When I first started writing a column on workplace issues for this newspaper 16 years ago, the company executives who spent much time thinking about workplace quality could have met in a phone booth.
Who cares? That was the private response of many managers -- at companies big and small -- to the idea of engaging workers' hearts and minds. Most saw little relationship between employee attitudes and the bottom line.
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Now, that viewpoint is almost as out-of-date as the phone booth. Executives vie for positions on best-workplace lists -- as was apparent in the number of nominations this paper received for its Top Small Workplace awards. They lure new recruits by pledging their devotion to work-family balance. And they boast to Wall Street investors and analysts about their "employee engagement" -- the buzz phrase for a level of worker commitment so strong that employees voluntarily invest extra effort on the job.
What's more, a growing body of research is finally proving what advocates of workplace quality have known for decades: that the human beings who execute the goals of business are more than just cogs in a wheel. Truly engaging them can have an almost magical effect on the bottom line.
The Wall Falls
I've seen this time and time again in my coverage of work-life issues. When I started the Work & Family column in 1991, the Chinese wall between work and personal life loomed large in most workplaces. Workers were expected to leave their personal lives, family issues and feelings at home. The concept of making workers motivated and satisfied seemed almost quaint.
But the few pioneering employers that bucked this pattern quickly saw that paying attention to workers' well-being bore business benefits. By the mid-1990s, Xerox Corp. was already trying to engage workers in some units through flexible scheduling. In a radical move, an executive in Xerox's Dallas operations announced all 300 of his employees would be allowed to set their own hours. Freed to better balance their lives, employees delivered improved customer service and a one-third reduction in costly absences.
(It's no accident that Anne Mulcahy, who led many workplace-quality initiatives as Xerox's former chief staff officer, was elevated to CEO at Xerox in 2001 and subsequently oversaw one of the most remarkable corporate turnarounds in recent history. "My priorities," she said in an interview last year, "were always customer and employee priorities.")
How It Works
The mechanism at work is simple: The rigid, controlling workplaces of the past left employees no flexibility to manage family or personal problems or the day-to-day demands of running a household. Over time, those unmet personal needs erode concentration, commitment and creativity on the job. Good workplace policies, on the other hand, enable employees to manage their larger lives, freeing them to apply more brainpower to complex Information Age jobs. Satisfied employees treat customers better, creating loyal customers. Beyond that, good policies also foster the kind of on-the-job relationships with bosses and co-workers that inspire employees to soar.
This isn't just touchy-feely, feel-good fluff. Over the years, I've seen it happen repeatedly: Real change in the workplace leads to real satisfaction among employees leads to real money for the company.
Swimming against the tide in 1995, for instance, First Horizon National Corp. (formerly First Tennessee National) saw this dynamic at work when it offered some employees who produce bank statements an occasional day off for doctor's appointments and other needs. In return, the company asked them to work longer days during the busiest times of the month. Employees responded by halving the total time needed to produce the statements, to four days from eight. And customer satisfaction "went through the roof," a First Tennessee executive said. Ralph Horn, the company's CEO at the time, called such work-life initiatives a "driving force" behind the company's quality-improvement efforts.
Employees who feel respected tend to enrich the lives of all those around them. Acuity, an 850-employee property-casualty insurer in Sheboygan, Wis., set about overhauling its rigid, factory-like workplace policies in 1999. In a conscious effort to "build an environment that was just a wonderful place to work," a new CEO, Ben Salzmann, added flextime and a fitness facility and improved training, benefits and merit raises. Executives stepped up face time with the rank-and-file, meeting workers at the door quarterly to hand out free breakfast and holding town hall meetings and small-group lunches. Acuity also began publicly rewarding performance standouts and e-mailing periodic audio files by Mr. Salzmann, sharing industry gossip and insights.
Personal Commitment
That wholehearted management support for employees was one reason Tom McDermott, a Brookfield, Wis., claims representative, returned to Acuity in 2001 after quitting the company years earlier to work for a competitor. It's also one reason he went the extra mile last year when he encountered two clients, an elderly couple and their two grandchildren, "sitting on a curb with 25 cents in their pocket" one Saturday morning after their house, with all their possessions, burned down, he says. Instead of making them wait for processing of their claim the next week, Mr. McDermott walked to a nearby ATM and took $300 out of his personal savings account, "to get you through" the weekend, he told the couple. The gesture drew grateful mail from the clients that became bulletin-board fodder at Acuity's headquarters.
| This year's top small workplaces offer good benefits, focus on employee growth and create family-like atmospheres. WSJ.com's Kelly Spors reports. |
Where's the real money in all this? Acuity's voluntary turnover plunged, and sales per employee soared after the company abandoned its rigid, factory-like workplace.
Does One Lead to the Other?
Amid mounting anecdotal evidence of the bottom-line benefits of employee well-being, researchers undertook systematic attempts to show a linkage between employee engagement and above-average customer service, sales and profit. After all, critics said, correlation isn't the same as causality; employees at more profitable companies would naturally be happier and more engaged.
So in 2004, Hewitt Associates, Lincolnshire, Ill., tracked about 300 companies over five years, and found that increases in employee engagement clearly preceded improvements in financial performance. Even among companies with below-average profit, an upturn in employee attitudes tended to precede a profit turnaround.
Separately, a three-year study of 41 employers by Towers Perrin-ISR, a unit of Towers Perrin, Stamford, Conn., found companies that worked consistently on engaging their employees posted a 3.74% increase in operating profit over a three-year period, while companies with poorly engaged employees saw a 2% decline, says Patrick Kulesa, Towers Perrin-ISR's global research director; the results show "the remarkable ability of an engaged work force to impact a company's bottom line."
Wrapping up these and other studies, the Conference Board, New York, a nonprofit business-research group, said in a study last year that there's "clear and mounting evidence that employee engagement is strongly correlated to" productivity, profit and revenue growth. The Hewitt study in particular, the Conference Board said, "gives credence to the assumption that employee engagement actually causes an increase in a company's overall financial performance."
Of course, Anne Mulcahy, Ralph Horn, Ben Salzmann and other CEOs like them didn't need a study to see that. The evidence was all around them.
--Ms. Shellenbarger is The Wall Street Journal's Work & Family columnist.
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