It's Not the Economy, Stupid

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

Follow Krisztina Holly on Twitter: www.twitter.com/krisztinaholly

Comments

[Overtone]

For a different perspective and some revolutionary innovation, see the articles on the website: www.aesopinstitute.org

[Krisztina Holly - Huffpost Blogger]

Thanks everyone for your input on this important issue.

To be clear, neither Jim nor I are academics; we are from the business world. I currently work for a university and I have published a few papers, but my background is as an engineer and serial entrepreneur. We both have extensive first-hand experience building great teams and innovative cultures.

This column first ran in BusinessWeek http://bit.ly//ETB5D), aiming to encourage executives to help their employees be happier by demonstrating to them that it will not only benefit the employees, but it’ll also improve the bottom line.

It’s too bad most Huffington Post readers are resisting the idea of increasing employee engagement. Who wouldn’t want to be more passionate about their work? Yes, we point out that it will benefit the company. And it’ll improve the economy, too. Increasing employee engagement should be a win-win for everyone.

Unfortunately, the comments here underscore our point that cynicism, frustration, and lack of engagement are rampant in our workforce. I’d really like to see that change – for everyone’s benefit.

Thanks again for your feedback.

Krisztina “Z” Holly

[iridium53]

Innovation is a very important issue.
But, yes, it is the economy.
Manufacturing is being systematically moved out of the U.S. because it is more profitable for large companies, in the short-term, to do so. Health care costs seem to be a big part of that, and, in reality, many of the healthcare issues are created by the big companies that still wish to tie employees to them.

Despite their words, Obama's administration is not doing anything for small business. And, the economy is hurting - banks are not lending to small business, yet when working for those big buisnesses they have unilaterally extended payment time out - our biggest customer, a very big computer company is now out to 120 days. Our DSO is now out to nearly 160.

Employees work for the job, but they also work for the money. What I've seen many times is that, in big companies, the innovators get an attaboy while the administrators get a new Bentley GTC.
The remuneration disparity between the innovators and management is getting ever wider. Frustrating and anti-motivating. Bankers that produce nothing make much more than the innovators and producers - the system is more inverted than ever before.

Combine that with banking and government policies that are openly anti-Small Business - and you have an environment that is hostile to innovation. Despite what speeches POTUS makes.

[leduck]

You're right -- it's not the economy
it's ENERGY
or more specifically -- ENTROPY

we have an ENTROPY problem
it's called PEAK OIL

[RandVictims]

Translation:

It's the "employers market", so work harder for less.

It's not a coincidence you can find "Atlas Shrugged" and "Harry Potter" on the same book shelf.

[FoonTheElder]

Drop out of academia and see how the real world has worked for the past 30 years.

American productivity increases, but wages go nowhere. There is no incentive to be highly engaged in your work when there is no reward and at the first opportunity your job will be eliminated or outsourced to pay higher bonuses for CEOs. The 'team spirit' is for your fellow workers, not for the incompetent and vastly overpaid top management.

This is the reality of American business, not the pie in the sky academia that you participate in. I'm sure you can talk to CEOs who will give you their rosy outlook on the situation, while at the same time they are busy destroying their workforce for an extra penny per share.

The CEOs love to talk about false skills shortages and how they are building for the future. In reality all they are looking to do is to either monopolize an industry through buyouts and consoliation or sell out to the monopolizers so they can cash out big time. Employees are just their pawns in this big finance game. They are there to be underpaid and sacrificed when the time comes.

[marinara]

Yes, I'm a believer! I will engage all my employees! Now make me a captain of industry. Quick!

[FoonTheElder]

I'm sorry, you're not sociopathic enough yet.

[Fabini]

This article does not outline a solution, it details the corporate problem.

Where in this article is the worker, the laborer, the employee's well-being considered?

Excerpts from the article:

1. ". . . 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."

2. ". . . 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."

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

My response:

1. New pathways to growth for whom? The corporation's bottom line.
2. More job opportunities for everyone? This is double speak for working more for less. Taking on more and more responsibilities while your wage stays the same or decreases.
3. More valuable than any money can provide! Real revenue! People labor for money, not for the altruistic corporate good.

This article reflects the shameful old idea of trickle down wealth. It is obvious to everyone in the bottom third this is a lie. It should become obvious to those in the middle third who espouse the corporate doctrine, for they will soon be betrayed, and as for those in the top third, shame on you.

[ImmanuelGoldstein]

The problem is that American workers as a whole are very engaged, Indeed as measured in productivity they have been becoming more and more engaged as time has gone by.
The problem is that the benefits of that 'engagement' has flowed almost entirely to the top few percentiles of income.
I put it to you that 'engagement' isn't doing most people a lot of good, that some people have noticed this and are simply.dis­engaging for that reason.

[Rayme]

My company tries to engage us in teamwork more than any other company I've ever worked for. But they send to mixed messages, one they want us to take pride in our work and do our best and two they disregard input from some people in the office but not others. You cannot be clichy and build a team atmosphere. Even so, after they told us that we won't be getting any raises, bonuses or overtime this year or anytime soon, most people in the office have lost interest in doing anything but what they have to do to keep from getting laid off.

[joebaggadonuts]

Yeah, unemployment figures don't work for me either. But they do tell an important and relevant story. You don't have to focus on it though.

It's also a bad idea to pretend that GDP equates to economic health. If you measured the health of your checking account by the sum of all checks written and all deposits made, you would have the equivalent measure of what we take when we measure GDP.

If you are in a car and sliding out of control in a turn, and you watch the wall you are headed for instead of where you want to be, you WILL hit the wall.

Good advice to look at where you want to be rather than where you don't want to be. Thanks for yours.

[DuganS1]

Gallup surveys are not an accurate gauge of how engaged employees are. Every employee is engaged to some degree, it's just that it ranges from one extreme to the other. Most companies fire employees who are not engaged, and tend to promote employees who are very engaged, etc. etc. Government rarely eliminates workers, so they keep a lot of workers who are not engaged, which has always been a problem. Many folks who are very engaged own their own businesses, and those entrepeneurs have been the key drive of economic growth for the past 35 years. Also note that millions of jobs don't even require much engagement. Some jobs require virtually none at all.