Jobsite recently sat down with Steve Coughran, Chief Financial Officer for EMJ Corporation, where he focuses on bridging finance and strategy to drive competitive advantage. In our discussion, Steve discussed the challenges companies face with low employee morale and engagement. He shares his insight on how organizations can identify weak points in their engagement strategy and create successful and long-lasting solutions.
Jobsite: How can companies identify potential weak points in their engagement strategy?
Steve: To answer this question, I will first provide a bit of context around why employees, or humans for that matter, are motivated to move and exert energy. Take Newton’s first law of physics, the law of inertia as a metaphor. Newton declared that an object at rest stays at rest unless acted upon by an outside source. In this example, humans are inert. Companies are the outside source that influence employees to do, learn, and set goals. In order to motivate employees to complete simple tasks that require movement and energy, companies must pay us a reward that covers our basic living needs like food, clothing, and shelter.
The challenge I come across in many employee engagement strategies is that companies apply outdated management tactics derived during the industrial era.
Motivating employees to progress beyond simple tasks requires companies to incentivize employees. Companies typically incent through bonuses and other types of extrinsic rewards formed by if-then agreements. This is the performance contract that establishes clear parameters—if you do this, we will reward you with that. If you sell this much work, we will pay you this commission; or if you maintain this margin, we will pay you this bonus. This incentive strategy works for companies competing in a predictable environment where tasks are routine and human capital is abundant. However, in our AEC industry, complexity is the norm, every project is different, and layers and layers of direct supervision are expensive and cumbersome.
The challenge I come across in many employee engagement strategies is that companies apply outdated management tactics derived during the industrial era. Now, in our service and experience-based economies, compliance-based reward programs fail to prompt the desired outcomes. In best case scenarios, these quid pro quo strategies simply don’t produce the results. In worse case scenarios, they generate a slew of unintended consequences.
As we move into a budding experience economy where tasks become less routine, this structure starts to break down. For example, after basic needs are met, compensating superintendents or project managers solely with monetary, extrinsic-based rewards will not inspire outstanding action or ensure retention. I have conducted thousands of surveys on this topic and found that once an employee’s basic needs are met, there is little correlation between engagement and higher compensation.
Companies don’t just need employees to be compliant–they need them to be engaged. This begins by incorporating both extrinsic and intrinsic rewards, coordinating work through mutual adjustment, and aligning everyone on a well-defined strategy.
So back to your initial question–how can we tell if we have weak points in our engagement strategy? The first place to look is at your employee turnover. I would analyze overall turnover, new employee turnover, and even break it down by position or project turnover. This provides insight into what specific parts of the business are struggling to maintain employees.
I also recommend conducting regular employee engagement satisfaction surveys and just simply walking around and talking to employees. Ask employees at all levels, ‘Why does your company exist? What is its strategy? What are the expected results?’ Sometimes, I will get blank stares or conflicting answers to these questions. A lack of understanding of the enterprise strategy is a clear indicator that the engagement strategy has some weak points.
Jobsite: Once a company finds the weak points you mentioned, how do they go about developing a plan that ‘sticks?’
Steve: As you identify the weak points, begin to dig a little deeper into why they exist. Back to the employee turnover example, let’s say that your calculations reveal that PM turnover is dramatically higher than turnover for other positions. Interviews, surveys, and conversations might help you nail down some specific reasons for the elevated turnover. For example, you could find out that PMs in your organization don’t feel they receive adequate training. Maybe they are struggling with work/life balance and are putting in too many hours and are getting burnt out. Maybe they are receiving better offers from other companies and are being enticed to leave.
When employees can see a clear path ahead, they are far more likely to buy into a long-term plan that requires more focus and energy on their part.
The simplest way to understand what you need to do and what changes you need to make is to ask employees. They will give you genuine, valuable feedback on what you can do to improve the engagement strategy. In my experience, this involves seeking their opinions and engaging them in the overall company strategy. When employees can see a clear path ahead, they are far more likely to buy into a long-term plan that requires more focus and energy on their part.
Additionally, as I mentioned before, this plan should revolve around intrinsic rewards rather than just ‘if-then’ extrinsic rewards. Beyond praise and recognition, employees want a sense of autonomy where they can own their work and see the value of their contributions. They want to feel like they’re a part of something bigger than themselves. This requires strong teamwork and a commitment from all to produce quality, meaningful work. There’s also a deep desire for learning and growth. That's when it gets into the whole purpose-driven culture. People must understand the company's purpose, why it exists. They also must understand what the organization is trying to accomplish and how it will win. That's the strategy.
Jobsite: How does a company go about identifying the problem of employee engagement and not just the symptoms?
Steve: Clearly identifying the problem you are hoping to solve with your strategy is the most important step. A strategic problem should be viewed as a major, underlying issue that will impact your organization’s long-term success and well-being. In other words, solving this strategic problem allows you to offset a series of other interrelated problems. This requires companies to continue to ask ‘why,’ until the root of the issue is revealed.
For example, a company has a turnover rate of 32 percent. They may ask, ‘Why do we have a high turnover rate?’ As I alluded to before, a high turnover rate is a clear symptom of a poor engagement strategy. Let’s say the employees’ feedback is that they're not excited about the jobs, so they're quitting to go elsewhere. ‘Why aren't they excited about their jobs?’ Because they don’t feel like they have any opportunity to advance. ‘Why don’t they feel like they have the opportunity to advance?’ Because we're not doing the right type of projects. ‘Why aren't we doing the right type of projects?’ Because we don't have the right VPs in place to manage the work. In this example, the engagement problem may be rooted in ineffective VPs—asking why uncovers this.
Companies that fail to dig deep enough may find themselves pursuing misaligned initiatives that may appear like the right move on the surface but are insufficient to solve the real problem. In the previous example, they may uncover that the company needs to restructure its operations to improve engagement, which might involve putting a VP of construction and VP of preconstruction in place to oversee estimating and operations to win and perform better work.
Too often, companies try to increase engagement by boosting perks such as putting ping pong tables in the lunchroom, paying PTO on birthdays, or hosting company luncheons. While these actions might be exciting, fringe benefits don’t create long-term engagement. They must be linked to the larger strategy.
At the end of the day, engagement stems from winning in a meaningful way. When’s the last time you saw a Super Bowl championship team that was not engaged?
At the end of the day, engagement stems from winning in a meaningful way. When’s the last time you saw a Super Bowl championship team that was not engaged? Tackle the tough strategic challenges and make the difficult decisions, and engagement will improve. This may involve terminating employees who bring down morale even if they are high producers. It’s important to establish your workforce with your ideal culture in mind, so recruit, hire, and promote candidates that exhibit your company’s values and drive forward its purpose.
Jobsite: Once a company sets up this engagement strategy, what are some common obstacles it might face? How can it keep the initiatives cost-effective and impactful?
Steve: One of the biggest obstacles is that companies confuse effort with results. Often, companies will devise a strategy and answer the question, ‘Where are we going to compete, and how are we going to win?’ They define a strong purpose and then go out and start making changes. However, sometimes they put the cart before the horse, and their actions are misaligned with the desired outcomes.
For example, a GC might come up with a strategic plan with 85 initiatives. Employees might exert a lot of effort and accomplish 50 percent of the initiatives. But if these 50 percent of initiatives don’t directly drive their overall strategic objectives, the effort is for naught. If employees are working hard–maybe putting in extra time, missing obligations to stay at work late–and can’t see the results of their labor, they will become disengaged very quickly. You must ensure that your employees’ efforts tie to meaningful, tangible strategic outcomes. Additionally, these intrinsic motivational tactics are inherently cost-effective.
Jobsite: What are your big takeaways for boosting employee engagement?
Steve: My number one takeaway is that a company must build a strategy that describes how they will win in detail. Ensure that your efforts align with results and continuously seek employee input and feedback. Motivate employees intrinsically, rather than focusing on compliance-based extrinsic motivational tactics. Provide employees with updates on their progress and inform and remind them about how they contribute to something bigger than themselves. Communicate a clear path for learning and growth. Overarching organizational strategy is the genesis of strong employee engagement.