The Weak Linkage Between Employee Engagement and Productivity

Posted by on Jul 11, 2011

Look Before You Leap

Managers often leap from the notion that “employee engagement is low” to “engaging employees will increase productivity and our strategic success”. While there may be a strong link between these ideas in some cases, it is far from universally true.

Some will undoubtedly wonder how we strayed from strategic management to productivity. After all, isn’t productivity primarily about operations management? The answer is an emphatic no! Productivity is defined as “the value of outputs divided by the inputs required to produce them”. By that definition, an effective strategy improves productivity, even if it contains no initiatives to increase efficiency.

Strategy is about selecting the right priorities, usually to reap more revenue per dollar of cost by “doing the right things”. If we can sustainably produce more value for every dollar of inputs (labour, capital, material cost, etc.) our strategy is on the way to becoming a success.

A myriad of possibilities for increasing productivity

Pursuing more revenue per dollar of inputs offers a wide range of possibilities for increasing productivity, profits and strategic success. Just a few of the ways we might do so include winning and keeping more profitable customers, bringing new or improved products or services to market, increasing internal efficiency and reducing errors through process re-engineering, adopting new technologies to increase efficiency, or even by outsourcing manufacturing to a lower cost country. These are all strategic, and all could improve productivity.

One idea present in many strategies is increasing labour productivity by training or incentivizing employees to “work smarter” or faster, thus getting more units of output per employee hour. The prospect is tantalizing because in most organizations, we can see inefficiency in the ways human resources are deployed and in how they operate. We can’t fault managers for thinking that if they could engage employees more deeply in their work, it would translate into more dollars worth of output for every dollar of inputs. It’s easy to see why some leaders place employee engagement on their short-list of strategy ideas.

But not only is it far from the only strategy to increase productivity, it’s possible that increasing employee engagement could achieve just the opposite – decreases in productivity! In the March 2010 issue of Talent Management Magazine, Laurie Bassi and Dan McMurrer of McBassi and Company argued that “since the drivers of employee engagement are not identical to the drivers of business results, attempting to maximize employee engagement can actually take an organization in the wrong direction.” We agree, having seen it happen in a few organizations.

Myths about employee engagement

Bassi and McMurrer’s article cites three common myths about employee engagement that prompt poorly thought-through initiatives:

Myth No. 1: The drivers of employee engagement are the same everywhere.
Myth No. 2: The drivers of employee engagement are the same as the drivers of business results.
Myth No. 3: Employee engagement should be maximized.

These myths underlie the flawed logic that persuades some leaders to leap too easily from “lack of engagement” to “let’s engage everyone”.

Four key questions you should be asking yourself

If your strategy includes the intention to significantly increase the leverage you gain through your human resources, we suggest you guide your initiatives by finding good answers to four key strategic questions.

1. Through which of your core strategies could you gain the most through increased leverage of your human resources? Your strategy map provides a good tool for identifying opportunities to increase employee engagement in the right areas – the ones most likely to accelerate payback from your strategy.

2. Specifically what can you do to make it easier for your employees to excel in delivering results that are aligned with your strategy? For example, if delivering superior customer service is part of your strategy, how will you discover and remove roadblocks that are holding your employees back, and sharpen their skills to deliver?

3. How will you develop, maintain and retain the knowledge, skills and attitudes of your workforce to make this a sustainable advantage for your organization instead of just another “program” or “flavour of the month”? If workforce engagement is going to be a part of your strategy, you’ll benefit greatly from developing a human capital strategy for building and retaining the capabilities on which your success will depend.

4. How will you measure and track progress to ensure you’re achieving the gains you anticipated? This is an important question not only for gains intended to come from employee engagement, but from all key elements of your strategy.

Of course, the answers to these questions will differ widely among organizations. And that is precisely why you should be taking a strategic approach to employee engagement, basing your approach on what you most need to succeed with your organization’s strategy.

© Knowlan Consulting Group Inc. 2011

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