There is a lot of lip service paid to employees being an organisation's greatest asset, but the reality is rather different

'People are our greatest asset'.

Put it in to Google, with New Zealand as the specific country, and the range of companies that appear with the strap line is remarkable. From accounting firms through science to media and volunteer organisations. The employees of some of the companies might, however, give the Tui billboard response… Yeah, right.

Staff engagement in New Zealand continues to be low, yet almost three-quarters of employers wanting to improve productivity over the next five years know that improving engagement and collaboration is key. The Randstad World of Work Report 2013/2014 states that 46% of employees surveyed received a pay increase in the last 12 months and salary expectations are optimistic for the year ahead. This confidence means 51% of New Zealand employees intend to leave their job in the next 12 months, in comparison with only 36% planning to make a move in Australia.

The problem is that 40% of employees in New Zealand feel either neutral or dissatisfied about their current job. Randstad reports that this is largely because they are being asked to do more with less (25%) or have a difficult boss (24%). Over a third of employees say the biggest motivator to perform well and remain in their role is a strong feeling of being valued and recognised. Randstad states that New Zealanders are signalling the need for employers to invest in their future: 63% of New Zealanders will leave their current organisation due to a lack of career growth and advancement. In comparison, 45% will leave due to uncompetitive salary/benefits and 26% will move because of a lack of feedback, recognition or appreciation. These latter aspects are fundamental to performance and are about dignity and respect. They are about acknowledging that employees know their job and take pride in their results. They are about trust and autonomy, in combination with interaction. It is a fine balance and New Zealand appears to be getting it wrong.

In December last year Gallup reported that only 23% of New Zealander workers were engaged. The headline was ‘Low worker engagement holds NZ back: study’. Gallup estimated that actively disengaged workers cost the New Zealand economy $7.5 billion a year. Although there is debate on whether leadership, management or corporate is responsible, research has the answer. Employee engagement is the responsibility of line managers. Bain & Company released a document last year asking ‘Who’s responsible for employee engagement?’ The report points out that it is difficult for employees to be truly engaged if they are not fans of their boss: 87% of employees who promoted their company also rated their direct supervisor highly.

Good behaviour starts at the top: Bain & Co. suggest that senior executives must ensure that team enjoyment is a high priority by not themselves prescribing solutions, but enabling supervisors to take responsibility for determining the right course of action. This will increase their own sense of autonomy, and an engaged and empowered supervisor has a direct influence on the engagement of the team. A Gallup Business Journal article following the 2012 employment engagement meta-analysis supports empowerment. Focusing on engagement at the local and organisational levels means top down and bottom up. The most benefit from engagement initiatives appeared to occur ‘when leaders weave employee engagement into performance expectations for managers and enable them to execute on those expectations’.

Selecting the right managers is therefore crucial, and those managers must understand that their success and that of the organisation relies on the achievements of the employees. Gallup suggests that managers should be coached and held accountable for engagement – which is part of the fine balance required in management. Accountability must be realistic and goals must be translatable to employee day-to-day experience.

A Harvard Business Review report on ‘The Impact of Employee Engagement on Performance’ indicates that the most ‘impactful employee engagement drivers’ are about employees being rewarded for high performance and knowing how their work aligns with strategy – that is, how their performance makes a difference to the company. In September 2013, ‘The Impact of Employee Engagement on Performance’, Harvard Business Review Analytical Services revealed that the most ‘impactful employee engagement drivers’ are recognition for high performers (72%), individuals having a clear understanding of how their job contributes to strategy (70%), senior leaders continually updating and communicating strategy (70%), business goals communicated company-wide and understood (69%), individual staff goals aligned with corporate goals (67%), assessment and performance reviews aligned with corporate goals (64%), some or all staff pay linked to corporate goal achievement (54%), training and development organised around corporate goals (52%).

These drivers apply right through any organisation. The problem for New Zealand is the proliferation of managers that are not adding to the ability of the company to perform. Lincoln University’s crisis has been highlighted in the press by Professor Keith Woodford. “First more management positions were added. Then, new marketing and business development positions were created. The marketing spend is now at least $6 million of direct costs, but ancillary marketing costs would take the overall cost higher. The University’s Research Office has also expanded and continues to do so. These overhead costs have to be met from somewhere.” The areas of expansion are not the ones that can do the teaching and research that Lincoln’s students require.

The true cost of hiring a manager has been indicated by Michael Mankins, a Bain & Co partner: when you hire a manager, that manager typically generates enough work to keep somebody else busy as well: 2 FTEs for one position. Senior executives are even more costly at 4.2 FTEs per hire, including the executive’s own time. The support staff or business developers are not doing the actual business of the company where revenue is generated – they are managing the performance of the people who are the revenue generators.

The Crown Research Institutes (CRIs) are also suffering from managerialism. At Agresearch, for instance, all groups have been asked to identify staff for reduction as 'staff are the biggest cost'. Ironically 10 new managers, not counting the consultant company in Christchurch, have been employed to oversee the Future Foot Printing exercise which is all about relocation rather than science. Professor Susanne Rasmussen, who resigned from Agresearch early this year, gave the keynote talk at the Association of Women in Science conference held in Wellington in the second week of July. She explained that the CRI model has a top-down approach where science is prescribed by managers who are often not qualified in the area required to know what research should be done. “The highest science grade has less authority than the bottom managerial grade,” said Professor Rasmussen. “This leads to lack of respect for scientists and reduced recognition of scientific delivery.”

The overall problem is that managerial opinion outweighs expert judgement. Leaders must be enabled to understand that they are responsible for creating the organisation’s culture and the culture they create is reflected both in the attitude and engagement levels of the people that actually do the work. However a Right Management Survey reported last year that the leadership skills required to create and lead an employee and customer centric culture are missing. The report also commented that senior industry leaders think they are doing a very good job, which results in high levels of complacency and a readiness to blame others.

If Bain & Company is right in its conclusion – and line managers are the key – then everybody has a role to play in improvement, because each boss can make a change. The Harvard Business Review eight drivers can be put into play at various levels and mandated by the Board through leaders and managers. Although change is a challenge, this challenge is also the opportunity to add $7.5 billion dollars to the New Zealand economy, just through treating people as professionals and hence as assets.