Employee Engagement

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Council Teleconference

Corporate Leadership Council

Driving Performance and Retention Through Employee Engagement

A Quantitative Analysis of Effective Engagement Strategies Road Map for the Discussion

A Unique Point in Time

Sizing the Opportunity

The Voice of the Workforce

Reframing the Organization’s Response

The Evolving Employment Contract

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

Sample Engagement Deﬁ nitions Sample Engagement “Advice” Claimed Beneﬁ ts of Engagements

• Engagement is a positive emotional • Become a “great place to work” • Increase total shareholder return by up connection to an employee’s work through building trust in colleagues and to 47 percent ensuring employee pride and enjoyment • Engagement is affective, normative, and • Reduce absenteeism continuance commitment • Segmentation is the key to managing • Better customer feedback employee commitment and productivity • Less shrinkage of inventory • Engaged employees are inspired to go • Great managers are key to achieving an above and beyond the call of duty to engaged workforce • Higher sales help meet business goals • To achieve motivation, give the employee a “kick in the pants”

…lead to conceptual confusion and no clear road map for action

And We’re Supposed to Do What…? “Frankly, we don’t even agree on what it is we’re attempting to change, much less how to go about changing it.” SVP of Administration Financial Services Company

Source: Allen, Natalie, and John Meyer, “Affective, Continuance, and Normative Commitment to the Organization: An Examination of Construct Validity,” Journal of Vocational Behavior, 1996; Herzberg, Frederick. “One More Time: How do You Motivate Employees?” Harvard Business Review (Classic), January 2003; Coffman, Curt and Gabriel Gonzales-Molina, Follow This Path: How the World’s Greatest Organizations Drive Growth by Unleashing High Potential, New York: Warner Books, 2002; Towers, Perrin, Understanding What Drives Employee Engagement, 2003; Age Wave and Harris Interactive, The New Employee/Employer Equation, 2003; Watson Wyatt, WorkUSA2000: Employee Commitment and the Bottom Line, 2000; Hay Group, The Retention Dilemma: Why Productive Workers Leave—Seven Drivers for Keeping Them; Hewitt Associates, LLC, Best Employers in Canada, 2003, http://www.greatplace towork.com/; Corporate Leadership Council research.

© 2004 Corporate Executive Board 2 Bringing It All Together Engagement is the extent to which employees commit to something or someone in their organization and how hard they work and how long they stay as a result of that commitment

Two Commitment Four Focal Points The Outputs of Commitment: “Types” of Commitment Discretionary Effort and Intent to Leave

Discretionary Effort An employee’s willingness to go “above and Day-to-Day Work Rational Commitment beyond” the call of duty, such as helping Performance The extent to which employees believe that others with heavy workloads, volunteering managers, teams, or organizations are in their for additional duties, and looking for ways to perform their jobs more effectively. self-interest (ﬁ nancial, developmental, Team or professional).

Emotional Commitment The extent to which employees value, enjoy Direct Manager Intent to Stay and believe in their jobs, managers, teams, or An employee’s desire to stay with the organizations. organization, based on whether they intend to look for a new job within a year, whether Attrition Organization they frequently think of quitting, whether they are actively looking for a job or have begun to take tangible steps like placing phone calls or sending out résumés.

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

Assessment Methodology

The Council assessed the engagement level of employees through 47 questions that measured the strength of rational and emotional commitment to day-to-day work, direct manager, team, and organization, along with the level of discretionary effort and intent to stay.

Sample Emotional Commitment Sample Rational Commitment Sample Discretionary Effort Sample Intent to Stay Questions Questions* Questions Questions • I believe in what I do every day at work • The best way for me to develop my skills • I frequently try to help others who have • I intend to look for a new job with in my organization right now is to stay heavy workloads another organization within the next year with my current team Strongly Strongly Disagree Agree Strongly Strongly Strongly Strongly Disagree Agree Strongly Strongly Disagree Agree Disagree Agree • I enjoy working with my team • There are days when I don’t put much • I frequently think about quitting my job • The best way for me to advance in this and leaving this organization organization is to stay with my current effort into my job Strongly Strongly Disagree Agree supervisor Strongly Strongly Strongly Strongly Disagree Agree Disagree Agree • When speaking to others, I speak highly Strongly Strongly • I am actively looking for a job with Disagree Agree of my supervisor • I am constantly looking for ways to do my another organization • The best way for me to advance my job better career is to stay with my current Strongly Strongly Strongly Strongly Disagree Agree organization Strongly Strongly Disagree Agree Disagree Agree I have recently made phone calls or sent • I am proud to work for my organization • Strongly Strongly out my résumé in order to ﬁ nd a job with Disagree Agree • When needed, I am willing to put in the extra effort to get a job done another organization Strongly Strongly • My performance would suffer if I worked Disagree Agree with any other team in my organization Strongly Strongly Strongly Strongly Disagree Agree Disagree Agree

Strongly Strongly Disagree Agree

* Rational commitment to day-to-day work was not measured due to its similarity to rational commitment Source: Corporate Leadership Council 2004 Employee Engagement Survey. to the team, direct manager, and organization.

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

© 2004 Corporate Executive Board 5 Survey Demographics Organizational Level, Function, and Geography of the Survey Participants Management Level Work Function Geography Division Senior Executive Other2 Department/ Head/VP 2% < 1% Sales 6% Corporate Admin Australia/ Europe 2% Unit Manager/ New Zealand Director 4% Customer 5% 4% 17% 15% Services South Other1 Africa 14% 31% 6% Engineering 13% 68% 8% and Design 75% Finance/Accounting North 9% 9% Supervisor/ 5% America Human Resources Administrator Operations IT Non-Management 4% Marketing 3% Manufacturing

Age, Gender, and Tenure of Survey Participants Age Gender Tenure with Company 61 Years or Older 31 Years or More 2% 3% 51–60 18–30 Years Old Years Old 21–30 Years 16% 14% 19% 10 Years or Less Female 11–20 46% 22% 31% 31–40 54% Male Years 61% 32% Years Old 41–50 Years Old

1 Retail (2%), Strategy/Planning (2%), Research and Development (1%), Quality Control (3%), Purchasing Source: Corporate Leadership Council 2004 Employee Engagement Survey. (2%), Legal (2%), Communications (3%), Actuaries (3%), Pharmacists (1%), and Miscellaneous (12%). 2 Includes Asia (1%), South America (1%), and Paciﬁ c Rim (<1%). Note: Percentage totals may not equal 100 percent due to rounding.

© 2004 Corporate Executive Board 6 State of Workforce Engagement Good News, Bad News Approximately 13 percent of the overall …76 percent are “up for grabs,” neither …and the remaining 11 percent workforce is highly uncommitted… fully committed or uncommitted… are highly committed

The “Disaffected” The “Agnostics” The “True Believers”

20%29% 27%

13% 11%

Strongly Strongly Strongly Strongly Strongly Strongly Disagree Agree Disagree Agree Disagree Agree Characteristics Characteristics Characteristics • Exhibit very strong emotional and rational non- • Exhibit strong emotional or rational commitment • Exhibit very strong emotional and rational commitment to day-to-day work, the manager, the to one focus, but only moderate commitment to commitment to day-to-day work, the manager, the team, and the organization remaining foci team, and the organization • Twenty percent lean toward non-commitment, twenty-seven percent lean toward strong commitment, while twenty-nine percent are truly ambivalent

• Poorer performers who frequently put in minimal • Employees neither go to great lengths in their jobs, • Higher performers who frequently help others with effort nor do they shirk their work heavy workloads, volunteer for other duties, and are constantly looking for ways to do their jobs better • Four times more likely to leave the organization than • Signiﬁ cant variation in intent to stay the average employee • Half as likely to leave the organization as the average employee • Nine times more likely to leave the organization than the “true believers” • Nine times more likely to stay with the organization as the “disaffected”

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

Generation X “Slackers”? Single Parents with Children? “Overworked” Managers?

12.0% 11.7% 12.0% 11.4% 12.0% 10.6% 10.8% 10.8% 9.9%

Percentage Percentage Percentage of Employees of Employees of Employees with Highest 6.0% with Highest 6.0% with Lowest 6.0% Commitment Commitment Commitment Levels Levels Levels

0.0% 0.0% 0.0% Employees Employees Single Single Managers Managers Over 40 Under 40 Parents People Working Working with Three with No Fewer Than More Than Children Children 60 Hours per 60 Hours per Week Week Percentage of Highly Committed and Uncommitted by Employee Demographic Group

Demographic/Group Highly Committed Highly Uncommitted Married 10.8% 12.2% Single 11.7% 13.0% Three Years of Tenure 11.5% 12.9% Ten Years of Tenure 10.5% 13.7% Sales Function 13.4% 10.8% Corporate Administration 12.8% 10.6% Telecommunications Industry 10.7% 13.3% Financial Services Industry 11.5% 12.1% Management 11.1% 10.7% Non-Management 11.2% 12.5%

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

© 2004 Corporate Executive Board 8 Engagement Is Company-Speciﬁ c The Real Litmus Test: Companies While minimal differences in engagement exist among demographic segments, dramatic differences exist across organizations

Percentage of Company Workforce in “True Believer” Category*

23.8%

2.9%

Highest Scoring Lowest Scoring Company Company

* The analysis above is based on the percentage of each organization’s workforce that demonstrates the Source: Corporate Leadership Council 2004 Employee Engagement Survey. highest level of both emotional and rational commitment to day-to-day work, the manager, the team, and the organization (termed “True Believers” on page 14b).

Percentage of Workforce Exhibiting Highest Effort Levels, by Company

Nearly 25 percent of the 25.0% workforce in this organization exert maximum effort… …while in this organization, less than three percent of the workforce is willing to do the same.

Percentage of Company Workforce Exhibiting 12.5% Highest Level of Discretionary Effort

0.0% Company

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

Commitment… …drives effort and …resulting in improved intent to stay… performance and retention

Rational Commitment •Team •Manager Discretionary Effort Performance •Organization

Emotional Commitment •Job •Team Intent to Stay Retention •Manager •Organization

* Rational commitment to day-to-day work was not measured due to its similarity to rational commitment to the team, direct manager, and organization. Source: Corporate Leadership Council 2004 Employee Engagement Survey.

© 2004 Corporate Executive Board 11 A Note of Caution: Engagement Is Not a Cure-All A high-performing workforce ﬁ rst depends …once in place, engagement accounts for roughly on the recruitment of high-quality talent… 40 percent of observed performance improvements

Recruiting High Quality Talent Percentage of Observable Performance Improvement by Category1

100% Understanding Direct hire Performance Inﬂ ectors Direct performance inﬂ ectors include 43% • Job-relevant information (e.g., training) •Experiences (e.g., on-the-job development) Recruiting for High Performance • Resources (e.g., a better computer).2 Total •Intelligence Percentage 50% to Do urces Improvement Reso Job •Right Skill Set Your

1. • Strong Work Ethic 2. 3. 57%

Performance Improvement Through Employee Commitment and Effort Performance Improvement Through Direct Performance Inﬂ ectors 1 Using structural equation models, the total effect of more than 100 levers for increasing performance was decomposed into two components: the direct effect of the lever on performance (consisting of job relevant information, experiences, or resources) and the indirect effect of the lever on performance through emotional Source: Corporate Leadership Council 2004 Employee Engagement Survey. and rational commitment. The numbers presented are the average across the top 100 levers. 2 The Council’s recent study Building the High Performance Workforce presents an extensive treatment of direct performance inﬂ ectors.

Organizations that improve commitment …resulting in higher performance will see signiﬁ cant returns in discretionary effort… across the workforce

Maximum Impact of Commitment Maximum Impact of Discretionary on Discretionary Effort* Effort on Performance Percentile*

Moving employees from strong non- Moving from low to high commitment to strong commitment effort levels can result in a can result in a 57 percent increase in 20 percent improvement in discretionary effort. employee performance.

1.57

Change in 1.0 Number Discretionary of Employees Effort

Strongly Non- Strongly 50th 70th Committed Committed Percentile Percentile

The “10:6:2” Rule • Every 10 percent improvement in commitment can increase an employee’s effort level by 6 percent. • Every 6 percent improvement in effort can increase an employee’s performance by 2 percent.

* The analysis above presents a statistical estimate of the maximum total impact on discretionary effort and performance Source: Corporate Leadership Council 2004 Employee Engagement Survey. emotional commitment will produce. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort or performance rank for an employee who scores “high” in emotional commitment, and the predicted discretionary effort or performance rank for an employee who scores “low” in emotional commitment.

Maximum Impact of Commitment on the Probability of Departure

10% 9.2% Moving from strong non-commitment to strong commitment decreases the probability of departure by 87 percent.

Probability of Departure in Next 12 5% Months

1.2%

0% Strongly Non-Committed Strongly Committed

The “10:9” Rule Every 10 percent improvement in commitment can decrease an employee’s probability of departure by 9 percent.

* Analyzing data from the Council’s 2004 employee engagement data and attrition models from CLC Solutions, Source: Corporate Leadership Council 2004 Employee Engagement Survey. non-linear regression was used to estimate the rate of departure for employees according to commitment level.

Rational Commitment Discretionary Effort

22.9%

Percentage of 15.8% Percentage of Workforce in Workforce Highest Category 7.8 % Strongly Rationally 4.9% of Discretionary Committed Effort

Organization Organization Organization Organization A B A B

Emotional Commitment Intent to Stay` 42.9% 20.8%

Percentage of Workforce Percentage of Workforce in Strongly 13.7% Emotionally 4.9% Highest Category Committed of Intent to Stay Organization Organization A B Organization Organization A B

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

Companies with above average employee commitment had greater one-year revenue growth relative to their industry than those with below-average employee commitment.

Percentage of Companies by Economic Performance and Employee Commitment

Below Average Above Average Company Performance Company Performance

29% 38% 71% 62%

Above Average Below Average Company Performance Company Performance

Companies with Above Average Companies with Below Average Employee Commitment Employee Commitment

* Company performance is determined by above or below average one-year revenue growth relative to Source: Corporate Leadership Council 2004 industry peer group. Above average employee commitment is deﬁ ned as having more than 11 percent of an Employee Engagement Survey. organization’s workforce fall into the highly committed category. Below average employee commitment is deﬁ ned as having less than 11 percent of an organization’s workforce fall into the highly committed category.

A Unique Point in Time

Sizing the Opportunity

The Voice of the Workforce

Reframing the Organization’s Response

The Evolving Employment Contract

Commitment… …drives effort and …resulting in intent to leave… improved performance and reduced attrition

Rational Commitment •Team •Manager Discretionary Effort Performance •Organization

Engagement Levers

Emotional Commitment •Job •Team Intent to Stay Retention •Manager •Organization

Step #1: Measure Presence and Effectiveness of “Engagement Levers” Step #2: Measure Attitudes of Engagement

In the last 12 months, about how many hours of general training have you received Example:I believe in what I do every day at work. from your organization? Question 4 of Engagement Assessment: I received no general skills training in the last 12 months I believe in what I do every day at work. Less than 1 hour Strongly Agree Disagree 1 to 5 hours Agree Strongly Disagree … Somewhat Agree 61 to 70 hours Somewhat Disagree More than 70 hours of training

Step #4: Calculate the Lever’s Total Impact Step #3: Apply a Structural Equation Model on Discretionary Effort and Intent to Stay to Estimate Impact of Lever

Rational Commitment • Team Discretionary Effort • Manager • Organization Change in Effort and Intent to Leave Due to Engagement Amount of Levers General Training Received Emotional Commitment Intent to Stay Effort Intent to • Job Stay • Team • Manager • Organization

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

Maximum Impact of Commitment Type on Discretionary Effort*

A strong emotional commitment to Emotional Commitment one’s job and organization has the Rational Commitment greatest impact on discretionary effort. 60% 55.9%

43.2% The impact of rational commitment 38.9% is much smaller. 34.0% Change in Discretionary 30% Effort 18.4% 13.8% 7.6%

0% Emotional— Emotional— Emotional— Emotional— Rational— Rational— Rational— Job Organization Team Manager Organization Team Manager

* Each bar represents a statistical estimate of the maximum total impact on discretionary effort Source: Corporate Leadership Council 2004 Employee Engagement Survey. each type of commitment will produce. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who is strongly committed, and the predicted discretionary effort level for an employee who is strongly uncommitted. The impact of each commitment type is modeled separately.

© 2004 Corporate Executive Board 20 Retention Problems Are Problems of Rational Commitment Meet Employee Needs to Battle Attrition Employees leave organizations largely out of self-interest, but emotions still play a pivotal role

Maximum Impact of Commitment Type on Intent to Stay*

A strong rational commitment to the Emotional Commitment 60% organization leads to the strongest Rational Commitment reduction in intent to stay. 50.0%

38.8% 38.6% 33.7% 33.2% Improvements in 30.0% 30% Intent to Stay 25.4%

0% Rational— Rational— Emotional— Emotional— Emotional— Rational— Emotional— Organization Team Organization Manager Job Manager Team

* Each bar represents a statistical estimate of the maximum total impact on intent to Source: Corporate Leadership Council 2004 Employee Engagement Survey. stay each type of commitment will produce. The maximum total impact is calculated by comparing two statistical estimates: the predicted intent to stay for an employee who is strongly committed, and the predicted intent to stay for an employee who is strongly uncommitted. The impact of each commitment type is modeled separately.

The Corporate Leadership Council’s Model of Engagement

Rational Commitment •Team •Manager Discretionary Effort Performance •Organization

Engagement Levers

Emotional Commitment •Job •Team Intent to Stay Retention •Manager •Organization

• 401(k) Plan • Commission Internal Equity • Job Fit—Better Suited for Another Position • Manager: Possesses Job Skills • Ability to Obtain Necessary Information • Commission Satisfaction • Job Fit—Type of Work • Prescription Drug Benefi t • Manager: Accepts Responsibility for Successes and Failures • Manager: Commitment to Diversity • Job Freedom • Profi t Sharing External Equity • Manager: Accurately Evaluates Employee Performance • Community Involvement • Job Infl uence • Profi t Sharing Internal Equity • Manager: Accurately Evaluates Employee Potential • Company Performance • Leave Benefi ts Information • Profi t Sharing Satisfaction • Manager: Adapts to Changing Circumstances • Connection Between Work and Organizational Strategy • Manager: Lets Upper Management Know of Employee • Provides Job Freedom • Amount of General Skills Training Received • Manager: Creates Clear Work Plans and Timetables Effectiveness • Provides Necessary Tools and Resources • Amount of Job-Specifi c Training Received • Culture of Flexibility • Manager: Listens Carefully to Views and Opinions • Onboarding: Provides Work Immediately • Amount of Travel (Actual Versus Desired) • Culture of Innovation • Long-Term Disability • Quality of Informal Feedback • Manager: Analytical Thinking • Culture of Risk Taking • Senior Executive Team: Makes Efforts to Avoid Layoffs • Manager: Recognizes and Rewards Achievement • Manager: Appropriately Handles Crises • Customer Focus • Senior Executive Team: Makes Employee Development a • Organization’s Reputation of Integrity • Manager: Articulates a Long-Term Vision for the Future • Day-Care Priority • Manager: Respects Employees as Individuals • Manager: Attains Information, Resources, and Technology • Manager: Deeply Cares about Employees • Manager: Makes Sacrifi ces for Direct Reports • Retirement Information • Base Pay External Equity • Manager: Defends Direct Reports • Maternity Leave • Senior Executive Team: Strong in Strategy • Base Pay Internal Equity • Manager: Demonstrates Honesty and Integrity • Opportunity Culture Selection and Implementation • Base Pay Satisfaction • Manager: Demonstrates Passion to Succeed • Opportunity to be Promoted • Suffi cient People to Complete Tasks • Manager: Breaks Down Projects into Manageable Components • Development Plan: Challenge • Opportunity to Help Launch a New Business, Initiative, or • Suffi cient Time to Complete Tasks • Manager: Cares About Employees • Development Plan: Effectiveness Program • Suffi cient Tools and Resources • Cash Bonus External Equity • Manager: Has a Good Reputation within the Organization • Opportunity to Help Turn Around a Struggling Business • Manager: Respects Employees as Individuals • Cash Bonus Internal Equity • Health Benefi ts Information • Opportunity to Spend Time with a Professional Coach • Retirement Information • Cash Bonus Satisfaction • Manager: Helps Find Solutions to Problems • Opportunity to Take Breaks • Safe Workspace • Manager: Clearly Articulates Organizational Goals • Manager: Holds People Accountable • Opportunity to Work in a Different Country • Sick Leave • Manager: Clearly Communicates Performance Expectations • Importance of Job to Organizational Success • Opportunity to Work in a Variety of Jobs/ Roles • Stock Bonus External Equity • Onboarding: Clearly Explains Job Importance • Importance of Projects to Employees’ Personal Development • Opportunity to Work in New Divisions or Business Units • Stock Bonus Internal Equity • Onboarding: Clearly Explains Job Responsibilities • Importance of Projects to Employees’ Long-term Career • Opportunity to Work in New Functional Areas • Stock Bonus Satisfaction • Manager: Clearly Explains Performance Objectives • Manager: Inspires Others • Opportunity to Work on Things You Do Best • Senior Executive Team: Strong in Day-to-Day • Commission External Equity • Internal Communication • Opportunity to Work with a Mentor Process Management • Development Plan: Emphasis on General Skills Training, Job- • Onboarding: Introduces New Hires to Other New Employees • Effectiveness of General Skills Training • Retirement Medical Group Plan Specifi c Training, Skills and Behaviors, Job Experiences, Leadership • Senior Executive Team: Is Committed to Creating New Jobs • Effectiveness of Job-Specifi c Training • Paid Time-Off Bank Training, and Management Training • Manager: Is Friendly and Approachable • Employee Assistance Program • Pension • Development Plan: Employee Infl uence in Creating • Manager: Is Intelligent • Employee Stock Ownership Program • Manager: Puts People in the Right Roles at the • Development Plan: Suffi cient Time to Complete • Manager: Is Open to New Ideas • Manager: Encourages and Manages Innovation Right Time • Development Plan: Use • Senior Executive Team: Is Open to New Ideas • Perceived Rewards: Size of Annual Bonus • Safety of Tasks • Manager: Differential Treatment of Best and Worst Performers • Job Challenge • Perceived Rewards: Size of Annual Raise • Diffuse Decision-making Authority • Manager: Encourages and Manages Innovation • Manager: Persuades Employees to Move in a Desired • Senior Executive Team Diversity • Manager: Encourages Employee Development Direction • Domestic Partner • Equity and Recognition • Manager: Places Employee Interests First • Education Assistance • Fitness Program • Task Variety • Effectiveness of Career Advisor • Flexible Work Schedule • Onboarding: Teaches About Group or Division • Onboarding: Teaches About Organizational Vision and Strategy • Freedom from Harassment in the Workplace Work-Life Balance Information • Telecommuting • Future Orientation • Manager: Works Harder Than Expects Employees to Work • Manager: Values Work–Life Balance of Employees • Understanding of How to Successfully Complete Work Projects • Total Compensation External Equity • Manager: Sets Realistic Performance Expectations • Vacation • Total Compensation Internal Equity • Manager: Treats Direct Reports Equally • Perceived Rewards: Opportunity for Promotion • Total Compensation Satisfaction • Manager: Trusts Employees to Do Their Job • Short-Term Disability • Senior Executive Team: Strong in Leading and Managing • Opportunity to Work with the Senior Executive Team • Health Benefi ts People • Senior Executive Team: Strong in Personal Characteristics

Average Difference in Impact of Levers on Discretionary Effort Between Segment and Aggregate Workforce

Segment Type Average Difference in Impact of Lever Across Segments

Managers 5.04%

Regional 4.33%

Organizations 2.93%

Hourly Workers 2.70%

Front-Line Employees 2.42%

Sales People 2.03%

Generations X and YGen X 1.69%

R&D and Engineering 1.68%

* Using structural equation models, the total effect of more than 100 levers for increasing discretionary effort Source: Corporate Leadership Council 2004 Employee Engagement Survey. was measured for the aggregate population and the subsets outlined above. The average difference is found by subtracting the total effect for the aggregate dataset from the total effect for the subset and averaging over the 100 levers. The absolute value of the difference is presented.

© 2004 Corporate Executive Board 24 Some Engagement Levers Much More Effective Than Others The Power of Focus on High-Impact Levers While the majority of levers will improve discretionary effort, a select group of levers produce signiﬁ cantly higher returns

Maximum Impact of Engagement Levers on Discretionary Effort*

40%

The top 50 levers of discretionary effort are 40 times as powerful as the bottom 150 levers.

Change in Discretionary 20% Effort

0% 50 100 150 300

* Each bar represents a statistical estimate of the maximum total impact on discretionary effort each Source: Corporate Leadership Council 2004 Employee Engagement Survey. lever will produce through its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately.

Manager Manager (Continued) Senior Executive Team Compensation Benefi ts • Accepts Responsibility for Successes • Helps Find Solutions to Problems • Deeply Cares About Employees • Total Compensation Satisfaction Health Benefi ts: and Failures • Holds People Accountable • Is Committed to Creating New • Total Compensation External • Health Benefi ts Plan • Accurately Evaluates Employee • Inspires Others Jobs Equity • Health Benefi ts Information Performance • Is Friendly and Approachable • Is Open to New Ideas • Total Compensation • Prescription Drug Benefi t • Internal Equity • Accurately Evaluates Employee • Is Intelligent • Makes Employee Development a • Base Pay Satisfaction Potential Priority Leave Benefi ts: • Is Open to New Ideas • Base Pay External Equity • Adapts to Changing Circumstances • Provides Necessary Tools and • Lets Upper Management Know of • Base Pay Internal Equity • Leave Benefi ts Information • Analytical Thinking Resources Employee Effectiveness • Cash Bonus Satisfaction • Long-Term Disability • Appropriately Handles Crises • Listens Carefully to Views and • Strong in Day-to-Day Process • Cash Bonus External Equity • Maternity Leave • Articulates a Long-Term Vision for Opinions Management • Cash Bonus Internal Equity • Paid Time-Off Bank the Future • Makes Sacrifi ces for Direct • Strong in Leading and Managing • Commission Satisfaction • Short-Term Disability • Attains Information, Resources, and Reports People • Commission External Equity • Sick Leave Technology • People in the Right Roles at the • Strong in Personal • Commission Internal Equity • Vacation • Breaks Down Projects into Right Time Characteristics • Profi t Sharing Satisfaction Manageable Components • Strong in Strategy Selection and • Profi t Sharing External Equity • Persuades Employees to Move in a Retirement Benefi ts: • Cares About Employees Desired Direction Implementation • Profi t Sharing Internal Equity • Retirement information • Clearly Articulates Organizational Places Employee Interests First • Teaches About Organizational • Stock Bonus Satisfaction • • 401(k) Plan Goals Possesses Job Skills Vision and Strategy • Stock Bonus External • • Employee Stock Ownership • Clearly Communicates Performance • Provides Job Freedom • Equity Stock Bonus • Internal Equity Program Expectations • Quality of Informal Feedback • Commitment to Diversity • Pension • Recognizes and Rewards • Retirement Medical Group Plan • Creates Clear Work Plans and Achievement Timetables • Respects Employees as Individuals Work–Life Benefi ts: • Defends Direct Reports • Sets Realistic Performance • Work–Life Balance Information • Demonstrates Honesty and Expectations • Day-Care Integrity • Treats Direct Reports Equally • Domestic Partner • Demonstrates Passion to Succeed • Trusts Employees to Do Their Job • Employee Assistance Program • Encourages and Manages Innovation • Values Work–Life Balance of • Encourages Employee Development Employees • Education Assistance • Has a Good Reputation Within the • Works Harder Than Expects • Fitness Program Organization Employees to Work • Flexible Work Schedule • Telecommuting

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

Onboarding Day-to-Day Work Learning and Development Organizational Culture • Clearly Explains Job Importance • Ability to Obtain Necessary Information • Development Plan: Challenge • Community Involvement • Clearly Explains Job Responsibilities • Amount of Travel (Actual Versus Desired) • Development Plan: Effectiveness • Company Performance • Clearly Explains Performance • Connection Between Work and Organizational • Development Plan: Emphasis on General Skills • Customer Focus Objectives Strategy Training, Job-Specifi c Training, Skills and Behaviors, • Diffuse Decision-Making Authority • Introduces New Hires to Other • Understanding of How to Successfully Complete Work Job Experiences, Leadership Training, and • Diversity New Employees Projects Management Training • Culture of Flexibility • Provides Necessary Tools and • Freedom from Harassment in the Workplace • Development Plan: Employee Infl uence in Creating • Differential Treatment of Best and Resources • Importance of Job to Organizational Success • Development Plan: Suffi cient Time to Complete Worst Performers • Provides Work Immediately • Importance of Projects to Employees’ Long-Term • Development Plan: Use • Equity and Recognition • Teaches About Group or Division Career • Amount of General Skills Training Received • Future Orientation • Teaches About Organizational • Importance of Projects to Employees’ Personal • Amount of Job-Specifi c Training Received • Culture of Innovation Vision and Strategy Development • Effectiveness of General Skills Training • Communication • Job Challenge • Effectiveness of Job-Specifi c Training • Opportunity Culture • Job Fit—Better Suited for Another Position • Effectiveness of Career Advisor Opportunity to Be • Culture of Risk Taking • Job Fit—Type of Work Promoted • Reputation of Integrity • Job Freedom • Opportunity to Help Launch a New Business, • Job Infl uence Initiative, or Program • Opportunity to Take Breaks • Opportunity to Help Turn Around a Struggling • Opportunity to Work on Things You Do Best Business • Perceived Rewards: Opportunity for Promotion • Opportunity to Spend Time with a Professional • Perceived Rewards: Size of Annual Bonus Coach • Perceived Rewards: Size of Annual Raise • Opportunity to Work in a Different Country • Safe Workspace • Opportunity to Work in a Variety of Jobs/ Roles • Safety of Tasks • Opportunity to Work in New Divisions or Business • Suffi cient People to Complete Tasks Units • Suffi cient Time to Complete Tasks • Opportunity to Work in New Functional Areas • Suffi cient Tools and Resources • Opportunity to Work with a Mentor • Task Variety • Opportunity to Work with the Senior Executive Team

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

Direct Manager: The Rule of Three and the challenge of scale

Senior Executive Team: The importance of reciprocity

Compensation Plans: The power and limitations of ﬁ nancial rewards

Beneﬁ ts Plans: The value of information

Onboarding: An important job from day one

Day to Day Work: Connecting employees to something larger

Learning and Development: Tangible commitment to a personalized approach

Organizational Culture: Connection, contribution, and credibility

Maximum Impact on Discretionary Effort from Manager Characteristics*

Commitment to Diversity 28.5% Demonstrates Honesty and Integrity 27.9% Adapts to Changing Circumstances 27.6% Clearly Articulates Organizational Goals 27.6% Possesses Job Skills 27.2% Sets Realistic Performance Expectations 27.1% Puts People in the Right Roles at the Right Time 26.9% Helps Find Solutions to Problems 26.8% Breaks Down Projects into Manageable Components 26.7% Accepts Responsibility for Successes and Failures 26.6% Encourages and Manages Innovation 26.5% Accurately Evaluates Employee Potential 26.3% Respects Employees as Individuals 26.1% Demonstrates Passion to Succeed 26.0% Cares About Employees 26.0% Has a Good Reputation Within the Organization 26.0% Is Open to New Ideas 25.9% Defends Direct Reports 25.8% Analytical Thinking 25.7% Attains Information, Resources, and Technology 25.7%

Makes Sacrifices for Direct Reports 25.6% Quality of Informal Feedback 25.6% Encourages Employee Development 25.5% Persuades Employees to Move in a Desired Direction 25.4% Accurately Evaluates Employee Performance 25.3% Articulates a Long-term Vision for the Future 25.3% Inspires Others 25.2% Places Employee Interests First 24.8% Provides Job Freedom 24.7% Is Intelligent 24.6% Clearly Communicates Performance Expectations 24.6% Appropriately Handles Crises 24.4% Creates Clear Work Plans and Timetables 24.1% Trusts Employees to do their Job 23.8% Advertises Employee Effectiveness 23.0% Listens Carefully to Views and Opinions 23.0% Recognizes and Rewards Achievement 22.7% Holds People Accountable 22.6% Is Friendly and Approachable 22.2% Treats Direct Reports Equally 22.0% Values Work-life Balance of Employees 21.7% Works Harder than Expects Employees to Work 20.7%

* Each bar represents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its Source: Corporate Leadership Council 2004 Employee Engagement Survey. impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately.

Manager Spans of Control

Forty-Six Percent of Managers: Twenty-Five Percent of Managers: Twenty-Nine Percent of Managers: 1 to 5 Direct Reports 6 to 10 Direct Reports 11 to 100 Direct Reports*

* This group is made up of 17 percent of managers who manage 11 to 20 people, and 21 percent of Source: Corporate Leadership Council 2004 Employee Engagement Survey. managers who manage 21 or more people.

Maximum Impact of Senior Executive Team Qualities on Discretionary Effort*

Reciprocity pays: Senior executives who are open to input and commit to their employees receive heightened effort in return.

30%

22.9% 20.7% 19.7%

Change in 15.9% 15.6% 15.6% 15.3% Discretionary 15% 14.4% 14.0% Effort

Personal Is Open to Leading and New Ideas Employees Management Makes Employee Is Committed to MakesAvoid Efforts Layoffs to Implementation Characteristics Managing People Day-to-Day Process Deeply Cares About Creating New Jobs Strategy Selection and Development a Priority * Each bar represents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its Source: Corporate Leadership Council 2004 Employee Engagement Survey. impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately.

Maximum Impact of Compensation Levers on Discretionary Effort*

Connection Satisfaction Equity 12% 10.8% Connecting pay to performance has the greatest impact on discretionary effort… 9.9% 9.1% …while overall satisfaction with total 7.6% compensation is the next most inﬂ uential. 7.0% Change in Discretionary 6% 5.5% 5.4% Effort 5.1%

2.8% 2.5% 2.1% 1.9% 1.8% 1.3% 1.3% 1.1% 1.0% 0.9% 0.8% 0.8%

Satisfaction External Equity Internal Equity ConnectionConnection Between TotalBetween Compensation Base Pay Satisfaction Total Compensation Total Compensation Cash Bonus Satisfaction Performance and Raise Stock Bonus SatisfactionCommission Satisfaction Base Pay InternalBase Pay Equity External Equity Performance and Bonus Profi t-Sharing SatisfactionCash Bonus Internal Equity Cash Bonus External Equity Stock BonusStock Internal Bonus EquityCommissionExternal EquityCommission Internal Equity External Equity Profi t-Sharing Internal Equity Profi t-Sharing External Equity * Each bar represents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through Source: Corporate Leadership Council 2004 its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical Employee Engagement Survey. estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately.

Maximum Impact of Compensation Levers on Discretionary Effort*

14% 12.9% Aggregate Workforce 10.9% Sales Workforce

9.5% 9.1% 8.1% 7.6% Change in 7.0% 7.1% Discretionary 7% 6.8% Effort 5.5% 5.4% 5.1%

0% Total Base Pay Cash Bonus Stock Bonus Proﬁ t-Sharing Commission Compensation Satisfaction Satisfaction Satisfaction Satisfaction Satisfaction Satisfaction

* Each bar represents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through Source: Corporate Leadership Council 2004 Employee Engagement Survey. its impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately.

Maximum Impact on Discretionary Effort Due to Beneﬁ ts Programs*

Benefi t Health Retirement Leave Work–Life Communications Benefi ts Benefi ts Benefi ts Balance Benefi ts 18.0% 16.4% 15.1% Largest impact comes from clearly conveying Other programs have “signal value” of Ancillary benefi ts do benefi ts information to employees. company commitment to employees. not necessarily pay off in heightened effort.

11.7% 11.5% 11.8%11.7% 10.6%10.4% 10.5%10.5% 9.8% 9.6% Change in 9.1% 9.1% Discretionary 9.0% 8.2% Effort 7.8% 7.6% 7.0% 7.0% 6.5% 5.8% 5.6% 5.3%

0.0%

EAP 401(k) ESOP Pension Vacation Sick Leave Day Care LeaveInformation Benefi ts InformationInformation Group Plan Health Benefi ts Health Benefi ts Maternity Leave TelecommutingFitness Program Domestic Partner Work–Life Balance Retirement MedicalPaid Time Off Bank Long-Term DisabilityShort-Term Disability Education Assistance Retirement Information Flexible Work Schedule Prescription Drug Benefi t * Each bar represents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its Source: Corporate Leadership impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: Council 2004 Employee the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort Engagement Survey. level for an employee who scores “low” on the lever. The impact of each lever is modeled separately.

Maximum Impact of Onboarding Levers on Discretionary Effort*

New hires will try much harder when they understand and believe in their jobs’ importance to the organization.

30.0%

23.4% 21.9% 21.5% 20.9% 20.3% 19.2% 18.8% 17.9% Change in Discretionary 15.0% Effort

0.0% Clearly Teaches Teaches Clearly Clearly Introduces Provides Provides Explains Job About About Explains Explains Job New Hires Work Necessary Importance Organizational Group or Performance Responsibilities to Other Immediately Tools and Vision and Division Objectives New Resources Strategy Employees

* Each bar presents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its Source: Corporate Leadership Council 2004 Employee Engagement Survey. impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately.

Maximum Impact of Job Design Levers on Discretionary Effort*

Understanding how to do one’s job and a belief …job ﬁ t and job quality are …as are access to necessary in the importance of it are most critical… notably less important… resources and even safety.

Job Importance and Job Fit and Personal Understanding = 31% Goals = 17% Job Quality = 17% Resources = 15% Safety = 13%

40%

32.8% 30.3% 29.8%

23.8% 23.9% 22.0% 21.9% 20.5% 20% 18.8% 19.2% 18.9% 16.5% 16.9% 16.5% 14.0% 13.0% 11.0% 10.5% 9.4% 8.2% 6.9%

Change in Discretionary Effort 5.0%

Task Variety Job FreedomJob Infl uence Job Challenge Safety of Tasks ding of How to Work Youon Things Do Best Ability to Obtain Amount of TravelSafe Work Space Importance of Job to Long-Term Career Job Fit —Type of Work Job Fitfor —Better Another Suited Position Necessary Information OrganizationalUnderstan SuccessImportance ofImportance Projects to of Projects to (Actual Versus Desired) Connection Between Work Opportunity for Promotion Freedom from HarassmentOpportunity to Take Breaks and Organizational Strategy Suffi cient Tools and Resources Successfully Complete Projects Suffi cient Time to Complete Tasks Employees’ Personal Development Suffi cient People to Complete Tasks * Each bar presents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its Source: Corporate Leadership Council 2004 impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: Employee Engagement Survey. the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort level for an employee who scores “low” on the lever. The impact of each lever is modeled separately.

Maximum Impact of Learning and Development on Discretionary Effort*

An effective mentor helps employees feel personally connected to the organization. Career Advisor On-the-Job and Development Plan Training Programs Learning Opportunities 30%

25.5% Quality development 22.4% plans help employees feel 21.0% rationally and emotionally 20.1% committed. 17.8% 17.8% General skills training sends 17.1% 16.6% a message of “credible commitment” to employees. Change in 15% 14.3% 13.8% Discretionary 13.1% 13.0% Effort 11.0% 10.3% 9.7% 9.4% 9.2% 9.0% 8.6% 8.5% 8.0% 7.7% 7.5%

4.6% 4.1% 2.5%

0% s n h a t Plan Work ch ence in eneral ining unc e with nt Pla Skills and Help Turn Project Coa to Haveon General ness of Job- al lopment Plan lopmen ship TrainingEmphasist Training on lls Training ive g Received g Received to Work with onal Areas to Develop of Jobs/Roles cti Creating Plan Skills Training men Ski inin with a Mentor Spend Tim erent Country iveness of Gect Specifi c Tra ty to be Promoted Work in a Variety t Time to Complete aviors Leader Eff Tra Trainin ty to Help La Fun Developme Employee Infl u Emphasis Emphasis on on Opportunity to nior Executive Team a Diff Effectiveness of Mentor Beh ManageEffect a Profession Use of Deve Amount of General Skill Opportunity to Work in Opportunity to Opportunity Suffi cien elopment Plan Effectiveness Emphasis on Job Experience Amount of Job-Specifi c Skills Opportuni Opportuni the Se OpportunityDivisionsOpportunity to or Work Business in New to Units Work in New Challenge of Deve Dev Emphasis Around a Struggling Business Emphasis on Job-Specifi c Training Opportunity to Opportunity to New Business, Initiative, or * Each bar presents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its Source: Corporate Leadership impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: Council 2004 Employee the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort Engagement Survey. level for an employee who scores “low” on the lever. The impact of each lever is modeled separately.

© 2004 Corporate Executive Board 38 Organizational Culture Levers A Culture of Communication, Integrity, and Innovation “Give me job-relevant information, the opportunity to innovate, and a sense of pride”

Maximum Impact of Cultural and Performance Traits on Discretionary Effort

Cultures of information-sharing, Success invites greater effort while integrity, and innovation drive effort. the perception of failure risks employee shirking.

30% 29.2% 27.6% 26.0% 24.7% 23.2% 23.1% 21.5% 21.5% 21.1% 20.6% 18.7% 18.5% 18.3%

Change in Discretionary 15% Effort

5.5%

Flexibility Diversity Innovation Risk Taking Authority Communication Customer Focus Future Orientation Company Success Opportunity Culture Reputation of Integrity Equity and Recognition Community Involvement Differential TreatmentDiffuse of Decision-Making

* Each bar presents a statistical estimate of the maximum total impact on discretionary effort each lever will produce through its Best and Worst Performers Source: Corporate Leadership impact on rational and emotional commitment. The maximum total impact is calculated by comparing two statistical estimates: Council 2004 Employee the predicted discretionary effort level for an employee who scores “high” on the lever, and the predicted discretionary effort Engagement Survey. level for an employee who scores “low” on the lever. The impact of each lever is modeled separately.

A New Typology for Human Capital Strategies

Examples: Private Good Strategies Public Good Strategies Examples:

Cash Bonus On-the-Job Development • Subtractable—each • Non-Subtractable— Risk-Taking Culture Culture of Internal

employee’s use of the strategy is never “used NEW RISKS Communication $ strategy reduces the up” quantity available for others • Non-Excludable— Mentoring Job Rotation strategy affects Differential Treatment of Culture of Flexibility • Excludable—strategy all employees Best and Worst Performers can be administered to simultaneously some employees and withheld from others

Average Impact of Public Good Versus Private Good Strategies on Discretionary Effort* Pure Private Good Strategies Mixed Strategies Pure Public Good Strategies

25% 20% 21% 17% 17% Change in 12% Discretionary 10% Effort 2%

Compensation Beneﬁ ts Learning and Day-to-Day Work Senior Executive Areas of Direct Organizational Strategies Development Characteristics Team Qualities Onboarding Manager Culture Traits Opportunities Focus Characteristics

* Each bar presents an average of the maximum total impact of all the strategies within a category. The maximum Source: Corporate Leadership total impact for any given strategy is calculated by comparing two statistical estimates: the predicted discretionary Council 2004 Employee effort level for an employee who scores “high” on the strategy, and the predicted discretionary effort level for an Engagement Survey. employee who scores “low” on the strategy. The impact of each strategy is modeled separately.

Top 50 Most Effective Levers of Effort

Lever Impact Category Lever Impact Category 1. Connection Between Work and Organizational Strategy 32.8 D 26. Helps Attain Necessary Information, Resources, and Technology 25.7 M 2. Importance of Job to Organizational Success 30.3 D 27. Makes Sacriﬁ ces for Direct Reports 25.6 M 3. Understanding of How to Complete Work Projects 29.8 D 28. Quality of Informal Feedback 25.6 M 4. Internal Communication 29.2 O 29. Career Advisor Effectiveness 25.5 L&D 5. Demonstrates Strong Commitment to Diversity 28.5 M 30. Encourages Employee Development 25.4 M 6. Demonstrates Honesty and Integrity 27.9 M 31. Persuades Employees to Move in a Desired Direction 25.4 M 7. Reputation of Integrity 27.6 O 32. Accurately Evaluates Employee Performance 25.3 M 8. Adapts to Changing Circumstances 27.6 M 33. Identiﬁ es and Articulates a Long-Term Vision for the Future 25.3 M 9. Clearly Articulates Organizational Goals 27.6 M 34. Inspires Others 25.2 M 10. Possesses Job Skills 27.2 M 35. Places Employee Interests First 24.8 M 11. Sets Realistic Performance Expectations 27.1 M 36. Flexibility 24.7 O 12. Puts the Right People in the Right Roles at the Right Time 26.9 M 37. Provides Job Freedom 24.7 M 13. Helps Find Solutions to Problems 26.8 M 38. Is Intelligent 24.6 M 14 Breaks Down Projects into Manageable Components 26.7 M 39. Clearly Communicates Performance Expectations 24.6 M 15. Accepts Responsibility for Successes and Failures 26.6 M 40. Appropriately Handles Crisis 24.4 M 16. Encourages and Manages Innovation 26.5 M 41. Creates Clear Work Plans and Timetables 24.1 M 17. Accurately Evaluates Employee Potential 26.3 M 42. Ability to Obtain Necessary Information 23.9 D 18. Respects Employees as Individuals 26.1 M 43. Importance of Projects to Employees’ Personal Development 23.8 D 19. Demonstrates Passion to Succeed 26.0 M 44. Trusts Employees to do Their Job 23.8 M 20. Cares About Employees 26.0 M 45. Clearly Explains Job Importance 23.4 Onb 21. Has a Good Reputation Within the Organization 26.0 M 46. Customer Focus 23.2 O 22. Innovation 26.0 O 47. Future Orientation 23.1 O 23. Is Open to New Ideas 25.9 M 48. Lets Upper Management Know of Employee Effectiveness 23.0 M 24. Defends Direct Reports 25.8 M 49. Listens Carefully to Views and Options 23.0 M 25. Analytical Thinking 25.7 M 50. Is Open to New Ideas 22.9 Exec

O Organizational Culture and Performance Traits D Day-to-Day Work Characteristics L&D Learning and Development Opportunities M Manager Characteristics Onb Areas of Onboarding Focus Exec Senior Executive Team Qualities

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

1 Taking a business-outcome approach to measuring employee engagement. Engagement is the extent to which employees commit- rationally or emotionally- to something or someone in the organization, how hard they work as a result of this commitment, and how long they intend to stay.

2 Segment-speciﬁ c “rules of thumb” do not apply. Employee commitment is not a characteristic of group membership but is instead a characteristic of individual employees to be won or lost, created or destroyed by their organizations. 3 Dramatic differences between companies. Engagement is a source of competitive advantage. Some organizations have ten times as many highly committed, high-effort employees as others. 4 Engagement is the key to performance and retention. Highly committed employees try 57 percent harder, perform 20 percent better, and are 87 percent less like to leave than employees with low levels of commitment. 5 Not a cure-all, but still a business imperative. Employee commitment must be managed alongside other important drivers of performance, most importantly the recruitment of high quality talent and providing that talent with the information, experiences and resources they need to perform at their best. 6 Emotional commitment drives effort. Emotional commitment is four times as valuable as rational commitment in producing discretionary effort. Indeed, the search for a high-performing workforce in synonymous with the search for emotional commitment. 7 Rational commitment drives retention. Employees leave organizations when they conclude that the organization no longer meets their self-interest 8 The “Maslow’s Hierarchy” of engagement. Secure rational commitment from employees ﬁ rst. Employees are more likely to commit emotionally if their self-interested needs are met. 9 Focus on high-impact levers. The top 50 drivers of discretionary effort are 40 times as powerful as the bottom 150 levers. 10 Take a common approach to engaging employees. Most strategies have a common impact on employee segments. Most employees, most of the time, need the same things to commit, exert effort and perform at their best. 11 A means, not an end. The most important role of managers is to serve as a conduit for other, more valuable, forms of employee commitment: organizational, job and team. 12 The Rule of Three. The impact of excellence in additional manager skills diminishes quickly. Build on a limited number of existing manager strengths to maximize ROI. Source: Corporate Leadership Council 2004 Employee Engagement Survey.

13 The problem of scale. Most managers have very limited spans of control, an inherent limitation which reduces their appeal as an organization-wide engagement lever. 14 Communicate senior team openness and commitment to development. Employees try harder when they believe that the senior executive team has committed to them in the form of openness to new ideas and employee development. 15 Publicize leadership strength. While less important than employee perception of senior executive commitment, specifi c executive skill areas—such as leading and managing people and day-to-day process management—still have signifi cant impact on discretionary effort. 16 You can’t buy (much) effort. Compensation attracts talent into the organization and plays an important role in retention but has limited impact on employee effort. 17 Connect pay to performance. The most important element of a compensation strategy for driving effort is its connection to employee performance. 18 Brand your benefi ts programs. Distributing clear, compelling, actionable information about your benefi ts programs can have an impact on employee effort and retention that is commensurate with the programs themselves.

19 Do not overspend on benefi ts programs. The impact of benefi ts programs on effort and retention fall precipitously after a select group of “basic need” (e.g., health, retirement) and “niche” (e.g., domestic partner) programs are implemented. 20 Start early. The fi rst priority of onboarding programs should be to instill an understanding of, and a belief in, the job’s importance.

21 Get two things right about jobs. Understanding how to do one’s job, and a belief in the importance of it, are more critical in driving effort than access to necessary resources, an opportunity for promotion, or even safety. Employees need to feel connected to be at their best.

22 Personalize the connection. Providing sound career advice, a customized development plan, and general training provide a “credible commitment” to the employee.

23 Create public goods. The most effective levers of employee effort are organizational public goods, notably cultures of communication, integrity and innovation. Inﬁ nitely scalable, non-excludable and non-subtractable, they are capable of (simultaneously) driving effort and retention for thousands of employees at a time.

Source: Corporate Leadership Council 2004 Employee Engagement Survey.

Corporate Leadership Council Corporate Executive Board 2000 Pennsylvania Avenue NW Washington, DC 20006 Telephone: +1-202-777-5000 Fax: +1-202-777-5100 The Corporate Executive Board Company (UK) Ltd. Victoria House Fourth Floor 37–63 Southampton Row Bloomsbury Square London WC1B 4DR United Kingdom Telephone: +44-(0)20-7632-6000 Fax: +44-(0)20-7632-6001