First, Break All the Rules Read online

  Questions that we thought were a shoo-in — like those dealing with pay and benefits — fell under the analytical knife. At the same time, innocuous little questions — such as “Do I know what is expected of me at work?” — forced their way to the forefront. We cut and we culled. We rejigged and reworked, digging deeper and deeper to find the core of a great workplace.

  When the dust finally settled, we made a discovery: Measuring the strength of a workplace can be simplified to twelve questions. These twelve questions don’t capture everything you may want to know about your workplace, but they do capture the most information and the most important information. They measure the core elements needed to attract, focus, and keep the most talented employees.

  Here they are:

  Do I know what is expected of me at work?

  Do I have the materials and equipment I need to do my work right?

  At work, do I have the opportunity to do what I do best every day?

  In the last seven days, have I received recognition or praise for doing good work?

  Does my supervisor, or someone at work, seem to care about me as a person?

  Is there someone at work who encourages my development?

  At work, do my opinions seem to count?

  Does the mission/purpose of my company make me feel my job is important?

  Are my co-workers committed to doing quality work?

  Do I have a best friend at work?

  In the last six months, has someone at work talked to me about my progress?

  This last year, have I had opportunities at work to learn and grow?

  These twelve questions are the simplest and most accurate way to measure the strength of a workplace.

  When we started this research we didn’t know we were going to land on these twelve questions. But after running a hundred million questions through our “prism,” these exact questions were revealed as the most powerful. If you can create the kind of environment where employees answer positively to all twelve questions, then you will have built a great place to work.

  While at first glance these questions seem rather straightforward, the more you look at them, the more intriguing they become.

  First, you probably noticed that many of the questions contain an extreme. “I have a best friend at work” or “At work I have the opportunity to do what I do best every day.” When the questions are phrased like this, it is much more difficult to say “Strongly Agree,” or “5” on a scale of 1 to 5. But this is exactly what we wanted. We wanted to find questions that would discriminate between the most productive departments and the rest. We discovered that if you removed the extreme language, the question lost much of its power to discriminate. Everyone said “Strongly Agree” — the best, the rest, and everyone in between. A question where everyone always answers “Strongly Agree” is a weak question.

  Much of the power of this measuring stick, then, lies in the wording of the questions. The issues themselves aren’t a big surprise. Most people knew, for example, that strong relationships and frequent praise were vital ingredients of a healthy workplace. However, they didn’t know how to measure whether or not these ingredients were present, and if so, to what extent. Gallup has discovered the best questions to do just that.

  Second, you may be wondering why there are no questions dealing with pay, benefits, senior management, or organizational structure. There were initially, but they disappeared during the analysis. This doesn’t mean they are unimportant. It simply means they are equally important to every employee, good, bad, and mediocre. Yes, if you are paying 20 percent below the market average, you may have difficulty attracting people. But bringing your pay and benefits package up to market levels, while a sensible first step, will not take you very far. These kinds of issues are like tickets to the ballpark — they can get you into the game, but they can’t help you win.

  Putting the Twelve to the Test

  “Does the measuring stick link to business outcomes?”

  Gallup had set out to devise a way to measure strong workplaces: workplaces that would attract and retain the most productive employees and scare away the ROAD warriors. If these questions were in truth the best questions, then employees who answered them positively would presumably work in higher-performing departments. That was our goal when we designed the measuring stick. Would it prove to be true in practice?

  Throughout the spring and summer of 1998 Gallup launched a massive investigation to find out.

  We asked twenty-four different companies, representing a cross section of twelve distinct industries, to provide us with scores measuring four different kinds of business outcomes: productivity, profitability, employee retention, and customer satisfaction. Some companies had difficulty gathering this data, but in the end we managed to include over 2,500 business units in our study. The definition of a “business unit” varied by industry: for banking it was the branch; for hospitality it was the restaurant or the hotel; for manufacturing it was the factory; and so on.

  We then interviewed the employees who worked in these branches, restaurants, hotels, factories, and departments, asking them to respond to each of the twelve questions on a scale of 1 to 5, “1” being strongly disagree, “5” being strongly agree. One hundred and five thousand employees took part.

  Armed with all this data, we were set to go. We knew the productivity, the profitability, the retention levels, and the customer ratings of these different business units. And we knew how the employees of the business units had answered the twelve questions. We could now see, finally, whether or not engaged employees did indeed drive positive business outcomes, across 2,500 business units and 24 companies.

  We were optimistic that the links would surface, but, truth be told, it was entirely possible that we wouldn’t find them. The links between employee opinion and business unit performance seem inevitable — after all, most of us have probably heard ourselves rattle off such clichés as “Happy employees are more productive” or “If you treat your people right, they will treat your customers right.” Yet in their attempts to prove these statements, researchers have frequently come up empty-handed. In fact, in most studies, if you test one hundred employee opinion questions, you will be lucky to find five or six that show a strong relationship to any business outcome. Disappointingly, if you repeat the study, you often find that a different set of five or six questions pop up the second time around.

  We also knew that no one had ever undertaken this kind of study before, across many different companies. Since each of these four business outcomes — productivity, profit, retention, and customer service — is vitally important to every company, and since the easiest lever for a manager to pull is the employee lever, you would have thought the air would be thick with research examining the links between employee opinion and these four business outcomes. It isn’t. You can track down research examining these links within a particular company — with decidedly mixed results — but never across companies and industries. Surprisingly, the Gallup research was the first cross-industry study to investigate the links between employee opinion and business unit performance.

  Why does this research vacuum exist? More than likely it’s because each company has different ways of measuring the same thing. Blockbuster Video might measure productivity by sales per square foot. Lankford-Sysco might use packages shipped and number of breakages. The Walt Disney Company might include only full-time employees in their retention figures. Marriott might include full-time and part-time. It is frustratingly difficult to pick up on linkages between employee opinion and business performance, when every company insists on measuring performance differently.

  Fortunately we had discovered a solution: meta-analysis. A detailed explanation can put even the most ardent number cruncher to sleep, so let’s just say that it is a statistical technique that cuts through the different performance measures used by different co
mpanies and allows you to zero in on the real links between employee opinion and business unit performance.

  So, having entered the performance data from over 2,500 business units and punched in the opinion data from over 105,000 employees, we programmed the meta-analysis formulas, pressed Run, and held our breath.

  This is what we found. First, we saw that those employees who responded more positively to the twelve questions also worked in business units with higher levels of productivity, profit, retention, and customer satisfaction. This demonstrated, for the first time, the link between employee opinion and business unit performance, across many different companies.

  Second, the meta-analysis revealed that employees rated the questions differently depending on which business unit they worked for rather than which company. This meant that, for the most part, these twelve opinions were being formed by the employees’ immediate manager rather than by the policies or procedures of the overall company. We had discovered that the manager — not pay, benefits, perks, or a charismatic corporate leader — was the critical player in building a strong workplace. The manager was the key. We will discuss this finding in more detail later in the chapter. For now let’s concentrate on our first discovery, the link between employee opinion and business unit performance.

  THE LINKS BETWEEN EMPLOYEE OPINION AND BUSINESS UNIT PERFORMANCE

  If you are so inclined, you can find in the appendix a detailed description of all our discoveries and the methodology behind them. This is the top line.

  Every one of the twelve questions was linked to at least one of the four business outcomes: productivity, profitability, retention, and customer satisfaction. Most of the questions revealed links to two or more business outcomes. The twelve questions were indeed capturing those few, vital employee opinions that related to top performance, whether in a bank, a restaurant, a hotel, a factory, or any other kind of business unit. The measuring stick had withstood its most rigorous test.

  As you might have expected, the most consistent links (ten of the twelve questions) were to the “productivity” measure. People have always believed there is a direct link between an employee’s opinion and his work group’s productivity. Nonetheless, it was good to see the numbers jibe with the theory.

  Eight of the twelve questions showed a link to the “profitability” measure. That means employees who answered these eight questions more positively than other employees also worked in more profitable banks, restaurants, hotels, factories, or departments. To some people this might seem a little surprising. After all, many believe that profit is a function of factors that lie far beyond the control of individual employees: factors like pricing, competitive positioning, or variable-cost management. But the more you think about it, the more understandable this link becomes. There are so many things one employee can do to affect profit — everything from turning off more lights, to negotiating harder on price, to avoiding the temptations of the till. Simply put, these will happen more often when each employee feels truly engaged.

  What about employee retention? Strangely enough, only five of the twelve questions revealed a link to retention:

  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 right?

  3. Do I have the opportunity to do what I do best every day?

  5. Does my supervisor, or someone at work, seem to care about me as a person?

  7. At work, do my opinions seem to count?

  Most people would instinctively agree with the generalization “Engaged employees will stay longer.” But our research suggests that the link between employee opinion and employee retention is subtler and more specific than this kind of generalization has allowed. Even more than the rest, these five questions are most directly influenced by the employee’s immediate manager. What does this tell us? It tells us that people leave managers, not companies. So much money has been thrown at the challenge of keeping good people — in the form of better pay, better perks, and better training — when, in the end, turnover is mostly a manager issue. If you have a turnover problem, look first to your managers.

  Of the twelve, the most powerful questions are those with a combination of the strongest links to the most business outcomes. Armed with this perspective, we now know that the following six are the most powerful 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 right?

  3. Do I have the opportunity to do what I do best every day?

  4. In the last 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?

  As a manager, if you want to know what you should do to build a strong and productive workplace, securing 5’s to these six questions would be an excellent place to start. We will return to these questions in a moment.

  MANAGERS TRUMP COMPANIES

  Once a year a study is published entitled “The Hundred Best Companies to Work For.” The criteria for selection are such factors as Does the company have an on-site day care facility? How much vacation does the company provide? Does the company offer any kind of profit sharing? Is the company committed to employee training? Companies are examined, and the list of the top one hundred is compiled.

  Our research suggests that these criteria miss the mark. It’s not that these employee-focused initiatives are unimportant. It’s just that your immediate manager is more important. She defines and pervades your work environment. If she sets clear expectations, knows you, trusts you, and invests in you, then you can forgive the company its lack of a profit-sharing program. But if your relationship with your manager is fractured, then no amount of in-chair massaging or company-sponsored dog walking will persuade you to stay and perform. It is better to work for a great manager in an old-fashioned company than for a terrible manager in a company offering an enlightened, employee-focused culture.

  Sharon F., a graduate of Stanford and Harvard, left American Express a little over a year ago. She wanted to get into the world of publishing, so she joined one of the media-entertainment giants in the marketing department of one of their many magazines. She was responsible for devising loyalty programs to ensure that subscription holders would renew. She loved the work, excelled at it, and caught the eye of senior management. Sharon is a very small cog in this giant machine, but according to the chairman of this giant, employees like her — bright, talented, ambitious employees — are “the fuel for our future.”

  Unfortunately for this giant, the fuel is leaking. After only a year Sharon is leaving the company. She is joining a restaurant start-up as head of marketing and business development. Her boss, it appears, drove her away.

  “He’s not a bad man,” she admits. “He’s just not a manager. He’s insecure, and I don’t think you can be insecure and a good manager. It makes him compete with his own people. It makes him boast about his high-style living, when he should be listening to us. And he plays these silly little power games to show us who’s the boss. Like last week he didn’t show up for a ten a.m. interview with a candidate who had made a two-hour commute just to see him, because he had stayed out much too late the night before. He called me at nine fifty-five a.m., asked me to break the news to her, and tried to make it seem like he was giving me some kind of compliment, that he could really trust me to cover for him. I can’t stand behavior like that.”

  Listening to Sharon, you might wonder if it is just a personality clash or even whether it is she who is somehow causing the problems. So you ask her, “Does anyone else on the team feel the same way?”

  “I’m not sure,” she confesses. “I don’t like to bad-mouth my boss, so I haven’t really talked about it with anyone at work. But I do know this: When
I came here there were thirteen of us on his team. Now, a year later, every single one of them has left, except me.”

  Sharon’s company does many things very well, both in terms of its overall business performance and its employee-friendly culture. But deep within this giant, unseen by the senior executives or Wall Street, one individual is draining the company of power and value. As Sharon says, he is not a bad man, but he is a bad manager. Woefully miscast, he now spends his days chasing away one talented employee after another.

  Perhaps he is an exception. Or perhaps the giant makes a habit of promoting people into manager roles who are talented individual achievers but poor managers. The giant would certainly hope for the former. But Sharon doesn’t care one way or the other. When she told her company that she was considering leaving, they offered her more money and a bigger title, to try to coax her back. But they didn’t offer her what she wanted most: a new manager. So she left.

  An employee may join Disney or GE or Time Warner because she is lured by their generous benefits package and their reputation for valuing employees. But it is her relationship with her immediate manager that will determine how long she stays and how productive she is while she is there. Michael Eisner, Jack Welch, Gerald Levin, and all the goodwill in the world can do only so much. In the end these questions tell us that, from the employee’s perspective, managers trump companies.

  Unlike Wall Street and the business press, employees don’t put their faith in the myth of “great companies” or “great leaders.” For employees, there are only managers: great ones, poor ones, and many in between. Perhaps the best thing any leader can do to drive the whole company toward greatness is, first, to hold each manager accountable for what his employees say to these twelve questions, and, second, to help each manager know what actions to take to deserve “Strongly Agree” responses from his employees.