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Published Article on Employee Engagement and Employment Value Proposition
 

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    Published Article on Employee Engagement and Employment Value Proposition Published Article on Employee Engagement and Employment Value Proposition Document Transcript

    • O R G A N I Z A T I O N D E V E L O P M E N T J O U R N A L Linking the Employment Value Proposition (EVP) to Employee Engagement and Business Outcomes: Preliminary Findings from a Linkage Research Pilot Study Brian K. Heger, AT&T Abstract source of competitive advantage.2 The discrepancy be- tween the new employment relationship and the desired This article addresses an important business concept business outcome of achieving competitive edge through called Employment Value Proposition (EVP), which de- human capital presents significant challenges to those scribes the value or benefit an employee derives from his who are charged with retaining key employees and en- or her membership in an organization. The EVP has been gaging the workforce. These challenges are compounded suggested to be a determinant of employee engagement by a growing job market in which employees increasingly and retention, both of which have an impact on critical reevaluate their firms’ Employment Value Proposition business outcomes. Specifically, this article describes a (EVP)— the value or benefit an employee perceives by pilot study which examines the relationships between var- serving as a member of the organization—and determine ious EVP and employee engagement measures and the for themselves the extent to which this “value” is com- business outcomes of profit margin, productivity, voluntary petitive. Employees who perceive their own organiza- turnover, and accounts receivable. Using an on-line survey, tions’ EVP to be less competitive than the EVP of other 614 respondents rated the strength of their organizations’ organizations are likely to disengage from their own ei- EVP and self-reported their levels of employee engage- ther by reducing their contributions or by leaving their ment. Results showed several important relationships organizations altogether.3 In either case, the outcome has between EVP fulfillment and the intention to stay compo- implications for a firm’s bottom-line. nent of employee engagement. However, relationships The current landscape requires, first, that organizations between the employee measures and business outcomes take a strategic approach to measuring the strength of were not as robust. Recommendations for making human their EVP and, second, that they accurately analyze the capital investments and improving the design of future resulting data to make human capital decisions that ef- linkage research interventions are discussed. fectively enhance employee engagement and business results. The ability to link these measures can provide a Introduction powerful roadmap for improving business performance and gaining a competitive advantage. Never before have we witnessed such a remarkable transformation in the nature of work than what we have seen in the past two decades. The wave of corporate re- Purpose and Overview structurings, technological advances, and competitive The purpose of this paper is to provide internal O.D. pressures that began in the early 1980s has rippled well practitioners with an approach to linking the EVP to into the 21st century by revolutionizing the terms and employee engagement and business outcomes. Over the conditions of work and redefining the relationship past few years, linkage research has been advocated as a between employer and employee. methodology for understanding the relationship between Much has been written about the “new employment rela- employee, customer, and financial data.4 Linkage re- tionship” and how it is characterized by diminished feel- search allows organizations to connect elements of the ings of employee loyalty, trust, and commitment.1 It is work environment—as described by employees— to em- interesting, then, to observe that the new employment ployee engagement and organizational outcomes such as relationship coexists in time with a business practice customer satisfaction and financial performance.5 How- termed employee engagement, which is often touted as a ever, few organizations utilize linkage research because VOLUME 25 • NUMBER 1 • SPRING 2007 | P121
    • of the significant challenges it poses—ranging from the Employee Engagement: Going Beyond Employee technical (appropriating and combining different data- Satisfaction bases) to the political (gaining and maintaining commit- Although the concept of employee engagement has ment).6 Our goal is to help internal O.D. practitioners semblance of employee satisfaction, a growing stream of overcome some of these challenges by sharing prelimi- research suggests a clearer distinction between the two nary findings from a linkage research pilot study that constructs. For example, the New Employer/Employee we recently conducted in one of our business units. Equation Study found that while 45 percent of employees First, we will briefly describe the concept of employee feel satisfied with their jobs, fewer of them are engaged.9 engagement—what it is and how it differs from employee In particular, only 31 percent feel that their employer satisfaction. Second, we will discuss our rationale for con- inspires the best in them, still fewer (20 percent) feel ducting this initiative and will share our methodology for passionate about their jobs, and less than 15 percent assessing the EVP and its impact on employee engage- feel energized by their work. ment and business outcomes. Third, we will share our Kahn lends further distinction between employee satis- preliminary findings and offer recommendations for im- faction and employee engagement.10 According to Kahn, proving the design and implementation of future linkage employee satisfaction is a general cognitive evaluation of projects. Although the full implications of our research an employee’s overall work experience and fulfillment of are still being understood, we believe that our approach basic employment needs. Measuring employee satisfac- and preliminary findings will encourage O.D. practitio- tion provides a barometer of employees’ general percep- ners to attempt their own linkage projects and overcome tions of their work environment, but it does not capture some of the challenges that we faced. In doing so, the how they express themselves intellectually and emotion- O.D. Community can build a better understanding of ally in their day-to-day jobs. In fact, it is well established the practical application of linkage research and use that the relationship between employee satisfaction and this knowledge to drive best practices that impact the job performance is tenuous at best.11 Conversely, em- bottom-line. ployee engagement has been shown to be strongly re- lated to employee performance12 and other important Employee Engagement Defined organizational outcomes including total shareholder re- The past few years have brought an explosion of interest turn,13 operating margin,14 turnover and absenteeism,15 in the area of employee engagement.7,8 This body of re- and customer focus.16 Although employee satisfaction is search describes employee engagement as the intellec- a useful measure, these findings suggest that employee tual and emotional attachment that an employee has to engagement is a superior measure for understanding the his or her work and organization. That is, employee en- link between employee attitudes, their behaviors, and gagement involves both rational and emotional factors— business results. what employees think (the mind) and feel (the heart) The section that follows will describe an intervention that about their work and organization. Rational factors in- we recently implemented in one of our business units. volve the relationship that employees have with the Specifically, we will discuss how we used the Employ- broader organization such as having the resources, tools, ment Value Proposition (EVP)—an employee’s perception and support they need to perform their jobs. Rationally of the value or benefit he or she gets through association engaged employees understand how their work contrib- with the firm—as a diagnostic tool for identifying high- utes to the success of the organization and have a clear impact employee engagement and retention strategies. line of sight between their roles and company objectives. We believe that employee engagement and retention are In contrast, emotional factors refer to the sense of inspi- largely influenced by an organization’s EVP, in that EVP ration and accomplishment that employees get from attributes (e.g. learning opportunities) serve to motivate their work and by being a member of the firm. Emotion- and retain a firm’s workforce. By understanding which ally engaged employees feel inspired to do their best, EVP attributes have the greatest impact on employee en- are passionate about their work, and recommend their gagement and retention, organizational leaders are better company as a good place to work. Simply put, engaged equipped to devise and implement workforce practices employees are intellectually stimulated and emotionally that enhance various aspects of business performance. inspired. They have the tools needed to perform their jobs, are advocates of their organizations, have a desire to stay with their employers, and willingly “go the extra Rationale for Intervention mile” for their organizations when needed. A business unit within our company that was experienc- ing above average turnover enlisted our support to col- laborate in the development of an employee engagement and retention strategy. The business unit provides IT P122 | VOLUME 25 • NUMBER 2 • SUMMER 2007
    • solutions, program management support, and consulting external research on the EVP and input from the busi- services to the external market. The organization is ness unit’s leadership team. Content selection was based unique in that its revenue stream is directly impacted by on attribute themes that emerged in the research as the number of employees who are assigned to a client drivers of retention and engagement, and which the account. Therefore, a position vacancy has an immediate leadership team deemed actionable or unique to its orga- negative effect on revenue until a replacement can be nization. Each attribute was given a name (e.g. mentor- recruited, onboarded, and supported quickly up the ing) and a definition (e.g. opportunity to spend time learning curve to work independently and productively. with a mentor within AT&T). The estimated costs of employee turnover for this busi- Using a 7-point Likert scale ranging from 1 (extremely ness unit are 150% of the departing employee’s annual unimportant) to 7 (extremely important), employees were salary. This organization’s leadership team wanted to asked to rate the importance they placed on each of the identify the drivers of employee engagement within its 52 EVP attributes (importance score). Next, using the workforce so that it could establish a targeted action plan same 52 attributes and a 7-point Likert scale ranging that would increase its Employment Value Proposition from 1 (extremely ineffective) to 7 (extremely effective), (EVP) and reduce employee turnover within its organiza- employees were asked to rate the organization’s effec- tion. A pilot study was sponsored as the first step in a tiveness at fulfilling these areas (fulfillment score). Last, series of sequential data collection over time. The intent we calculated EVP discrepancy scores by subtracting was to collect enough data so that linkages can be estab- the employees’ fulfillment rating from their importance lished and our approach could be refined and applied rating for each attribute. For example, if an attribute was on a much broader basis. given an importance rating of 7 (extremely important) and a fulfillment rating of 1 (extremely ineffective), the result Method is a discrepancy score of 6. The higher the discrepancy score, the weaker the EVP is for that attribute. Converse- Sample and Overview of Procedure and Measures ly, lower discrepancy scores indicate greater strength of The business unit for this study has 10 divisions compris- the EVP. The discrepancy scores were intended to serve ing 936 full-time company employees. All 936 employees as independent variables for measuring variation in were sent an automated e-mail invitation from the orga- employee engagement (one of our other employee mea- nization’s Vice-President to participate in this study. sures). Our hypothesis was that lower EVP discrepancy Six-hundred fourteen (614) respondents (66% response scores would indicate higher levels of employee engage- rate) completed the survey during a 2-week time frame. ment. We also used the fulfillment scores and importance Participants were informed that the leadership team was scores as separate independent variables. This methodol- conducting research to understand the importance that ogy was adopted from similar studies conducted in the employees place on various aspects of their employment academic literature on the psychological contract. 17, 18 and to assess the extent to which the organization was Based upon factor analysis and internal consistency tests fulfilling those expectations. The invitation included a of the actual survey results, the EVP content was later direct link to a website belonging to a third-party survey modified to include 41 of the original 52 attributes that vendor along with a Personal Identification Number were on the initial survey. As shown in Figure 1, these (PIN) each employee could use to access the survey. 41 attributes were grouped into 11 EVP categories. Although the survey vendor could link the PIN back to information in AT&T’s HR database for purposes of seg- menting survey results by demographics, no person or group within AT&T was able to access individual survey responses. The employee survey included: 52 EVP attri- butes, 11 questions on employee engagement, 1 question on labor market opportunity, 1 question on overall employee satisfaction, and 2 open-ended questions on employee engagement. Business outcome measures were gathered from existing archival data and included: profit margin, productivity, voluntary turnover, and accounts receivable. Employee Survey Measures E1. Employment Value Proposition (EVP) Ratings. The initial content for this measure consisted of 52 EVP Figure 1. Final EVP content structure of 11 categories and 41 attributes that we constructed upon guidance from the attributes. VOLUME 25 • NUMBER 2 • SUMMER 2007 | P123
    • E2. Employee Engagement Measures. Drawing on job. Each question included a drop-down menu of validated employee engagement models from the exter- category themes (e.g. communication, resources, etc.) nal research,19, 20 our working premise for this study was that employees could select, and a text box in which that employee engagement is one concept comprised they could write their comments. of three distinct components: discretionary effort, organiza- E3. Employee Satisfaction. Our survey included one tional advocacy, and intention to stay. Each component question to measure employees’ overall satisfaction with captures a unique aspect of employee engagement and the company. We included this question for trending can manifest itself through rational and emotional purposes since it has been asked for over 25 years on engagement, or both (see earlier part of this paper for previous AT&T employee surveys. Its inclusion also the distinction between rational and emotional engage- allowed us to test our hypothesis that employee satisfac- ment). For this study, we developed 11 questions to tion differs from employee engagement. A 5-point Likert measure the three aspects of our employee engagement scale ranging from 1 (very dissatisfied) to 5 (very satisfied) model. We conducted a factor analysis and internal was used for this question. consistency tests of the survey results to ensure that each question was a reliable measure of its respective compo- E4. Labor Market Opportunity. This measure was nent. The analysis confirmed our three-component used as a moderating variable consisting of one question model, but warranted the removal of three questions. We that gauges an employee’s perception of how challenging aggregated the remaining eight questions to form an it would be to obtain a job outside of AT&T that is of overall employee engagement index. For employee en- equivalent or greater pay and status. One of our hypoth- gagement measures A through C, a 5-point Likert scale eses was that the relationships between EVP fulfillment was used: 1 (strongly disagree) to 5 (strongly agree). and intention to stay would be moderated by the quality of alternative jobs available. For example, employees who A.Discretionary Effort. Discretionary effort was believe that it will be difficult for them to find similar measured using a three-item index that assesses an employment elsewhere are likely to remain with the employee’s tendency to go beyond the performance company even during periods in which their EVP needs requirements of his job. It includes survey items that are not being fulfilled.21 In such a case, perceptions of measure an employee’s willingness to look for new low EVP fulfillment are less likely to translate into lower and better ways of doing her job and helping cowork- levels of intention to stay. Moderating variables are im- ers. The internal consistency reliability (Cronbach’s portant to include in linkage research since they enhance alpha) is .72 for this scale. the predictive ability of the linkage model and may help B. Organizational Advocacy. Organizational Advocacy to explain counterintuitive findings.22 A 5-point Likert was measured using a three-item index that assesses scale ranging from 1 (strongly disagree) to 5 (strongly the degree to which an employee speaks positively agree) was used for this measure. about the organization, promotes the positive aspects of working for AT&T, and would recommend the Business Outcome Measures company as a good place to work. The Cronbach’s B1. Profit Margin. Financial measures for this study alpha for this scale is .73. were available for six major divisions. To calculate a sim- C.Intention to Stay. Intention to stay was measured plistic rate of profit margin for each of these divisions, we using a two-item index that assesses an employee’s used revenue, operating costs and average headcount for desire to remain employed with the organization. It is a 4-month period leading up to the survey. In combining based on survey items that measure actual job search these measures to estimate profit margin, we were able behavior and the frequency with which an employee to control for the size of the organization, which was thinks about leaving the organization. The Cronbach’s needed due to the wide variation in revenue and alpha for this scale is .79. headcount between the divisions. D.Employee Engagement Index. In order to capture B2. Productivity. Productivity data were available an overall measure of employee engagement, we cre- for 39 sub-divisions. Productivity was computed as the ated a fourth engagement measure that consists of the percent of an employee’s work time that is billed to the equally weighted sum of each of the three independent client; the higher the percentage, the more productive engagement measures (measures A through C). the organization. This was a cumulative measure span- ning 5 months of performance leading up to the survey. E. Open-ended Questions. To supplement the quanti- tative findings of this study, we asked employees two B3. Voluntary Turnover. Turnover data were available open-ended questions on employee engagement: (1) for 53 sub-divisions. Voluntary turnover was calculated What can the organization do to strengthen your de- as the percentage of employees who resigned in the sire to remain with the company? (2) How could the 5 months prior to the survey. It does not include organization enable you to be more effective in your involuntary terminations. P124 | VOLUME 25 • NUMBER 2 • SUMMER 2007
    • Figure 2. Linkage model of the EVP, employee engagement, and business outcome measures. B4. Accounts Receivable. Since this business unit did Preliminary Findings, Lessons Learned, not have a good customer satisfaction metric, Accounts and Recommendations Receivable (AR) data, which were available for 39 sub- divisions, was used as an additional business metric for 1. “Importance” scores provided marginal value. The this study. Since we were looking for an indication of first part of our analysis looked at the importance that business performance, the metric we used was the pro- employees placed on 41 attributes of the EVP. Results portion of AR that was unpaid after more than 180 days. showed that most employees rated each of the attributes Using the proportion rather than actual dollars served to as “very important” or “extremely important,” providing control for the different organization sizes. little variance in employee responses. Although we ex- pected more variation in EVP importance scores, these An example of the linkage model illustrating the results were not totally surprising when considering that hypothesized relationships between all of the employee our attributes are anchored in the most current research measures and business outcomes is shown in Figure 2. on employee engagement and retention. That is, many of the attributes that we included on our survey have been Data Analyses shown to be important to the general workforce. With almost no variability, the importance scores did not pro- Relationships between employee survey responses and vide any additional value for the analysis. Likewise, there business outcomes were tested at the appropriate level for was no need to utilize the discrepancy score for each at- which data were tracked (e.g. survey results for the 39 sub- tribute, since the discrepancy scores did little more than divisions that had productivity data compared to produc- reflect the fulfillment scores. Instead, we utilized the ful- tivity outcomes for those same sub-divisions). Correlations fillment scores as our independent EVP measures since were calculated to estimate the relationship between each this is where we saw the greatest variability. EVP attribute measure (importance, fulfillment, and dis- crepancy) with our four employee engagement measures Moving forward, one suggestion for obtaining a more and four business outcome measures. We also conducted balanced importance score distribution is to have em- correlation analysis between each engagement measure ployees force rank a fixed number of attributes into and our four business outcome measures. We used a vari- three categories of importance—critically important, im- ety of multivariate analyses (e.g., multiple regression, path portant, and less important. This approach, sometimes analysis) and other structural equation modeling methods referred to as Q-Sort, would expose the “relative impor- to examine the relationships between all of the employee tance” that employees place on attributes that would oth- measures and business outcomes. erwise receive a rating of “very important” or “extremely VOLUME 25 • NUMBER 2 • SUMMER 2007 | P125
    • important” when rated independently. A more sophisti- employees to endorse a higher rating of discretionary cated alternative to force ranking is conjoint analysis—a effort and is more likely to result in greater variance. Still, technique used by the Corporate Leadership Council in since this approach does not fully eliminate social desir- their research on employee preferences.23 Conjoint anal- ability bias, some O.D. practitioners may argue that the ysis asks respondents to make tradeoffs between a series best method for measuring employees’ discretionary effort of job attribute pairs (e.g. base pay vs. vacation) and vary- is to obtain ratings directly from independent sources, ing levels of those attributes (e.g. 10k base pay increase such as the supervisors and co-workers of those employ- or 2 weeks vacation). As respondents indicate which at- ees being rated. Despite the intuitive appeal of this ap- tributes they are most and least willing to give up, the proach, we believe that it may not be feasible for some or- “true” importance structure of all attributes is discovered. ganizations since its implementation requires more time, Although conjoint analysis is the more rigorous and pre- effort, and logistical planning (e.g. multiple independent cise of the two alternatives, we believe that the forced ratings must be aggregated and linked back to individual ranking option provides a better balance of rigor and employee survey responses). Further, since some forms of practicality for most organizations. Regardless, either discretionary effort are subtle and therefore difficult for alternative will yield a more accurate picture of EVP “im- independent raters to objectively assess, independent rat- portance” scores, since they imitate “real world” decision- ings may weaken the validity of the survey results. There- making behavior where employees are forced to choose fore, we believe that the BARS approach to self-reporting and make tradeoffs among several alternative attributes. discretionary effort is the most viable alternative. 2. Discretionary effort scores yielded less variance 3. Various relationships between EVP fulfillment than expected. Although employees showed greater scores and intention to stay. Again, the primary goal of variability in their responses on the intention to stay and this research was to understand the relationship between organizational advocacy components of employee engage- EVP fulfillment and intention to stay. As shown in Figure ment, most respondents rated themselves highly on the 3, we plotted the correlations of the 41 fulfillment scores discretionary effort measure—reporting that they often and the intention to stay results at the business unit level go above and beyond what is expected of them. These (614 respondents). We segmented the correlation matrix results may be due to a few reasons. into four regions to illustrate the strength of the relation- ships and the potential for improving each fulfillment First, it is possible that employees within this business unit score. A few of these findings are noteworthy. do indeed exhibit higher levels of discretionary effort by willingly exceeding the performance requirements of their First, Region I of the matrix shows attributes that are jobs. Second, given the resource constraints that high high-impact (higher correlation with intention to stay, employee turnover has placed on this business unit, it is p = < .0001) and offer the most opportunity for improve- also likely that many employees may have felt “obligated” ment (fulfillment scores fall below the mean). Although or“required” to assume the responsibilities of those em- the 13 attributes in Region I provide a logical starting ployees who have left the organization. As such, our dis- point for developing retention strategies, we recommend cretionary effort measure may have been tapping into prioritizing them against the criteria of costs, benefits, employee behaviors that are not as “discretionary” as they and scalability before determining a retention strategy. may appear. Finally, high discretionary effort scores may For example, of the 13 attributes in this region, 7 of them be due to social desirability bias—where individuals have are related to the EVP categories of Learning and Develop- a tendency to over-report socially desirable personal char- ment and Compensation—both of which require the use of acteristics and under-report socially undesirable character- finite resources (e.g. financial, mentors). As such, these istics.24 By asking employees to self-report discretionary strategies are restricted in the number of employees that effort, we were essentially asking them to rate an aspect they can impact. Likewise, providing all employees with of their performance. As such, employees may have been job fulfillment (r = .48) and challenging work (r = .39) has inclined to inflate their discretionary effort ratings. limitations since not all jobs lend themselves to variation, and managers are restricted in the number of employees To the extent that social desirability bias may have re- they can impact due to span of control. Rather than apply duced the validity of our discretionary effort results, one these limited strategies broadly, we will further analyze recommendation for minimizing its effects in the future the survey results of critical employee segments, such as is to have employees’ self-report discretionary effort high-potentials and mission-critical groups, to determine using Behaviorally Anchored Rating Scales (BARS).25 Unlike whether these attributes are areas of concern within the Likert scale used for our study—where employees these populations. Although we plan to identify strate- answered how often they go above and beyond—BARS gies that will impact the broader population, critical can be used to capture specific and varying levels of employee segments will be a priority when it comes to discretionary effort (e.g. volunteers for additional work allocating limited resources—given that these employees assignments). This approach makes it more difficult for bring disproportionate value to the organization. P126 | VOLUME 25 • NUMBER 2 • SUMMER 2007
    • Figure 3. Correlations between the 41 EVP fulfillment scores and intention to stay index for the entire business unit. One attribute in Region I that we plan to widely address the potential to impact multiple employees simultane- is resources (r = .37): making sure that all employees have ously, such as leaders providing open and honest communi- the resources and information they need to do their jobs. cation (r = .43), communication of goals (r = .38), and This attribute is the cornerstone of rational engagement showing concern for employees (r = .38). Further, this re- and provides a foundation upon which emotional engage- gion has four attributes related to Performance Manage- ment can be built. We suspect that resource issues may be ment that can be leveraged to optimize the organization’s tied to the process efficiency (r = .28) concerns identified in performance management platform. Not only are all of Region III; deficiencies in these two areas (resources and the attributes mentioned scalable, but they are low-cost process efficiency) may be what are leading to elevated and likely to sustain returns beyond the initial invest- workloads (r = .37), see mid-point of Figure 3. Our plan ment since they are aspects of organizational culture. is to conduct a segment analysis of the survey results to Lastly, there are a few attributes in Region IV that have pinpoint whether these concerns are systemic or specific higher fulfillment scores, but weak relationships with in- to a particular employee segment. We will also analyze tention to stay, (p = < .0001). They include: profit sharing the written responses to the open-ended questions to (r = .18), retirement savings plan (r = .21), competitive health determine the best corrective actions for improving benefits (r = .21), value of health benefits (r = .22), and paid these areas. time off (r = .23). We suspect that weaker relationships in For additional broad-impact retention strategies, we can these areas may be due to a large portion (over 50%) of draw from attributes in Region II (higher impact and this business unit’s members having low tenure and higher fulfillment). Although these attributes offer less being younger in age relative to the general workforce. room for improvement, they have stronger relationships That is, for many of the respondents, the attainment of with intention to stay than the remaining two regions these attributes may appear to be out of reach and less (III and IV). We recommend that the leadership team tangible than the shorter-term rewards, such as base continue to build on attributes in this region that have pay and bonus, which had stronger relationships with VOLUME 25 • NUMBER 2 • SUMMER 2007 | P127
    • Figure 4. Marginal returns on intention to stay when focusing retention strategy beyond 3 EVP categories. intention to stay. Further, these results are in line with returns on intention to stay. For example, all 11 catego- external research that suggests the current generation of ries explained 35% of the variance in intention to stay young employees does not place nearly as much impor- scores, only 3 points above the three-category model. tance on paternalistic attributes of an employer. 26 As This analysis confirmed that the leadership team should such, there is no action needed relative to these attri- build its retention strategy on no more than three core butes regarding this business unit’s retention strategy. areas in order to get a higher return on its investment. 4. A few areas of focus are all it takes to impact in- We conducted additional multiple regressions to identify tention to stay. In addition to understanding the correla- the optimal number of attributes within the best three- tion between each EVP fulfillment score and intention to category models that were needed to gain the most stay, we assessed the impact of multiple EVP attributes potential impact on intention to stay. In general, only two on intention to stay. Although correlation analysis can attributes in each category were needed to achieve the help to explain the relationship between an EVP attribute maximum potential impact. The good news is that there and an employee’s desire to remain with the company, its were several two-attribute options in each category that limitation is that it does not allow us to understand the can produce a similar increase in intention to stay. simultaneous impact of multiple attributes on intention These findings are important since they reduce the likeli- to stay. Since the impact (correlation) of each attribute is hood of over-investing in retention strategies that would not additive, we utilized multiple regressions to cancel yield a marginal return. If, for example, we relied exclu- out the overlap or shared variance of multiple attributes. sively on the correlation matrix (Figure 3), we would have As shown in Figure 4, regression analysis of the 11 been led to believe that improving all four Learning and overall EVP categories found that most of the variance Development attributes in Region I would have yielded in intention to stay was explained by 3 categories. For the most potential increase in intention to stay through example, the most variance that the best single EVP learning and development activities. However, multiple category (Day to Day Work) accounted for in intention to regressions revealed that improvement in only two of stay was 23%. That is, improving attributes associated these attributes was needed to achieve the maximum po- with Day to Day Work can influence an employee’s desire tential increase in intention to stay. Further, it informed to remain with the company by up to 23%. The most us that any combination of these four attributes would variance that the best two-category combination (Day to produce a similar result. Day Work & Learning and Development) accounted for in 5. No relationships between intention to stay and intention to stay was 29%, an increase of (+6) over the voluntary turnover (at this time). One goal of this one-category model. The best three-category models research was to test the extent to which our intention to accounted for 32% (+3) of the variance in intention to stay index correlates with Voluntary Turnover. However, stay. Many of the best three-category models included: because this study was a pilot, the turnover data available Day to Day Work, Learning and Development, and Compen- for our research preceded the collection of intention to sation. Beyond three EVP categories, there were marginal stay data. As such, we were forced to test the relationship P128 | VOLUME 25 • NUMBER 2 • SUMMER 2007
    • between the intention to stay scores of those who are marketability to potential employers. Given this finding, still employed to the turnover data of those who have we plan to monitor the market opportunity and intention already left the organization—an incorrect temporal to stay scores of these productive business divisions so sequence. Our plan is to wait 9 to 12 months and then that we can gauge retention risk on an ongoing basis. We track the individual intention to stay scores to actual will use these measures as leading indicators to help the turnover at the individual level. This approach will allow leadership team detect and mitigate potential departures us to determine whether the intention to stay scores for that pose the greatest threat to productivity. employees who resigned was significantly lower than In answer to the question that asks why more significant employees who stayed with the organization. If we are relationships were not found between the employee able to validate our intention to stay index as a predictor measures and business outcomes, we considered three of voluntary turnover, we will conduct an analysis to possible explanations. The first focuses on the time peri- identify the specific EVP attribute scores of those who ods over which business metric data were collected. Due left the organization and compare them to those who to logistical issues, we were only able to obtain business stayed. If statistical analysis shows, for example, that metric data for 5 months leading up to the survey. We those who stayed rated the mentoring attribute as “highly believe that fluctuations in random variables (e.g. sea- fulfilled,” and those who left rated it “highly unfulfilled,” sonality) that occur over shorter periods may have led to we can make the inference that mentoring is a driver or a less reliable measure of performance. Moving forward, leading indicator of retention/turnover. Over time, these we recommend averaging business outcome variables additional data points will allow us to move our analysis over longer time periods, such as year-to-year sales. from correlation to causation. Despite our recommenda- tion to track intention to stay and retention/turnover A second reason that may explain the weak relationships results at the individual level, we recommend that only between the employee measures and business outcomes the third-party vendor be privy to the individual survey has to deal with the sample size used for this study. Since results so that promises of confidentiality are upheld. linkage analysis requires that individual employee survey responses be aggregated to the same level at which busi- 6. Few but interesting relationships between employ- ness metrics are captured, we were forced to reduce the ee measures and business outcomes. An important number of single employee observations from 614 to 6 piece of our research was to understand the relationship divisions or 53 sub-divisions depending on the business between various employee measures and four business metric. The reduction of data resulted in the loss of outcomes. Although we found only two significant rela- statistical power and may have obscured meaningful tionships between the employee measures and business relationships between the employee measures and outcomes, these findings provide useful insights. business outcomes. For future linkage projects, we will First, employees in units with higher Productivity were ensure that the unit of analysis provides sufficient data more likely to say that the business unit was highly effec- points. Some have suggested that a sample in excess of tive in the EVP category of Pay for Performance (r = .28, p < 100 units may be needed to establish such linkages.27 .10). That is, the business unit differentiates salary increas- Third, weak relationships may also be due to the divi- es and bonus payments between high and lower perform- sions and sub-divisions being too homogenous. That is, ing employees. This finding is noteworthy, especially since they all do very similar contracting work and are exposed there were no significant relationships found between the to similar workforce practices. This condition may have business outcome of Productivity and the EVP attributes led to uniformity of responses and low variability. With- of base pay and bonus. This result implies that base pay and out variance, no relationships can be detected. To address bonus in general are not the major issues when it comes this issue in the future, we recommend testing for group to productivity. Rather, it is whether employees perceive homogeneity through a statistical comparison of within- that these financial rewards are based on a pay for perfor- group and between group variance to justify the level mance philosophy. We suggest that the leadership team of aggregation.28 continue to establish and communicate a clear framework for cascading performance goals and objectives through- 7. Developing a conceptual model is essential for out the organization, and which ties an employee’s bot- gaining leadership team support. Lastly, it is important tom-line results to his or her salary increase and bonus. to mention the critical role that a conceptual linkage model plays in mobilizing the linkage intervention. Be- A second notable finding is that highly Productive em- fore collecting any data, we developed a model (example ployees were more likely to say that they could easily find shown in Figure 2) that illustrated the hypothesized a job (Market Opportunity) outside of the company that is linkages between our employee measures and business of equivalent or greater pay and status (r = .35, p < .04). outcomes. The model forced us as the designers to iden- The implication is that highly productive employees be- tify and organize the variables of our study into a holistic lieve that their current productivity level enhances their framework and take inventory of the measures that were VOLUME 25 • NUMBER 2 • SUMMER 2007 | P129
    • needed to implement this study. The model served as a they can leverage employee survey results to achieve roadmap that we used with the leadership team to so- business results. As our continued work in this area cialize our approach and test our assumptions about reveals new insights, we expect to share our findings their organization. The leadership team helped us to in a future edition of this journal. refine the model by recommending business metrics that were most important to them. By introducing the References employee survey in the context of business metrics, the 1 Tsui, A.S, & Wu, J.B. (2005). The new employment leaders quickly saw the value of conducting the study. relationship versus the mutual investment approach: We also provided the leadership team with a “mock” Implications for human resources management. PowerPoint presentation that we created using fictitious Human Resource Management, 44(2), 115-121. data in order to give them a sense of the potential output 2 Wellins, R.S., Bernthal, P.B., & Phelps, M.(n.d.). our analyses could produce. We used compelling and Employee engagement: The key to realizing a competitive easy to read graphical charts that distilled various data advantage. Retrieved February 2, 2007, from the DDI points into succinct and insightful key takeaways. The Web site: http://www.ddiworld.com/pdf/ddi_em- conceptual model and mock analysis made the project ployeeengagement_mg.pdf more tangible to all stakeholders and generated enthusi- asm amongst the team. We also utilized these materials 3 Corporate Leadership Council. (2006). Attracting and with a business metric team who helped us to under- retaining critical talent segments: Building a competitive stand the business unit’s financial metrics and collect employment value proposition. Washington, DC: business data for this study. Each of these preliminary Corporate Executive Board. activities was essential to our linkage intervention and 4 Wiley, J.W., & Campbell, B.H. (2006). Using linkage was the cornerstone for mobilizing stakeholder support. research to drive high performance: A case study in organization development. In. A.I. Kraut (Ed.), Get- ting action from organizational surveys: New concepts, Conclusion technologies, and applications (pp. 150-180). San F Since the full implications of our pilot study are still rancisco: Jossey-Bass. being analyzed, a complete review of our findings is not 5 Pugh, D.S, Dietz, J., Wiley, J.W, & Brooks, S.M. feasible at the time of this publication. Further, given the (2002). Driving service effectiveness through em- proprietary and confidential nature of survey instruments ployee-customer linkages. Academy of Management and results, we are limited to sharing our general insights Executive, 16(4), 73-84. and recommendations. Nonetheless, our shared ap- proach, preliminary findings, and recommendations 6 Lundby, K., Fenlason, K., & Magnan, S. (2001). have provided some ideas for internal O.D. practitioners Linking employee and customer data to business to consider as they design their own linkage research performance – difficult but not impossible: Some interventions. Although our recommendations may be lessons from the field. Consulting Psychology Journal: more apparent to consulting firms specializing in linkage Practice and Research. 53(1), 22-34. research, they may be less evident to internal O.D. practi- 7 Towers Perrin (2003). Working today: Understanding tioners who must manage multiple interventions that what drives employee engagement. Retrieved on require different levels of expertise. For these practitio- January 22, 2007, from the Towers Perrin Web site: ners, it is our hope that we have provided the foundation http://www.towersperrin.com/tp/Getwebcachedoc? to initiate linkage efforts within their organizations. webc=HRS/USA/2003/200309/Talent_2003.pdf For our own next steps, we plan to further analyze our 8 Corporate Leadership Council (2004). Driving em- data and use this information to refine and improve our ployee performance and retention through engagement: approach. We expect to conduct more linkage projects A quantitative analysis of the effectiveness of employee so that we can expand our current data and utilize the engagement strategies. Washington, DC: Corporate updated findings to quantify the financial benefits of Executive Board. improving employee engagement. The enhanced dataset 9 Concours Group (2005). Problems at the top - apathy, we expect to obtain through future linkage projects will contempt for managers. Retrieved on December 3, enable us to uncover the unique EVP needs of diverse 2006, from the Concours Group Web site: http:// employee segments (e.g. generational, geographical, www.concoursgroup.com/publications/EEE_011905_ functional, etc.), and will allow us to make targeted PressRelease.pdf human capital investments that yield a greater return to the company’s bottom-line. Despite the limitations of 10 Kahn, W.A. (1990). Psychological conditions of our pilot study, we believe that it has provided a critical personal engagement and disengagement at work. first step in helping our business leaders understand how Academy of Management Journal, 33 (4),692. P130 | VOLUME 25 • NUMBER 2 • SUMMER 2007
    • 11 Iaffaldano, M.T., & Muchinsky, P.M. (1985). Job 22 Wiley, J.W. (1996). Linking survey results to customer satisfaction and job performance: A meta-analysis. satisfaction and business performance. In A.I. Kraut Psychological Bulletin, 97, 251-273. (Ed.), Organizational surveys: Tools for assessment and 12 Corporate Leadership Council (2004). Driving em- change (pp. 330-359). San Francisco: Jossey-Bass. ployee performance and retention through engagement: 23 Corporate Leadership Council (2002). Customizing A quantitative analysis of the effectiveness of employee the employment offer: Understanding employee job offer engagement strategies. Washington, DC: Corporate preferences across the workforce. Washington, DC: Executive Board. Corporate Executive Board. 13 Hewitt Associates (2004). Employee engagement higher 24 Hugh, J.A., & Feldman, D.C. (1981). Social desirabil- at double-digit growth companies. Retrieved on January ity response bias in self-report choice situations. 7, 2007, from the Hewitt Associates Web site: http:// Academy of Management Journal, 24(22), 377-385. www.hewittassociates.com/_MetaBasicCMAsset- 25 Smith, P.C, & Kendall, L.M. (1963). Retranslation Cache_/Assets/Articles/DDGSalesfull.pdf of expectations: An approach to the construction of 14 ISR (2004). Retention still matters. Retrieved February unambiguous anchors for rating scales. Journal of 2, 2007, from ISR Web site: http://www.isrsurveys. Applied Psychology, 47, 149-155. com/pdf/insight/RetentionMatters.pdf 26 Zemke, R., Raines, C., & Filipczak, B. (2000). Genera- 15 DDI (n.d.). E3sm and organizational outcomes. Re- tions at work: Managing the clash of veterans, boomers, trieved February 3, 2007, from the DDI Web site: xers, and nexters in your workplace. New York: Ameri- http://www.ddiworld.com/pdf/ddi_e3andorganizatio can Management Association. naloutcomes_wp.pdf 27 Lundby, K., Fenlason, K., & Magnan, S. (2001). Link- 16 Towers Perrin (2003). Working today: Understanding ing employee and customer data to business perfor- what drives employee engagement. Retrieved on Janu- mance – difficult but not impossible: Some lessons ary 22, 2007, from the Towers Perrin Web site: http:// from the field. Consulting Psychology Journal: Practice www.towersperrin.com/tp/getwebcachedoc?webc= and Research. 53(1), 22-34. HRS/USA/2003/200309/Talent_2003.pdf 28 James, L.R. (1982). Aggregation bias in estimates of 17 Lester, S.W. & Kickul, J. (2001). Psychological con- perceptual agreement. Journal of Applied Psychology, tracts in the 21st century: What employees value 67, 219-229. most and how well organizations are responding to these expectations. Human Resource Planning, 24(1), Acknowledgments 10-21. 18 Coyle-Shapiro, J. & Kessler, I. (2000). Consequences I would like to thank Mary Kay Ross & Sharon Snyder of of the psychological contract for the employment AT&T and Art Wohlers, Ph.D of Survey Research Associ- relationship: A large scale survey. Journal of Manage- ates, Inc. for their assistance on this project and comments ment Studies, 37(7), 903-930. on an earlier draft of this paper. I also want to acknowledge Jerry Kehoe, Ph.D for his comments on a previous version 19 ISR (n.d.).“Retired on the job”: How to recognize and of this paper. I am thankful to the HR leaders and business recharge the complacent employee. Retrieved on April 2, leaders of AT&T who supported this initiative and who un- 2006, from the ISR Web site: http://www.isrsurveys. derstand the strategic value of employee surveys. Last, I com/pdf/insight/Reengaging%20Complacent%20Em want to thank my wonderful wife, Jody, for her support and ployees-US%20Singles.pdf encouragement throughout the writing of this paper. 20 Hewitt Associates (2004). Employee engagement higher at double-digit growth companies. Retrieved on January Author’s Reflection 7, 2007, from the Hewitt Associates Web site: http:// www.hewittassociates.com/_MetaBasicCMAsset- Although AT&T continues to go through several struc- Cache_/Assets/Articles/DDGSalesfull.pdf tural changes as a result of recent acquisitions, at the 21 Turnley, W.H., & Feldman, D.C. (1999). A discrepancy time of this O.D. initiative, O.D. support for the company model of psychological contract violations. Human was generally provided by my team, which included two Resource Management Review, 9(3), 367-386. employees whom reported directly to me. My team was part of the Workforce Strategy and Policy Organization (WSPO), which was part of the Human Resources func- tion. The WSPO was headed by an HR Vice-President, to whom I directly reported, who in turn reported to the Executive Vice-President (EVP) of HR. The EVP of HR VOLUME 25 • NUMBER 2 • SUMMER 2007 | P131
    • was a member of the company’s Executive Committee preliminary action plan for the leadership team to con- and reported directly to the CEO. sider and discuss. My team is currently working with the The WSPO was responsible for developing corporate- leadership team on helping them to refine the action wide HR strategies, tools, policy, and processes that sup- plan and establish accountability for its implementation. ported various initiatives including: succession planning, One of the challenges of implementing this survey was leadership development, talent acquisition, employee the collection and organization of business outcome surveys, diversity, and people planning, to name a few. data, such as productivity and revenue. Since the busi- In addition to providing overall direction and support to ness metrics used for this study were collected and re- the firm in many of these areas, my team provided con- ported at different levels within the organization, it was sultation to internal business clients who needed support necessary for my immediate team to enlist the support of in developing and implementing customized O.D. and a business metric team who helped us to collect and un- talent management solutions. derstand the business metric data. These team members Since the business client for this initiative had an imme- were employed in the business unit where the study was diate need for addressing its retention issue, a decision implemented and have strong knowledge of the business was made to design the survey in-house. Developing the metrics and the environment in which the business unit survey in-house allowed my team to leverage its internal operates. Without the involvement of the business metric survey experience and knowledge of the business, and team, it would have been very difficult for my team to enabled us to act quickly and decisively on survey imple- understand the various metrics used by the business unit. mentation. Although my team designed the survey and For those O.D. practitioners seeking to link employee overall approach, we did engage a third-party survey survey results to business outcomes, I believe that the vendor for this assignment. The vendor is a Ph.D indus- involvement of a business metric team from the onset trial psychologist with extensive experience in supporting of the project is a requirement, not an option, for con- AT&T surveys and has expert knowledge in employee ducting such an initiative. surveys and statistical analysis. One benefit of having the This new approach to employee surveys is a signifi- vendor host the survey on his company’s website is that cant improvement over traditional employee satis- employees generally feel more comfortable in providing faction surveys --- where employee satisfaction was candid feedback to an external third-party vendor rather often viewed in isolation from performance and real than a person or group within AT&T. Embedded in business results. By effectively correlating employee AT&T’s employee survey process is a robust communica- engagement with results, my leadership team is bet- tion platform that ensures all participating employees ter equipped to devise and implement action plans that no AT&T employee or group will have access to any that are far more likely to improve overall business individual survey responses. Respondents of our surveys performance and enhance the employee experience. frequently acknowledge through their written comments AT&T VP – Business Leader that they take great comfort in knowing that their indi- vidual survey responses are protected and secured by This new employee survey has shown my leadership the survey vendor. team how to leverage employee survey results to achieve business results. By placing the employee Another benefit of using a third-party survey vendor is survey in the context of business outcomes, our lead- the vendor’s ability to conduct several statistical tests and ership team has found a rigorous way to identify produce various statistical reports. Since my team has and improve those vital few workforce practices that responsibility for other areas outside of employee sur- have greatest impact on the bottom-line. veys, I have found that it is a better use of my team’s time to have the vendor generate and organize raw sur- AT&T VP – Business Leader vey reports. This approach allows my team to attend to Brian Heger has been employed with AT&T over the past many other organizational issues during this stage of the 7.5 years, where he has held positions as an HR General- survey process. Once the raw survey data reports were ist, HR Program Manager, and Talent Management Con- generated for this project, the vendor then provided my sultant. In his most recent position as Talent Management team with this information so that we could begin to an- Consultant, Brian is responsible for corporate-wide suc- alyze the data and translate the results into a powerful cession planning, organizational surveys, and various as- presentation for the business unit leadership team. The pects of talent management. Brian holds an M.A in Indus- presentation that I delivered to the leadership team pro- trial/Organizational Psychology and a B.A in Psychology vided them with the “so what’ of the survey results and from Fairleigh Dickinson University in Madison, New was communicated in a “language” and format that they Jersey. Brian can be contacted at brian_heger@yahoo.com. easily understood. The final part of the presentation drew the connection between the survey data and a P132 | VOLUME 25 • NUMBER 2 • SUMMER 2007