In the traditional depiction of a Balanced Scorecard strategy map, the four perspectives are stacked up on top of each other: learning & growth at the bottom and financial at the top. Sometimes, people think this implies employees are the least important perspective but a better interpretation is that employees are the foundation of a successful organization. If employees don’t understand your mission and don’t have the correct skills to achieve it, you’re highly unlikely to be successful.
This shouldn’t be surprising. Many studies have shown the linkage between employee satisfaction and increased performance on customer and financial objectives. The University of Sheffield in the UK conducted a research study to help explain the difference in profitability between manufacturing companies. It found people management practices were better predictors of company performance than strategy, technology or research and development. Employee satisfaction isn’t just important; it’s critical.
Some organizations have even managed to quantify the relationship. In 1997 a Fortune Magazine article reported that Sears conducted an 820-store survey to determine the impact of employee attitude on the bottom line. Analysis of the results by Claes Fornell International Group, an organization made up of econometric statisticians at the University of Michigan, showed that a 5-point improvement in employees’ attitudes yielded a 1.3-point improvement in customer satisfaction, which in turn improved revenue by 0.5%. Happier employees led directly to higher profits.
Because employee satisfaction is a good indication of future success, it should almost always be one of the key performance indicators on your scorecard. As with my cautions around measuring customer satisfaction in an earlier post, I would discourage you from using surrogate measure of employee satisfaction such as “average length of service” or “retention percentage”. If you want to know if employees are happy, it’s best to ask them.
However, be careful with the questions that get used on many employee satisfaction surveys. Many years ago, the HR department in the company I worked for sent out a single-question survey that asked how satisfied we were with our jobs on a scale of 0 to 4, with 4 being the highest. When the results came back, my department had the lowest average score (2.6) of any group in the company. The HR VP solemnly explained that my group was in danger of mass exodus and that my annual bonus was going to be negatively affected.
I was mystified because I had heard very few complaints from my group and no one had left in the last year. Not one to leave such mysteries unsolved, I convinced HR to ask my group three other questions:
- How likely are you to leave the company in the next 6 months?
- How does your job compare to other jobs that you’ve had?
- How does your satisfaction with your job compare with how it was 3 months ago?
The results made me feel much better. On average, my group reported that they were very unlikely to leave the company in the next six months, that their current job was a little better than ones they’d had in the past, and that they felt the same about their job today as compared to 3 months ago. The evidence convinced HR that I didn’t have a major problem brewing.
Despite this, I was still curious why my group responded so much lower than the company average. In the following weeks, during my regular one-on-ones, I described the situation to each of my employees and asked them for their opinion. The answers were striking. Software engineers, it seems, are tough graders. Even though the theoretical maximum was 4.0, many said that they would never give a higher score than 3.5 no matter how happy they were. And it irritated them that the company soda machines only carried Coke products and not Pepsi ones; enough that they lowered their grades. So, a 2.6 average score for my group might indicate equivalent satisfaction to a 3.4 score for another group.
All of this confusion might have been avoided if the HR group hadn’t chosen to benchmark my group against others in the company. Instead, they would have been better served to ignore the raw number and to focus on the trend over time. Are the results from this quarter’s survey result going up or down as compared to last quarter? Since we only had one data point, I was trying to approximate this trend by asking, “how does your satisfaction with your job compare with how it was 3 months ago?”
As with everything in performance management, understanding time is critical to interpreting results. If there is seasonality in your business (like there is in retail), you might consider also comparing the results to the same period last year, as satisfaction is notoriously lower during the Christmas blitz than during other slower parts of the year. For the software company I worked for, we needed to make we weren’t accidentally comparing the end of a release push to the relative calm of a planning period.
As it turns out, no one ever left my group during my tenure as a manager despite the VP’s warning. While interesting work or a soft job market might have been the primary reasons, I like to think that it had something to do with the fact that I stocked my office mini-fridge with free Pepsis.
great that you offer Pepsi as well, although I like both, Coke and Pepsi, and I don’t think that soft drinks would have influenced my voting (as long as you offer tea… 🙂
Actually you are making a very good point here. It is always crucial to define your measures in the right way, especially when you go for benchmarking. This is the reason why we have setup a KPI Wiki with the goal to let the community discuss and define business KPIs. Any contribution or feedback is welcome.
International comparisons should also be taken with a pinch of salt — a few years ago, our marketing group had similarly low scores, but it turned out to be mostly related to the number of people we had based in Europe, where people typically give lower marks than in the US. And like your engineers, we found that marketing had lower numbers without affecting how much they were likely to leave — maybe a certain amount of healthy cynicism is required to do the job effectively? Finally, note the importance of good old business intelligence in all this — when faced with an interesting result, you need the ability to drill into the numbers to find out what’s driving them (and make sure you test causation, not just correlation, as I’m glad to see the Sears folks did).
Interesting topic. We’ve had similar discussions internally with my partners. Could come to a consensus though.
In order to measure employee satisfaction, you can also use 5 methods such as:
1. Job Descriptive Index (JDI)
Job Descriptive Index is a scale used to measure five major factors associated with job satisfaction: Work itself, Supervision, Pay, Promotion, Co-workers. The JDI was first introduced in 1969 and since then has been used by over 1,000 organizations in many sectors.
2. Job In General Scale (JIG)
Job In General Scale is a method of employee satisfaction and developed as a global measure of job satisfaction.
JIG is similar to JDI, it introduced 1969 by Smith, Kendall, & Hulin, was modified in 1985 by the JDI Research Group.
3. Minnesota Satisfaction Questionnaire (MSQ)
The Minnesota Satisfaction Questionnaire (MSQ) is designed to measure an employee’s satisfaction with their particular job.
Method includes 100 items measuring 20 facets of job satisfaction.
There are three version are available: two long forms (1977 version and 1967 version) and a short form.
4. Satisfied / dissatisfied method
In this method, you just send a question form that include:
• What is good thing in our company?
• What is not good one in our company?
This method is suitable for “emergency events” and you need result in a short time.
5. Interview method
This method is used for:
• Review all data collected from other method..
• Review key person.
Thanks for your feedback. In fact, the company I worked for heavily used MSQ with no better results. The fault was not in the survey but rather that satisfaction varies widely over time, based on seasonal events. In addition, measures without appropriate targets are useless.
It is interesting to hear other people’s comments regarding Employee’s satisfaction survey but my questions is when do you need to conduct one (timing) and how often?
I am looking for a survey that one can conduct to check if the employees morale has improved after a certain intervention eg I am in the process of putting together some fun activities in the work place and I want to mesure the impact of that and how does it contribute to the business bottom line.
John, one size doesn’t fit all. I encourage groups to continuously check the employee pulse but, to avoid survey fatigue, to vary the population in a statistically valid way. I also encourage to check during high and low times (defined by your organization).
Borrowing from the Net Promoter Score, I find that one of the most powerful question combos for an employee satisfaction questionnaire is
1) “How likely would you be to recommend [your Company] to a friend or colleague interested in seeking employment?” (Use a 0 to 10 scale)
2) What, in particular, made you choose that rating in the last question? (open-ended)
The temptation in surveys is always to ask too many questions without allowing the respondent (employee) to sort out what matters most to him or her.
Including open-ended questions will help to overcome this.
The Satisfaction Questionnaire Blog
I have mixed feelings about the Net Promoter Score (http://www.atypon-link.com/AMA/doi/pdf/10.1509/jmkg.71.3.39?cookieSet=1). Regardless, I’m not sure whether these questions would have solved the problem in this case. The issue is asking questions *at a particular moment in time*, rather than checking over time. Specific moments in time can be highly variable.
Jonathan-Always enjoyable to read your thoughts, particularly on a HR topic. Made me smile. It’s been too long…Ann