Forget Employee Engagement -- Are They Happy?

Organizations have entire departments and a corporate officer dedicated to measuring various aspects of financial performance. Even the smallest of companies has a finance person who tracks sales, expenditures, taxes, and reports on achievements and problems to the boss. Financial metrics are tracked daily in some cases, and at least weekly or monthly. Real-time decisions are made based on changes to key metrics like cash flow, sales, orders and expenses.

Yet, more and more organizations today are driven by people, not just investments in raw materials and equipment. In fact, even an airline, which has some pretty expensive equipment and raw materials (fuel), finds that labor costs are one of the biggest items on their list of expenses.

In recent years, companies have become more concerned about tracking the satisfaction or engagement (the newest buzzword) of their employees. I'm told that both are important but that they are different. An employee working 80 hours a week on an important project that takes phone calls and responds to emails at all hours of the night might be highly engaged, but not very satisfied with her job. Conversely, I recall working with a group of bored, talented engineers at a big oil company that were very happy with their jobs because of the short hours and fat paychecks, but they were not at all engaged in their work or the organization's mission. As the economy improves and more companies start hiring, employers need to start paying more attention to the happiness of their employees or they will go elsewhere.

What Makes Employees Happy?

We tend to equate happiness with achievement of key milestones or accomplishments in life: getting that promotion to VP you've waited for, getting married, having your first child, buying your first house, taking a trip around the world, or finally getting that Ph.D. However, day-to-day happiness does not seem to be influenced much by achievement of major milestones at either home or work.

Gallup's research suggests that having a great boss and good friends at work are two huge factors. This seems to ring true for most of us that have had good and bad bosses, and jobs with lots of friends and none of them. The work itself sometimes is a big factor as well. Getting to do something you are really good at and have a passion for is important as well. Stephen Lundin's book Fish is a great lesson on how to make boring and even unpleasant work fun. The employees at the Pike Street Fish Market in Seattle have found an innovative way of making work (selling fresh fish) more fun and they are much happier because of it.

A Culture of Weirdness and Fun

Online shoe company Zappos in Henderson, Nev., is known for both its business savvy and highly engaged workforce. People love working at this company that rewards, creativity, laughter and weirdness. In fact, if you are really normal and boring, you probably won't fit in well there.

Zappos is so confident that employees will be happy working at their company, they offer new employees a check for $2,000 to quit after the first 30 days on the job. No questions asked, they will pay you to leave. Surprisingly, almost no one takes the offer. Zappos uses this offer as a test to see if the employee really likes working there and is happy.

Southwest Airlines is always mentioned as a great place to work as well, and if employees are not really happy, they sure fake it well. Year after year, Southwest continues to grow and remain profitable, while other airlines struggle with labor problems and possible bankruptcy.

Another company that was recently named the best company in America for work/life balance is Nestle Purina in St. Louis. Companies that make it to Fortune's annual list of the best employers get around 80% employee satisfaction. Purina has 97% employee satisfaction and also beats any company in their industry on key measures like sales, profits, customer satisfaction, and innovation. Purina also recently won the Baldrige Award given out by the President to the best run American companies. Having happy, engaged employees seems to translate to better business performance.

How to Measure Employee Happiness

While everyone will acknowledge that happy and engaged employees are a prerequisite to good performance on all sorts of key success metrics, 99% of companies rely on annual surveys as their only measure of employee satisfaction or engagement. The three major problems with this are:

1. Surveys are notoriously unreliable.
2. Most people don't fill them out, (or if they do, they are not honest).
3. Surveys can only be done a few times a year or people will go crazy ("Didn't we just fill out one these stupid surveys a few months ago?").

Surveys are also just a measure of someone's opinions. Many distrust the anonymity of surveys as well, and may report being ecstatic about their company and job, in case someone decides to get rid of the employees with a "bad attitude." Measuring anything once a year does not allow you to manage the aspect of performance being measured. Imagine managing the financial results of a company if you could only measure key metrics like income and expenses once a year. Yet, that is exactly what most organizations do when tracking employee satisfaction.

Net Promoter Score

Well-researched employee surveys like those conducted by Gallup and others do have their place, and are an excellent way of taking the pulse of the organization once a year. Gallup's 12 questions are likely to provide enough details to diagnose the causes of problems and develop action plans for improvement. A recent trend is to avoid asking 12-50 questions on employee surveys but to only ask one: "On a 1-10 scale would you recommend (Company name) as a great place to work?". Those that score a 8, 9, or 10 are called your "promoters" and are likely to talk about how great their job and employer is to anyone who will listen.

The logic of these one-question surveys is that employees are much more likely to answer a survey if it is only one question, and the 10-point scale provides a wide enough range to capture diverse opinions. The biggest problem with these one-question surveys is that what do you do if you get a score of 3? Unless you start asking follow-up questions, you have no idea why you got a low score and what to do about improving it.

Whether a survey is one question or 50, it can only be administered periodically. Employee happiness changes almost hourly, depending on what is going on and how they feel about it. You could have been having a good day until you got an email an hour ago, or heard some bad news in a meeting. Consequently, it is important to frequently take the pulse of employee satisfaction levels, and identify and manage problems before they become worse.

Using Social Media to Track Employee Happiness

Happiily, a company based in Vancouver, B.C., has created a web and mobile application that provides managers with a near real-time dashboard of their employees' engagement and sentiment. The product, called happily, provides a secure, anonymous way for employees to quickly and easily respond to questions customized by their employer about four aspects of their work life: the person they work for, the people they work with, the work they do and the organization overall.

Each employee's answers are anonymously aggregated on a web-based dashboard that a manager accesses daily. Within seconds, managers can see the dips and spikes of employee sentiment and zero in on the issues most in-need of being addressed.

This is one of the best things I have seen in recent years as a practical and easy way of measuring employee satisfaction. Companies that get daily or weekly data on employee happiness can actually manage this important aspect of performance rather than just look at annual survey results and wonder why scores went down from last year. The cost of happily ranges from $25 to just $5 per month per active user, which is actually quite reasonable when you consider that annual employee surveys often cost over $100,000 and provide you with a once-a-year report.

An even lower-tech approach used by several of my clients is to have employees drop a red, yellow, or green marble in a vase at the end of the day, indicating how they felt about the day at work. Another company uses poker chips and coffee cans to track employee happiness on a weekly basis. Lake Arrowhead Hospital in California clips a stoplight chart to your bi-weekly time sheet, asking employees to indicate how they felt.

All of these lower-tech approaches are definitely less expensive, but they all suffer from the anonymity problem -- others may see which marble or chip you are dropping in the bowl or can. The happilly approach capitalizes on the fact that most employees are using various forms of social media many times throughout the day anyway so are used to communicating this way.

Employee Satisfaction Index

When assessing credit worthiness and risk, bankers and mortgage companies use a credit score or FICO, which is an index of a wide variety of individual metrics like asset/liability ratio, available credit, payment history, etc. The logic behind a credit score is that this composite number is more thorough and accurate than any singular statistic. A similar index might be developed to measure employee happiness at work. That index would consist of a variety of individual metrics like the following list developed by several of my clients:

• Absenteeism
• Hours worked per week
• Unused vacation time
• Percentage of employees who do work while on vacation
• Use of company services like day care and health clubs
• Job growth
• Internal promotions versus outside hires
• Pay versus industry and competitors
• Access to training and developmental opportunities
• Complaints/grievances
• Tolerance of poor performers
• Real versus stated culture
• Employees eligible for retirement who still work
• Flexibility of HR policies and practices
• Participation in social activities with co-workers (happy hour, softball, etc.)
• Positive reinforcement/recognition
• Employee focus groups.

The key to measuring a dimension as complex as employee happiness is to construct an index that is based on a number of different individual metrics that are each assigned a weight based on factors like data integrity and the degree to which they are a true measure of employee happiness. For example, absenteeism is not a clean measure of employee stress or happiness because sometimes people just get sick. Similarly, an employee may work long hours because he does not have much of a life outside of work and loves his job. Because of factors like this, it is important that an employee satisfaction or happiness index be comprised of a number of different individual measures.

Tracking Employee Happiness Daily

Employee happiness is becoming increasingly important as a predictor of business performance. Important studies as well as anecdotal data suggest that people who love their jobs perform at 120%, and those who hate their job and employer do just enough to avoid being fired. Smart organizations realize that a factor like employee satisfaction needs to be accurately measured and managed just like financial performance. What this means is that you need to figure out how to measure employee happiness frequently, be able to analyze the data to determine the causes of high and low scores, and develop actions and improvement initiatives to make your organization a better place to work.

Just like the financial health of a company cannot be assessed by a single metric, employee satisfaction should be measured using a suite of individual measures combined into an index like a FICO score. The dreaded annual employee survey is a practice that is quickly falling by the wayside as new companies like happilly are developing tools for tracking employee happiness daily and providing enough analytical data to help improve this important performance dimension.

Mark Graham Brown is a veteran consultant and regarded as one of the leading experts on performance measurement/balanced scorecard and the Baldrige model. He is a regular contributor to Business Finance.