The 3 dimensions of Fairness that Impacts Employee Engagement

What is fairness really?

When most people talk about fairness, they talk about the concept as an absolute and objective term, things are either fair or they are not. This is also how people behave although it is blaringly obvious that even two people can disagree on what is fair. If fairness truly was objective we would have no wars, sufferings or extreme inequality – there would be enough for everybody.

Fairness is a very subjective concept and it is shaped by age, culture, religion, age and a whole host of other dimensions. Fairness also changes according to context; in scarce situations like who should have the last bottle of water in a desert, people’s perception of fairness changes dramatically.

Anybody that has been in a situation they deemed unfair knows that the response is instantaneous and can be quite powerful. This reveals that fairness is hardwired in the emotional parts of the brain, in particular the amygdala – where also anger gets trigged and the two often works in concert.

Why fairness impacts Employee Engagement

For companies the fairness concept really is a tightrope that needs to be walked. If you trip, you risk getting a powerful emotional response from people that can have a dramatic and instantaneous impact of the engagement levels – disengagement can increase very fast.

Fairness is also a positive engagement factor but it builds slowly over time as the company demonstrates that it is a fair company. Communication strategies cannot only be built around rational business strategies and decisions – it will need to respect the fact that fairness is emotional in nature.

The 3 Dimensions of fairness

Taking a deeper dive into the concept of fairness, reveals that there are three dimensions that needs to be considered when dealing with Employee Engagement and the fact that they interact.

Fairness towards Self

The relationship between the employee and the employer can be seen in the light of fairness. The tangible elements of fairness are what the employee gives in terms of presence and effort compared to what the company gives back in pay and benefits. The tangible elements of fairness are closely related to satisfaction but not much to motivation and engagement.

The intangible elements of the relationship, like how you are treated, trusted and listened to combined with other leadership and cultural elements has a high impact on how motivated and engaged the employee is. Engagement is not about money – it is about how you treat people.

Fairness compared to others

Another dimension of fairness is when employee compares their situation to those of others. This could be colleagues, leaders, similar groups outside the organisation. When employees start to compare their situation to others, their perception of fairness can change very rapidly. What they were happy with a second ago is now completely unacceptable when they have seen what the others get. This is key in designing engagement, you need to either be transparent and up front or be secretive if you have very differential pay or treat people very different.

Fairness towards others

The last dimension is about how fair the company treats others and can have a significant impact on the engagement. Companies that only focus on shareholder value are typically short term oriented and see conflicts between the shareholder and other stakeholders like workers, customers, society and the environment.

Fortunately a lot of the younger more successful companies are built on a foundation of a strong worthwhile purpose and know that serving multiple stakeholders eventually benefits the shareholder. If a company treats all stakeholders well and respect them their reputation, brand and image as an employee grows. This can significantly increase employee engagement.

If you want to create engagement in your company you need to be able to manage fairness along the three dimensions

Everybody talks about Employee Engagement - can anybody define it?

There are many definitions of Engagement, some more academic than others but one of the simplest was made by David McLeod in his report to the British Government of the state of engagement in the UK: 

“You know it when you see it”

It would be very easy to accept the term “Employee Engagement” as a more modern or advanced description of Employee Satisfaction – a term we all understand. This assumption makes most people misunderstand the concept and power engaging people.

The CAB model highlights some of the key differences between Employee Satisfaction and Employee Engagement:

Where Employee Satisfaction is a rational state that is based on what the employee deliver in terms of work compared to the benefits received, Employee Engagement represents an emotional relationship. This relationship is not only to the company itself, it extends to all the company’s stakeholders and to the company’s purpose.

This also reveals that Engagement is not only about the exchange between the company and the employee but also about other exchanges between the company and its stakeholders – exchanges that does not directly impact the employee.

As Engagement is a complex relationship it challenges the traditional industrial HR view of the world. It is not viable to identify humans that “have engagement” therefore it is not possible to hire and fire your way to Engagement – you have to create it. You have to change from selecting and changing the employee to fit the corporation to change the corporation to fit humans.

Gallup that regularly surveys the state of engagement worldwide defines engagement as different emotional states employees are in.

They highlight that not only is Engagement and opportunity, it also represents a threat as disengaged employees are working to sabotage the organisation.

The Institute of employment studies has a definition that highlights it is not only about what you do, but also how you do it:

“A positive attitude held by the employee towards the organisation and its values. An engaged employee is aware of the business context, and works with colleagues to improve performance within the job for the benefit of the organisation. The organisation must work to develop and nurture engagement, which requires a two-way relationship between employee and employer.”

Engagement is strongly connected to motivation – especially intrinsic motivation like passion, purpose and personal growth. Extrinsic motivators like pay and working conditions can impact negatively but does not have a positive effect.

This also means that Employee Engagement can be seen as a hierarchy  – like the surgeon model to highlight the impact that Employee Engagement has on the subjects – be it customers, colleagues or patients.

What is needed to bring employees from Disengaged to Engaged is very different from what it takes to move them on to Actively Engaged.

This also highlights that the creation of Engagement is not a prescriptive process that can be standardised like most people processes. Engagement is a strategic process that depends on people’s current level of engagement, the company, the market situation – it has to be tailored.

The creation of Employee Engagement is extremely important as it impacts: Motivation, Company performance, Learning, Knowledge and Innovation.

Additional Definitions of Employee Engagement:

"Full discretionary effort and living up to their full potential and doing what it takes to help their organisation succeed." Towers Perrin

"Engagement is a positive fulfilling work related state of mind that is characterised by vigor, dedication and absorption." Schaufeli et al

"Engagement or passion for work involves feeling positive about your job as well as wanting to go the extra mile to make sure you do your job to the best of your ability." Truss et al

"The extent to which the employees commit to something or someone in their organisation, how hard they work and how long they stay as a result of that commitment." Corporate Leadership Council

The Surgeon Model of Employee Engagement

If you were facing a serious operation and you were offered a choice between different surgeons, all equally technically qualified, what other information would you like to have?

If you were told that research has shown that there was one important data point related to the surgeon that could predict his performance – would you like to know?

What if you were told that the hospital did not investigate this parameter? How would you feel?

This is in reality what happens in most companies today. Companies relentlessly measure employee (and customer) satisfaction as it allegedly predicts employee retention and productivity – or at least it used to in the old industrial ages. Today most companies have high average satisfaction levels and satisfaction is not a competitive element anymore.  Employee satisfaction does not predict performance.

Gallup research has shown that organisations with high Employee Engagement outperform organisations with low Employee Engagement on all financial parameters, have lower absenteeism and fewer accidents and quality issues.

 Still very few companies have started to measure Employee Engagement and the ones that do, have difficulties in translating the results into actionable strategies. In average engagement levels are 15 to 30% depending on country and industry. This is much more difficult to deal with than the normal employee surveys that yield 80% satisfaction levels and cement Status Quo.

             

The difference between highly engaged people and the rest are has a significant impact on performance. With 50% less accidents and 41% quality defects you might be interested to know what level of engagement your surgeon has.

The 4 different levels of engagement:

I am a hostage (Hope your procedure is really simple)

The actively disengaged employees are company assassins; they are actively trying to sabotage the operation. The main drivers of dissatisfaction are often the direct manager, pay, fairness, personal values versus company values or individual incidents. People often want to leave but cannot for some reason. They stay on as hostages which is good for the HR retention KPI but lethal if they deal with customers. Their focus is escape

It is a Job (Don’t get operated near a shift)

This is normally the highest group of employees. They are satisfied employees and believe there is a fair balance between what the company asks and what they deliver. They are however not inspired to do their best and will try to do the minimum acceptable activity to keep their job. They see their job as a way of financing their leisure time in which they can express themselves themselves with something meaningful. Their focus is self interest

It is a career (Hope you don’t have an interesting condition)

The engaged employees have a high degree of focus on personal and professional growth which gives them great potential. They will however put their growth and their mastery ahead of the company and its purpose whenever there is a conflict. When dealing with customers their focus can be more about being right (which they are most of the time) rather than winning the customer relationship and the order. Their focus is Mastery

It is a calling (Hope this is your surgeon)

The actively engaged employees are closely connected to the purpose and values of the company. When dealing with customers they create strong customer engagement and directly impacts revenue and profit levels, especially in a service environment. Most companies do not utilise this great resource but treat their service departments as a cost and outsorce it to a cheap jurisdiction. As a customer you want to be serviced by actively engaged employees as they focus on you. Where would you prefer to invest?  Who do you want to be operated by?

“One great employee equals three average employees” 

Kip Tindall, Container Store

They are willing to go the extra mile and even break the rules to do the right thing for the company. Focus is on helping and providing value to others

How is Engagement created?

The current HR toolbox of “processing people” does not work well when the aim is to increase engagement. The main reason is that engagement is not an attribute of the employee – you cannot hire and fire your way to Employee Engagement. Engagement is an emotional relationship between the organisation and the individual and needs to be addressed at an organisational level.

Another issue is that the creation of Engagement is different from company to company and from situation to situation. The starting point has to be a survey evaluating the individual drivers of Engagement combined with interviews of select employee representatives to understand what really goes on.

Once the situation and drivers are understood for each individual group and engagement level in the organisation, the strategic development can begin. It is quite important to involved people in the strategic process. Far too often the senior management team close the door and cook up a strategy that has no connection to people. By involving people in the strategic development engagement is created and the implementation of the change process will be easier. For more on the strategic process: You cannot separate strategy and implementation

“Employee Engagement is not about changing people – it is about changing organisations”

Top 10 dangers in your BIG is BEAUTIFUL Strategy

To want to grow and become a bigger company is a normal objective for most businesses, but in some companies it becomes the main purpose – above and beyond becoming a better company and creating value for the company’s stakeholders. 

Like revenue and profit, size is really an outcome – it is a measure of how much your customers are willing to pay for your services and how inspired your employees are. Both are shaped significantly by the way the company treats its other and often weaker stakeholders.

If customers and employees are just plankton feeding your corporate whale you can use the shortcut of an acquisition strategy.

Unfortunately the BIG is Beautiful thinking has been accepted as a commandment in the corporate religion not to be challenged – only good things comes out pursuing BIG. It is well documented that large companies have scale of economies and can do a lot of things cheaper than smaller companies. 

BIG companies can compete more effectively in traditional markets and squeeze smaller players out of the distribution channels and outspend them. This has worked in the industrial age and to a degree in the knowledge age – but the global business environment is changing:

• The average lifespan of an S&P 500 company has declined from 70 years in the 1920s to 15 years today. 

• More than half the S&P500 companies from year 2000 have disappeared. 

• There are 40% less public companies in the US than in 2000. In UK it is 50% less

If large corporations were a species – we would call it endangered - Lynn Stout, UCLA

If companies manage to get into fortune 50 they are almost guaranteed not to grow. So treating  growth and size as a married couple is wrong – they are not even dating!

Contrary to the BIG is Beautiful thinking it is not the asset builders that have dominated the most recent future – it is time to look at the dangers of being big.

Top 10 dangers in your BIG is BEAUTIFUL Strategy

1. Takeover targets are not just about tangible assets anymore.

To buy acquire a company you have to pay more than it is worth and find synergies (short for axing management and all staff functions, marketing and sales). This worked well when assets mainly where brick, machines, products and other tangibles but this has been overtaken by intangible values like knowledge, brand, engagement and networking capabilities. 

2. Asset hoarding is not the most effective business model anymore

The companies with the most effective business models seen from a revenue and profit perspective is not relying on the traditional logic of buying competitors or squeezing them out of markets. The new network companies like Google, Apple (in its app store driven version), Amazon and their likes are connecting manufacturers and suppliers with consumers and buyers in a massive scale.

The central goal was not to buy their way to big but to create massive value for users with radically useful products. Big was certainly an outcome.

3. Acquisitions are not as profitable as they used to be

 Few in numbers the network companies normally create markets rather than fight the incumbents in their well-defined little market sandboxes with set rules about who own the toys. In the process of creating new markets they destroy old markets. The incumbents in the mobile phone market fell as a result of the appstores – not the smart phones. The newspaper industry lost half its advertising revenue to Google in a few years and Amazon is closing brick and mortar stores. 

Being big in a market that is being disrupted does not protect a company; it just means a larger and more smelly carcass.

It is also well known that acquisitions are a reset button that can mask a company’s true performance. When the balance sheets merge the CEO gets a new lease of his corner office making it impossible to really measure the value of an acquisition.

Asset builders are not the largest animals in the jungle anymore and the networking companies don’t want to buy them or even compete with them. They will be outmaneuvered.

4. When you buy intangibles they might not work in your company.

This became obvious when McDonalds bought Chipotle and although they expanded the chain dramatically the Chipotle sustainability brand grew faster outside McDonalds. From a valuation of 1.5B$ in 2006 when it was sold to 23B$ today – this McDonald could not unlock. As knowledge become more generally available more value is locked in the engagement created with employees and customers. Both can walk out the door at any time.

5. A takeover destroys massive amounts of value

If an acquisition is driven by being “BIG” rather than synergies with the existing organisations the value extraction process becomes painful as cannot buy a company for what it is worth – you have to pay more. The headcount stripping exercise is only seen as impacting cost when in reality it affects all areas of the business – people have a lot of knowledge that is not captured in systems. A long time after the CEO declares the acquisition a success and completed customers and employees are still suffering from lack of knowledgeable people that could have intervened when the poorly integrated systems fail. Before the systems are up running the next acquisition will be lined up.

Synergies are often internally driven not market driven

If an acquisition was treated like a product 

6. Measurement often destroys more value than it creates 

The growth imperative often forces organisations to take a very short sighted approach. Acquisitions and other “getting big” initiatives have to be successful and results demonstrated immediately. Anybody that has been through a merger knows that it often take many years before the merger is settled – not quarters.

Large organisations also tend to measure the wrong things. Typically the focus is on the easy rather than the important measures which lead to a cost centric culture. Creating value and innovation is a long term process that cannot effectively be managed through cost control. Finally large companies tend to use the measurements for the wrong purpose. Measurements are typically used to control people and not to develop and motivate them.

“No measure does less damage than wrong measures or measures used for the wrong purpose” Jeffrey Pfeffer

7. Innovation and creativity declines as corporation grows

Most of the truly innovative companies of our time did not exist a few years ago and they claim to fame is not innovative products it is innovative business models and thinking. This kind of innovation rarely happens in large corporations.

Larger corporations also have difficulty tapping into their people creativity as the executive suite gets isolated from their people, from customers and society at large and frankly they often don’t believe in the organisations value capabilities

In a survey of 400 CFOs 80% stated “they would reduce discretionary spending on potentially value creating activities in order to meet short term earnings targets”   The Boston Consulting Group

8. The illusion of bigger means more diversified and lower risk

The prevailing wisdom is that when companies diversify they also lower risk although the financial crisis should have eradicated that assumption it still lives on. Markets are not safe isolated lakes where the larges fish rule – disruptors empty these lakes fast. 

Many companies rely on some commodities that seriously impact their business either as raw goods or as finished products. These markets used to follow demand and supply models before the derivatives markets started to dominate. Today every $ of commodity traded Is multiplied by hundreds of dollars of derivative contracts that are controlled by algorithms rather than people – perfect bubble economy conditions.

9. Corporate Silence, Effectiveness & Psychological distance

The larger a corporation becomes the more it follows the conventional wisdom it has created. There is no consent and all views are convergent with the logic of the corporation and its industry. This is coined corporate silence. 

In large scale organisations efficiency becomes the focus rather than actually investigating if processes create the desired output. Effective is forgotten and finally the psychological distance between large corporation managers and ordinary customers and customers becomes so large that they really fail to understand each other.

10. Large organisations have lower engagement

As Gallup has demonstrated, companies with a high level of engagement outperform their low engagement peers on all revenue, profit and quality parameters. 

At the same time they can demonstrate that there is a significant correlation between size and engagement levels.

Is it time to rethink your BIG IS BEAUTIFUL strategy?

Interesting data about your Employee survey

Officevibe has some very interesting data on the view of employee data. It is obviously not enough just do a survey.

• 25% of employees think that their manager views an engagement survey as a tick box exercise

• 30% is the average response rate for employee surveys

• 20% is the abandon rate for surveys longer than 8 minutes

• 29% of employees found the survey pointless

• 80% did not believe their manager would act on the information

• 47% of managers spend less than 5 days a year related to activities of their surveys

• 20% said their managers never responded to concerns raised

• 27% of managers never reviewed survey results

• 52% of managers reviewed results but took no action.

• 48% of senior managers found surveys highly valuable

• 45% of employees found little or no value in surveys

http://www.officevibe.com/blog/employee-surveys-infographic

Interview with Sir Richard Branson Founder of Virgin Group by Christina Lattimer

Interview with Sir Richard Branson Founder of Virgin Group

By Christina Latimer
Full article here: http://peopledevelopmentmagazine.com/2014/09/03/sir-richard-branson/

This is the final interview in this wonderful series about the 6 Challenges identified by CEO’s across the globe, highlighted by the Centre for Creative Leadership in their Report in 2013.  When I turned my attention to who I would want to interview for this important final issue,  the first person who sprang to mind was Sir Richard Branson.  To me Richard epitomises the ultimate combination of brilliant leadership and business skills.  Richard has successfully, transparently and wholeheartedly lived his values which have been demonstrated time and time again both in his unique approach to business and in his attitude to Virgin’s many faceted global success.   So you will no doubt understand how delighted and grateful  I felt when Richard confirmed he was willing to contribute to this month’s magazine.   I hope his wonderful words of wisdom, as always, help you our readers and contributors alike, I think you will,  like me, be delighted!

Here is what Richard had to say:

1) What do you consider is the biggest challenge for CEO’s and leaders in the business world today and what can be done? 

Business leaders and CEO’s have a responsibility to inspire their employees and run their business in a sustainable way.   This is difficult for CEO’s as they are judged on their performance in the short term and any long term initiatives do take time to come through.  Shareholders and stakeholders need to modify their expectations of CEO’s from short-term profits and back the leaders of businesses to create long lasting plans that will grow their businesses and tackle many of the world’s issues at the same time.

2) Can you describe your leadership culture in Virgin and why it works so well? 

When selecting people for leadership roles I believe you should have an open mind and be prepared to look out for talent which others may have over-looked.

It is extremely important to employ business leaders who are passionate about their particular area of expertise and understand that part of being a good leader is having the ability to listen.   Listening to your people and giving them the opportunity to act on any ideas they have helps foster passion in your people and deliver on their ideas, which is beneficial to your business.

3) Given your vast experience in business what is the single biggest piece of advice you would give to leaders and CEO’s reading this? 

If you look back at the most successful businesses of the past 20 years – Microsoft, Google or Apple, they all played a part in shaking up their sector by doing something that hadn’t ever been done and by continually innovating. They are now among the dominant forces.

Not everyone will achieve such great worldwide success but a good start is to create something that everybody who works for you is really proud of. Businesses generally consist of a group of people, and they are your biggest assets.

4) What is the most inspirational event, person or situation you’ve encountered so far in your career?  

I have been fortunate to have had a long and successful career in business, meeting many inspirational people along the way and attending some fantastic events full of fascinating people.

I have long admired Nelson Mandela and was so upset when I heard the news of his passing. He showed amazing courage and conviction overcoming an evil political system. Wherever he went he would make people smile, laugh and feel completely at home. A young friend, Peta-Lynn, found Madiba in the galley on a Virgin plane to New York a while back. He offered to make her a cup of tea. What an extraordinary man.

5) What is the most exciting project you’re involved in you’d like to share? 

Going into space has always been a dream of mine. I could think of nothing more exciting than looking at our planet from space. Virgin Galactic is pioneering the space tourism industry and making great progress. Our spaceship has successfully completed three powered flights, breaking the sound barrier in the process, and our mothership – WhiteKnightTwo – has flown over 150 flights. The project is looking promising and I get so excited every time the Galactic team update me on another milestone the project passes.

6) How can our readers’ best benefit from the work you are doing and how can they best engage with you (and Virgin)? 

I have been fortunate that over the years we have developed an incredibly strong management team to run the Virgin companies. This has allowed me to dedicate the majority of my time to Virgin Unite – the not-for-profit arm of the Virgin Group. Virgin Unite have incubated a number of organisations dedicated to tackling specific issues such as conflict resolution (The Elders), climate change (The Carbon War Room), ocean protection (Ocean Elders) and sustainability (The B Team). I would encourage anyone to try to engage with these organisations and be inspired by what they are trying to achieve. Go out and start something yourself that reflects what they stand for.   Virgin Unite, and Virgin.com, has a very strong digital presence and I update my blog daily at www.virgin.com/richard.

More about Sir Richard Branson

Sir Richard Branson is the Founder of Virgin.  Virgin is one of the world’s most intriquing brands and has a well known diverse and unique portfolio of companies.   There are now more than 100 Virgin companies worldwide, employing approximately 60,000 people in over 50 countries.  Sir Richard’s hallmark has been one of innovation, challenge and bravery.  Click here to read Richard’s full and inspiring biography on Virgin.com

The Virgin Way by Sir Richard Branson

Even though I asked Richard’s team if he wanted to promote or mention anything within the interview, Richard didn’t feel the need to mention or advertise his new book , which  doesn’t surprise me.  But because it looks so fantastic, I wanted to mention it here anyway, so readers were aware of it.  ” The Virgin Way”  is due to be published on the 8th September and you can find out more details by clicking on the image:

Will purpose and transparency kill your business model? Better create a new one fast.

The traditional approach to employee and other stakeholder engagement activities has been addressed predominantly on an operational level  with a focus on what the corporation is doing. By changing practices it is indeed possible to impact engagement but only if your stakeholders believe that you are doing it for the right reasons and in the right way.

Stakeholder engagement  strategies should follow Simon Sinek's golden circle model – always start with the why, followed by the how before you even start thinking about the what.

The Why

Stakeholders will forgive you for mistakes done for the right reasons – not for perfect products created by the exploitation of others. Although most companies have been started to serve a specific purpose or create value for stakeholders, the same companies often over time transform their value focus to a cost focus. A transformation that narrows the value creation to one single stakeholder – the shareholder itself. Many senior managers proudly declare their purpose as serving the shareholder – even when the other stakeholders are listening.

“Problems are just businesses waiting for the right entrepreneur to unlock the value.” Jay Samit         

Assuming that taking from the environment, society, the customers and the employees to give to shareholders is in the best long term interest of the shareholder is not logical. The shareholder will benefit when all other stakeholders benefit in a way that creates long term sustainable competitive advantage.

Most companies start like disruptive wolfs hunting apathetic market sheep busy competing for grass. Over time they themselves become sheep anxiously scanning for disruptive predators while protecting their patch of grass. Not a purpose that is likely to engage stakeholders.

Preserving or recreation of the purpose of the corporation will be increasingly important with the wave of millenials taking over as the prime stakeholders. It will be important to have a ”why” that serves many stakeholders simultaneously in what is know as super alignment.

"Make yourself sheep and the wolves will eat you" 

Benjamin Franklin                                       

The How

The rise of the millenials also makes it important how corporations operate not only as a corporate citizen with respect for society, the environment, customers, employees and other stakeholders but also with transparency.

The concept of corporate transparency is developing rapidly and can be a major source of stakeholder engagement. From being a spotlight you only pointed at the cleaner areas of the corporate exhibition halls the social media revolution is illuminating everything, including dirty laundry. Transparency is not a strategy anymore – organisations will have to work on creating sustainable business models that can withstand light rather than try and sugarcoat the existing business model.

”Transparency may be the most disruptive and far reaching 

innovation to come out of social media”           Paul Gillin

Transparency normally stops when getting close to the business model and the supply chain. Traditional companies are not comfortable disclosing their internal costs of manufacturing and similar. The official reason is that it is proprietary information that needs to be held from competitors but it could also bet that  customers would be furious knowing how they get robbed. And the other sheep are probably experts in grass anyway.

A few brave companies are taking this next step and disclosing internal costs to their customers. The company Everlane in the fashion industry have given full disclosure in a market where 8x markup is common. No doubt they will attract unwanted attention to the other sheep in that marketplace and has the potential of becoming a wolf.

It is uncomfortable for most leaders to address the why and the how of their strategy. ”Why cant we just focus on the shareholder like everybody else”? ”Why can’t we hide the true nature of our operation so we do not attract uncomfortable questions”?

Unfortunately addressing the why and the how of the strategy is seen as a negative that adds costs and not as having the potential to create significant engagement with the company's stakeholders.

“The best way to predict the future is to invent it.”

                                                              Alan Kay