Archive for September, 2008

Globoforce Listed on Inc. 500!

I’m very pleased with our latest achievement as a company – being listed among the 2008 Inc. 500 fastest growing private companies in the U.S.

Jane Berentson, editor of Inc., commented, “If you want to find out which companies are going to change the world, look at the Inc. 500. These are the most innovative, dynamic, fast-growing companies in the nation – the ones coming up with solutions to some of our knottiest problems, creating systems that let us conduct business faster and easier, and manufacturing products we soon discover we can’t live without.”

One of the “knottiest problems” in today’s fearful economic climate is helping employees stay motivated and focused on achieving company objectives. Our continued success in this ailing economy is due in part to our customers realizing the role strategic recognition plays. With just a small, well-governed investment in recognition programs for their people, company leadership can reap dramatic benefits in performance and achievement. Many companies having to do more with fewer resources, are putting strategic recognition to work for them.

Our listing is thanks to the hard work of all of our people – from product development creating an easy-to-use and fun platform for employee recognition to our rewards network developers securing relationships with nearly 3,000 desirable merchants around the world for truly global recognition capabilities to sales and marketing effectively communicating the value of achieving a global strategic recognition ambition to our Global 2000 customers. I thank all of our people for their efforts that put us on the Inc. 500!

Performance Reviews * What’s the Benefit?

Naomi Alderman recently dissected the six-month performance review in a recent issue of The Guardian. Alderman questions the value of the six-month review. She says most people would honestly answer, if allowed, “I did a pretty OK job, and I’m happy to go on doing the same for the next six months.” When the goal is to increase employee engagement – increase their level of discretionary effort – then continuing to do a “pretty good job” won’t accomplish that.

Alderman also points out that receiving feedback once or twice a year is pointless as the instances requiring feedback – positive or negative – are likely long forgotten. Alderman says, “A good manager will give feedback once or twice a week, and certainly at the end of any substantial project.”

That is precisely what good managers do. Unfortunately, managers often do not have a good tool at hand to both provide the feedback and record it for instant viewing by HR or even executives. A strategic recognition program provides such a tool by not only categorizing why an employee is being recognized – by peers as well as managers – but also reporting on that recognition in meaningful ways for company leadership. Trending of recognition performance by employee, by team or by division also provides excellent “lagging indicators” of areas of success as well as areas needing improvement.

Are you gaining the insight you need from your performance appraisals – either as an HR executive, a manager, or the employee on the receiving end? Tell me about it in comments.

Intangibles, Equity and Seeing Past Short-Term Blind Spots

Wharton finance professor Alex Edmans recently published a very interesting paper: “Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices.” Edmans compares the stock prices of companies on the Fortune “Best Companies to Work For” lists going back to 1984 to similar firms in the same industries and the broader market as a whole. Edmans summarizes:

“This paper documents statistically and economically significant long-horizon returns to portfolios containing companies with high employee satisfaction. These findings imply that the market fails to incorporate intangible assets fully into stock valuations – even if the existence of such assets is verified by a widely respected survey.”

I’ve blogged about this before here and here. Eric Mosley, our CEO, participated in a roundtable hosted by Chief Executive magazine on the value of intangibles. The Forum for People Performance Management and Measurement also found that 85% of a company’s assets are in “intangibles.” If, as is standard, Wall Street firms are valuing companies based only on tangibles, then much of the picture is being ignored.

What does this mean? Per Edmans, “An investor could have earned significant risk-adjusted returns by trading on the Fortune list.” I’ve studied similar research that shows an investor could have earned above average returns by investing in companies shown to have higher employee satisfaction levels (as measured via the Best Places to Work Survey) than if they simply invested in S&P index, for example.

Another concerning point Edmans raises is: “Even if managers believe employee satisfaction enhances long-term corporate performance, the may not act on their beliefs because investing in employees often reduces earnings in the long run.”

This is why executive sponsorship of long-run performance enhancing programs such as strategic employee recognition is critical. Without executives standing up to Wall Street and enforcing recognition targets with managers, short-term thinking will continue to rule. This and other change management practices are necessary to instill a culture of appreciation across a company.

What are you doing to support long-term high performance results over short-term goals? Do you believe your company has this kind of foresight? Are you in a position to affect change? Share your best practices in comments.

Employee Retention in China

A 2007 SHRM study of Employee Retention in China found very high turnover challenges in China, with turnover rates among Chinese managers more than 25% greater than the global average and 30-40% of senior managers at multinational organizations changing jobs every year. And trends show the rate only increasing. “Leaders” especially felt less loyal to the company and said they were less likely to still be working for their company in five years.

Considering the ever-increasing importance of China – both as a producer of goods and services in multinational organizations and as a consumer of international goods – these figures are concerning at many levels. Finding qualified leaders and managers is difficult enough. According to this report, encouraging them to stay and remain committed to the organization is nearly impossible.

So what were the reasons cited for employee turnover? Out of the top 10 reasons cited, insufficient rewards and recognition was fifth and unappreciated efforts was seventh. When combined, these concerns over recognition and appreciation rise to third place behind lack of opportunity to grow and better opportunities elsewhere. Interestingly, poor fit with organizational culture ranked ninth.

Employee retention drivers mirrored these findings. Out of the top 10 work characteristics cited for why employees stay, recognition for individual contributions was third, a creative or fun workplace culture was fifth, and an organization you are proud to work for was ninth.

Just as everywhere else in the world, getting recognition right is critical to business success in China. Only when employee recognition programs are implemented strategically can companies begin to evaluate their success and positively impact these abysmal retention rates.

Towers Perrin and the Global Employee Engagement Gap

Towers Perrin issued their 2007-2008 Global Workforce Study: Closing the Engagement Gap earlier this year. This comprehensive survey of 90,000 employees from mid- to large-sized organizations in 18 countries across all global regions measured the level of engagement of employees and the impact of their engagement on company performance. Just look at exhibit 2A to see the dramatic bottom-line impact engaged employees can have.

Towers Perrin found a significant engagement gap, which it describes as: “the difference between the discretionary effort that employers need for competitive advantage and employers’ ability to elicit this effort from a significant portion of their workforce.”

I encourage you to download the entire report to gain the full benefit of the research findings and recommendations. Following are a few gems that resonated with me.

Role of Senior Management in Engagement

“An engaged workforce starts at the top — and ends in the C-suite as well. Without engaged leadership, an engaged workforce is virtually impossible.”

The same is true with strategic recognition programs, which are themselves an excellent tool to foster increased employee engagement. Success is predicated on executive buy-in and sponsorship of the program throughout the company.

“Senior management’s ability to demonstrate genuine interest in employees is the top engagement driver globally.”

Employees need to be noticed, recognized and appreciated for their efforts. This is clearly a universal human need regardless of global location or culture. Showing interest can be demonstrated in so many ways – acknowledging performance, appreciating effort, even just saying thank you for a job well done. But clearly many are failing to follow even such simply steps.

Current State of Engagement

“Only one out of every five workers today is giving full discretionary effort on the job, and this ‘engagement gap’ poses serious risks for employers because of the strong connection between employee engagement and company financial performance.”

I’ve blogged frequently about the astounding impact of engagement, with happy employees returning upwards of 1,000% return for shareholders. So how do you achieve the engagement needed?

Tips for Engagement

“Organizations need to customize and shape the work environment and culture to match their unique basis for competitive advantage, tangibly aligning workforce strategies with business priorities.” Also, “An organization’s culture and workplace practices must actively drive the employee behaviors needed to deliver on its strategy and reflect its competitive focus.”

What better way to do that than by tying strategic recognition efforts to the company values, causing employees to be recognized specifically for behaviors and actions that reflect the company values and help achieve the mission?

Doing so effectively changes your company’s social architecture to a culture of appreciation, fostering the employee engagement levels for bottom-line success.

What, No Perks? Count Me Out.

If you want to spark employee disengagement, take away their perks. That’s the major conclusion I draw from a recent Wharton School at the University of Pennsylvania report. Though spun largely toward executive perks, there is a lesson to be learned from this report as companies are continuing to tighten their belts. As Wharton management professor Nancy Rothbard said, “Once you have the perk, to take it away is seen as a violation of a psychological contract you have with your employee.”

The report author explains further:

“To remove the perk is one of the most direct routes to employee anger, which in turn, leads to lower levels of motivation and retaliatory behavior. The retaliation can take on a psychological form, such as less commitment to the job, or a behavioral form, such as working less hard.”

That is the classic definition of employee disengagement. During this tough economic time, we should be doing all we can to encourage employees to want to work harder with a greater commitment to the team and the firm. Employee recognition is a key way to do this. When implemented correctly and measured appropriately, strategic recognition programs an actually save companies considerable money over the various tactical and untracked ad-hoc initiatives often scattered throughout a company’s many groups or divisions.

What are you doing to ensure you maintain or improve your psychological contract with your employees? Talk about it in Comments.

Upside to the Downturn: Is Retention Easier?

The HR Capitalist, Kris Dunn, recently posted a blog questioning if retention is easier in a down economy. A key conclusion of his was that your best performers will always have options. He cited a Leadership IQ study that reported 47% of high performers surveyed are actively seeking another job but only 18% of low performers and 25% of middle performers are actively looking.

Towers Perrin reported the same in their most recent Global Workforce Study:

“Engagement has an impact on retention. Even among the engaged, almost 40% are ‘passive job-seekers.’ Even worse, fully half of the disengaged have no plans to leave. This means employers face a real risk of losing the people they’d most like to keep – while retaining those who are not contributing as they should.”

So what does this mean for managers and HR executives? If you want to keep your A players, you better give them reason to stay. For these top performers, compensation and benefits is only part of the picture. They also need a challenge, opportunity, and the knowledge they are valued for their efforts. Use a strategic recognition program to not only recognize your A players as you should be, but to also track and measure your recognition efforts. When you then tie these results to your turnover statistics, you can begin to evaluate based on clear metrics the synchronistic effects of recognition on turnover.

(Image from Towers Perrin 2007-2008 Global Workforce Study)

The Upturn Is Just around the Corner * Are You Preparing?

Michael Fitzgerald’s Bnet post “Planning for the Upturn” got me thinking about what companies can and should be doing today to ensure they are well positioned for the market recovery.

The biggest risk to companies when planning for an upturn while stuck in a downturn is allowing short-sighted layoffs of key staff. Especially since many teams were cut to the bone during the last downturn, there is very little wiggle room in current staffing models. These short-sighted layoffs have three significant effects:

1) Overburdening remaining staff and fostering fear and disengagement in the ranks, negatively impacting productivity

2) Leaving staff stretched too thin to react quickly when the market does recover, putting the company at a disadvantage to better prepared competitors

3) Causing remaining employees to seriously reconsider their commitment to a company apparently not committed to them when their own career options expand along with economy when good times return

Regardless of these negative impacts, many companies have and will resort to extensive layoffs. So how do you overcome these hidden costs of layoffs to start out with your best foot forward when the upturn comes? The answers correspond to the challenges above:

1) Acknowledge the additional stresses your team is under and thank them for their redoubled efforts. Seek out opportunities to praise them while also addressing their fears and concerns for their own jobs. Communicate clearly and frequently the refined goals and mission of the company during the downturn and how their continued commitment and effort will better position the company for the upturn.

2) Successfully implementing this first step makes your company a desirable place to work and will help draw top performers to you as your ability to rehire expands in the early stages of the upturn.

3) Remaining top performers will better understand the mission and your repeated acknowledgment of their efforts will reinforce the culture of appreciation in the company, reducing the likelihood of their desire to depart.

All of this can be accomplished, measured, and tracked through a strategic recognition program that puts your employees first.