The value of being a Great Place to Work

Ever since The Great Place to Work Institute was set up as a separate entity in India, I get to spend a lot of time addressing in-house conferences and meetings of senior management of Organisations. One common question I face in many of these meetings is, What is the business benefit of being a great workplace? Examples are given of Organisations who are doing significantly well financially, but who are known to be, well, not great places to work. Recently, a senior marketing manager gave the example of his previous employer in the white goods FMCG market. This Organisation, according to him, pays great incentives to its sales team, and has one of the highest growth rates in the industry. However, according to this gentleman, no one lasts in the sales function for more than 3 years due to the high pressure of performance. Can you disagree that a great workplace and financial results have no correlation?, he challenged me. I decided to pose this challenge to participants in a workshop on employee engagement that I was facilitating. As I had anticipated we discovered that there were many more examples of successful Organisations who are apparently not great places to work at all, based on the collective experience of the group. We debated the possible reasons. In case of a few Organisations we found that their compensation was a huge attraction, talented employees joined them even though as an employer they were not perceived to be great. In some cases, the Organisation operated in monopoly or oligopoly kind of market, and in yet other cases scale, price or technology were the key success factors in their market rather than talent. We discussed how it required only one competitor to change the rules of the game like Southwest airlines did in US in the low budget airlines business where most low budget carriers had assumed that low prices alone are sufficient to be successful. As a result, Southwest is consistently successful in an industry where most competitors have burnt their fingers. How much more successful will these Organisations be, we argued, if only they could engage their employees better. Try as we might to find reasons for financial success of Organisations with poor employee experience, and speculate on how things can change, the stark fact before us is clear there is enough experiential and anecdotal evidence that tells us it is possible to be financially successful and yet have low levels of employee engagement/ morale. How about the other way round? Would there be examples of Organisations who are great in employee engagement, but do not do well financially. Many people again gave examples of working in Organisations where employees are respected and co-workers care about each other, yet the Organisation lags behind its competitors. The trick is in the definition of the term employee engagement. It turns out that all major studies have defined the term differently leading to different key drivers and implications. A random search in the free dictionary in Google gives the following definition:

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Employee engagement is a concept that is generally viewed as managing discretionary effort, that is, when employees have choices, they will act in a way that furthers their organization's interests. An engaged employee is a person who is fully involved in, and enthusiastic about, his or her work. There is an ever growing body of evidence to show that softer aspects like employee engagement and employee morale do impact hard results like turnover, productivity, profits and market cap. So much so, that Jack Welch, the former CEO of GE says, The soft stuff is the hard stuff. In the book, The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want, author David Sirota and colleagues draw on 30 years of research to conclude that enthusiastic employees consistently outproduce and outperform their less satisfied counterparts. David Maister, author of Practice What You Preach, has done comparable research, with very analogous findings. One of Maisters primary takeaways was that employee attitudes clearly cause financial results, rather than the other way around. The Gallup Organisation in their research has found correlation between the 12 items of their framework and hard outputs like productivity, turnover, profits and customer satisfaction. The Great Place to Work Institute does not define employee engagement. Instead, it defines a Great Place to Work as an Organisation where you trust the people you work for, take pride in what you do, and enjoy the company of people you work with. This is one framework that looks at the Organisation from an employees eyes, rather than looking at employees from an Organizations (read Managements) eyes. While on the surface the definition may give the impression that there could be a number of Organisations with high trust, pride and camaraderie, and yet be a laggard financially and in other hard measures when compared to its competitors. In reality this is almost never true. To find the reason we will have to study the details of the framework. Can you have trust in your Management if you do not perceive them to be competent? Unlikely. At a personal level perhaps you will trust a friend who is professionally not competent. You would not trust him to manage your business. Trust in management is directly proportional to the kind of Credibility that the Management of an Organisation has. Over 90 per cent of employees of the Top 25 Great Places to Work in India agree that Management is competent at running the business. If an overwhelming number of employees agree that Management has a clear view about where the Organisation is going and how to get there, and Management does a good job of assigning and coordinating people (all statements from the Great Place to Work survey), it is unlikely that the Organisation is a industry laggard. In fact, our experience shows that Organisations whose employees say that it is a great workplace are likely to be subsequently recognised by others as evidenced by their inclusion in other lists like Most Respected Companies List (which are

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based on industry perception and hard data). This is the difference between a lead indicator and lag indicator. What your employees think today, your industry and market will think tomorrow. Sometimes we equate terms like employee engagement and Great Place to Work with being a caring Organisation and a fun place to work. In reality, these are but two elements necessary but by no means sufficient. To put it simply, great places to work care for people and care for results. To revert to the original question, Can you disagree that a great workplace and financial results have no correlation?, my answer would be unambiguous. It is possible to get financial results without being a Great Place to Work, but it is almost impossible to be a Great Place to Work and be a financial laggard. If financial results are our only goals, we have more than one way of achieving the same. The choice and consequences are ours.

Prasenjit Bhattacharya Mumbai, India

The author is CEO of The Great Place to Work Institute, India. He can be reached at pbhattacharya@greatplacetowork.in Views expressed are personal.

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Annex 100 Best vs. Stock Market: 1998-2006 Annualized Return of 100 Best Workplaces that feature in the Great Place to Work Institutes list published in Fortune magazine in US

14.16% 10.65% 5.97% 6.34%

100 Best Market

Reset Buy & Hold S&P 500 Annually Russell 3000

Note: With Great Place to Work Institute being a separate independent entity in India from this year, similar analysis would be available from next year for great workplaces in India. Reset Annually Portfolio The 100 Best Reset Annually column represents the annualized return on the Reset Annually Portfolio, which reflects the practice of investing in the stock of each of the publicly traded 100 Best for a given year, then liquidating the portfolio at year-end and using the proceeds to invest in the new list of 100 Best the following year. This portfolio starts this process in 1998 with the 1998 100 Best and repeats it each year through 2006. Buy & Hold Portfolio The Buy and Hold portfolio represents the annualized return a portfolio that invests equal dollar amounts (at the beginning of 1998) in the stock of each of the 1998 100 Best publicly traded companies and holds these stocks for all years covered in the charts. Financial Performance of the 100 Best The returns on the Reset Annually Portfolio illustrate the extent to which publicly traded 100 Best Companies consistently outperform major stock indices over time. The returns for the Buy and Hold portfolio confirm the long term benefits that may come from investing in one set of great companies and holding that stock over many years. Either way, with an annual resetting of the portfolio or a more conservative buy and hold approach, the financial success of the 100 Best over time is clear.

Great Place to Work Institute, India