Why Organizations Need to Focus on Performance-Driven Engagement

Photo by istockphoto
Photo by istockphoto

Editor’s Note: Gerry Ledford will be giving a longer speech on the topic at next week’s TLNT Transform conference in How Employee Engagement Can Pay Off, and Why It Often Doesn’t.

Increasing employee engagement scores is easy. Increasing organizational performance is hard. How can we increase engagement in ways that also increase performance?

All it takes to increase engagement scores is more rewards – and almost any kind of reward will do. Pay employees more, offer them better benefits, increase recognition, or give them more opportunities for learning and development, and they will be more engaged.

An enormous amount of research literature proves this point. The bigger the shower of rewards, the bigger the increase in engagement scores.

However, organizations that simply increase rewards without tying those rewards to performance are unlikely to see any meaningful return on their investment in rewards.

Engagement alone does not equal higher performance

Employees like rewards. Some managers think it’s fun to play Santa Claus by delivering goodies to employees. If the rewards are high enough, turnover will decrease because employees will not want to lose the rewards. Contrary to the belief of many managers, however, performance will not increase just because engagement scores are higher.

The problem is that engagement too often is seen as the goal of human capital efforts. That leads to programs that have no impact on the ultimate business-based goal — namely performance.

Here’s a prime example: work-life benefits, which have vastly increased based on the rationale that they increase employee engagement. Fitness centers, yoga sessions, financial counseling, child care, and time management classes add significant costs and greatly increase administrative complexity in the benefits offering. They typically are available to all – high performers and terrible performers equally – in good times and bad, and are not contingent on anything other than membership in the organization.

Even if engagement increases as a result of such programs, the gains usually are not sustainable. Costly engagement programs that do not provide a meaningful return on investment eventually whither when hard times hit.

Better to keep the business goal of increasing performance front and center. The key to Performance-Driven Engagement is to help employees be more successful in their jobs and to reward them for higher performance. Engagement follows, but as a secondary effect – it is the result of higher performance and the rewards that come with it. These rewards are intrinsic – a such as a feeling of accomplishment – as well as extrinsic – such as the higher pay and job security that come with greater success.

Hard work is required

Developing a Performance-Driven Engagement (PDE) strategy is hard work. If the goal is increased performance rather than simply increased engagement, it is not good enough to copy the practices of other companies, such as those on Best Places to Work lists.

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PDE requires a careful analysis of the needs of the organization as reflected in its business strategy, organization design, technology, and desired culture. PDE also requires an understanding of the many levers that can drive performance and engagement, including compensation, benefits, work design, development opportunities, selection, performance management, and a sense of affiliation with the organization (leaders, supervisors, and peers).

A good strategy involves selecting a few things to do very well, not trying to make changes using all of the levers at once. Blindly copying the practices of competitors is lazy and likely to fail as a competitive strategy. A good strategy also seeks competitive advantage by doing a few things superbly that competitors are not doing or are not doing well.

Too many HR leaders misunderstand the ways in which engagement and performance are connected and disconnected.

Disconnects are common. Organizations can increase employee engagement without improving performance simply by increasing employee rewards across the board. Similarly, organizations can increase performance in ways that reduce engagement, such as cost cutting via layoffs.

HR’s primary contribution to the business should be in helping business leaders understand how to increase performance using human capital levers. If human capital interventions are designed and implemented well, they also will enhance employee well-being as a secondary consequence. This formulation avoids putting the cart (engagement) before the horse (performance).

Gerry Ledford will talk about How Employee Engagement Can Pay Off, and Why It Often Doesn’t at the TLNT Transform conference in Austin, TX Feb. 26-28, 2012. Click here for more information on attending this event. 

Gerald E. Ledford, Jr., Ph.D is a nationally recognized authority on human capital issues, including compensation and total rewards, talent management, organization design, change management, and management of the HR function. Currently he is president of Ledford Consulting Network in Redondo Beach, CA. Previously, Gerry was a leader at Sibson Consulting and served as Senior Vice President and National Practice Leader for Employee Effectiveness, the largest Sibson practice. He also was a research professor at the Center for Effective Organizations, Marshall School of Business, University of Southern California. Contact him at gerry@ledfordconsultingnetwork.com .

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