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Monday, June 23, 2014

Strategy: Maximize Your Current Customers

American businesses are among the best run in the world, but Fortune 1000 leaders still haven't mastered organic growth. They talk a good game about growing their customer base, but then they go back to their offices, shut their doors, and either acquire competitors or -- worse yet -- cut their prices even further. They do this because they've given up on organic growth.

This is all wrong. You don't achieve organic growth through acquisitions or price cutting. You achieve growth by creating many more fully engaged customers -- "true believers" in your business.

And you achieve the highest quality growth by getting a lot more business out of your existing customers. Here is a general rule of thumb for you and your strategy teams. Right now, you're probably doing a maximum of one-third of the business you should be doing with current customers. This means that if you're doing $2 million in sales, there's an additional $4 million in low-hanging fruit with your current customers, just waiting to be picked. Same if you're doing $20 billion in sales -- there's $40 billion of untapped business to be found in your current accounts. So why go out and acquire another company when you can more fully engage what's right in front of you?

The reason acquisitions don't ultimately produce organic growth is that money can't buy the emotional relationship that creates a fully engaged customer. You can't "acquire" true believers.

Let me put some numbers to this. Gallup research has found that customers who are fully engaged represent an average 23% premium in terms of share of wallet, profitability, revenue, and relationship growth over the average customer. Here's another one: Companies that engage both their employees and customers gain a 240% boost in performance-related business outcomes. Those companies understand the essential role of human nature in driving performance, especially those critical moments when engaged employees and engaged customers interact.

Before you go to your next strategy meeting, read our just-released State of the American Consumer report, and then ask your team, "What percent of our customer base is fully engaged right now? How many of our customers are true believers? And what, exactly, do we have to do to double those customers?" When, and if, you double your fully engaged customers -- your true believers -- you will not only boom organic growth and your stock price, you will have transformed the very character of your company.

Thursday, June 5, 2014

Employee Satisfaction Doesn’t Matter

The employee engagement movement started in the late 1990s and then went full steam ahead in 2000. Organizations everywhere began systematically measuring employee engagement. That intense interest is now evolving into deeper thinking about company culture. Top leadership teams are seriously considering what kind of culture they want and need to win more customers.

A warning to those leaders: If you’re measuring the effectiveness of your culture by your workforce’s “satisfaction,” you’re doing it all wrong.

Fortune 1000 executives often come up to me and say, “Our company culture is robust -- our employees have an 85% satisfaction rate.” Good for you. You have ruined your workplace. Ask any employee, “What will satisfy you?” and the answer is easy: free lunches, more vacation time, latte machines --- and don’t forget a ping pong table.

Problem is, measuring workers' satisfaction or happiness levels is just not enough to retain star performers and build a successful business. You think giving more vacation time is great? Try this on: Engaged employees who took less than one week off from work in a year had 25% higher overall well-being than actively disengaged associates -- even those who took six weeks or more of vacation time.

Employees don’t want to be “satisfied” as much as they want to be engaged. What they want most is a great boss who cares about their development, and a company that focuses on and develops their strengths. Trying to satisfy employees’ appetites for free lunches, lattes, and ping pong tables is giving people something they don’t deeply want -- and that isn’t natural or good for them. What you’re doing is feeding the bears.

Let me explain. While at Yellowstone National Park several years ago, I noticed the famous sign that says, “Don’t Feed the Bears.” I asked the ranger if a lot of campers were getting mauled. “No,” he shot back, and then went on to explain that the sign isn’t for the protection of the campers -- but for the protection of the bears. Because once the bears taste a peanut butter and jelly sandwich, they quit digging for roots and catching deer. A kind gesture by a camper ruins the natural instincts and therefore the lives of these cool bears.

Most companies still feed their bears. And if you feed them well enough, national business magazines will even give you an award for it. Your bear-feeding culture will be recognized and celebrated worldwide.

But what is the right culture? More importantly: What is a winning culture?

A winning culture is one of engagement and individual contribution to an important mission and purpose. Human beings are not looking for company-bought goodies -- they are looking for meaningful, fulfilling work. It is the new great global dream -- to have a good job, not a free lunch. The dream is to have a job in which you work for a great manager; where you constantly develop; and where you can use your God-given strengths every single day.

Companies with winning cultures feed their employees’ deep-down need to develop and grow. They don’t feed the bears.

Wednesday, April 30, 2014

Nothing Fixes a Bad Manager

Companies seem to try everything imaginable to fix their workplaces, except the only thing that matters: Naming the right person manager.

Leaders go to seminars, hire consultants, and employ a long list of interventions -- competencies, 360s, and so forth. I don’t think any of them work. What’s worse, nobody really cares that they don’t work.

Most CEOs I know honestly don’t care about employees or take an interest in human resources. Sure, they know who their stars are -- but it ends there. Since the people in the corner offices don’t care, they never put much pressure on their HR departments to get their workplace cultures right, and this allows HR to implement all kinds of development and succession strategies that don’t work. 

The results of this indifference and ineffectiveness have become significant. Gallup reported in two large-scale studies that only 30% of U.S. employees are engaged at work, and a staggeringly low 13% worldwide are engaged. Worse, over the past 12 years, these low numbers have barely budged, meaning that the vast majority of employees worldwide are failing to develop and contribute at work.

Why is that? Gallup estimates that managers account for 70% of variance in employee engagement scores across business units. When managers have real management talent, workgroups develop and win customers. When managers don’t have that talent, human development freezes and workgroups fail.

Now, here’s a truly frightening number Gallup has uncovered: Companies fail to choose the candidate with the right talent for the job 82% of the time. Those companies are wasting time and resources attempting to train bad managers to be who they're not. Nothing fixes the wrong pick.

There’s a reason for this -- authentic management talent is very rare. Gallup research shows that just one in 10 have the natural, God-given talent to manage. Those gifted people know how to motivate every individual on their team; boldly review performance; build relationships; overcome adversity; and make decisions based on productivity, not politics. A manager with no real talent for the job will deal with workplace problems through manipulation and unhelpful office politics, because they lack the inner personal courage required to manage teams effectively.

Gallup also found that another two in 10 people have some characteristics of basic managerial talent and can function at a high level if their company coaches and supports them.

The fact is, rare management talent exists in your company right now -- it’s hiding in plain sight. Companies that use predictive testing analytics to find that talent will have the biggest advantage in the global war for the best customers.

Tuesday, March 18, 2014

Gallup: The Truth About Telecommuting

I just read this sentence in a New York Times article on telecommuting: “We know that those who work at home tend to put in longer hours and are often more productive.”

What? Is that the writer’s scientific conclusion? To me, it looks more like a note someone sends to his boss on why he isn’t coming in again today.

A lot of what I read about telecommuting assumes that it’s a good thing and that businesses should allow for more of it. The Times piece cites a survey by the Society for Human Resource Management that “found a greater increase in the number of companies planning to offer telecommuting in 2014 than those offering just about any other new benefit.”

We all hear lots of great anecdotes about productive people working at home in their pajamas or increasing their company’s performance over a latte at the local Starbucks. What’s missing here are data. So I asked Gallup’s best workplace scientists what they could find on telecommuting in our U.S. employee engagement database, which is the largest of its kind. The resulting discoveries offer a mixed picture at best.

On the plus side, people who work remotely less than 20% of the time are the most likely to be engaged of all employees: 35% of those employees are engaged, compared with an average 30% engagement in the overall U.S. workforce.

But active disengagement rises as employees spend more time off-site. Among people who work remotely 20% to 50% of the time, 18% are actively disengaged. That number increases to 22% actively disengaged for employees who work remotely 51% to 99% of the time. And here’s a killer finding: People who spend all of their time working remotely are nearly twice as likely to be actively disengaged (23%) compared with those who telecommute less than 20% of the time (12% actively disengaged).

Pretty simple math here: Working remotely less than 20% of the time is very good for engagement, but doing so 100% of the time is very bad. That’s because actively disengaged employees aren’t just miserable, but they spread their misery among their colleagues. Remote employees may infect their colleagues via email and phone calls, rather than by roaming the halls, but don’t kid yourself: They’re still doing damage to your company.

Yet people who work away from the office less than 20% of the time are, by far, the least likely to be actively disengaged -- 12% vs. 18% for the U.S. workforce as a whole. Why is that?

My hunch is that people who can choose to work at home some of the time enjoy a culture of great workplace freedom -- one where productivity trumps punching a clock. But my other hunch is that, while people love the freedom, they also draw immeasurable energy and inspiration from human interactions in the workplace. They feed off of being around their colleagues. And while working at home has many positives, the downside is isolation -- no friends and no fun.

To many of us, sitting at our desks in our pajamas, going out for an extra-long workout, and then grabbing a really good coffee and logging on at Starbucks sounds like a pretty good work schedule. But when it comes to telecommuting, it’s possible to have too much of a good thing.

Tuesday, March 11, 2014

Washington: Deaf to the Will of the People

The founder of our company, Dr. George Gallup (1901-1984), was once named one of the top 100 most influential people in American history by The Atlantic magazine. The publication included him among George Washington, Thomas Jefferson, Abraham Lincoln, and many other luminaries. He made the list because he’s the pioneer of a critical part of democracy, modern public opinion polling.

Dr. Gallup had a simple mission: “If democracy is supposed to be based on the will of the people, someone should find out what that will is.”

His concern was this: If there isn’t a systematic way to gauge the biggest problems facing the American people, then we run the risk of having leaders on the wrong page, making the wrong assumptions, creating the wrong policies, and thus making the country worse off. Dr. Gallup understood that if what the American people want is different from what their leaders want, this could ruin our democracy, our country, and subsequently global human development.

His concern is as relevant today as it’s ever been. All we seem to hear from Washington leadership right now are debates over immigration, the minimum wage, the environment, and healthcare. That’s where our leaders are spending their precious time and energy. Yet we’re hearing nothing about strategies for creating badly needed new, good jobs -- which is exactly what the American people are most worried about.

Americans recently told Gallup that unemployment/jobs and the economy in general are the most important problems facing the country (43% of respondents combined). Healthcare -- which we seem to hear about all the time -- came in at 15%. Immigration, another issue that seems to consume the president and Congress, was way down on the list -- only 6% in the U.S. cited it as the country’s top problem. In an earlier poll, relatively few Americans mentioned raising minimum wage as the best way to fix the U.S. economy, and the environment didn’t even make the list.

We are exactly where Dr. Gallup feared we’d be. There’s a sprawling and alarming gap between the will of the people and the focus of their leadership. The will of the American people is to have a good job. I guess our leaders don’t know that.

Right now, 75% of Americans are dissatisfied with the way things are going in the country. Is anyone surprised?

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