Low Employee Engagement and Retention is a Business Risk
“I never worry about action, but only about inaction.” — Winston Churchill
Finding and retaining good talent was always hard and is getting harder.
As we keep hearing, the “Great Resignation” is well underway.
Data from the Bureau of Labor Statistics indicates that job openings are at a record high and have been increasing for several months.
Recent surveys by Bankrate and McKinsey reveal that more people than ever before are voluntarily changing jobs or actively considering leaving. Fifty percent of employees fit into these two categories per the Bankrate survey data.
Anecdotal data I get from my clients and members in the Journey CxO Community reinforces my sense that attracting and retaining people is harder than ever.
Yet I remain confused.
I firmly believe that, as leaders, we know what to do to address low employee engagement and job satisfaction challenges.
Why do I believe this?
1. We Sit on “Both Sides of the Table.”
Many of us hold the role of both employer (i.e., are a manager or leader) and employee (have a boss above us in the organization.)
We have ample opportunity to reflect on our own experiences in the workplace over our careers. In addition, we can listen to the work experiences of our loved ones and close friends and the feedback they offer on how work could be better.
I see the solution as simply applying the golden rule with some judgment. Let’s treat others, especially those less fortunate that us (i.e. further down the title/earnings ladder), as we would want to be treated.
2. Quality Content with Specific Advice Exists.
There has been a lot written on this topic recently making suggestions on how to improve employee engagement and the employee experience. A couple of examples of blogs replete with content include the First Round Review People and Culture section and the OpenView Partner HR and Leadership blog. This recent McKinsey Quarterly article reminds leaders that they have the choice and power to change the employee experience.
Yet, on balance, as employers, leaders, and managers, we are not doing enough.
Why is this? If at our core, we know what to do, why don’t we take positive action more frequently?
My hypothesis for this confusing behavior lies in this inherent contradiction that governs much of our behavior. Between what we think we “should” do or is appropriate behavior for an employer versus how we would like to be treated.
- When we put on our organizational hat, we overvalue rationality and logic (the left brain) and undervalue emotions and belonging (the right brain.)
- By contrast, when we think and speak as employees and individuals, how we feel (emotions and all the other right brain “reactions”) are much more impactful than anything driven by economic logic.
Employer Behavior –> Poor Outcomes
I believe no one single item fully explains the mismatch between employer behavior and employee experience. However, a combination of the explanations described below (different ones are more salient depending on the individual company) help make sense of this conundrum.
1. Lack of Incentive Alignment.
Really bad behavior, such as creating a hostile working environment, is usually (though not always) penalized. Pro-social or good behavior is often not recognized in the shared company environment. We do however broadly praise business outcomes such as product releases, customer growth metrics or new contract wins. There is not enough publicly recognized upside to the individual manager for being far above average as a leader.
2. “Caring” Is Hard to Measure.
There is a business proverb, “What gets measured, gets managed.” Revenues, costs, products sold, hours worked – these are all relatively easy to measure. Being a good boss and colleague is hard to measure, at least objectively with the same fidelity as the other metrics above. Items that are hard to measure don’t typically get incorporated into compensation plans. While I prefer not to believe that incentives drive all behavior, they certainly have a substantial impact on where we focus our time and attention, both precious resources.
3. They Call It “Work” for a Reason.
Wearing the employer hat, we might think, ‘Jobs come with a paycheck for a reason. They are not always meant to be “enjoyable” or “interesting” or “satisfying” all the time.’
If as the employer I am paying a slightly above-market wage with appropriate benefits, isn’t that enough? I believe “good hygiene” in compensation and benefits is necessary but not sufficient to create engaged employees and a positive workplace experience.
4. The Confusion of Urgent with Important.
Caring about others is always on our to do list as important. It is rarely as urgent as updating the model, getting a code fix done, or talking with another prospect. We believe we will get to it in the future. And that we can make up for a period of neglect.
In reality, caring (or lack of it) is something that compounds over time much like fitness training, healthy eating or saving for retirement. Consistency and authenticity with the little things on a regular basis are more important than big gestures on an occasional basis.
5. Treating People with Love Is Harder than It Sounds.
Genuinely caring about others whom we work with is hard, especially given the challenges we all face daily (work, personal and family and life needs). Sometimes, people are unsure what to do. They need others to model the expected behavior. Those to whom this prosocial behavior is second nature may not realize others in the organization need to be taught, encouraged, and appreciated for doing it. So we underinvest in training for this.
6. “Mission Statements” Sound Better Than They Feel.
If you are the founder/CEO or People Leader of an organization you helped sculpt the “vision, mission and values.” It really resonates with you. The mission reflects how the organization makes a big difference in the lives of “customers”.
However, the bureaucracy of all organizations coupled with the minutiae of daily work often conspire to make the mission seem ephemeral. If statements on purpose were enough, non-profits would have no turnover except for pure monetary reasons.
7. “Status” is more valuable to those at the top.
Social status is a huge motivator of human behavior. Feelings of status have important impacts on happiness and satisfaction. Those in leadership roles in organizations may forget that the “status benefits” they receive from their title and influence in an organization is far greater than that experienced by people one or two levels below them. Similar to the point on “purpose” above, the value of “status” related to a job or career may be overestimated by those closer to the top. To those who experience the benefits of high status, the importance of the workplace environment is less.
8. The Motivating Power of Big Goals is Overvalued.
A lot of the writing on leadership, particularly about start-ups and transformative technology businesses states that the role of leaders is “to make the future possible.” That future may include the goal of creating something tangible and revolutionary (a new product) or something intangible and valuable (a billion-dollar market capitalization business.) These BHAGs (big, hairy, audacious goals) even when they are realized take a long time to achieve. Typically, many years and often multiple decades. The time horizons of the founder/CEO as well as the VC/PE investor are much longer and very different from most employees.
9. Money Is More Emotionally Valuable in Theory than Reality.
Rationale logic says taking home an extra $500 or $1000 per month after taxes is a sizable raise and thus offering these sorts of rewards should make employees excited to stay. When we think hypothetically about earning more money (a raise, a new client, a big bonus or commission check), most of us feel excited.
However, psychologists have shown that hedonic adaptation results in the initial excitement of getting something “valuable” wear off quickly. It is why although the quality of life today is far superior to what it was 50 years ago (in almost every measurable sense), the level of happiness is not materially higher. While we can “see” money in our bank accounts, we don’t actually “feel” the benefit of having more as strongly (unless you are being lifted out of poverty.) Money does not stick in the emotional centers of our brain (to be recalled affectionately later) as does a genuine compliment or a hug.
10. The importance of “belonging” is undervalued.
One of the important and under-appreciated roles of the modern workplace is to create “community.” For younger people (those single or married without kids), work was the place to build a new community after college. Particularly in an era where attending religious services (a traditional alternative path to community) keeps declining. It is much easier to create community and thus feel belonging when there is the opportunity for repeated casual, short and unplanned interactions. In a post-COVID world where we are interacting over Zoom it is much harder to feel the emotional connection that comes with close human interaction. Zoom conversations are much more structured and thus feel transactional.
11. “No One Ever Got Fired for Buying IBM.” Or, the Status Quo Bias.
This anachronistic phrase means that if we make the safe bet and do what everyone else does, we can’t get into trouble with our “bosses,” whether they be managers, Board Members, or shareholders. Intellectually, we know that above average results are achieved by taking non-consensus actions. But non-consensus actions are also far more open to second-guessing when they don’t create a favorable result. Benchmarking is everywhere in our lives, both business and personal.
While benchmarks can be useful, in this case they perpetuate a vicious cycle. By copying the behavior of other comparable employers, we unwittingly make the problems of employee engagement worse.
The Illusion of Low Control
Leaders at many companies have fooled themselves into thinking that employee engagement and retention is largely out of their control. Employers tell themselves that employees are mostly responsible for choosing to stay and choosing to engage. This is a dysfunctional belief. But its persistence makes sense because we humans are biased to see action (i.e. quitting) as a choice and inaction (i.e., staying) as unrelated to personal agency.
The reality is that a choice to not do something – not react to a remark or to stay with the same job – is as much of a choice as action that changes the course from the status quo.
Employers ought to remember that they influence employees in both making the choice to do something and the choice to not do something.
Low Employee Engagement and Retention is a Business Risk
In early October we are deep into the business planning cycle for most companies. When plans are presented and discussed with senior leadership and the Board, an element of the dialogue centers on execution risk. Almost all plans show meaningful revenue growth and the associated risks typically called out are about product (new feature or module development), the go-to-market motion and hiring cadence.
Employee engagement and retention is rarely mentioned as a risk. If there is turnover, it is often rationalized as acceptable – ‘we don’t mind losing persons X and Y; now we can upgrade our talent in that position.’ Because of our unconscious bias towards recognizing and pursuing change in a positive direction, we set new hire goals, new customer addition targets, and new product release dates. And we hold ourselves accountable to these metrics.
I strongly believe that employers can make a positive change in the lives of their existing employees by consciously engaging with them in a more caring and connected way. By treating employees as they would like to be treated or have wished that their partner or children were treated.
Employers need to take on this challenge to combat a sizable and typically underappreciated business risk.
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