In 2012, Twinkie fans taught us an important lesson about marketing: When it comes to company valuation, customer loyalty is king.
Why Employee Satisfaction Isn’t Enough
For many years, the name of the game for managing people was “employee satisfaction.” We measured how satisfied people were with their job against the backdrop of salary, benefits, and perks. More recently, however, the conversation has shifted toward employee engagement – the level of commitment, passion, and loyalty a worker has toward their work and company. The more engaged an employee is, the more work they’ll put forth.
At face value, these two terms could almost be deemed synonymous. Shouldn’t workers who generally enjoy the highest compensation, benefits, and job security also be most inclined to do good work?
If that assumption was correct, it would follow that the largest companies – the ones that can afford high-powered HR teams, pensions, flexible working arrangements, and a crop of other big-business benefits – should have the most engaged employees.
As it turns out, however, the exact opposite is true.
Gallup’s latest “State of the American Workforce” report found that firms with fewer than 25 workers have the most engaged employees (at 41%), while those with the most employees have the lowest engagement levels (at 29%).
How can this be?
The Surprising Truth About What Motivates Us
For those familiar with Daniel Pink’s bestselling book, Drive, this may come as no surprise. For generations, business has believed that the best way to motivate people is with rewards like money – the “carrot-and-stick” approach. However, research has shown time and again that this does not drive performance – and in fact, often demotivates employees.
Instead, Pink asserts, leaders should create an environment centered around what truly motivates us, inside the workplace and out: autonomy, mastery, and – most importantly – purpose.
This may explain why smaller companies have the edge when it comes to employee engagement: they’re able to connect to the organization’s larger purpose on a more intimate level than corporate behemoths. At a smaller scale, employees are able to see how their work contributes directly to something bigger than themselves.
However, the power of purpose is hardly exclusive to small businesses. A Deloitte survey, conducted with organizations with more than 100 employees, found that 73% of people who work for a “purpose-driven company” are engaged, while just 23% of those who don’t work for such a firm are engaged.
Gerry Anderson, CEO of DTE Energy, learned this when amidst the recession he refocused his 10,000-person company around shared purpose and saw total shareholder return up 275%. As he says in this Harvard Business Review interview:
“I mean it’s a simple thing, but if you want a company to be excellent you have to draw people’s discretionary energy, their extra energy. Well, what do you give your extra energy to? I give it to things I care about and believe in.”
This exchange cannot be not one-sided, however. Anderson cautions business owners to think of this as a mutual agreement.
“One of the cornerstone principles is respect for people. You cannot ask your people to go to bat for the corporation unless they sense that you’re going to bat for them. It’s just an unfair exchange. You can’t ask for their heart and their energy, but not provide something equally meaningful in return.”
Building a Culture of Purpose
And how do you go about providing that meaning? By giving employees something to believe in and rally behind. A higher purpose is not about economic exchanges. It reflects something more aspirational. It explains how the people involved with an organization are making a difference, gives them a sense of meaning, and draws their support.
Leaders can start this process by considering why they started a business to begin with. At Kinesis, we work with all kinds of companies – from analytics consultants to electrical contractors – but when we ask them what gets them up in the morning, they never say “data” or “electricity.” Their higher purpose is developing the next generation of leaders, creating lasting community impact, or making the world a better place.
It’s WHY you do, not WHAT you do, that inspires and motivates a team. As Anderson (an engineer with a background in quantitative economics) put it:
“You can call me soft if you’d like, but I’ve come to believe that the soft stuff really is the hard stuff. You have to go for your people’s energy – when you do it’s the wind at your back. That doesn’t mean you don’t have to do finances and strategy and operations really well to perform, but boy those things are so much easier when your people are with you – really with you.”
Why Being a Purpose-Driven Organization Matters
Businesses are entering the new year amid an acute labor shortage – in that there are literally more jobs available than people to fill them. US job openings exceed the number of unemployed Americans by almost 1 million, and this tight labor market is raising the bar. Coveted employees simply aren’t all that interested in working for companies that don’t give them the level of trust and motivation they want.
This is particularly important as it pertains to positioning your company for market shifts and making your business recession-proof. According to Jim Harter, chief workplace scientist at Gallup, companies that rank in the top 10% in engaging their employees posted profit gains of 26% through the last recession, compared with a 14% decline at comparable employers. The leaders also thrived through the recovery: Their annual profits in 2014-15 grew four times as fast from the 2011-13 period as did those of other companies.
So purpose is not just a lofty ideal; it has practical implications for your company’s financial health and competitiveness. People who find meaning in their work don’t hoard their energy and dedication. They give them freely, defying conventional economic assumptions about self-interest. They grow rather than stagnate. They do more – and they do it better.
By tapping into that power, you can transform an entire organization.