compared to last year and we have lost 3.2% in item Y.” Does this sound familiar at all? Likely. We seldom see a company that doesn’t make this comparison.

This method of interpreting results is intuitive; it makes sense to almost any audience. The problem here is in the fundamental nature of measuring humans. We’re not atomic particles. You can ask us a question one day and it might be a completely different answer from when you asked us last week. We’re fickle and capricious and easily swayed. And even when we try to be consistent, we’re not. So any survey of employee attitudes and perceptions is going to have some natural fluctuations one way or the other.

Flip a coin 100 times and I’ll bet you $100 that it doesn’t end up 50-50. It will more likely be off balance, something like 53-47 or 45-55. If you then said “looks like we lost 8 percentage points from our first flip,” technically you’re correct. But does that loss mean anything?

So when we say we “lost 3.2% in item Y from last year” not only are we being overly precise on something that shouldn’t be measured with such granularity, we’re not even sure if that’s a real difference or if it’s just random chance. This method is not robust enough to draw any conclusions yet. We need to know if the difference is real and significant.

Step 2: Test the Significance of the Difference

Fortunately there are statistical analyses that we can use to analyze whether those differences are likely due to chance or to some sort of meaningful difference. Data are compared, and a score is spat out. That score corresponds with a percentage likelihood that the difference is due to chance—or not. The typical cutoff used by statisticians and sociologists when dealing with people is 5%, which for our purposes here means there is only a 5% chance that the difference between two things is due to random variation.

This level of rigorous testing is critical for interpreting data meaningfully. We have to know if a real difference exists before we start investing in something that was never actually a problem to begin with. However, statistical testing is not without its concerns.

Statisticians are quite good at what they do. As such, they have developed tests that are incredibly sensitive in picking up differences between groups, even when the groups are quite small. In industry, we often are testing large groups of employees with relatively sensitive tests, which can lead to complications.

Let’s look at this in real life. A 2013 Business Insider poll asked which American states were the most arrogant. New York won, although followed closely by Texas. Let’s say I want to examine whether New Yorkers have a reason to be more arrogant than Texans, and I choose “average IQ” as my measure. I want to make sure I capture the effect, so I test 4,000 people from each state—a statistically representative sample of the overall population. Lo and behold, I find that New Yorkers do, in fact, have a reason to be arrogant, as they have significantly higher IQs than Texans (corroborated by a 2006 study). After all, as Babe Ruth said, “It ain’t braggin’ if you can back it up.”

A deeper dive into the data, however, reveals that New Yorkers averaged a 100.7 on the test, and Texans an even 100. That means in a 75-minute test, with hundreds of activities and tasks, the average Texan possibly defined one fewer word, or could only recite six numbers backwards instead of seven. In other words, despite the statistical test indicating there was a significant difference, that difference is meaningless. Texans redeemed.
Using significance can work if the environment is just right. But, there are enough potential obstacles that could necessitate something a bit more powerful.

Step 3: Measure the Effect Size

This is where effect size calculations come in. Effect size measures the magnitude of the difference between two groups. This simple procedure can shed a vast amount of light onto the true nature of the differences and allow for more meaning to be drawn from the results. The interpretation of effect size numbers is actually very straightforward.

A score between 0 and .2 is a trivial difference.
A score between .2 and .5 is a moderate difference, and at that point where you want to start paying attention.
Any score above .5 is substantial and should be either a cause for concern a cause for celebration.

For the IQ example, the effect size was .02, i.e. it shouldn’t merit a second thought.

Effect size can always be measured, and is independent of significance, meaning every significant result has an effect size, but not every effect size is significant.
Sometimes, when looking at the difference between two groups, it is readily apparent that the difference is so small as to be negligible (as in the IQ example). However, often it is not. Statistics take into account both the average of a group and also the variation of scores around that average. This can reveal insights that might go undetected.

Recently, I completed an analysis for one of our employee engagement client partners. When comparing their survey items to our national norms, several items jumped off the page as needing immediate attention. But, one that was lurking in the wings was a question that asked if they “…[understood] how [their] work contributes to the overall goals of the organization.” This particular item typically receives fairly high scores across industries, and while this organization came in lower than the industry benchmark, the scores were still relatively high. Under normal circumstances, this would have been treated as a non-factor.

However, the effect size was unusually large. Further analysis revealed that the scores on this question are relatively tight around the average score (there wasn’t much variance between employee opinions). When this company scored lower than the benchmark or average, that was a more meaningful difference than a question with a greater differential, but for which answers range all over the scale. In other words, it wasn’t just a few employees telling the company they were having a “below average employee experience,” it was most employees. Dealing with this issue ended up being one of this company’s highest priorities to come out of the survey. It wouldn’t have even registered without checking for effect size.

The reality is that any question you ask is going to have a distribution of answers. To ignore the distribution, in favor of reporting simple comparisons such as those we typically see from most surveys is not only inadequate, it’s potentially misleading. Bad data result in bad decisions. The effect size is a straightforward calculation that resolves any problems arising from sample size or comparing differently shaped distributions. Further, it has the added bonus of simplifying ordering priorities.
The next time you analyze results, ask yourself if you’d rather:

Make your job harder and get poor conclusions, but at least do it the way it’s always been done, OR
Expend the same amount of effort in calculating, less effort in interpreting, and draw more accurate conclusions.

Without answering each question in the three-step process, organizations can be distracted by focusing on the wrong issue or miss an issue all-together. Remember:

Is there a difference?
Is that difference real?
Is that difference meaningful?

The end of my story is that when the doctor swabbed my son’s throat for a strep test, the redness came off on the swab. It turns out my wonderful progeny had decided he didn’t want to go to school. So at breakfast, he ate around all the red marshmallows from his cereal until he was done and then swallowed them last, hence the bright red throat. I was too impressed to be angry. And more germane to this article, had I not followed the three-step process (i.e. seeing if the apparent difference was meaningful), my conclusion would have been incorrect. Maybe we all need to quit faking it and get back to school.

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4 Misconceptions CEOs Have about Employee Engagement

Listen, I get it. Your employees have a good job that “most people in the world would die for. “They’re only working 40 hours a week. They have healthcare. You’re matching their 401k contributions. You even PAY them for time OFF.

This is the fault of the Millenials, isn’t it? Just one more example of this entitled, me-first generation infecting the workplace. Why don’t we just give everyone a trophy for showing up on time? Better yet, if they’re not happy, they should just get another job, right? Heaven knows in this economy, there are plenty of people who would be willing to take their place.

It’d be nice to help employees be engaged, sure, but it’s not necessary. Ultimately it’s the epitome of a first-world problem, an indulgent luxury, and a darn shame that we even need to address this softest of all soft skills.
But indulge me for a moment to review some common misconceptions out there about employee engagement…

1) Employee Engagement is just another perk

If I gave you a choice between a sharp saw and a dull saw, which would you use to cut something? What about between a computer with more RAM and one with less RAM? Is there ever a scenario where, all other things being equal, you don’t choose the better performing tool?

And if that’s the case, it should apply to employees as well, i.e. you would always choose the better performing employee. I shouldn’t have to make too strong an argument that an employee engaged in their work is going to produce better quality work than one who is not engaged.

Engagement isn’t a perk you trot out to entice potential recruits, or wield in lieu of bonuses. Engagement is a primary motivation, the state of existence in which employees operate. They’re going to be motivated by something; it might as well be the intrinsic nature of the job. Stop thinking of engagement as a perk and think of it more as a core cultural element.

But going back to that false dichotomy from earlier (the choice between an adequate employee and a great employee all other things being equal), all other things aren’t necessarily equal, are they? Generally, when choosing between a good tool and an adequate tool, you take a value/cost ratio into account. You might not need a top-of-the-line tool, just one that you can afford that still gets the job done.

2) Employee Engagement is a premium option, not the value one

My first car was a 1967 Mustang. It wasn’t in the best condition, but as a high school senior, it was the best I could afford. Or so I thought. Within two years, I had replaced a cracked head, the transmission, brakes, tires, spark plugs, front shocks, front and rear speakers, as well as changed the axle alignment and installed a shoulder strap for my seat belts. Turns out, I could have bought a car that was 3 years old instead of 30 and I would have spent about the same amount of money and spent much less time on my back in the garage.

It’s good to be cost-conscious. And you can do it two ways: spend less money upfront, or invest in something that will save money over the long haul. It really depends on your business model which one you choose for employees.

If you have a model that burns through employees really fast and wouldn’t benefit from keeping them around, by all means eschew investing in engagement.

However, reality quickly sets in and reminds us that most companies don’t have that “luxury.” And, even if they did, organizations have a moral responsibility to create a good working environment. So, if you think that “just maybe” it would be better to have employees that work harder, for a longer time, and for less money “What?!” You’re probably saying right now “you can’t just throw that in without any explanation!” You’re right. Let’s do a quick thought experiment, if I gave you a choice between two jobs where one of them was fun, and one of them was fun but helped feed hungry children, would you work for less to do the more meaningful job? This is how jobs like “teacher” and “social worker” and “mom” get away with paying so little. Maybe you should stop throwing money away and invest in helping people engage. And here’s the kicker – it doesn’t take a lot of money (often, none at all) and the investment in creating a culture of engagement becomes self-perpetuating to the point that it stops being an active investment, and turns into muscle memory.

3) Employee Engagement is only for people in cushy jobs

Is your job (or that of your employees) too taxing to worry about engagement? Are long hours, dangerous working conditions, or simply a miserable environment creating a workplace that skews closer to needing a survival mentality than an engaged one? For the answer to this one, I turned to my friend Stephanie, who served two years in the Peace Corps.
Has it ever been too hot to sleep and so you took a walk at night and got attacked by a camel spider? Had your spouse almost die from a scorpion sting? Been mugged on the job? Stranded in the desert without food or water? Had to go into lockdown because an armed militia wanted to kidnap your students? Known exactly what those lockdown procedures were because this happens so often?!

The point isn’t to play “Whose job is the hardest?” (she wins), but rather to point out that even in the most extreme circumstances, you can find engagement. “I can’t say every day was joy-filled. But I can definitely say I loved it,” she told me. “There were awesome moments, such as a student teaching me Chichewa through us singing together as we watched the sun set or thwarting a pretty awful, corrupt public official. But also a general awesomeness that wasn’t about any specific moment.”

Engagement is possible in any job condition because it’s not about the environment alone but, rather, the person in the environment. In fact, it’s probably even more crucial when the environment is dangerous or difficult or tedious because otherwise what motivation keeps them around?

And that’s why this last point is so important…

4) Engagement isn’t a learnable skill

Let’s play Desert Island. You get transported to an island in the middle of the ocean with 50 other people. What skills do you bring to the table that make you a valuable member of the castaways? Some medical know-how? Maybe you’re an engineer and you can help create an aqueduct. I’m a consultant that specializes in employee engagement so I’m probably the first to be cooked for dinner.

When it comes to survival, literal or figurative, most would say employee engagement is not a priority investment. Not to say it wouldn’t help, but as I said earlier, it has the reputation as a perk, a soft squishy management tactic, and something only companies with more money than sense would throw resources at. So yes, employee engagement training tends to come across like a luxury – a “less expensive version of a company yacht.” Right? Not so fast.

One of the quickest of quick wins in business is correcting this misperception. Being a skill in which you can train is actually employee engagement’s strength because it means ANYONE CAN GET BETTER AT IT! I know because I’ve seen it hundreds of times. And the best part is any amount of investment will show dividends. You can’t say that about a ping-pong table in the breakroom. Rather than thinking about employee engagement as a frill, it should be considered an essential component of unlocking your company’s full potential.

Employee engagement, at its most basic, is just making life a more fulfilling experience. It’s not a waste of time but rather a more efficient use of it! Wanting to be engaged is a natural part of the human condition and, therefore not exclusive to any one type of person or job. Do you know those days when you can’t wait to get out of bed? Would you like more of them?

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5 Personal Employee Engagement Wins: INFOGRAPHIC

Employee engagement is a two-way street. It’s a 50-50 proposition. It’s the organization’s responsibility to provide a working environment where employees want to engage, but employees need to choose to be engaged. So what’s in it for employees you ask? Here are Five Personal Employee Engagement Wins that employees receive by being engaged.

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Infographic: Where do you land on the Employee Engagement Spectrum?

Employee engagement isn’t binary. It’s a continuum, a SPECTRUM! There are many levels, and they change over time. In our employee engagement surveys, we break down the results into four categories.

This infographic displays the truths, myths, and characteristics of employees from fully engaged to fully disengaged.

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