What a waste

Over a quarter of a century the Gallup Organization has interviewed more than a million employees worldwide to discover which factors most affect their productivity

What came out of that research was the Q12 Index – a dozen questions that identify the most pressing needs of every productive employee (see below).

In the past three years we have put these questions to 1.7 million employees, carrying out a census of 195 companies, including a substantial proportion from the UK. We believe this is the most comprehensive investigation undertaken into the British workforce. It provides answers to questions such as “how engaged are your employees?”, “how effective is your leadership and management training?” and “how well are you capitalising on the talents, skills and knowledge of your people?”

Unfortunately, the answer to all these questions turns out to be the same: “Not very”. Despite the millions of pounds spent on remuneration and benefits, the energy devoted to leadership and management development programmes, the plethora of employee opinion surveys and all the well-meant pronouncements from executives that “our core competency is our people”, this research reveals that we are systematically mismanaging our employees. We don’t engage them when they join our companies and, bizarrely, the longer they stay with us, the less engaged they become. As a nation we are not making use of our human capital. And here is the evidence:

More than 80 per cent of employees in the UK are not engaged at work

During the first few months of 2001, Gallup conducted interviews using the Q12 Index with a national sample of the UK working population. From previous research we knew which of the questions were the most powerful and, armed with this knowledge, we devised a formula to identify three distinct categories of employee. The first group, engaged employees, are loyal and productive. They not only get their work done effectively, but they are also less likely to leave and more inclined to recommend their company to friends and family. Second, employees who are not engaged may be productive, but they are not psychologically bonded to their organisation. They are much more susceptible to temptations to defect to other employers. And third, actively disengaged employees are physically present at work but psychologically absent. They are intent on sharing with colleagues the many reasons for which they believe their organisation is such a rotten place to work.

Using our national sample we calculated how many employees fell into each category. The results are not inspiring: only 17 per cent of British workers are engaged, 63 per cent are not engaged and 20 per cent are actively disengaged.

As well as the Q12, we asked a series of attitudinal questions, such as “do you plan to be with your company a year from now?”, “would you recommend your company to friends and family as a great place to work?” and “how many days of work did you miss in the last year?”

Not surprisingly, we found that engaged employees look on their company much more positively than their actively disengaged colleagues do. For example, engaged employees miss, on average, 4.67 days of work a year. Actively disengaged employees miss 10.68 days, while those who are not engaged miss 5.95 days.

Around 80 per cent of engaged employees report that they will be with their organisation one year from now, compared with 31 per cent of the actively disengaged group. Sixty-six per cent of engaged employees would happily recommend their organisation to friends and family as a great place to work. Only 3 per cent of their actively disengaged peers would do the same.

Employees who are not engaged cost organisations tens of millions

Few would disagree that actively disengaged employees drain value from their organisations. They are less collaborative than their colleagues, less innovative, less tolerant of change and more vocal about their many dissatisfactions. But these kinds of spirit-depleting activities are almost impossible to measure. To assess the true cost of disengagement in our organisations we need to focus on more quantifiable outcomes.

Since that great management theorist Woody Allen once reported that 80 per cent of success is about showing up, let’s start with lost work days and employee turnover. As we said earlier, engaged employees take much less time off than those who are actively disengaged. Using census data on the number of employees in the UK and their average salary and productivity, we can estimate that the lost work days of actively disengaged employees cost somewhere between £39 billion and £48 billion a year – more than the entire budget of the NHS.

For the organisations in our database, the staff turnover levels of the engaged work groups were much lower than those of the actively disengaged groups. For example, in retail organisations actively disengaged employees were, on average, 20 percentage points higher in terms of turnover than engaged employees.

To calculate how much these differences cost, let’s use the following cost-of-turnover estimate from a study by the Conference Board, the Washington, DC-based workplace think-tank. According to its calculations, the costs of replacing a front-line employee are roughly 0.41 times their salary. So, if your organisation has 20,000 front-line employees, let’s assume that your engaged employees will leave at a rate of 50 per cent every year, whereas the turnover rate for your actively disengaged employees will be 20 points higher at 70 per cent. Using these assumptions, the turnover cost for your engaged employees is 3,400 (17 per cent of 20,000) employees multiplied by the turnover rate (50 per cent) multiplied by the average salary (£10,000) multiplied by 0.41, which comes to £6.97 million. The turnover costs of your actively disengaged employees and those not engaged are £11.48 million and £31 million respectively, which comes to a total of £42.48 million. If we subtract £6.97 million from this total, we get £35.51 million, which is the cost of not engaging employees in this scenario.

Startling as these figures are, they are actually conservative estimates, because they don’t begin to account for all the other measures of performance that might be affected by an employee’s psychological state. When we incorporate these other measures, which include productivity and customer satisfaction, we start to see the full impact of employee disengagement. For example, in our latest meta-analysis of 7,939 work groups from 36 organisations, the work groups in the top quartile on the Q12 Index were 56 per cent more likely to be in the top quartile on measures of customer loyalty, 38 per cent more likely to be in the top quartile on measures of productivity and 50 per cent more likely to be in the top quartile on safety measures.

These findings confirm what most of us know intuitively: disengaged employees are very wasteful – of time, money and goodwill. They bring us down.

The longer employees stay with you, the less engaged they become

This was perhaps our most surprising discovery. We had imagined that the longer people stayed with an organisation, the more engaged they would become. Our thinking went something like this: when new recruits join a company, they are unsure of how they will be treated, how their performance will be measured, what their colleagues will be like and even if they have taken the right job. But we thought that this uncertainty would diminish once managers made their expectations clear, colleagues revealed themselves to be friendly, trustworthy people and the new recruits found roles in which they could apply their strengths.

Of course, we knew that things wouldn’t always play out this way, that some organisations wouldn’t follow through on their promises, that some managers would fail to set clear expectations and that veteran employees would sometimes be only too happy to undermine newcomers. But we thought that these would be the exceptions that proved the rule. We were wrong. In our Q12 database we found an inverse correlation between an employee’s length of service and their rating of the Q12 items. In other words, the longer employees stay with an organisation, the less likely they are to say that their expectations are clear, that they have the resources needed to do the job, that they are in a role that plays to their strengths, that they receive the recognition they deserve and that someone is encouraging their development. This means that, for most employees, their first year in an organisation is their best. It’s downhill from there.

Enlightened economists will tell you that, in theory, human capital is one of the few assets that can genuinely appreciate. People can develop new skills, acquire useful experience, learn from their mistakes, innovate and thereby become more valuable over time. The reality is quite different. Over time, organisations systematically depreciate their human capital – it actually becomes less valuable, at least according to the humans who comprise it.

Your organisation’s culture is incoherent

In every organisation where we asked employees the Q12 questions, we found some work groups in the top 1 per cent of our Q12 database and some work groups in the bottom 1 per cent. Often these work groups are involved in exactly the same kinds of work and in very similar situations. For example, we found factories where on one shift of 35 employees, 80 per cent strongly agreed that they knew what was expected of them at work (question 1), while on another shift in the same factory only 20 per cent strongly agreed with this statement.

We studied retail companies where, in one store of more than 100 employees, 85 per cent strongly agreed that they had a chance to do what they do best every day (question 3), and where in another store in the same company and in the same part of the country, not a single employee strongly agreed with this statement. In every organisation in our database, we found huge variations in how employees answered the 12 questions.

Two rather disturbing implications follow from this discovery. First, no organisation has a single culture. Royal Dutch Shell doesn’t have a coherent culture, and neither does Marks and Spencer, the Walt Disney Corporation and Virgin. Instead, large organisations contain as many cultures as they do work groups. These organisations may claim that their corporate culture is unique and distinct, but, when viewed through the Q12 lens, most large organisations actually look very similar to one another: they are all equally varied and equally incoherent.

Organisations that spend a lot of time and money on deciding what their corporate culture should be, devise organisation-wide communications to reinforce this culture and ascribe much of their success to the strength of this corporate culture are missing the point. The point is that all cultures are local. In terms of those elements of culture that are relevant to productivity – clarity of expectations, strong relationships, a sense of mission or purpose and so on – all cultures are created by the behaviour of local managers and their teams. You cannot impose a productive culture from the centre. All you can do is try to teach leaders, managers and supervisors how to engage employees and then measure the results.

Following on from this, the second implication of our data is that almost all of the money that organisations invest in leadership and management training is wasted. The express purpose of such training is to teach executives, managers and supervisors how to create the kind of local working conditions that stimulate productivity. If this training were effective, we would expect to find similar local working conditions across the entire organisation – rather like finding the same blood type in a particular individual, no matter from which vein we drew blood. But we don’t find this. Instead, we find that local conditions vary wildly within the same organisation. We find the distribution of scores on such simple questions as “do I know what is expected of me at work?” to be no better than random.

When you see such data, the only conclusion you can draw is that leadership and management training doesn’t work. It doesn’t create, in every local work group across the organisation, the kind of conditions that stimulate productivity. For all the good it is doing, most organisations could simply cut all their leadership and management training and never know the difference.

There is one other conclusion – happily, a much more positive one – that we can draw from the massive range of scores on the Q12 Index. The range implies that some managers excel at engaging their employees under existing conditions. So there is no reason that the whole organisation can’t be designed to replicate their performance.

Of course, you will probably never succeed in eradicating all actively disengaged employees from your organisation the way that some managers are able to do within their local work groups. Most organisations are too large and unwieldy to achieve that kind of result.

So what is a reasonable goal? Well, right now, your organisation probably has slightly fewer engaged employees than it has actively disengaged employees. The ratio is just under 1:1. I suggest shooting for a ratio of 4:1. By learning from your best managers, you can, within 18 months, build an organisation with four times as many engaged employees as those who are actively disengaged.

The Q12 Index questions

  1. Do I know what is expected of me at work?
  2. Do I have the materials and equipment I need to do my work properly?
  3. At work, do I have the opportunity to do what I do best every day?
  4. In the past seven days, have I received recognition or praise for good work?
  5. Does my supervisor, or someone at work, seem to care about me as a person?
  6. Is there someone at work who encourages my development?
  7. At work, do my opinions seem to count?
  8. Does the mission of my company make me feel like my work is important?
  9. Are my co-workers committed to doing quality work?
  10. Do I have a best friend at work?
  11. In the past six months, have I talked with someone about my progress?
  12. This past year, have I had opportunities at work to learn and grow? 

Further information

Marcus Buckingham is global practice leader at the Gallup Organization. His second book, Now, Discover Your Strengths, is available from Simon & Schuster, price £16.99

Marcus Buckingham will speak at the “Building a strengths-based organisation” seminar on Thursday 25 October at the CIPD’s national conference, 24-26 October.