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Engage employees to boost
The Business Case for Engaged
PerformanceTM Chris Watkin The Hay Group
People do not become engaged at work merely
because they get paid a lot, or because they have
a fast computer, a nice cafteria or flexitime. Even jobs the difference in discretionary performance
inspirational leadership, on its own, might not do between superior and average performers was
the trick.The question remains, what does engage 19 per cent (see Figure 1)2. In more complex jobs
them? To help answer that question and to such as sales, the difference was as great as
understand better how to tap employees 120 per cent.
discretionary effort, research was initiated What gives similar capability accounts for the
recognising that the vast majority of employees significant gaps between superior and standard
are not star performers. In reality most people performers? The answer seems to lie in the
make up the engine room organisations depend individuals degree of motivation and engage-
on to get things done. ment.Work with a professional services firm con-
Stars tend to be intrinsically motivated, and firms the link. At 10 of the firms regional offices,
they capture most of the prizes on offer the employees current levels of satisfaction were
most interesting work, the best promotions, big measured using the Engaged Performance
salary increases and bonuses. The more difficult diagnostic survey. Professionals in the five most
challenge for employers is capturing the hearts engaged offices generated 166,400 average
and minds of good, reliable employees who are revenue per consultant. Those in the five least
not stars but who are significantly more produc- engaged offices generated just 116,100 per con-
tive when engaged. sultant.The offices with engaged employees were
Research suggests that many organisations are as much as 43 per cent more productive.
not succeeding. A huge percentage of their
engine room employees are disengaged.
Employee Attitude Surveys1 show that fewer than
half of them feel that they do interesting work.
Just one-third feel they can advance, and only
about the same proportion feel that better perfor- Figure 1: Difference in value-added
discretionary performance between
mance will lead to increased pay. What seems to
superior and standard' performers
matter more is a better psychological contract,
one that successfully engages by letting people Type of Job Performance
know their contributions matter. Difference
Employees start every day with an extraordi- Low-complexity jobs 19%
nary amount of energy, but the amount of discre- Moderate-complexity jobs 32%
tionary effort that people apply to their jobs High-complexity jobs 48%
varies tremendously. Hunter, Schmidt, and
Sales 48%120%
Judiesch showed that even in relatively simple

Selection & Development Review Vol. 18 No. 2 May 2002 3

Engaged Performance defined many people who have high levels of engagement
Engaged Performance is defined as a result that outside work in their local community. They
is achieved by stimulating employees experience flow, but not at work, because the
enthusiasm for their work and directing it environment they work in disables engagement.
toward organisational success. This result can
only be achieved when employers offer an Engaged Performance and company
implicit contract to their employees that elicits valuations
specific positive behaviours aligned with the If people are a key source of competitive
organisations goals. advantage, their engagement and performance
Getting Engaged Performance is not just about levels can make or break any organisations
investing financially in employees through pay strategy. Ultimately, delivering strategy is about
and benefit increases. It is about striking a new hiring the right people and motivating them to
contract in which the organisation invests emo- deliver results. Employers, therefore, need to
tionally in its workforce. In exchange, employees answer three questions:
make a similar emotional investment pouring What types of people will help our organisa-
their discretionary effort into their work and tion succeed?
delivering superior performance. The new con- Why would the best people for our business
tract says, Well make your job (and life) more want to work here?
meaningful.You give us your hearts and minds. How should we treat our people so that they
Work is a significant part of peoples lives. deliver peak performance?
When you meet someone new, the second or third These questions cut to the heart of engaged
question is What do you do? It seems imperative performance, and influence company valuations.
that leaders give people meaning in their work A survey by Ernst and Young4 of institutional
because passionate employees get better results. If investors showed that 35 per cent of their deci-
leaders cant give people passion about their sions now hinge on non-financial factors. The
work, employees will find it somewhere else. investors top-ranked non-financial factor was
execution of corporate strategy i.e. manage-
What Engagement looks like ments ability to motivate people and channel
University of Chicago psychologist Mihalyi their discretionary effort. Employers ignore at
Csikzentmihalyi3, who has studied the psychology great risk the elements that contribute to the
of engaged employees at all levels, found that they engaged performance of their employees. In the
create a hyper-focused state of mind. He calls it public sector, politicians now recognise that, man-
flow. People in flow are exhilarated and are agement quality and staff morale are critical to
remarkably unstressed even when doing successful service delivery.
challenging work. They lose themselves in a task
they love and feel out of time.Their brains work Why Engagement is important
efficiently and precisely. People are much more Working relationships within organisations have
likely to be in flow while working than while changed significantly since many of todays Chief
involved in leisure activities. Moreover, flow Executives started work. Before the early 1990s
occurs most often when tasks are tightly aligned recession, an unspoken contract existed between
with the persons goals. employer and employee: commit to working here
for the long term and we will offer you job
What Disengagement looks like security, good pay and promotions. But the
Disengaged employees go through the motions recession led to re-engineering and downsizing,
of what is required of them at work.They are not breaking that contract.
proactive, do not show either initiative or Moreover, there is a new mindset among young
commitment, but most perform well enough to people who began their careers in the boom
get by as acceptable. Yet within this group are years after the 1990 recession.They do not expect

4 Selection & Development Review Vol. 18 No. 2 May 2002

Figure 2: The Engaged Performance Model 6 Core Elements

lifetime employment with a single employer. Most Proof that Engaged Employees
consider personal fulfilment in their work as a deliver results
birthright and this is extremely unlikely to Will engaged employees really deliver improved
change during economic downturn.They will just business results? Research in leading business
take different options for example, becoming schools from eminent academics such as David
self employed rather than work for a low-repu- Guest5 and Dave Ulrich6 is producing clear
tation employer or in a place they dont like. evidence on the added value of getting the
Many organisations that have not recognised people issues right.
this significant change in agenda are struggling to Recent research for the Chartered Institute of
cope. Frustrated executives say, we raised their Personnel and Development from a range of
salaries, gave them performance-based incentives sources confirms the engagement/productivity
and more flexibility but were still losing good link. For example, organisation effectiveness
employees and having productivity problems. research at the Institute of Work Psychology at
The demands of the employee tend to mirror Sheffield University showed that among the
the demands customers now make. Customers manufacturing companies studied, good manage-
have become increasingly demanding and busi- ment practices could account for an 18 per cent
nesses have responded by forging new value improvement in productively and a 19 per cent
propositions, usually value-added service. To improvement in profitability7. People manage-
become an employer of choice you have to think ment practices were a better predicator of com-
about the people you employ the same way you pany performance than strategy, technology or
think about customers.That means offering them research and development.
a rewarding environment to work in, not just The Hay Group has identified six motivational
financial rewards. drivers that help create an engaged workplace
and influence results. They are: Inspiration and

Selection & Development Review Vol. 18 No. 2 May 2002 5

Values, Future Growth/Opportunity, Quality of References
Work, Enabling Environment, Work/Life Balance 1. Based on data from Hay Insights employee
and Tangible Rewards. opinion database, which contains survey
Not all of these drivers will matter equally to responses obtained in the past four years from
everyone. You need to collect specific data to about one million employees at more than
identify the most significant needs within the 330 companies.
different demographic segments of your work- 2. J.E. Hunter, F.L. Schmidt & M.K. Judiesch,
force. Only then can you develop high-impact pro- Individual differences in output variability as
grammes to meet employees needs and a function of job complexity. Journal of
effectively engage them. One-size-fits-all no longer Applied Psychology, 75, 2842.
works as a HR or Reward Strategy. 3. Flow: The Psychology of Optimal Experience
In sum, it requires a coherent people model. by Mihalyi Csikzentmihalyi. Harper & Row,
The payoff is clear when organisations create the New York, 1990.
conditions for engagement and tap their 4. Measures that matter: An exploratory
employees discretionary effort: improved investigation of investors information needs
morale, higher productively and a boost in and value priorities, by Sarah Mavrinac & Tony
financial performance. Siesfield. Ernst & Young Centre for Business
Earning Engaged Performance from the engine Information and the Organisation for
room is about organisational change. Its difficult Economic Co-operation and Development,
and takes time. It requires research to learn more 1998.
about your organisation. It needs to encourage a 5. David Guest. Personnels Paradox: People
continuous performance dialogue one that is Management, 27 September, 2001.
not just about processes and systems, but about 6. Dave Ulrich. Delivering results: A new
real changes in behaviour. As such it requires mandate for human resource professionals.
senior managers to adopt the appropriate leader- Harvard Business School Press, 1999.
ship styles required to create a climate where 7. Cited in The Change Agenda by Simon
engaged performance can happen. Its often heard Caulkin. Published by the Chartered Institute
said that, Organisations dont change, people of Personnel and Development (CIPD), 2001.
change. Focusing on Engaged Performance can
help achieve that change. Chris Watkin is a Chartered Occupational
Psychologist working for the Hay Group. He can
be contacted on:

The Hay Group has helped many international

companies and major public service
organisations create sustained performance by
engaging their workforce and has developed the
Engaged PerformanceTM Diagnostic.

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