Feature
SDR
Engage employees to boost
performance
The Business Case for Engaged
PerformanceTM
People do not become engaged at work merely
because they get paid a lot, or because they have
a fast computer, a nice cafteria or flexitime. Even
inspirational leadership, on its own, might not do
the trick.The question remains, what does engage
them? To help answer that question and to
understand better how to tap employees
discretionary effort, research was initiated
recognising that the vast majority of employees
are not star performers. In reality most people
make up the engine room organisations depend
on to get things done.
Stars tend to be intrinsically motivated, and
they capture most of the prizes on offer the
most interesting work, the best promotions, big
salary increases and bonuses. The more difficult
challenge for employers is capturing the hearts
and minds of good, reliable employees who are
not stars but who are significantly more produc-
tive when engaged.
Research suggests that many organisations are
not succeeding. A huge percentage of their
engine room employees are disengaged.
Employee Attitude Surveys1 show that fewer than
half of them feel that they do interesting work.
Just one-third feel they can advance, and only
about the same proportion feel that better perfor-
mance will lead to increased pay. What seems to
matter more is a better psychological contract,
one that successfully engages by letting people
know their contributions matter.
Employees start every day with an extraordi-
nary amount of energy, but the amount of discre-
tionary effort that people apply to their jobs
varies tremendously. Hunter, Schmidt, and
Judiesch showed that even in relatively simple
Selection & Development Review Vol. 18 No. 2 May 2002
Chris Watkin The Hay Group
jobs the difference in discretionary performance
between superior and average performers was
19 per cent (see Figure 1)2. In more complex jobs
such as sales, the difference was as great as
120 per cent.
What gives similar capability accounts for the
significant gaps between superior and standard
performers? The answer seems to lie in the
individuals degree of motivation and engage-
ment.Work with a professional services firm con-
firms the link. At 10 of the firms regional offices,
employees current levels of satisfaction were
measured using the Engaged Performance
diagnostic survey. Professionals in the five most
engaged offices generated 166,400 average
revenue per consultant. Those in the five least
engaged offices generated just 116,100 per con-
sultant.The offices with engaged employees were
as much as 43 per cent more productive.
Figure 1: Difference in value-added
discretionary performance between
superior and standard' performers
Type of Job Performance
Difference
Low-complexity jobs 19%
Moderate-complexity jobs 32%
High-complexity jobs 48%
Sales 48%120%
3
Engaged Performance defined
Engaged Performance is defined as a result that
is achieved by stimulating employees
enthusiasm for their work and directing it
toward organisational success. This result can
only be achieved when employers offer an
implicit contract to their employees that elicits
specific positive behaviours aligned with the
organisations goals.
Getting Engaged Performance is not just about
investing financially in employees through pay
and benefit increases. It is about striking a new
contract in which the organisation invests emo-
tionally in its workforce. In exchange, employees
make a similar emotional investment pouring
their discretionary effort into their work and
delivering superior performance. The new con-
tract says, Well make your job (and life) more
meaningful.You give us your hearts and minds.
Work is a significant part of peoples lives.
When you meet someone new, the second or third
question is What do you do? It seems imperative
that leaders give people meaning in their work
because passionate employees get better results. If
leaders cant give people passion about their
work, employees will find it somewhere else.
What Engagement looks like
University of Chicago psychologist Mihalyi
Csikzentmihalyi3, who has studied the psychology
of engaged employees at all levels, found that they
create a hyper-focused state of mind. He calls it
flow. People in flow are exhilarated and are
remarkably unstressed even when doing
challenging work. They lose themselves in a task
they love and feel out of time.Their brains work
efficiently and precisely. People are much more
likely to be in flow while working than while
involved in leisure activities. Moreover, flow
occurs most often when tasks are tightly aligned
with the persons goals.
What Disengagement looks like
Disengaged employees go through the motions
of what is required of them at work.They are not
proactive, do not show either initiative or
commitment, but most perform well enough to
get by as acceptable. Yet within this group are
4 Selection & Development Review Vol. 18 No. 2 May 2002
many people who have high levels of engagement
outside work in their local community. They
experience flow, but not at work, because the
environment they work in disables engagement.
Engaged Performance and company
valuations
If people are a key source of competitive
advantage, their engagement and performance
levels can make or break any organisations
strategy. Ultimately, delivering strategy is about
hiring the right people and motivating them to
deliver results. Employers, therefore, need to
answer three questions:
What types of people will help our organisa-
tion succeed?
Why would the best people for our business
want to work here?
How should we treat our people so that they
deliver peak performance?
These questions cut to the heart of engaged
performance, and influence company valuations.
A survey by Ernst and Young4 of institutional
investors showed that 35 per cent of their deci-
sions now hinge on non-financial factors. The
investors top-ranked non-financial factor was
execution of corporate strategy i.e. manage-
ments ability to motivate people and channel
their discretionary effort. Employers ignore at
great risk the elements that contribute to the
engaged performance of their employees. In the
public sector, politicians now recognise that, man-
agement quality and staff morale are critical to
successful service delivery.
Why Engagement is important
Working relationships within organisations have
changed significantly since many of todays Chief
Executives started work. Before the early 1990s
recession, an unspoken contract existed between
employer and employee: commit to working here
for the long term and we will offer you job
security, good pay and promotions. But the
recession led to re-engineering and downsizing,
breaking that contract.
Moreover, there is a new mindset among young
people who began their careers in the boom
years after the 1990 recession.They do not expect
 Figure 2: The Engaged Performance Model 6 Core Elements
lifetime employment with a single employer. Most
consider personal fulfilment in their work as a
birthright and this is extremely unlikely to
change during economic downturn.They will just
take different options for example, becoming
self employed rather than work for a low-repu-
tation employer or in a place they dont like.
Many organisations that have not recognised
this significant change in agenda are struggling to
cope. Frustrated executives say, we raised their
salaries, gave them performance-based incentives
and more flexibility but were still losing good
employees and having productivity problems.
The demands of the employee tend to mirror
the demands customers now make. Customers
have become increasingly demanding and busi-
nesses have responded by forging new value
propositions, usually value-added service. To
become an employer of choice you have to think
about the people you employ the same way you
think about customers.That means offering them
a rewarding environment to work in, not just
financial rewards.
Selection & Development Review Vol. 18 No. 2 May 2002
Proof that Engaged Employees
deliver results
Will engaged employees really deliver improved
business results? Research in leading business
schools from eminent academics such as David
Guest5 and Dave Ulrich6 is producing clear
evidence on the added value of getting the
people issues right.
Recent research for the Chartered Institute of
Personnel and Development from a range of
sources confirms the engagement/productivity
link. For example, organisation effectiveness
research at the Institute of Work Psychology at
Sheffield University showed that among the
manufacturing companies studied, good manage-
ment practices could account for an 18 per cent
improvement in productively and a 19 per cent
improvement in profitability7. People manage-
ment practices were a better predicator of com-
pany performance than strategy, technology or
research and development.
The Hay Group has identified six motivational
drivers that help create an engaged workplace
and influence results. They are: Inspiration and
5
Values, Future Growth/Opportunity, Quality of
Work, Enabling Environment, Work/Life Balance
and Tangible Rewards.
Not all of these drivers will matter equally to
everyone. You need to collect specific data to
identify the most significant needs within the
different demographic segments of your work-
force. Only then can you develop high-impact pro-
grammes to meet employees needs and
effectively engage them. One-size-fits-all no longer
works as a HR or Reward Strategy.
In sum, it requires a coherent people model.
The payoff is clear when organisations create the
conditions for engagement and tap their
employees discretionary effort: improved
morale, higher productively and a boost in
financial performance.
Earning Engaged Performance from the engine
room is about organisational change. Its difficult
and takes time. It requires research to learn more
about your organisation. It needs to encourage a
continuous performance dialogue one that is
not just about processes and systems, but about
real changes in behaviour. As such it requires
senior managers to adopt the appropriate leader-
ship styles required to create a climate where
engaged performance can happen. Its often heard
said that, Organisations dont change, people
change. Focusing on Engaged Performance can
help achieve that change.
6 Selection & Development Review Vol. 18 No. 2 May 2002
References
1. Based on data from Hay Insights employee
opinion database, which contains survey
responses obtained in the past four years from
about one million employees at more than
330 companies.
2. J.E. Hunter, F.L. Schmidt & M.K. Judiesch,
Individual differences in output variability as
a function of job complexity. Journal of
Applied Psychology, 75, 2842.
3. Flow: The Psychology of Optimal Experience
by Mihalyi Csikzentmihalyi. Harper & Row,
New York, 1990.
4. Measures that matter: An exploratory
investigation of investors information needs
and value priorities, by Sarah Mavrinac & Tony
Siesfield. Ernst & Young Centre for Business
Information and the Organisation for
Economic Co-operation and Development,
1998.
5. David Guest. Personnels Paradox: People
Management, 27 September, 2001.
6. Dave Ulrich. Delivering results: A new
mandate for human resource professionals.
Harvard Business School Press, 1999.
7. Cited in The Change Agenda by Simon
Caulkin. Published by the Chartered Institute
of Personnel and Development (CIPD), 2001.
Chris Watkin is a Chartered Occupational
Psychologist working for the Hay Group. He can
be contacted on: chris_watkin@haygroup.com
The Hay Group has helped many international
companies and major public service
organisations create sustained performance by
engaging their workforce and has developed the
Engaged PerformanceTM Diagnostic.