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Krisztina 'Z' Holly Headshot

It's Not the Economy, Stupid

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Focusing on unemployment isn't the key to fueling innovation and job growth
Co-written by Jim Clifton

How can we be expected to grow and create jobs, many executives wonder, when we are shrinking?

Despite a slight easing on the unemployment rate last week, a quarter million Americans lost their jobs last month and job prospects for those out of work look bleak for the foreseeable future. Policymakers and citizens alike are concerned with how we can reduce the unemployment rate -- no easy feat when balanced with the country's and most organizations' need to slash expenses.

However, focusing on unemployment is exactly the wrong thing to do. There is a more effective way to grow -- a way that is free, does not rely on a government bail-out, and has the potential for massive societal impact: engaging employees more fully in the mission and purpose of their organizations, so that they are equipped and motivated to create new pathways to growth.

Don't get us wrong: the job numbers are critical. There are 15 million unemployed, which is a staggering number. We've lost 6.7 million since the recession began in 2007. But unemployment numbers only tell part of the story, and they do not offer a solution for relieving the economic chaos.

Instead, let's turn to the 140 million people who have jobs, and find practical ways to inspire them in their work, so we can empower them to innovate us out of a mess.

Studies have shown repeatedly that "engaged" employees -- those who work with passion and who feel a profound connection to their companies -- lead to increased customer engagement and innovation within their organizations. And these increases turn into real revenue and, eventually, more job opportunities for everyone.

This may seem obvious, but amid the crush of various urgencies, executives and managers have overlooked some crucial, elementary tasks like ensuring employees know what is expected of them and allowing them to use their talents in their roles.

Based on extensive research conducted over decades, Gallup has determined that less than 30% of the corporate workforce is truly engaged in its work. The need to better engage employees is especially crucial during a recession, when mantras such as "do more with less" can madden employees who must pick up extra duties after their colleagues are laid off, but who are offered no tangible financial incentive to innovate.

Engagement serves as an intangible incentive -- one that can be more valuable than any money can provide.

Take, for example, one store of a multi-billion dollar national electronics and appliance retailer. Executives evaluated employee engagement and discovered the store was middling at best. It was impacting morale, employee turnover, and store profits.

After polling the employees for solutions, the management implemented some significant institutional changes, like a "team close," so all team members felt jointly responsible for the nightly store closing, and not just an unlucky few.

As a result of management listening and taking risks, employee engagement improved and the store substantially lowered employee turnover and increased profits. Moreover, the changes were scaled across the 1,200-store retail chain. For every tenth of a point increase in employee engagement, each of the stores increased profits by $100,000 a year.

So consider all of those Americans who aren't inspired to put their hearts into their work. Worse still, nearly 20% are "actively disengaged" and trying to undermine all of the productive work of the few engaged employees. This is not merely a caricature of Office Space or Dilbert. Tens of millions of people deliberately clock in every day with the intention of holding back U.S. corporations' ability to compete and innovate.

This is a shame -- and yet it is an opportunity too.

This is a call to arms for all leaders. Consider the results if we were to double employee engagement at our organizations within 18 months, from 30% to 60%. It can be done. Through a disciplined effort to increase the connection and commitment of our employed, our organizations can innovate and create new solutions. This is the surest way to lower those devastating unemployment numbers. We have no excuse -- not even a bad economy.

Krisztina "Z" Holly is vice provost for innovation at the University of Southern California, and Jim Clifton is Chairman and CEO of Gallup, Inc.
This story originally ran in Businessweek.com