A client confided in us that they suspended their annual employee engagement surveys for three years to save costs due to an economic downturn. Now their business is growing again, and they plan to restart their surveys. Instead, we suggested using an empirically developed survey that measures the organization’s capability and culture for innovation and provides recommendations for improving business performance. Even Gallup, a leader in employee engagement, has found that clients who score high on its surveys focus on developing culture.

The employee engagement business is a whopping $100 billion industry. Conducting employee engagement surveys is ingrained in the HR establishment, which administers them annually and sometimes as pulse surveys.

There are plenty of benefits touted for employee engagement. According to a 2016 Gallup report, engaged teams have 24 to 59 percent less turnover, 21 percent greater profitability, ten percent higher customer ratings, and 41 percent less absenteeism. Gallup maintains that managers are critical for these outcomes.

But are these outcomes rock solid? Employee engagement is hard to improve, and its surveys generally don’t have prescribed advice for organizations.

Beginning with its first employee engagement survey in 2000, Gallup’s State of Global Workforce Reports show that overall employee engagement has not improved much as measured by its survey. Between 2000 and 2018, actively engaged employee scores have ranged from 13 percent to 20 percent, and disengaged employee scores from 26 percent to 30 percent. 2019 was a watershed for employee engagement. Gallup’s 2020 State of Employee Engagement Report found “that in 2019, the percentage of ‘engaged’ workers reached 36 percent. Then Covid-19 hit, and dynamics changed.

Before then in 2018, Gallup recommended that organizations do more than their traditional employee engagement playbook to improve business performance. It told organizations not to manage by an engagement score but by business metrics. In 2019, Gallup learned that organizations scoring high on their surveys had spent more resources developing their cultures and providing employees opportunities for learning. In 2021, Gallup told organizations that worker stress rose from 50 percent in 2019 to 57 percent in 2020. Due to Covid-19 illness and disruptions and return-to-work-expectations, the workforce is highly stressed. It needed more than employee engagement. Employees needed managers that looked after their well-being and to assist them with resiliency.

Other research shows that organizations that improve business performance focus on other organizational issues than employee engagement. For example, research shows that investing in learning and career development reduces turner more than classic employee engagement efforts. The old saying that employees leave managers is only valid when it is a bad company. In good companies where learning and career development are offered, employees will stay and transfer away from a bad manager to a good manager to continue their career development with the company.

Studies by MIT and Google show that the critical drivers for effective team performance are open and safe team cultures (trust), equity, empathy, clear goals and norms, and a strong sense of purpose. The top driver of all of these is trust. Teams with high trust also had less turnover. Moreover, teams who trust their managers are more at ease talking through their worries about Covid-19 and other changes.

Other studies find that innovation doesn’t occur with happy employees. Innovation comes from restless and dissatisfied employees about the status quo who are willing to drive forward to make a change in a purposeful way. Unfortunately, engaged workforces can become complacent or arrogant and no longer be self-critical and innovative. Nokia, Kodak, and Yahoo! are just a few examples.

However, too much dissatisfaction and drive can also have a disastrous effect. Academic research shows that highly engaged employees who put many hours into work can have their family lives disturbed and eventually quit. Recent research by MIT shows that many highly innovative brands with hard-charging “toxic” cultures, such as Tesla, SpaceX, and Netflix, have higher-than-average turnover during the Great Resignation. Companies with a reputation for a healthy culture, including Southwest Airlines, Johnson & Johnson, Enterprise Rent-A-Car, and LinkedIn, experienced lower-than-average turnover during the first six months of the Great Resignation.

InnovationOne® LLC’s research finds that highly innovative and successful organizations focus on improving and measuring holistic cultures — more than employee engagement. Executives can manage what they measure, and innovation and culture are measurable. Companies scoring in the top quartile of our InnovationOne Culture Index© reported higher financial performance than bottom quartile performers by as much as 22 percent. Public research labs see a three-fold improvement in lab outcomes for every one-point increase in the InnovationOne Culture Index©.

The InnovationOne Culture Index© assesses and benchmarks an organization’s culture and capability to be innovative across 12 drivers of innovation. Please see the graphic below. Two of those drivers, Employee Connectivity and Employee Empowerment, assess most of what a typical employee engagement survey measures. Employee Connectivity assesses how employees believe they are valued, treated with equity, included, respected, and allowed to learn and contribute to the organization. Employee Empowerment evaluates the level teams and employees feel safe generating ideas, improvising with innovation, acting on opportunities, and making decisions within known parameters to speed up, slow down, change course, and even cancel projects. The other ten drivers go beyond typical employee engagement surveys to assess more of the organization’s holistic culture and capability to innovate.

These ten drivers include the following:

  1. Innovation Goals / Vision. Executives enthusiastically share their vision and goals for innovation and invite employees and external partners to innovate.
  2. Strategic Model. Strategic planning is action-orientated and nimble – not overly bureaucratic.
  3. Employee Skills and Creativity. Developing employee job skills, knowledge of customer needs, collaboration behaviors, and allowing time for creativity.
  4. Organizational Learning. Sharing the customer, market, and technology trends, and internal successes and failures to allow for organizational learning.
  5. Technologies and Financial Support. Investing in the technologies, research labs, space, digitization, and employee time to support innovation.
  6. Knowledge Generation. Creating a well-known process to allow employees and external partners to generate ideas and move them forward.
  7. Knowledge Transfer. Creating a collaborative environment to build upon the ideas of others and prototype with ideas.
  8. Knowledge Decision Making. Creating a process for management to decide rapidly, based on analytics which ideas to fund for commercialization
  9. Idea Management – Trial new ideas for selected innovation projects, learn from successes and failures — and keep experimenting.
  10. Alignment – The level the enterprise’s performance management and rewards systems measures and aligns its processes to speedily advance and commercialize innovation.

The employee engagement movement is be complimented for its focus on providing employees’ work with meaning, recognition, improving manager and employee interactions, and assessing the employees’ emotional attachment to the company. However, improving employee commitment, organizational innovation and performance, and financial success requires more. It requires a holistic focus on the organization’s broader culture and capability to innovate.

About InnovationOne®, LLC.

InnovationOne®, LLC helps organizations worldwide build a culture of innovation and make it sustainable. InnovationOne® uses a scientifically developed assessment to measure, benchmark, and improve your company’s culture and capability to innovate and enjoy better outcomes and financial results. Companies scoring in the top quartile of our InnovationOne Culture Index© reported higher financial performance than bottom quartile performers by as much as 22 percent.