Management Strategies: And The Survey Says...

Aug. 24, 2005
Leading companies survey employees to check on compliance, massage morale and ensure engagement.

Though just one look at the bored, surly teenage cashier at your local grocery store seems like evidence enough, recent studies have concluded that people must be excited by their jobs to perform well. A 2003 Towers Perrin study showed a positive correlation between highly engaged employees and their companies' one-year revenue growth relative to average revenue growth for their respective Dow Jones industry sectors.

So how do you put a smile on that cashier's face? Ask her to take a survey, says Robert Fralicx, global director of employee research at Mercer Human Resource Consulting. "What drives an engineer would be different from what drives a salesperson," Fralicx says. "Anybody who claims they know what drives engagement for all of their employees is wrong. Without surveying people, you are just shooting in the dark."

No wonder employee surveys are the secret weapon for many top companies. Nearly 30% of IndustryWeek's Best Plants finalists from 2001 to 2004 poll their employee more than once a year; 44% conduct surveys annually; and 27% send out questionnaires less than once a year. Best Practices LLC consulting firm reports that 64% of high-performing companies report using external surveys as one of their most effective methods of bolstering employee engagement.

Surveys can alert companies to underlying problems in the office. Consultant Lynda Ford, founder of Ford Group, Rome, N.Y., remembers a client that was puzzled by one regional office's lagging performance. "The numbers were not what they should have been with such a seasoned sales force," Ford says. She ran an employee survey focused on key areas of business, then followed up with more intimate focus groups. She quickly discovered that something was indeed amiss. As she says, "There were some management issues that could be rectified."

Employees have not always believed a questionnaire from the "suits" in upper management could solve their problems. "Ten years ago, surveys were catamount to corporate espionage," recalls Charlie Watts, who runs research in human resources for Towers Perrin. "[Surveys] were not considered a useful processor of data but as a way to give managers numbers to either applaud people or spank them."

Nowadays, surveys are used for everything from spearheading corporate change to choosing the best benefits practices, or sometimes even just for fun. Toledo, Ohio-based Dana Corp., whose truck-frame plant in Owensboro, Ky., was a 2003 winner of IndustryWeek's Best Plants award, even polled employees on their interest in attending a NASCAR event in North Carolina.

"We asked if people wanted to go, and negotiated a package, but the employees paid for it themselves," explains company spokesman Gary Corrigan.

Many companies have either never surveyed their employees, or simply don't realize how vast the uses of survey data can be. That's why IndustryWeek has talked to three organizations -- York International, Tennessee Valley Authority and Medtronic -- that have taken a fresh approach to employee surveys, and have enjoyed real results for both their corporate cultures and their bottom lines.

Compliance Check

When Congress passed the Sarbanes-Oxley Act (SOX) of 2002, investors saw the U.S. government finally putting the breaks on future accounting scandals. But to York International, the sprawling legislation -- one that requires companies at over $75 million market capitalization to report internal financial data -- looked more like a compliance nightmare. After all, SOX meant that this $4.5 billion global manufacturer of heating, refrigeration and air-conditioning equipment needed to reinvent an accounting system managed by over 23,000 employees. Talk about a stressful tax season.

As Ian Howells, director of Internal Controls at York explains it: "We are a very decentralized company. We have a lot of people who make a lot of decisions. We had a large population of people, [and] we needed to make sure that they understood the new law."

So Howells launched an employee survey in 2004 to make sure his people had a grasp on the daunting new task. "We needed a document that would show us 'Here are the things that we need for [SOX] compliance, and here is what we need to identify as control issues,'" he says.

With offices in 125 different countries, York's survey needed to be clear to French, Spanish and Japanese speakers alike. "Language can be a very tricky thing, and people have a number of associations with words," says Mohamed Latib, co-founder of Periscope IQ, which wrote the York survey. In order to test the survey's comprehensibility, Periscope sent out a first draft of the questionnaire to a sample group, revising questions that may have confused early readers.

Next, human resources managers tried to ramp up employee response rate with a splashy, widespread communications campaign. They showed up at senior meetings so that managers could bone up on the survey's finer points without looking silly in front of their staffs. They ran a video featuring senior management promoting the survey, and even made sure their CEO filled out his own questionnaire. And York encouraged people to respond electronically, so those who travel frequently had a chance to weigh in.

One interesting twist: York knew the identity of every participant. Anonymity remains the most common way companies preserve respondents' candidness. However in York's case, the survey needed to pinpoint confused employees to avoid future problems. So Periscope embedded its own veritable polygraph system by requiring participants to jot down a few follow-up sentences to their "yes" or "no" answer. "We were able to determine false negatives and false positives," Howells reports. "You can always tell from the text how well they understood the question. In some instances we went back to employees as part of validation. We actually called people in some cases and asked for documentation."

Periscope IQ plugged the results into a scoring mechanism, and calculated key areas on a 100-point index. The firm then color-coded the index, posting trouble spots in yellow or red. Luckily York's report appeared in cooler shades of blue and green, a sign that all is well with its SOX compliance "We actually exceeded our expectations," Howells says.

The survey opened up a venue for employees to clarify parts of the legislation that seemed a bit murky. "One country had gone through a dramatic reorganization. The country manager found himself struggling to know the right questions to ask," says Howells. "He used the questionnaire as a template to talk to his manager."

Motivational Makeover

Like most utilities companies, Tennessee Valley Authority (TVA) spent a good portion of the decade positioning itself for deregulation. As the largest government-run energy producer in the country, TVA worried that its New Deal culture may not translate well to the competitive landscape of its future. So the power company introduced STAR 7, a new initiative designed to give employees a motivational makeover. And because TVA is populated by measurement-obsessed engineers, upper management drafted industrial psychologist Darren Smith in 2002 to develop a system to prove just how well STAR 7 was working.

Smith came up with the Cultural Health Index (CHI), a highly technical measurement of an initiative with fairly touchy-feely undertones. TVA presented employees with a spare questionnaire of just 60 questions. Survey results were subjected to the same kind of significant testing used in Statistical Process Control applications. Most unusual, TVA actually factored in the response rate to data analysis. As Smith explains: "If I have a work group where 80% of the people are responding versus 40%, I should be able to have a better degree of confidence of the accuracy of the information around their employee engagement." Sounds obvious, but most employee surveys fail to function so logically.

Although Enron's accounting scandal derailed plans for deregulation, the index has become more valuable to TVA than ever. The power company's compensation program is based on the balanced scorecard system, which measures a business's workforce, operational efficiency, productivity, financial indicators, and customer and stakeholder satisfaction. Smith soon found that the results of the CHI could be used to forecast the productivity of business units.

The correlations were uncanny. Business units that performed within the top quartile of the Cultural Health Index in mid-2003 had nearly doubled their year-end productivity bonuses in 2004. Conversely, 11 out of 15 business units that had underperformed gave early signs of trouble in the 2003 Cultural Health Index.

TVA's culture seems to have changed for the better; Smith reports that in 2003, TVA saw an increase in the index of almost 6% from the previous year. As human resources executive vice president John Long puts it: "The CHI focuses on how winning performance and the winning behaviors are becoming a way of life at TVA, as well as on how TVA is doing in helping employees be more engaged and excited about their work. It is a leading indicator for TVA's future business performance"

Keeping Employees Focused

Most companies tout the importance of corporate mission, but to Medtronic, it's a matter of life and death. After all, employees at the legendary medical device maker must take the utmost care to meticulously design and assemble vital products such as pacemakers, insulin pumps and surgical devices. One misstep could potentially put the lives of thousands of patients at risk. No wonder most Medtronic employees confidently recite their corporate mission: "Always work towards the light by helping patients enjoy full and productive lives with our products."

How has Medtronic developed such focus? Every two years, employees congregate in various conference rooms to take a survey. While the questions cover topics such as senior management, customer focus and strategic direction, the survey's overarching point is to make sure employees apply the corporate mission to every part of their jobs.

Rather than deducing aggrandized theories on the state of the company, Medtronic divides the results according to business divisions. Managers then are asked to go over results with their employees, and then brainstorm for new ways to improve performance. Last year, the human resource department came up with a plan to improve its Six Sigma strategy.

Notice employees do not plug their answers into the Internet. In a somewhat counterintuitive move, Medtronic made a conscious decision several years ago to keep its survey on paper.

"We feel once its on the computer it becomes more abstract and less personal," says Richard Ploetz, vice president of human resources for global business. "If we send it out on a Web site, it seems less significant to the organization. Call us old fashioned, but that's our approach."

As Ploetz joked: "[In the early 1990s] we were not going to apply for national recognition for employee culture." That's hardly the case today. Medtronic reported a survey response rate of an almost unheard of 85%, and 95% of those respondents demonstrated a clear understanding the corporate mission. "We have begun to get very consistent results," Ploetz says. "In the last three or four cycles, we found that the survey indicates employee attitudes toward the company continue to become more positive."

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