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1
New York Human ResourcePlanning Society

• The Financial Case for
• Making a Commitment to Employees
• Judith M. Bardwick, Ph.D.
• Wednesday, October 26, 2005
• The Sony Corporation
• 550 Madison Avenue at 55th Street New York

2
American Workers Not Happy With Jobs

• Yahoo survey reveals that 47 of US workers are
  ready to jump ship at next opportunity or plan to
  change jobs within 12 months.
• In another study 52 of workers are interested in
  leaving their jobs, 75 of those within 12
  months.
• 34 of those workers would not recommend their
  employer to others
• 45 cited a lack of potential for career growth
• 36 were in search of a better benefits package.

3
Take care of your workers now or youll lose them

• Employees are bound only as long as employers
  provide them skills and training to improve their
  job situations
• Survey of 3,350 workers shows that 2/3 are
  disenchanted with their job situation and ready
  to leave
• 31 of workers feel trapped, unable to leave
  because they dont feel they can find replacement
  jobs

4
2003 Towers Perrin Study

• Disgruntled employees either quit and leave or
  they quit and stay.
• The more positively employees felt over 5 years,
  the higher the companies profits and the greater
  the share price.

5

• SAS Institute is a software company
• The industry turnover average is 20 percent
• SASs turnover in 2003 was 3 percent.
• That saved SAS 60-80 million.
• Low turnover is also key to their 98 percent
  customer retention rate.

6
Employee retention is key driver of customer
retention

• MBNAs credit card business showed that a 5
  increase in customer retention translates into a
  125 increase in per-customer profits.
• A 7 decrease in employee turnover led to
  increases of more than 27,000 sales per employee
  and almost 4,000 in profits per employee in
  another study

7
If you invested the same amount of money from
1998 through 2002 in

• The SP 500,
• The Russell 3000, and
• The 100 Best Companies
• You would have had an annual return of
• -0.71 for the SP 500
• -0.56 for the Russell 3000
• 9.86 for the 100 Best.

8
Training Development

• Top corporate spenders on training and
  development earned 16.2 in 1996 2001
• That was 6.5 more than the Wilshire 5000

9
Counter to Wall Streets view -- Higher Wages
mean Higher Profits

• Costcos high-wage strategy beats Wal-Mart

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But Gets More Out of Its Workers
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Commitment and Engagement

• A level of passion and reciprocity
• Not morale and satisfaction

12
COMMITMENT

• This organization is an important part of my
  life.
• What do you do?
• Im with
• IBM
• HP
• U of Michigan
• Instead of
• Im a software engineer.
• Im in finance.
• Im a professor.

13
ENGAGEMENT

• Im in! What we do matters! Lets go!

14
Employee commitment is associated with job
performance

• Employees who are committed to an organization
  work harder and are more productive in their jobs
  than employees with weak commitment, as measured
  by
• - sales figures,
• - control of operational costs,
• - supervisors ratings of work performance

15
Company profits tied to employee commitment

• Nationwide survey of 7,500 employees found
  employers whose workers had low commitment had a
  36 lower three-year total return to shareholders
  than did companies with high employee commitment

16
Relationship of ECI and Shareholder Value
(Employee Commitment Index)

• 3-Year Total Return to Shareholders (TRS)
• Low Employee Commitment 76
• Average Employee Commitment 90
• High Employee Commitment 112

17
High commitment and engagement - lead to

• High employee retention which leads to
• High customer satisfaction which leads to
• High customer retention which leads to high
  profits and share price.

18
Getting Commitment and Engagement requires Yes!,
to each of these questions

• Do you need me?
• Respect me?
• Recognize me?
• Trust me?
• Invest in me?
• Reward me?
• Support me?
• Expect more from me?

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What Should Organizations Do?

• Create significant relationships between bosses
  and subordinates
• Customize outcomes and working conditions
• Achieve a Best Fit

20
A Bosss Performance is Directly Tied to Retention

• Only 11 of workers who rated their bosss
  performance excellent said they were likely to
  look for a new job in the next year, but
• 40 of those who rated their bosss performance
  poor said they were likely to jump ship.

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Key Drivers of Employee Commitment( Impact of
Each Factor)

• Trust in Senior Leadership 14
• Chance to Use Skills on Job 14
• Competitiveness of Rewards 11
• Job Security 11
• Quality of Co. Products/Services 10
• Absence of Work-Related Stress 7
• Honesty Integrity of Companys
• Business Conduct 7
• All Other Factors 26

22
Gaining Employee Trust Relies on Seven Key Factors

• Explaining reasons behind major decisions 10
• Gaining Support for the business direction 10
• Motivating Workforce to high performance 10
• Promoting the most qualified employees 10
• Acting on employee suggestions 9
• Providing job security 9
• Encouraging employee involvement 8
• All other factors 34

23
People want to

• Keep learning.
• Achieve reasonable security.
• Be successful.
• Have both their work and their family flourish.
• Like and respect their colleagues and bosses.
• Find meaning in their life and their work.

24
This organization is

• (Score 1 3) 1 Not very 2 Pretty much 3
  Very much so
• Characteristic Score
• Today In 2 years
• Calm and deliberate
• Fast and decisive
• Very high risk
• Low to medium risk
• Entrepreneurial
• Slow. People wait for orders. Polite
• Polite and not forthcoming

25
This organization is (Cont.)

• (Score 1 3) 1 Not very 2 Pretty much 3
  Very much so
• Characteristic Score
• Today In 2 years
• Characterized by forthright challenges
• Filled with an intense hum
• Filled with people who think like employees
• Dominated by seniority
• One where only results count
• Filled with high risk/high return excitement
• People are expected to be super-heroes

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This organization is (Cont.)

• (Score 1 3) 1 Not very 2 Pretty much 3
  Very much so
• Characteristic Score
• Today In 2 years
• Exceeding personal expectations is vital
• Achieving success is immensely important
• One in which people dont play together
• One where fun with colleagues is valued
• Individualism is a core value
• One where everyone is treated same
• One where loyalty is expected

27
This organization is (Cont.)

• (Score 1 3) 1 Not very 2 Pretty much 3
  Very much so
• Characteristic Score
• Today In 2 years
• Quiet, comfortable and few surprises
• Focused on business outcomes
• Dominated by staff and professionals
• Internally competitive
• Characterized by collegial relationships
• One in which results outweigh status
• Assumes work comes first
• Input welcomed from empl w/ideas knowledge
• Expects to hear the truth

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This organization is (Cont.)

• (Score 1 3) 1 Not very 2 Pretty much 3
  Very much so
• Characteristic Score
• Today In 2 years
• One in which status outweighs results
• One in which people tolerate boring work
• Learning and challenge are ongoing
• Exceeding personal expectations is vital
• Achieving success is immensely important
• One in which people dont play together
• Is changing rapidly in basic ways
• Wants empl to feel part of the family

29
This organization is (Cont.)

• (Score 1 3) 1 Not very 2 Pretty much 3
  Very much so
• Characteristic Score
• Today In 2 years
• One where having fun with colleagues is valued
• One where individualism is a core value
• One where people expect everyone to be
• treated the same regardless of contribution

30
I Want

• (Score 1 3) 1 Not very 2 Pretty much 3
  Very much so
• Characteristic Score
• My work assignments customized
• More flexible work arrangements
• Reasonable work hours
• Choice about benefits
• Choice about forms of compensation
• Opportunities to work on my ideas
• Options and a chance to get rich
• More autonomy
• Opportunities to make decisions and lead
• Clear distinction between work/personal time

31
I Want (Cont.)

• (Score 1 3) 1 Not very 2 Pretty much 3
  Very much so
• Characteristic Score
• Work to be an exciting place
• Very clear goals and deadlines
• Training/education
• Predictability and some job security
• The latest tools
• To work with the smartest people
• Fun colleagues
• To do important, cutting-edge work
• Opportunities to initiate
• Freedom to innovate
• An org. whose values fit with mine