The CEO’s New Strategic Imperative – Engagement

We have heard that old cliché that the lifeblood of every business is its employees so many times that it [...]

July 21 2009 by Bob Donnelly


We have heard that old cliché that the lifeblood of every business is its employees so many times that it has become like one of the proverbs from the bible.

But, like with the bible many proverbs have fallen on deaf ears. Just like the assumption that every business has a detailed business plan, there is a similar assumption  that every business has a solid set of processes in place to insure that their employees are fully engaged.

However, studies have verified that only about 29 percent of employees are fully engaged, while 19 percent are totally disengaged, which leaves over 50 percent with only average levels of engagement. The result of this can only be that customers of companies with these disengaged employees become unhappy with the level of service they receive and eventually shop elsewhere.

As a matter of fact other studies have reveal that 60 percent of all customers stop dealing with a company  because of perceived indifference on the part of an employee. Jim Barnes, in his book on “Secrets of CRM” states that “a typical business hears from only 4 percent of its dissatisfied customers – the other 96 percent leave, 91 percent for good.

As I have written in other columns “successful marketing is owning a share of the customers mind by creating an emotional bond with your brand.” An important part of developing  brand equity with customers is having employees sharing positive emotional energy and conveying that feeling when dealing with customers. If your employees aren’t engaged and don’t believe enthusiastically in your brand, why should customers?

Best Buy was able to demonstrate that an increase in engagement among its store employees of 0.1 percent on a 5 point scale resulted in an annual profit increase of $100,000 for their store. If you really believe that your employees are the lifeblood of your company then your employees are an integral part of your brand equity.

For example,  in my feature “Two CEOs, One Strategy” (CE, December 2008) I demonstrated that Doug Conant, CEO of Campbell’s Soup, achieved a performance turnaround by increasing the engagement ratio of Campbell’s management team and employees.

In other studies 51 percent of consumers agree that “outstanding service” is the number one reason they continue to do business with a company. Eighty percent state that they will never buy from a company after a negative experience. Think about it – how do you feel about your shopping experiences?

Another thought to ponder is that many companies today claim to be customer centric, but pay their employees to sell products rather than compensating them for engaging customers. In a world that is changing rapidly and as the speed of change increases, all product businesses are really becoming service businesses. To insure that your customers will have good experiences with your products, your employees must be engaged.

To achieve this you have to treat your employees like customers. Herb Kelleher, who was selected in 1999 as the Chief Executive of the Year, and co-founder and Chairman and CEO of Southwest Airlines said, “when you treat your employees right, they will treat your customers right. That has been a powerful competitive weapon for us”.

What if you were able to align the goals of your business plan with the goals of your employees? Wouldn’t that be a powerful competitive strategy? That emotional connection would naturally be reflected in improved engagement with customers. However, if you do not have a business plan how can you do this?

Jim Skinner, the new CEO of McDonald’s and 2009 CEO of the Year recently said, “We are in the restaurant business. You need to hire good people, train them, engage them, and give them the freedom and tools to be able to deliver for the customers. With 32,000 locations around the world, you need to have a good team aligned with a solid plan, with very simple expectations about what needs to get done”.

Fact: McDonald’s was one of only two DJIA stocks that ended 2008 with a gain. McDonald’s serves 56 million customers every day around the world.

Skinner observed, “I never met an employee who doesn’t want to feel like they are making a positive contribution. However, without the proper emotional motivation you probably have apathetic employees who are just working for a paycheck. An engaged employee is someone who is enthusiastic about coming to work, as opposed to an apathetic employee who dreads it.”

Aren’t you interested in growing the value of your customers, and in so doing increasing profitability? Engaged employees make a positive contribution to the bottom line. Disengaged employees with no emotional connection to the business or the customers negatively impact profitability.

The internet has created a global marketplace where much of what businesses produce can be commoditized. Today customers are just a click away from access to a number of alternatives if they are unhappy with a brand experience. In addition, social networks and blogs allow unhappy customers the ability to broadcast their unhappy experiences to consumers around the world.

This is even more of an incentive for CEO’s to adopt engagement as their important new strategic imperative.

*  *  *

Engagement can be contagious! If you would like to start a dialogue on how to improve employee engagement at your company let me know.

Bob Donnelly, is CEO of VAAS Americas, the U.S. unit of the Chennai, India based maker and distributor of industrial valves. A coach, educator, and advisor to founders/CEOs of growing firms, he is a serial entrepreneur, having started, grown and sold several technology based businesses. Earlier in his career he held senior management positions with IBM, Pfizer, and Exxon.

He has developed an online MBA program in Entrepreneurship for Rushmore University with managers from global firms enrolled in the program. Since 1998 he has served as a venture mentor at New York University’s Stern School of Business Berkeley Center for Entrepreneurial Studies, where he advises start-ups on business plan development, marketing strategy, and presentation skills.

He writes the online Entrepreneurial CEO column for Chief Executive.