Naturally Innovative

“But if you will it, it is not fantasy” – Theodor Herzl

Recently, virtually every organization that I speak with has put innovation front and center as a necessary, in fact imperative characteristic of their organizational cultures. The thinking is clear. In order to thrive in turbulent environments organizations must innovate, must examine the way they do business, update their products and services, and must differentiate themselves in order to outperform the competition. Competition, environmental stress and the need to survive as an organization spur on innovation.

Innovation is often described as coming in bursts, but much more common is the rolling-up-the-sleeves, hard work, incremental innovation, building on other’s breakthroughs, often in a collaborative fashion, that over the long run can radically change the way things work and the products that an organization offers.

It could easily be argued that innovation occurs naturally among all of the earth’s creatures. Species innovate constantly and naturally in the never ending battle to survive. One species of cuckoo finch has eggs that mimic the coloration of another species so that when the finch deposits their eggs into the other species’ nest, the hatched baby birds are raised by the tricked surrogate parents. As a defense the second species, the tawny-flanked prinias evolved more colorful eggs that looked different form the finch’s eggs but the finches responded by evolving and again mimicking the more colorful eggs. Evolution is innovative.

The mitochondria that inhabit our cells and produce the energy which powers cells originated externally from the cells they now inhabit. They have their own DNA and can reproduce only from their own DNA, indicating that they were a separate life form somewhat like bacteria. Prior to their role in our cells they existed independently. Mitochondria entered into a symbiotic relationship with cells and then that combined organism evolved into the variety of cells that make up human beings. Today we would not be able to survive without these creatures living within our cells and the mitochondria would not exist without us. Evolutionary innovation is often collaborative.

Beyond evolving on a biological front, humans evolve and innovate their behaviors constantly if not quickly, with our ancestors developing new forms of stone tools over millennia, fire being tamed, the taking up of living in shelters of one sort or another, and placing metal strips on the teeth of our children to improve function and appearance.

Many of the inventions that propelled our civilization and were described as deriving from “ah-ha” moments were nothing of the sort. Rather the innovative breakthrough came from groundwork that laid the foundation and was then built upon. Basic innovations often sit dormant until additional development work and insights are gained allowing the innovation to be applied in day-to-day life.

Take Edison’s light bulb for instance. It is often credited to Edison as a singular event. And in fact Edison played a very important role in the light bulb, but without the innovations of those who came both before and after him the light bulb would not have become as wide spread as it has. Here is a chronology of the major milestones.

• The first electric light was made in 1800 by Humphry Davy. When he connected wires to his newly invented battery and a piece of carbon, the carbon glowed, producing light.
• Much later, in 1860, physicist Sir Joseph Wilson Swan was determined to devise a practical, long-lasting electric light. He found that a carbon paper filament worked well, but burned up quickly. In 1878, he demonstrated his new electric lamps in Newcastle, England.
• In 1877, Charles Francis Brush manufactured some carbon arcs to light a public square in Cleveland, Ohio, USA. These arcs were used on a few streets, in a few large office buildings, and even some stores. Electric lights were only used by a few people.
• Thomas Alva Edison experimented with thousands of different filaments to find just the right materials to glow well and be long-lasting. In 1879, Edison discovered that a carbon filament in an oxygen-free bulb glowed but did not burn up for 40 hours. Edison eventually produced a bulb that could glow for over 1500 hours.
• Lewis Howard Latimer improved the bulb by inventing a carbon filament (patented in 1881); Latimer was a member of Edison’s research team, which was called “Edison’s Pioneers.” In 1882, Latimer developed and patented a method of manufacturing his carbon filaments.
• In 1903, Willis R. Whitney invented a treatment for the filament so that it wouldn’t darken the inside of the bulb as it glowed.
• In 1910, William David Coolidge (1873-1975) invented a tungsten filament which lasted even longer than the older filaments. The incandescent bulb revolutionized the world. (Enchanted Learning).

Rather than being the exception the “evolution” of the light bulb is very often how innovation occurs with multiple people contributing, often working collaboratively over a period of time.

There are multiple methods available for measuring the existence of innovation in organizations. You could count the number of patents issued to the organization, or the age of each of its product’s since design, the amount of time that employees spend on innovation, the R&D budget, the headcount assigned to “innovation”, or the perceptions of the customers towards the organization’s products and services as being innovative. One method for measuring the degree of innovation in organizations is through the perceptions of the employees.

Employee surveys will often ask about the “emphasis” on innovation within the organization, but I prefer asking about whether innovation is actually occurring. Critical when measuring innovation through employee surveys is to ask about:
• the generation of innovative ideas;
• the ability to test out those ideas from a funding and other resources standpoint;
• the ability to evaluate innovations to see which one’s should be implemented organization-wide and which ones rejected.

Examining or asking about the reward system is also often very informative as an organization may truly desire to be innovative, but is actually rewarding its employees for playing it safe and not trying new things rather than the innovative efforts desired.

Slack and redundancy are two concepts that are also critical to be in place for an organization to successfully innovate. If an organization is being run in such a tight fashion with no slack so that it can’t try new things, because all resources are dedicated to getting the work done the traditional way, the ability to be innovative does not exist. And likewise if the organization does not have the ability to experiment with new methods, while another redundant process is performing in a traditional fashion, the evaluation of innovative ideas and processes will be very difficult to objectively assess.

Organizational innovation is critical and creating organizational cultures that support innovation rather than suppress it is within reach for all organizations.

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© 2012 by Jeffrey M. Saltzman. All rights reserved.
Visit http://www.orgvitality.com

Healthy, Safe, Prosperous and Unhappy

In the August 23/30^th issue, Newsweek magazine printed its first ever list of the world’s best countries in which to live. They reviewed 100 countries and you can see the complete listing here. Their definition of best was “which country would provide you the very best opportunity to live a healthy, safe, reasonably prosperous, and upwardly mobile life.” Knowing the dangerous waters in which they were treading they clearly state that “people practically anywhere in the world will find something to love – and something to hate” about the listing.

The listing reminded me of a study that I did in 2006, examining the responses to employee surveys across 52 countries, 49 of which were on the Newsweek list. The number of survey item responses I examined was approximately 29 million. I decided to revisit the data and looked up the press release which was put out about the study, which you can see here.

First, a brief description of the two lists. The Newsweek list rated each country on education, health, quality of life, economic competitiveness, and political environment, combining those categories into an overall score on a scale of 1 to 100, ranging from Finland with an overall score of 89.4 to Berkina Faso at 33.6. The USA came in at 85.5. My research reviewed employee ratings of their employers on a myriad of organizational variables, such as management effectiveness, pride, satisfaction, training, communications, decision making etc. Those survey items were combined and one overall score ranging between 1 and 100 on “Employee Positiveness” based on percent of employee responding favorably was calculated for each country.

As I glanced at the Newsweek list I was struck by the number of countries at the top of their list that I recalled being at the lower end of my listing, and the number of countries at the bottom of their chart that were among the most favorably scoring from an Employee Positiveness perspective, so I took a closer look.

I examined only the 49 countries that the two lists had in common. There were 22 countries from my research that scored below the worldwide Employee Positiveness average score of 64% favorable, ranging from New Zealand at 63 to Japan at 45. Among those 22 countries from the bottom half of my distribution, 20 of them were from the top half of the Newsweek distribution. In other words, 20 of the 22 countries with the lowest scores on Employee Positiveness, scored in the top half rank on the Best Places to Live list. Among the 27 countries that scored above the worldwide Employee Positiveness average of 64, 11 of them were at in the bottom half of the Newsweek Best Places to Live list, ranging from Indonesia with an Employee Positiveness score of 77% favorable to Mayasia, Argentina, and Thailand all at 64%. The USA came in at 67%.

Using Spearman’s rank order correlation I found a -.54 (negative) correlation between the two lists comprising the 49 in common countries. This means that there is a tendency for those countries which are rated as among the Best Places to Live to have the lowest scores on Employee Positiveness. What gives?

Could it be that people who live in countries that are better performing in the areas of health, safety, providing a reasonably prosperous environment and an upwardly mobile life also create a level of discontent among the workforce? Could it be that the people with the most are just never satisfied? The Employee Positiveness scores were from employees whose companies had decided to conduct employee attitudes surveys and hence represent a sub-group of people from each country, namely, those who are employed, typically by an American or European multinational. If you examine the   Newsweek list for low scoring Best Countries to Live that are high on Employee Positiveness, you find countries like Indonesia, Columbia, Guatemala, Philippines, Venezuela, and India with some of the most extreme difference scores, meaning high on one list and low on the other. These are countries that have fairly large gaps between the haves and the have not’s. So if you are working for an American or European multinational in one of those countries life is pretty good, but if you are an average Joe on the street, not so much.

The interpretation is more difficult if you are from a high scoring Best Place to Live country such as Finland, Sweden, Australia, Norway, Canada, Japan, Denmark, Germany and the Netherlands that have fairly low Employee Positiveness scores. Are these simply cultures that are more cynical, more reserved, less exuberant, could they be populated by people who are just less positive about working for larger multinational businesses?

There are two countries that standout as having fairly high scores on both Best Places to Live and Employee Positiveness. One is the United States and the other is Switzerland. In the United States we rank 11^th in the world as a Best Place to Live and 14^th in terms of Employee Positiveness, pretty much even in terms of rankings on the two measures.  Are those of us in the USA more aware of how good we have it and have the attitude to match, or is it just a fluke? Hard to say.

I do like to think that as US employers consider where to locate jobs around the world that some of this data may be indicative of the notion that perhaps there is simply “no place like home”.

© 2010 by OrgVitality, Jeffrey M. Saltzman. All rights reserved.

Visit OV: www.orgvitality.com

Desire to Work, Unemployment and Social Safety Nets

Some of the research I have done over the last few years treats countries as nothing more than large organizations, with each country’s respective head of state filling the role of CEO. This approach has enabled me to apply the research techniques developed over the last few decades, such as linkage, on measuring organizational performance to entire countries. Not surprisingly, the results we would expect to find at an organizational level, say a public or private entity within a country, also applies when you sample a representative cross-section of citizenry and look at country-level performance indicators such as GDP growth or corporate bankruptcy rates. I developed an index a good number of years ago called Employee Confidence, and since June 2008 was measuring it quarterly on 16,000 people in the 12 largest global economies.

Within just the USA for one study, I treated each state as the organizational unit and made comparisons of citizenry attitudes to unemployment levels, and by looking at the change in attitudes over time, was able to get some indication of whether the citizenry attitudes were a leading indicator of what unemployment levels would be or a lagging indicator. The largest correlations between citizenry attitudes and unemployment came when linking together attitudes at time 1, with the following month’s unemployment level. In other words, the strongest relationships found were between attitudes now and what officially reported unemployment levels would be 1 month from now. This relationship was marginally stronger than the relationship between current attitudes compared to the previous month’s unemployment levels (postdictive – unemployment levels, the month preceding the measurement of the attitudes), current attitudes compared to current unemployment levels (concurrent points in time), and current attitudes compared to unemployment 2 months out. This would seem to give some indication that asking a cross section of citizenry about their levels of Employee Confidence might be a leading indicator of whether unemployment levels and potentially other economic metrics were heading upwards or downwards in the near term, and this leading indicator can be available before officially reported economic figures.

I recently co-authored with Scott Brooks, a book chapter, appearing in Going Global, for the Professional Practice Series, for the Society of Industrial and Organizational Psychology which documented some of the major findings from this body of research.

Now, given that the evidence suggests that certain citizenry attitudes at a country level can be used in a similar fashion to employee attitudes in predicting organizational performance we can begin to draw some conclusions not only about “people at work” which has been done countless times, but about “people as working or unemployed citizens”.

For instance, a good number of years ago I looked at the combination of workload and employee satisfaction or morale in the workplace. Here is an excerpt published in Executive Viewpoints on that work. “Employees who consider their workload to be “about right” tend to be the most satisfied with their jobs, while those who say they are underworked are even less happy than employees who complain of being overworked”.

“The study looked at the job satisfaction levels of more than 800,000 employees at 61 companies worldwide. Of the companies surveyed, 75% have operations in North America, 11% have operations in Europe, and 14% have operations in Asia. Employees participating in the survey were asked to rate their overall satisfaction with their jobs, as it relates to their workload, on a 100-point scale. Respondents who described their workload as “about right” rated their job satisfaction at an average of 73, while employees who said they had “too much work” rated their satisfaction level at 57. Those with “much too much work” had an average satisfaction rating of 42. By contrast, those who said they have “too little work” rated their job satisfaction at 49, and those who complained of having “much too little work” had the lowest average job satisfaction rating, of 32. The survey also identified variations in the way workers in different parts of the world felt about their workloads.

“Results showed that employees in Europe and Asia were about three times less likely as North American workers to say they were satisfied with having “much too little work.” Employees in North America who said they had “much too little work” had an average satisfaction rating of 36, whereas European workers in this category had a satisfaction rating of 12, and Asian employees a rating of 13. The study also showed that employees in Europe and Asia who claimed they have “much too much work” were somewhat less satisfied with their jobs than their counterparts in North America. While North American employees who said their workload was much too heavy had an average job satisfaction rating of 44, European and Asian employees with “much too much work” rated their job satisfaction at 34 and 25, respectively.”

Some conclusions that can be drawn looking across these studies include:

• There is some generalizability possible between employee attitudes at work, and given a large enough and a representative sample, citizenry attitudes at a country level.
• People tend to be more positive when working productively and on a whole would rather be working harder than not having enough to do. When they do not have enough to do, either at their employer or when unemployed, there is a tendency to feel that their contribution is not valued either by their employer or society.
• The notion that creating societies with strong social safety nets, such as unemployment insurance, as has been done in some European countries to an even greater extent than in the USA, diminishes the desire to work does not bear out.

There is a tendency for humans to make decisions and draw conclusions representing their world-view based on heuristics, or rules of thumb. The down side of this evolutionary derived shortcut to speedier human information processing is that it can play into stereotypes and even bias and bigotry if one is not careful.

And there is a tendency on the part of organizations to also simplify their need to process information, which requires an expenditure of energy (i.e. resources) by creating rules which are broadly applied to those who reside within the organization. Unfortunately, these rules are often derived to control the outliers in the organizational distribution, the worst case scenario, rather than the vast majority who are in the “fat” part of the distribution.

Lets apply some evidence-based decision making to the notion that by extending unemployment insurance, we as a society, are creating benefits that are so generous that those who are unemployed will have less of a desire to work.

• The evidence suggests that the vast majority of people are happiest when working, and in fact are happier when over-worked rather than underworked.
• The evidence suggests that in societies with strong social safety-nets that there is no diminution of the happiness and satisfaction for the majority of workers that working and working hard brings.

It is possible to go into the general population and at the extremes of the behavioral distribution find individuals who fit the worst-case scenarios of people who do not want to work and would rather collect money from the in-place social safety nets, but they are nowhere near what the majority of us want and what makes most people feel good about themselves. Based on a review of multiple databases that include both the private and public sector, the evidence is clear, most people want to do a good job at work, want to feel that they are contributing in a meaningful fashion, would rather be overworked rather than underworked and their frustration levels and eventual withdrawal from the organization can be driven by their inability to do so.

© 2010 by OrgVitality, Jeffrey M. Saltzman. All rights reserved.

Visit OV: www.orgvitality.com

Employee Attitudes during this Recession

“When the tide goes out, you can see who’s been swimming naked.”

Warren Buffet on leadership in a recession.

How do employees react during a recessionary period? What happens to their attitudes about work and the work environment? What about their perceptions towards leadership? And most importantly do those attitudes, or shifts in attitudes actually affect organizational performance? The information that has been distributed on this topic over the last couple of years has been somewhat less than clear, or at the very least has been sending mixed interpretive messages. Some of the reported data has indicated that employees on a whole are less positive, less engaged or as some term it actively disengaged. That finding could represent a possible reaction to the somewhat harsh measures that some leaders adopted as they attempted to increase the odds of organizational survival during a deep recession.

Other reported findings strongly affirmed that employees are more positive now than prior to this recessionary period, possibly as a result of realizing how ugly things are on the outside, so the inside is looking pretty good. That would be a result underpinned by both frame of reference comparisons and the notions of cognitive dissonance, the need to resolve conflictual cognitive positions (e.g. even though I used to really hate it here, the place must not be so bad since I am staying). Categorical statements, that something is all one way or the other, black or white, raise my warning antennas and so one is left wondering, is it possible to look across the various reported results, many of them stated in a categorical fashion, and make some sense of it all? Scott Brooks, Walter Reichman and I did just that and here is a summary of some of what we found.

Methodological observations regarding the reviewed reports:

Some of the reports we reviewed¹ are based on client data, meaning data that has been collected from clients during the course of a consulting firm running their employee surveys. Client data over the course of a few years can change, depending on which clients the consulting firm happens to have, what survey cycles clients are on etc. One industry for instance that may be well-represented in the norms during normal economic times like retail, and has been hard hit by the recession may cut costs by delaying or canceling their survey, and so their industry may be underrepresented in the data during a recessionary period if the norms are client based. So when examining client data over time you may not be looking at an apples-to-apples comparison even if the data is coming from a single source such as a consulting company.

Additionally, surveys of clients that occur during recessions may represent clients that are weathering the recessionary storm slightly better than most, since the budget for collecting the data has not been axed, or the data may be coming from organizations that are deep adherents (at least more so than others) to the notions of collecting and measuring certain aspects of employee attitudes, employee engagement being one of those. And of course the employees themselves who are being surveyed in client based norms are the survivors, those who have not been laid-off, which may also have an impact on their attitudes, especially when compared to the general population. One approach to correcting some of the issues with client-based research is the use of a standard basket of companies for tracking purposes, similar to the Dow Jones Industrial Average methodology. That could be achieved through a consortium of companies who agree to share their results. That would fix the problem of which companies are included (since it would be standardized) but not who from each company is included (during a recession we would still be surveying only survivors).

Some of the reports that have attempted to shed light on the state of employee attitudes during this recession are based on random sample surveys or stratified random samples (meaning you make sure certain demographic categories, such as senior managers, or females etc. are adequately represented). These data are not client based, but rather are gathered from people who have agreed to complete surveys, usually for some kind of incentive, for instance, a chance to be entered into a lottery for each survey they complete. These surveys include a cross section of people, some employed, some under or unemployed but if sampled correctly are representative of the population as a whole, not necessarily the employed population, or the population from companies that care enough about employee attitudes to be out there measuring it. Depending on how the sample is drawn they may come from private and public sector organizations, government as well as not-for profit. It may include those working full-time as well as part-time. One issue of course here is the motivation that these individuals have for completing the survey. Many of them, we have to assume, are not doing it for the sake of the research, but rather in a fashion to maximize their ability to achieve whatever incentive is being offered. (That is why it is called an incentive.) That creates a question in many minds of just how these people will respond, and will they take the survey seriously.

One conclusion from looking at all of the data that gets put out is that unless it is clearly stated in the report, and often times it is not, and the methodology explicit, you really don’t know who is included in either client-based or in random sample survey reports and hence the conclusions from one report are not all that easily compared against another.

Some broad trends we saw:

• “Engagement” during this recession has not declined.  With an eyeball meta-analysis, the actual change may be slight improvement, perhaps 2-4 percentage points over the last year.   This “surfs across” potentially meaningful differences in sampling, methodology and varied definitions of how you measure engagement. But those institutions that describe engagement as declining are in the minority.

• Not all employee opinions act the same way, moving up or down in lockstep.
  • Stress is increasing.
  • Opinions about leaders have fluctuated.
  • US Employee Confidence hit a low 1Q09 and has not returned to the 2Q08 baseline.
  • One conclusion is that “engagement” may not be the best indicator of the strain of the recession on the employee population and hence organizational performance.
  • There is no “overall” recession impact across all survey topics

• There is evidence of polarization within some organizations. While different across different studies, there seem to be segments (levels, functions, etc.) within the organization showing divergent trends:
  • Perhaps while engagement goes up, there is a growing core of actively disengaged employees.
  • Executives and middle management respond differently, though exactly which layer feels the squeeze most keenly is not clear from the reports (and they likely differ organization-by-organization… as is clear in some cases among our own clients).

• Increasing frustrations (driven by increasing workload and lowered rewards/benefits) among high performers/high-potentials put them more at-risk for eventual voluntary turnover.

Some More Detail:

One concept created a good number of years ago called Employee Confidence^© has been tracked quarterly since June 2008³, by asking employees about attitudes towards their company’s internal as well as external performance (organizational performance). Internal covers such areas as business processes and leadership and external covers the attractiveness and value of products and services offered to the market as well as competitive positioning. Also tracked has been people’s perception of their personal situation, again both internally and externally. The internal situation deals with perceptions of job security and future prospects at current employers, and the external with being able to land on their feet elsewhere if necessary by finding another job. (To be part of this tracking study, which cut across the 12 largest economies globally, you needed to be: an over 18, full-time employee in the private sector, in a company with at least 100 employees. Data was collected quarterly on random samples of 5000 in the USA and 1000 in each of the other countries, with the exception of Russia where the number was 500. Incentives were used. The data was compared to known demographic characteristics of the working population in each of those countries.) Taking a step back from all the data, both from this Employee Confidence sample and from client based data, and drawing some insights and overall conclusions, or at least observations what we see as highlights include:

About Employee Engagement:

In 2008/2009 you generally did not see declining employee engagement scores at organizations (there was the occasional exception). The scores were flat at worst but most were actually rising with many hitting heights not seen within the organization prior. This was in spite of the general concern among clients that engagement would decline during the recession. Some of this can be attributed to good management taking action on important issues and some is environmental, a response to the concern that people have about losing their jobs. One notable study had a client with 7 point rise in their employee engagement score across about 25,000 people. A determination was made that 2-3 points of that rise was likely due to management actions and 4-5 points was due to the environment. (Drop me a note if you want to know how that was done jeffreysaltzman@orgvitality.com).

About Employee Satisfaction:

In many cases however, items that were markers of the employee’s current state of satisfaction with their situation declined. By way of explanation, a person can be very unhappy with increased workload and stress, with their 401k losing substantial value, with no company match, no raises, friends being laid off, increased concern about their own job security, perhaps seeing management taking care of themselves before the rank and file, but that person can still be engaged in their work. As an example, a person can be very engaged at their employer making buggy whips as Henry Ford is in the next building figuring out how to mass produce cars. They are engaged, working diligently to produce the best buggy whips in the world, but their level of engagement does not stop the world from changing nor does it assuage increased concern at seeing the world changing with perhaps the employer not changing or not changing fast enough to keep up. A corollary to this is the false notion that employees who complain are not engaged. They in fact may be the most engaged as they are trying to communicate to the organization information to head off a potential disaster as they see it.

While some people/organizations measure satisfaction and engagement with the same items, they are clearly different constructs. (Of course there is no agreed upon set of items in use to measure engagement within the employee survey industry which may account for some of the reported differences).

About Job Prospects and Job Security:

Being able to find other employment if necessary, which is normally very favorably rated, began to decline and has remained at or near the bottom of all the items tracked. Most normal people by nature tend to rate their skill sets highly and see value (beyond what others may see) in what they can do.  This makes them normally very confident in their ability to find another job should the need arise. The precipitous decline in this dimension is a fundamental shift in people’s confidence (it has rocked their world and how they self-perceive) and affects all sorts of behavior including buying patterns and a willingness to tolerate intolerable conditions at an employer. As this score recovers we will see people who had been staying with an employer because of a lack of opportunity elsewhere move on with a corresponding increase in voluntary turnover. This may be starting already as for the last 3 months voluntary quits has surpassed layoffs as why people leave jobs and for the 15 months prior to that layoffs surpassed quits.⁴ This finding is perhaps giving an inkling of what is to come.

Perceptions of job security at the beginning of the recession when all the layoffs started were understandably in steep decline. This lasted through the first quarter of 2009 and roughly corresponded to when a massive bulge of layoffs occurred with 3979 mass layoff events occurring in 1Q09, a record high affecting 705,000 people⁵. This also corresponded to the lowest Employee Confidence scores recorded. However, once that bottom was hit there was a rather sharp rebound later in the year. One possible interpretation is that employees felt that the organizations had cut to the bone and could not cut any more. Employees felt that they had survived so far and so where likely to weather the storm. Exceptions to this pattern of decline and then rebound occurred in industries that were weathering the recessionary storm rather well including healthcare, education, government and food service. They did not see nearly as much of a decline. Females were more positive about job security than males, not because they were females, but because of an over-representation in industries that were doing ok. The gap between males and females disappeared when the rebound occurred, possibly due to the males feeling that all the cutting that was to be done had been carried out.

About Business Process:

During this recession it was pretty clear in the data that the majority of employers were trying to cut their way to profitability, rather than innovating with new attractive offerings or by moving into new markets. They were revamping internal processes, laying off people, cutting budgets and benefits. They were looking inward rather than outward to find solutions to their performance problems. And while it is always healthy to improve internal organizational performance, in this case it is a rather risk adverse approach compared to modifying the products and/or services being offered. It is more of a sure thing to cut back on costs rather than create products that people find attractive, even in a recession, as a way to protect margins in the short term. Not every company took that path however and historically companies that have been started in recessionary periods included: HP, GE, Burger King, Fedex, Microsoft, CNN, Trader Joes, and our own OrgVitality. Each one creating a path to success based on offering attractive and valued products and services to the marketplace that were relevant to the economic time period in which they found themselves. In this recession Autodesk, Nucor, Colgate Palmolive, Apple, Coca Cola, Target, McDonalds, Dunkin Donuts, and Google among others for instance have done quite well by developing new and innovative products and by moving into new markets.²

About Organizational Effectiveness and Leadership:

At the beginning of the recession, the back-half of 2008, management was given the benefit of the doubt and was given stable or slightly increasing scores from the rank and file regarding their job performance. Of course you need to keep in mind that the rank and file during this period are the survivors, those who had not yet lost their jobs. As it appeared that the recession was going to get really ugly in the first quarter of 2009, the rank and file lost a lot of confidence in management and performance ratings on management plummeted. The realization hit that there was no magic bullet that the recession was going to be painful and deep and of a long duration and the blame, at least partially, was laid at management’s feet.

Ratings of leadership over the last year and a half or so have been very volatile with some organizations reporting extremely favorable ratings on leadership while at the same time others are reporting the poorest scores of recent memory. There has also been more divergent trends within organizations, often with vital groups perhaps feeling more stress than others (e.g., VP levels) declining dramatically while other levels are able to maintain or improve. A sharp recovery was noted in the perceptions of the job being done by management, as rated by employees, during the back half of 2009 as many of the programs designed to temper the recession began to have an effect among those still employed and further draconian layoffs were not as prevalent.

About Geographic differences in the USA:

If you compared the attitudes of employees against the unemployment level at the state level a significant relationship was found. In other words, in general those states that were exhibiting higher levels of unemployment were generally those where employees had the lowest levels of confidence. Some interesting patterns and exceptions to that statement emerged.

Those employees in southern states tended to be more positive than their unemployment level suggested they should be. In general, those in the mid-west were less positive than they should have been with the notable exceptions of Nebraska, the most positive single state and the state with the lowest level of unemployment, and Michigan with the highest level of unemployment and the second lowest level of employee confidence. Those states located in the northeast and west had employee attitudes as predicted by their unemployment levels with the exception of Oregon where employee attitudes were less positive than they should have been. The states that were exceptions certainly had the attitudes going in the predicted direction given their unemployment levels, it is just that the corresponding employee attitudes were more exaggerated than expected in either the positive or negative direction.⁶

Interpretation:

• The recession has put organizations and employees on edge.  While dealing with the increased stress and load created by aggressive cost-cutting, employees have a heightened sensitivity to leadership messages and missteps and organizational cues regarding the future.  Critically, employees watch how the crisis has revealed the organization’s commitment (or not) to its stated values.
• As a result of this sensitivity, organizations may experience greater swings in engagement and/or satisfaction through the recession (the two not necessarily being related or moving in the same direction), though the swings may go in either direction and may be concentrated within a specific population. These swings may occur within key segments (e.g., management layers, functional areas or performance levels).
• But changes in survey results seen across clients lead to a conclusion: the recession isn’t the only cause of changes in employee opinions and engagement in particular; it’s the organization’s response to the recession.
• In many cases, employees have rallied behind their organizations’ recovery efforts, and are as engaged or more engaged than ever.  In part, they are not simply comparing the “now” to what was.  Clearly they understand that the crisis has demanded dramatic change, and they have hunkered down to help.  To some extent they may compare themselves to other cases of what might be, for example to the failings of other organizations or to their unemployed acquaintances.
• One way to sum it up is that the recession has become a test of Vitality including strategy, values, behaviors, organizational agility and resiliency.  Organizations are not passive players regarding the degree to which decision-making authority is sucked upwards, open communication is stifled, leadership commitment to values are maintained, or the emphasis on service remains central.  Certainly, it has become harder to invest in employees.  But in many cases, employees understand that and may take even greater pride in how their organizations handle the recession.

¹Sources of published findings which were reviewed included: OrgVitality, McKinsey, CLC, Metrus, Valtera, Modern Survey, Kenexa and Towers Perrin among others.

²The Business Week 50, Business Week, March 26, 2009

³The Employee Confidence Framework was developed by Jeffrey M. Saltzman.

⁴ MSNBC June 9^th, 2010

⁵Bureau of Labor Statistics; http://www.bls.gov/news.release/pdf/mslo.pdf

⁶Saltzman & Brooks, “Strategic Surveying in the Global Marketplace and the Role of Vitality Measures”, appearing in “Going Global” (Kyle Lundby, editor), 2010 Jossey-Bass

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