The CEO of Utopia – Why High Employee Engagement Doesn’t Equal Better Performance

Alex KaarFeatured The CEO of Utopia – Why High Employee Engagement Doesn’t Equal Better Performance

The CEO of Utopia – Why High Employee Engagement Doesn’t Equal Better Performance

Let me tell you a story about a CEO of a booming tech company named John. John is one of the most likeable guys you’d ever meet. He’s friendly, approachable and inspirational. John walks the hallways daily and he knows everybody’s name and when he asks a question, people get the sense that he’s genuinely interested in their answer. When he talks to you, it’s like the sun is shining on you. He’s great at giving speeches about how great work can be, how supportive the environment is and how the company bends over backwards to give employees every incentive possible to stay and absolutely no reason to leave.


Everybody loves John. It’s hard not to.


The staff know how lucky they are and they promote the business to their friends as an amazing place to work. They recruit their mates in droves, which creates little “clicks” here and there, however everyone is part of one huge friendship group anyway. Swarms of happy people buzz in and out of the office and they celebrate every time they win another award for their highly revered culture. They measure employee engagement every year and their scores are always incredibly high. In fact, they are so good, they only move one or two points up every year, because…well, the scale only extends so far.


The business is performing okay, not great exactly, but it’s going backwards at such a slow rate that nobody really worries too much. After all, the company is still making a healthy profit and it’s still the market leader. You can’t be better than number one, right? They posted a $400 million profit last year and $395 million this year. No biggie. Everyone still gets a nice dividend. If you go back five years and calculate the losses it’s a larger short fall ($18 million to be exact) and a little more analysis demonstrates that the losses are gathering pace and expenses are growing as well, but nobody is looking at that right now. Other than one or two nagging voices of descent in the shareholder group – shareholders who ask for clarification regarding the innovation pipeline, or why it’s taking so long to get a new product out – everyone seems happy with their returns and the canaries in the coal mine are quickly snuffed out.


John gives a great speech. His presentation is whimsical and inspirational and the future sounds bright. Whatever bump in the road they’ve hit is just that, a bump. It’s hard not to believe him, even if the actual content of his speech leaves something to be desired. It it’s full of motherhood statements about “creating a better world” and lacks specificity, however people don’t speak up because they don’t want to appear negative or too stupid to understand the vision. He exudes confidence and assures everyone that he’s got the “best people around him” – his reliable cohort that have followed him to his last three organisations. Sure, his “best people” are getting on a bit and they weren’t exactly knocking it out of the park in their previous roles, but back in the day they achieved something truly great (the launch of something, that everyone just assumes was successful because they’d heard of it and it still exists today) and they’ve been living off that fame ever since. John views them with nostalgic wonder and pumps up their tyres at every opportunity. So much so that everyone just accepts that they are “great”. What are the chances? To have run into the best people in the business 25 years ago and find they are still the best people in the business today. Lucky John.


John’s people love him and if he was to go, his people would likely go with him. We can’t risk that. No. We’ve been told (by John) that they are the “best in the business”. We need “John’s people”.


But finally, John’s long reign comes to an end. He resigns, amicably of course, and receives a well-deserved golden handshake. Everyone is devastated and people are literally crying in the hallway. There’s a period of mourning, the pain of which is exacerbated by rumors of a vicious new CEO who may soon arrive to destroy the Garden of Eden.


As feared, a new CEO is appointed, and her reputation proceeds her. Jane has been instructed/guided/warned from the outset by the board not to “rock the boat, if you can help it” because if she were to, in any way, erode the incredible culture that John has built, then the whole place would fall into chaos and despair.


Jane has heard that it’s a great place to work and frankly, after dealing with a series of shit shows in per past two organisations, she’s looking forward to chugging at a more relaxed pace where there are fewer broken parts and broken people for her to repair. In fact, it’s why she took the job. She’s happy to shake the reputation of “resident ball buster”, a term she used to wear as a badge of honour, but now makes her recoil.


Jane wants to make a good impression and set the tone early, so she arrives an hour early on her first day. As she hasn’t been issued a pass yet, the cleaner lets her in. His surprised expression gives her an unsettling feeling. She learns that not only is she the only person there, but that she’s the only person to have turned up at that time… ever.


Jane watches the clock as she walks the floor, searching for signs of life. 8:30am, 9am… nothing. Then at 9:20, an ambling, giggling group of staff start to trickle in. She greets them with a smile as they cautiously shake her hand and make small talk, welcoming her. “Oh… I forgot today was your first day”, someone says nonchalantly. The rest of the team eventually make it to the office by 10:30 and she watches as the stragglers spend another half an hour making coffee and toast.


By the end of the day, Jane’s tempted to send an email asking everyone to join her for a 9am stand up the following day, but she second guesses herself and decides against it. After all, the employee engagement scores are off the charts and she doesn’t want to be the ogre who destroyed the incredible culture they’ve built.


Day two is more telling. Several large product releases are due and Jane is excited to see their progress. She’s energised by the fact that in her first quarter, she’s going to be able to take three new products to market. They sit around a large table – 25 of them or so. The top brass and all the product heads. She recalls one of them from the day before, she even knows what he likes on his toast. Their expressions are unnervingly solemn, and she braces herself for the bad news she knows is coming. They start with an apology, and there it is. Yes… they are going to miss the deadline. She’s furious.


Everyone leaves, but Jane insists that the top brass, “John’s people”, stay behind. She asks them candidly… How did this happen? The silence is deafening. Their eyes dart around and they all dig deep into their bag of excuses. Jane stops them in their tracks. She sees exactly what’s happening.


John’s high scores around employee engagement were a direct result of him allowing his people to run at a pace that suited them, not the business. Bad habits had formed, but they were merely a symptom of a much bigger issue. They’d built a false Utopia. They’d become slow, lazy and the complete antithesis of everything that made them successful in the first place. They’d confused “Being a great place to work” with “Being a fun place to work”.


I doubt many professional sports teams would call their places of work “fun”. Hard, demanding, challenging? Sure. But fun? Probably not. Elite performance comes from challenging yourself, as an individual and as a team. Your measure of success? There’s only one. Winning.


Employee Engagement Surveys


Employee engagement surveys, on the surface, make complete sense. They are detailed, the questions seem straight forward and even though most of us without a mathematics degree don’t quite understand how they land on the magic number, they do, for the most part, seem logical. Please, don’t think I’m suggesting they are not worthwhile. As imperfect as they are, they are still a potentially valuable tool, if used correctly.


Employee engagement surveys must be viewed objectively. If the number is low, that’s a problem. If the number is high… that can also be a problem! Unfortunately, despite the best efforts of many HR leaders, most employee engagement surveys are “taken with a grain of salt” (yes, I’ve heard that one many times), or ignored altogether, making the exercise no more than lip service.


There are so many factors that can influence how a person fills out a survey. Some people just tell you what they think you want to hear. Some people are afraid that “anonymous” responses aren’t so anonymous. Others are so disgruntled they’ll mark you harder than they probably should just to make you look bad. Others think the exercise is futile and will just whizz through it with little-to-no thought given. What you are left with is some pretty useless data.


Employee engagement scores weight the preferences and responses of a high performer exactly the same as a low performer. One “vote” equals one “vote”, so to speak. Do you want the future of your business to be influenced by the people you are trying to exit, or the people you are trying to keep? If you have a company of 100 employees and 20 of them are top performers – all of whom say the culture is rubbish, but the low performing 80% say it’s great, then you’ve created a Utopia for underperformers to thrive and multiply.


What Makes a Truly “Great” workplace?


A Winning Culture – There’s nothing more invigorating than winning. It’s addictive and it motivates people to do extraordinary things. Winning customers is the lifeblood of a business. Talk about customers more and your staff less. Focus outward, rather than inward. Too many organisations spend too much time focussing on their people, they completely forget about their customers.


High Performers – High performers are like magnets. They attract other high performers and repel underperformers. They set a high benchmark their colleagues must rise to meet. High performers don’t last long in average environments, so spend more time reviewing and engaging with them. Ask them what they need, what they like, who they like working with. Don’t survey them, just sit down with them. There is no better activity you can do to improve the performance of your business than to understand what makes your high performers tick.


A Sense of Purpose – Your team must not only understand your strategy, they must also believe in it (and in you, for that matter). Don’t wait until your annual survey. Ask them regularly. Your team will remain engaged, motivated and loyal if they believe the business is truly committed to its customers. People feel a sense of loyalty to other people, not businesses or brands. Your employees won’t stay purely because you’ve developed a good strategy, have a strong brand or offer superficial perks.


Belonging – Acceptance is a basic human need. Even the most stoic people need to feel like they belong. We’ve come a long way to overcome racial, gender and sexual orientation-based discrimination, but don’t forget about the middle aged, straight, white guy either. There’s a lot of them (they account for at least 30-40% of your workforce), and many are talented and driven people. They feel overlooked and while many of them understand the need to correct the imbalance, they feel like they’ve lost their voice. “Oh, boo-hoo” you say? Do so at your detriment. They are the easiest people to poach right now.


Rewards and Value – Lock your high performers in with short and long-term incentives tied to individual performance. Do everything you can to ring fence them. They are the single best investment you can make. There isn’t a universal solution regarding team or individual-based bonus systems. We need to accept that we operate in a capitalist system and there will, and always should, be different bonus structures and reward systems based on individual or team performances and on the nature of the role. A team approach can work successfully when the team members are truly interdependent on each other. Product teams work well under this system. Sales teams do not.


Where this approach goes seriously awry is when an organisation takes a capitalist approach for its top brass and a communist approach for everyone else. For example, if your CEO gets a golden handshake, worth more than a year’s salary, but your lowest employee gets a statutory minimum, that is the kind of fundamental delusion and double standard that will eventually chip away at a company’s employee engagement. Your people need to feel valued and you’ll need to reward their performance according to their currency. You need to tap into what that is.


Entrepreneurial Pursuit – Top performing employees will want to progress to the highest levels of an organisation (that usually means CEO), but those opportunities may not exist in your business right now. Create them. You need to have a system in place for top performing employees to pitch and run their own business units. New businesses that will be incorporated into your current structure. Allow them to create a business within the business – Get them to invest their time (and ideally) some of their own money into it. Get some skin in the game. Gear it so that they have a strong incentive to make it work. Allow them to fail. If they do fail, give them a chance to turn it around. If they can’t, then they are not cut out for entrepreneurial life and you’ve proven that to them. Offer them their old job back. It will cost the business, but the gains will outweigh the losses.


There was a time when the employer was king and people were made to feel lucky to have a job, but over the past 50 years, as the economy has experienced growth levels unprecedented in human history, the tables have turned and it’s the employee who now holds the cards. An abundance of opportunity has created an environment where fast moving, successful businesses with lots of momentum slowly slip into a coma without even realising it. They continue to maintain profitability… for a while anyway. Maintaining pace, agility and the ability to objectively look at the data that matters and weed out the “noise, gets harder and harder. But hard as it may be, it must be done. We must focus less on “likeability” and “engagement” and more on performance, output, reward and innovation.


Author note – I haven’t quoted other people’s opinions or studies. I don’t believe in promoting a study that “supports” my theory in order to validate my thinking. If you search for it, I guarantee you’ll find another study that contradicts my opinion. I also don’t believe in rehashing opinions which I believe to be wrong. Just because a “study” has been conducted, it doesn’t make the findings gospel. My evidence is entirely anecdotal, and the opinions are my own, based on over 20 years’ interviewing executives and hearing firsthand their experiences in the workplace. The story of John and Jane is not based on one workplace or one person. It’s an aggregate of several stories, told to me several different ways. 

Chris Hughes

Chris joined Alex Kaar in 2012 and leads the national Marketing, Communications, Sales, Customer Experience and Digital practices for Alex Kaar.

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