- A Focus on Measurable Outcomes
- The Model: Professional Services Fees Plus a Share of Results
- CEOs Lack a System With ROI for Employee Engagement
Smith’s specific approach, which like most consultants he will not share in detail, focuses on tapping the motivational power of involvement; i.e., creating a culture that makes every employee in the organization feel that they at any time can come up with an idea to cut costs, improve service, create a new product, highlight a risk, etc. with the absolute conviction that each idea will be seriously considered without regard to internal politics and to then see their ideas implemented nearly every day.
“I started the consulting business in 1991 originally serving CEOs as their interim CIO (chief information officer)," he says. "After many years of reengineering IT departments, it occurred to me that the most effective process we used to cut IT spending had far more to do with fixing the politics, culture and silos that were abusing the IT resource, as well as abusing the IT staff. I learned that success required a dual process: reduce spending on things that didn’t matter and protect the highly valuable staff from constant criticism. During one of these assignments, the company was attempting an IPO and couldn’t get their expenses aligned with the proposed offering price. They sent out an RFP to the big four consulting companies. Since I was there I asked if I could submit a simple letter explaining our process and what we expected to deliver: $35 million in cost savings in eight weeks. We got the deal and delivered exactly what we proposed using the same process we used to get control of IT spending.”
“So while we’re targeting costs, many other things that drive employees nuts are being addressed in two days as well, irrespective of whether costs are involved," Smith explains. "We never went back to the IT consulting once this approach started working.” He notes that he's paid based on the results, and says his largest projects generated fees in the low seven figures. "Seventy-five percent of our fees are based on the improvement employees deliver to the income statement...there are no invoices for expenses or consulting during the 10-week project.”
Smith won’t reveal all the details of the process, but he says the essential ingredient for success is total CEO support. “The methodology is our intellectual property, so I won’t go into great detail. We sell only to the CEO, and we become part of the project, reporting to the CEO and collecting all the data. The politics, silos and culture are suspended by the fact that if a member of leadership or management rejects a seemingly good idea, we escalate the debate, which could reach the CEO’s staff meeting. As you might guess, very few make it that far.”
The process, he reiterates, is completed in 10 weeks. “Hundreds of policies are killed or altered, and occasionally a corporate bully is sent home to the surprise and approval of the employees. HR is not involved whatsoever...actually, they're kept very busy with all the employee comments directed at HR.”
Pushed to provide more details, Smith explains: “It’s most accurate to state that we improve the company’s earnings through engaging employees, the most knowledgeable people in the company, by eliminating the obstructions in the culture, politics and silos. We do this by working directly for the CEO and receive all employee input to the one-question survey the CEO asks employees—communicated through all internal communications vehicles. Working with individuals throughout the company, each suggestion is vetted and, if found to be reasonable, it's given to the responsible manager for immediate execution. Refusals are then escalated and may eventually reach the CEO’s desk for final arbitration. Actions must be taken immediately.”
The more employees see action, Smith says, the more they contribute. "In one case, the company anticipated having to lay off three thousand people. Three weeks into the 10 weeks the CEO made a very big decision to eliminate an executive perk based on employee input. At that point we had eight hundred suggestions. After the CEO announced he was eliminating the perk, employee input soured to 4,700 suggestions in seven days. This points out the weakness in the current approaches of waiting weeks or months to announce changes driven by an employee engagement survey.”
The key motivator, Smith says, is that employees see that the system directly relates to change, even to the elimination of toxic management, and the element of politics is removed by focusing specifically on a non-political issue: ways to improve organizational results and the experience for all.
Smith explains that his plan does not include financial or tangible rewards for employees. "First, all the input is anonymous so rewarding specific suggestions, notwithstanding the financial value, is not possible. Secondly, what the company does with the savings is a company and sometimes a board decision. The engagement is a result of employees seeing their input acted upon. Killing or altering dumb policies, sending a bully home, acting on identified risks, both ethical and legal issues, improving benefits and more, all combine to reward employees. The example I used about the input soaring from 800 to 7,400 in seven days is the best indication that listening and taking action is a sufficient incentive. Employees like and appreciate seeing the ‘dumb’ things eliminated. We use the word dumb throughout our process because that’s what employees think about what’s going on. There are no studies that prove financial rewards serve to improve engagement and for twenty years we have seen employees respond with no financial incentives."
Smith notes he has worked with nine companies since he started focusing on cost reductions through employee engagement. “These have all been public companies that have had to decide whether to re-invest the savings or share with the investors. Because of the size of these transactions, the results are shared with the analysts and investors. They are open to reference checks.”
The employee engagement space, Smith believes, is mostly going down the wrong path. “All the companies that I'm aware of in the employee engagement space are doing the same thing," he says. "They sell to HR and offer little or no support for the CHRO, who has little impact on the politics, culture and silos. HR isn't positioned to deliver the results that impress employees; they can deliver only what they can sell to management. This helps explain why no studies have shown any appreciable results arising from HR-led employee engagement surveys. Considering the billions being spent, that’s really a shame.”
Smith says the singular focus on daily performance and experience improvement without ambiguity has the combined benefit of providing clear financial and quality-of-work/life benefits using a process that's easily baked into the culture if led by the CEO. For another article about Smith’s approach, click here.
For More Information:
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Online: The Enterprise Engagement Academy at EEA.tmlu.org, providing the only formal training on Enterprise Engagement and the new ISO 9001 and ISO 10018 quality people management standards. Provides preparation for professionals to support organizations seeking ISO 10018 employer or solution provider certification, as well as elective courses on Trade Show Engagement, Rewards and Recognition, Government, and other topics.
Services: The International Center for Enterprise Engagement at TheICEE.org, offering: ISO 10018 certification for employers, solution providers, and Enterprise Engagement technology platforms; Human Resources and Human Capital audits for organizations seeking to benchmark their practices and related Advisory services for the hospitality field.
The Engagement Agency at EngagementAgency.net, offering: complete support services for employers, solution providers, and technology firms seeking to profit from formal engagement practices for themselves or their clients, including Brand and Capability audits for solution providers to make sure their products and services are up to date.
Enterprise Engagement Benchmark Tools: The Enterprise Engagement Alliance offers three tools to help organizations profit from Engagement. Click here to access the tools.
• ROI of Engagement Calculator. Use this tool to determine the potential return-on-investment of an engagement strategy.
• EE Benchmark Indicator. Confidentially benchmark your organization’s Enterprise Engagement practices against organizations and best practices.
• Compare Your Company’s Level of Engagement. Quickly compare your organization’s level of engagement to those of others based on the same criteria as the EEA’s Engaged Company Stock Index.
• Gauge Your Personal Level of Engagement. This survey, donated by Horsepower, enables individuals to gauge their own personal levels of engagement.
For more information, contact Bruce Bolger at Bolger@TheEEA.org, 914-591-7600, ext. 230.