If you’re reading this, you’re already walking along the road to enlightenment—seeking to know more about how to increase productivity and employee engagement in your organization. This is your comprehensive map to speed your way through that journey.
We tend to measure organizational health through numbers. We look at P&L, at margins, at productivity rates, at growth, at NPS, at projections, at engagement scores, and at performance ratings. All of this is important.
But as important as these numbers are in their own right—they’re outcomes. They tell us what has happened or predict data trends, but they don’t identify the root causes of our successes or failures.
And mostly, those causes come down to people.
To really understand what makes our organizations tick, we need to look at and understand what makes the people within the organization tick. The answers we seek are all around us, every day. We just need to ask the right questions.
This e-book will help you gain a deeper understanding of the people problems that manifest as business problems. It will also alert you to the forces of disengagement that impact employees and suggest ways you can set your organization up for success and productivity.
Ready? Let’s get started.
Let’s start with the elephant in the room.
From time to time you may encounter people who dismiss industrial and organizational psychology as irrelevant or a “soft skill.” The reality is that thoughts and behaviors directly impact “hard” business results like productivity and profitability.
Behavioral psychology—understanding the drives and abilities of your employees—is not “soft” science. It’s people science.
We invest millions of dollars and hours into sharpening our understanding of the tools of our businesses. If you were a manufacturing company, you’d gain a crystal clear understanding of how your assembly machines work to maximize productivity and uptime. If you were a SaaS company, you’d have optimized your software down to each line of code.
Science helps us predict how machines behave. But are you equally able to predict how your employees will behave? Have you leveraged that science? Salaries constitute 43 percent of total company operating expenses on average; we also must account for the investment we make in our employees.
What if you could make your people 10 percent, 20 percent or even 30 percent more productive? Can you imagine how your business results would skyrocket?
Let’s look at the 1Q 2018 Middle Market Indicator report, which lists the most common business challenges:
As you can see, the vast majority of common business challenges are internal people challenges—managing talent, business, and costs. No one would call these concerns “soft.”
Here’s a list of some common issues—all of which have a profound impact on your bottom line and track back to business, talent management, or cost (and sometimes all three) .
□ Bad hires and involuntary turnover
□ Change management issues
□ Communication issues
□ Concerns about planned growth
□ Compliance/risk issues
□ Culture concerns
□ Customer churn
□ Difficulty hiring the right people
□ High voluntary turnover
□ Inefficient or bad hiring processes
□ Inefficient, inconsistent, or bad management
□ Low engagement scores
□ Low satisfaction scores
□ Mistakes or misalignment
□ Productivity issues
□ Safety issues
□ Trouble scaling culture after growth
□ Teamwork issues
□ Upcoming M&A
How mission critical are they for your organization? If you’ve checked three or less, you should be thinking about a surgical strike for change, but if you checked off four or more, you should be thinking much more broadly about culture change.
A resilient, illuminated culture—built on an engaged, self-aware workforce with high levels of mutual understanding and self-knowledge—can help correct these challenges, provide a huge return on investment, and even protect against unexpected trauma.
Maybe you’re solving for an existing problem. Maybe you’re future-proofing a cherished culture. Whatever you’re trying to do, understanding talent—more specifically, a deep understanding of how people think and work—is the key to solving your business problems.
The biggest risk? Doing nothing. Doing nothing is dangerous because there are malignancies that can sabotage your culture if left unchecked.
Let’s unpack them.
There are four main forces of disengagement that plague modern organizations. Any one of them alone can crush productivity. More than one can damage your organization’s health; teams and entire departments can be crippled.
Nothing can cause a new hire or existing employee to sour faster than discovering a person/role mismatch—or “poor job fit.” Nearly half (46 percent) of newly-hired employees fail within 18 months, while only 19 percent achieve unequivocal success.
Why? 82 percent of hiring managers admitted that in hindsight, they focused on the wrong things in the interview—prioritizing resume and skill checkboxes over stronger indicators of person/role fit, such as “coachability, emotional intelligence, motivation, and temperament.”
But the story doesn’t end with hiring. Often employees will flounder in existing roles when they’re not adequately defined or haven’t evolved to fit the changing duties or needs of the business. Job fit is a significant contributor to employee levels of engagement and productivity, so it’s critical that we get this right.
In the U.S., 75 percent of employees report that their manager is the worst part of their job, and 65 percent would take a pay cut if they could replace their boss with someone better.
Relationship with one’s direct manager is one of the most critical contributors to employee engagement. But “a mere 21 percent of employees strongly agree that their performance is managed in a way that motivates them to do outstanding work.”
Some managers are toxic, sure, but the bulk have good intentions and they’re trying. But these managers feel ill-equipped to coach and communicate with their employees. In other words, managers aren’t equipped with the information they need to manage effectively. The most important relationships in our organizations need more attention than this.
Teams have changed a lot over the past few decades, as we’ve added global, remote, and cross-functional groups, as well as technology and other complexities into the mix. One thing hasn’t changed: the challenges that can arise when different personalities come together.
According to one study, 97 percent of employees believe lack of alignment on a team directly impacts the outcome of the project, and 86 percent blame lack of collaboration and ineffective communication for workplace failures.
What’s more, 75 percent of employers rate teamwork and collaboration as “very important,” but only 18 percent of them make communications evaluations part of performance management. This is important because companies that don’t promote and enable collaboration are five times less likely to be high performing.
When an employee is misaligned with his or her corporate culture, the person will lack a feeling of belonging that can impact performance—and even create a toxic environment across the organization. This misalignment can be as simple as not feeling in tune with company values, feeling a lack of meaning and purpose, or lack of trust in company leadership. But it can also be a profound disconnect and feeling of isolation and loneliness.
There’s a reason ‘belonging’ ranks third on Maslow’s hierarchy of needs (it’s more important than self-esteem). Studies have shown that a feeling of not belonging can be experienced as acutely as physical pain—and it can result in anxiety, task avoidance, loneliness, and other hallmarks of active disengagement such as uncooperative or undermining behavior.
To be clear, engagement isn’t about fun, or even satisfaction. Some of the least engaged employees in your company may be having a blast. They just aren’t getting work done in the way you need them to.
There are various definitions of disengagement. Scholars have defined it as “a negative, unfulfilling, work-related state of mind that is characterized by … infidelity and disloyalty,” and also “the withdrawing or defending of oneself physically, cognitively, or emotionally during work role performance.”
The most widespread definition involves the “withholding of discretionary effort”—or in other words—doing the bare minimum as opposed to going the extra mile.
However you choose to break it down, disengagement is a wall standing in the path of productivity.
You can offer the top salaries, the coolest brand, and a beer keg in the kitchen—but if you don’t have engaged employees, you’ll never win the discretionary effort and resulting productivity to build your business and leave mediocrity behind.
Your disengaged employees are:
Disengagement can wreak havoc at all levels of your organization.
Studies have shown that disengaged workers have “37 percent higher absenteeism, 49 percent more accidents, and 60 percent more errors and defects.” Actively disengaged employees also report more health problems, including stress, high blood pressure, depression, and pain.
Disengaged workers exhibit a toxic ripple effect on peers and teams. According to a study, 78 percent of employees said their commitment to their organization declined in the face of toxic behavior, and 66 percent said their own performance declined.
Companies with high disengagement were 40x less likely to identify their culture as a great place to work, compared to fully engaged employees. Scholars have associated disengagement with lack of trust, increases in bullying, lack of creativity, poor interpersonal relations, conflict, and loss of cultural values—among many other negative effects.
According to studies: “In organizations with low employee engagement scores, they experienced 18 percent lower productivity, 16 percent lower profitability, 37 percent lower job growth, and 65 percent lower share price over time.” Low engagement businesses also receive 100 percent fewer job applications, and disengaged employees generate 40 percent less revenue than their engaged coworkers.
One way to measure the cost of disengagement is through the most common end result: turnover (whether voluntary or involuntary).
We tend to think of the cost of turnover as cost-to-replace. But recruitment costs are just the starting bid. Although these costs are staggering—roughly 40 percent of an employee’s annual salary—they don’t begin to take into account all the lost productivity on the path taken to get there.
We must also consider the tremendous impact from the employee’s lack of productivity, the spillover effect on peers who need to pick up the slack, and the time spent on onboarding and bringing the replacement employee up to speed.
So how did we get to this place where disengagement in the U.S. is hovering around 77 percent?
A lot of it has to do with how most companies hire and manage employees. How employers manage talent tends to fall into four main categories:
There’s nothing intrinsically wrong with these four categories. They’re precisely what we should be doing. It’s how we go about them that can get us into trouble. Here are some of the tripwires we encounter in our traditional way of doing things:
Organizations can solve their challenges when they utilize talent optimization. This four-part discipline allows business leaders to align their business strategy and their people strategy to reach their desired business results.
Though diagnose precedes design, hire, and inspire in this model initially, diagnose is an ongoing effort as your business goals and needs change over time.
While business strategy isn’t part of talent optimization, it—along with business results—provides critical context that “wraps” diagnose, design, hire, and inspire. For example, if your business strategy is to innovate and create new products, you’ll want to design your organization’s executive bench to include leaders who are innovative risk takers.
Implementing talent optimization must begin with buy-in at the top because executives will be the first messengers and champions of purposeful design through their words and actions.
When every aspect of running your business—from assessing leadership competencies in design to developing leaders at every level in inspire—is married to business strategy and supported by people data/talent analytics, a wonderful thing happens: engagement and productivity increase.
Addressing engagement can increase productivity—taking your team or company farther than you ever dreamt you could go.
One of the biggest benefits of an engaged employee is the application of discretionary effort—or the decision of employees to do more than they strictly have to, in order to do good work. This is referred to alternately as exceeding expectations, going above and beyond, or going the extra mile.
Here are a few benefits of high engagement and the resulting discretionary effort for top performing companies:
It’s clear that the benefits of engagement are connected on every level to the success and profitability of our organizations.
Engagement is also part of the larger picture of employee well-being and positive psychology. By focusing on the right things—addressing employee needs as individuals and opening productive lines of communication among managers, employees and peers—you’ll also see a positive impact other well-being metrics such as: employee happiness, positive relationships, health and wellness, optimism, hope, alignment to your mission, trust, resilience, and positive emotion. This all impacts discretionary effort. This is the X factor.
As we established in the previous section, engagement can be a key to unlock exponential success in any organization. But how do you get that key?
Ultimately the exact roadmap for how an organization builds engagement is unique to that business, but there are certain commonalities. Let’s unpack four key building blocks for driving engagement.
Here are the four most critical components of employee engagement:
As discussed above, one critical component of engagement is ensuring job-person fit. Offering challenging, meaningful and achievable work, and then acknowledging and recognizing success drives engagement.
One’s direct manager is routinely cited as the most important factor in employee engagement. Managers need tools and training to understand, support, and challenge employees as individuals.
Even the best manager cannot always correct for team misalignment. Feeling valued, involved, and respected on a team is critical. Pizza parties and team building exercises won’t cut it. Fostering relationships starts with a deeper understanding of each person’s drivers, needs, and communication styles, and a sensitivity on the part of leaders to team composition and dynamics.
The culture of a company is curated by its leaders—through values, through mission, through policies, and also through hiring. Each time we bring the wrong people into our culture we shift that culture further from where we want to be. Bad hires—no matter how skilled—will never belong and thrive, and will usually cause toxic ripples around them. Starting with the C-Suite and filtering down to each line manager, leaders must take the time to cooperatively craft and communicate your company’s purpose and mission, establish and live your values, and bring your people into alignment around them.
So, we’ve seen the toxic effects of employee disengagement, and the exponential benefits of engagement. But how do we connect the dots from employee insights?
Very simply, as it turns out.
When we take the time to understand employees’ behavioral drives and cognitive abilities, we elevate the “engagement” game to the next level. Employee insights act as your superpower—a sort of x-ray vision that not only helps you to understand what makes your current workers tick, but also to predict someone’s future behavior and interactions.
Here’s how understanding behavioral and cognitive data can help you:
Understand the job: When you define the behavioral and cognitive needs of a role you’ll be able to match the right candidates to it, and help them to thrive.
Understand candidates: When you understand candidates’ strengths, abilities, caution areas, and needs—as well as job and culture fit—you;ll be able to place people in roles they’re naturally-wired to do.
Understand employees: When you calibrate coaching, development, talent, and performance management to each employee’s unique needs and style, you yield the greatest productivity.
Understand teams: When you assemble and cultivate self-aware teams that are more considerate and respectful of differences, you decrease the time needed to build trust, reduce toxicity, and help teams work together more efficiently.
Empower hiring managers: When you provide managers with scientifically validated, objective data you reduce subjectivity and increase their ability to predict performance—avoiding bad hires in the process.
Inspire leadership: When you equip managers with the tools they need to be more self aware they better understand how to coach and develop their direct reports effectively.
Build culture: When you aggregate data to give leaders insight into what’s driving their culture—including where there may be gaps or misalignment—they can course correct.
The end result of all of these factors will be an increase in your bottom line. When we understand employees, we can help them thrive. When they thrive, so do our organizations, productivity, and profits.
The answer to how people think and work and why it matters lies in psychology. Here are a few quick definitions to guide us:
Psychology: Psychology is the science of behavior, feeling, and thought. There are three primary branches of psychology: cognitive, behavioral, and social.
Cognitive psychology: An internal approach that measures an aspect of intelligence—particularly how quickly people think, process, and problem solve.
Behavioral psychology: An external approach to psychology: concerned with observing how people act and interact and what’s driving it. In other words, how people are naturally wired.
Social psychology: Concerned with how people react to the behavior patterns of others during social situations. At PI, we combine social psychology with cognitive and behavioral psychology to understand how people think and work.
Organizational psychology: Also known as I/O, industrial or occupational psychology, this is the application of the principles of psychology to understand and predict how we think and behave at work.
Positive psychology: Psychology is rooted in pathology and abnormality—trying to identify and solve when things go wrong. Today’s organizational psychology leans more on positive psychology, which identifies what’s going right in order to recreate and encourage it.
Multivariate predictability: General cognitive, or mental, ability (also called GMA, or simply “g”) is the most common variable used by psychologists to understand how an employee will perform. It’s the gold standard to measure cognitive ability. But scholars stress that there are other factors—in addition to cognitive—that can significantly increase your ability to spot a stand-out candidate or employee. These variables include behavioral profiles, integrity tests, structured interviews, and education. Combining them will yield better results. To get a complete understanding of a person you need input from more than one of the categories above. This is called multivariate predictability.
What most of us really want to know about organizational psychology is how it can help us in our day-to-day work lives. Here are ways we can apply learnings from organizational psychology in our everyday work lives.
When we think about a role as more than a collection of resume keywords, but rather as a set of behaviors and traits, we are better able to align it with our goals as an organization. Organizational psychology helps us to:
Understanding how people think and behave allows us to align them to roles and tasks in a way that makes them more productive and helps them to thrive. Here, organizational psychology helps us to:
Managers are more successful at increasing productivity and employee engagement when they are able to understand the preferences and needs of their direct reports. In this area, organizational psychology helps us to:
When coaches and managers are able to understand the drives and needs of their employees, they can develop, inspire, and enable them more successfully—also ensuring they are in the right roles. Organizational psychology helps us to:
Teams work more harmoniously and productively when they have the information they need to understand and empathize with one another’s needs and perspectives. Organizational psychology helps us to:
There are forces of disengagement hindering productivity across the world’s workforce. Putting people in roles that truly align with their identity and managing them to greatness gives employees a greater sense of purpose and emotional connection to their work. Businesses that come to this realization, and use behavioral tools to tap into this greater power, are the innovators and leaders who will enjoy a competitive advantage.
To solve your business challenges once and for all you must focus on one mission: connecting business strategy to people strategy. In other words, increase your understanding of people so you give them jobs they were born to do then manage their performance to produce amazing results for the business.
The one constant in every workforce is people, and that’s what people science is focused on. If you employ humans, talent optimization can help you.
A surgeon wouldn’t slice into a patient without understanding their anatomy. An architect wouldn’t start moving walls in a building without understanding the plans. Business leaders will benefit from using people data in this same way.
Any time is a good time to talk about transforming your culture, maximizing employee productivity, and solving your business challenges through employee understanding.