Report Proves "Employees Matter" to Your Bottom Line

Sometimes managers push back on my science-based approach to team building by saying, in effect, "academics don't know what goes on in the real world." How delightful, then, to download a free report with 150 pages of real-world evidence that employee-centered business practices raise profits exactly as the research literature says they would.

Employees Matter: Maximizing Company Value through Workforce Engagement reports on structured interviews with 16 companies and additional research with eight others. It was written by Anne Claire Broughton, Senior Director of the SJF Institute. Affiliated with venture-capital firm SJF Ventures, the nonprofit institute renders assistance, mentorship, and best practices to "companies that provide green solutions and build workplaces where employees can grow and thrive."

Three traits the profiled companies had in common were low turnover rates, "high customer satisfaction rates and strong year-to-year customer retention," the report says. Most survived the Great Recession without layoffs, and all have had the kind of financial success any business owner wants. Those with full profiles in the report range from 50 employees to more than 3,500, with reported 2009 revenues from $6 million to $101 million. The report emphasizes that many provide lower-income positions; these practices aren't just for knowledge workers.

Of the ten "Employee Engagement Strategies" Broughton says emerged from the interviews, I'll focus on the ones most applicable to teams. The first makes chronological sense: "High Involvement Hiring." The report mentions Zappos.com founder Tony Hsieh, who recently admitted he wasted $100 million on bad hires before switching to this philosophy. "Hiring practices used by Employees Matter companies include conducting multiple interviews with multiple current employees, and holding separate interviews for skill and culture fit.

"At employee-owned engineering consulting firm ATA Engineering, for example, up to 12 current employees might interview a prospective hire," the report says. I have long taught that the best way to make sure a candidate will fit with your team is to include the team in the entire process.

Broughton writes that training is emphasized in all of the firms, "from initial orientation and soft skills (such as dressing for success and effective communication), to specific skill training, to ongoing coaching and management training." PrintingForLess.com invests eight to 10 weeks in new-hire orientation. A third of marketing firm Red Door Interactive's employees had taken management training, reminding me of the U.S. Marine Corps philosophy of training everyone to lead.

"Fostering a Culture of Mutual Respect and Trust" is exemplified by the "'attitude of gratitude'" mentioned by co-founder Maria Kingery of solar company Southern Energy Management, and by the catch-phrase "FOH" ("Frank, Open and Honest") described in the report and an earlier post on Namaste Solar. In a related strategy, the companies also "enjoy a range of celebrations, from potlucks and birthday lunches to annual holiday parties to lavish company-wide trips to Las Vegas." Anyone who has celebrated a sports victory or attended a post-show cast party knows the power these have for motivating a repeat performance.

Another common practice is, "Communicating the Company's Core Values Clearly and Consistently." Methods include "having new employees sign a mission and values statement, developing employee recognition programs crafted around core values, and reinforcing the core values in trainings and office signage," the report says. This should occur at the team level as well. I was especially impressed by the "no gossip" policy of PrintingForLess.

Two of the strategies go hand-in-hand: "Sharing Key Success Metrics," and "Performance-Based Rewards and Compensation." CleanScapes, a waste management company, provides "'CleanStats,' a summary of key metrics shared with employees at weekly company meetings." The effort by Full Sail Brewery to implement open book management includes "putting potentially confusing financial language into 'per barrel' terms–a frame of reference brewers understand…"

"And companies that value team-based performance are deliberate about tying some rewards with achieving metrics as a team," Broughton reports. The president of a thriving U.S. furniture company is indirectly quoted to say, "If you want an increase in team productivity, make sure the compensation system rewards team results rather than individual behavior." The report is replete with examples of bonuses based on performance improvements (such as "gainsharing").

Finally there's empowerment. "While the degree of employee participation in decision making varied from company to company in the Employees Matter interviews, making sure all employees are heard and have input on how work is done is key." Broughton adds, "sometimes the best ideas for efficiency improvements come from employees on the production and shipping lines or on the phones."

Some of the companies go so far as to make decisions by consensus. "Although it might be faster to use a 'benevolent dictator' decision making process, General Manager Jeff Young (of ATA) said, it would not result in the same broad level of buy-in."

There is so much useful information in the report, any top leader should download it. But I especially recommend that entrepreneurs with team-sized companies do so. The report says a Yale business professor concluded after studying startups, "it is much easier to get the culture and human resources blueprint right the first time than to go back and try to change it later, and that firms that established a strong culture from the beginning had a greater chance of long term survival."

In an interview, I asked Broughton where she would start. "Know what your core values are and focus on them…" she said."Know your critical numbers and keep associated metrics," making sure each employee knows what they need to accomplish and their individual impact on the metrics. But first, "make sure you hire the right people."

Gaining the results these companies have achieved takes intentional effort over a long time, Broughton said. "They get it, and they do it, and they do it well, and they keep checking in to re-tool it if they need to." The companies show the only barrier between you and higher profit may the one you put between what you know and what your employees do.

Perhaps Paal Gisholt, CEO of SmartPak, sums up the report best when he says, "'it is really hard to ask your team to treat customers really well if they're not being treated well themselves.'"

Action Item: Download the report and create a list of three best practices from it to try with your team within the next six months. Fill out a schedule of tasks with dates, and share it with a peer to help you stay on track.

Source: Broughton, A.C. (2011), Employees Matter: Maximizing Company Value through Workforce Engagement, SJF Institute: Durham, N.C.