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Human Capital Management

For Higher Profits in 2017, Invest in Employee Experience

Organizations that focus on employees’ technological, physical and cultural environments tend to crush those that don’t.

by Jacob Morgan

February 2017

Investment in employee engagement is higher than ever, with a market cap of 1.53 billion, according to Bersin. Meanwhile, employee engagement remains stagnant, with about one third of workers saying they are engaged in their jobs, according to Gallup. For decades, organizational leaders have been trying to improve these scores by spending more money, yet nothing has budged. How can this be possible?

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Unfortunately, spending to increase employee engagement – often on perks such as free food, office parties, or the ability to work from home now and then – has become the equivalent of an adrenaline shot, designed to temporarily spike employee happiness. Eventually, the shot wears off, another shot is introduced, and the whole cycle repeats. This approach does little to unlock human potential or achieve long-term business impact. In fact, I believe it is simply employee manipulation.

Today, we are seeing a bigger push toward employee experience. If employee engagement is an adrenaline shot, then employee experience is a long-term organizational redesign that puts people at the center. The overlap between employee’s needs, expectations and wants and the organization’s ability to design for those needs, expectations and wants is where employee experience is created. Cisco, Linkedin, Accenture, and others and others have broken down their people-related functions and rebuilt them from the ground up. Most organizations, on the other hand, simply try to fit people into outdated models of how work gets done.

Investing in employee experience doesn’t necessarily mean spending more money – often, it can just mean more effort and focus.”

The good news for organizations around the world is that every single employee experience is comprised of just three things, or more aptly put, environments: technology, physical space and culture.

  • Technology refers to the software, hardware, devices, apps, etc. that employees use to get their jobs done. This technological environment comprises 30% of the employee’s overall experience.
  • The physical space is the environment in which employees work. This could be a home office, a cubicle, an open floor plan, or anything in between. This, too, comprises 30% of the employee’s experience.
  • Culture is what employees feel as a result of working for your organization. This comprises 40% of the overall employee experience.

I conducted a survey of 252 organizations using a total of 17 variables -- three for culture, four for the physical space, and ten for culture. Physical variables included a flexible work environment and multiple workspace options. Technology variables included having tools based on employee needs versus business requirements. Culture variables included managers who act as coaches and mentors, investing in diversity and inclusion, and a positive company brand perception.

Using these 17 variables, I created nine categories based on how well the organization scored. The highest category of organizations is called “experiential” and the lowest category is called “inexperienced.”

What are experiential organizations doing to create a great employee experience? Cisco, for example, has an entire team devoted to looking at employee experience. One of the things they do is identify “moments that matter” in the life of employees, defined as career and personal moments that are important to them. Employees can then take advantage of programs or perks around these moments. For instance, if a moment that matters is giving back, employees can take time off to participate in community programs. This is a much more human approach than the common employee life cycle, which usually include onboarding, performance reviews, and off-boarding.

Airbnb has a head of employee experience who is responsible for creating an environment where employees want to show up. Linkedin and Accenture have HR hackathons in which they attempt to break down their people functions and rebuild them based on employee feedback and ideas. Google has a robust people analytics function that is constantly collecting data on how employees work, and in response, optimizing training programs, bonus packages, perks, the physical workspace, and everything else related to how employees work.

It turns out that organizations that do an amazing job of creating experiences for their people based on these three environments see dramatic business impact. Interestingly, I found that investing in employee experience doesn’t necessarily mean spending more money – often, it can just mean more effort and focus.

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Jacob Morgan’s latest book, The Employee Experience Advantage, analyzes over 250 global organizations to determine how to create an organization where people genuinely want to show up to work.

Based on the data I collected, experiential organizations on average have 4.2x the average amount of profit, 4x the amount of profit per employee, and 2.8x the revenue per employee when compared to non-experiential organizations. These organizations also saw a stock price that outperformed every other category that I measured against, including the Fortune 100 Best Places to Work, Glassdoor’s Best Places to Work, the NASDAQ, and the S&P 500.

Unfortunately, only 6% of the 252 organizations fell into this top experiential category. Almost half of the organizations are either doing nothing or investing in just one of the three environments mentioned above.

There is an amazing opportunity for organizations that are truly willing to change and commit to putting their people first. If you truly want to unlock human potential, drive innovation, improve customer satisfaction and outlast your competition, then you must invest in employee experience in a strategic and meaningful way. This is the next battleground for organizations around the world.

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