Taleo Research White Paper

Alignment Drives Employee Engagement and Productivity

Table of Contents
Alignment Drives Employee Engagement and Productivity .............................................................. 1 Alignment .......................................................... 2 Aligning Business Goals to Talent Goals ...... 2 Management Commitment ........................... 2 HRs Role ...................................................... 3 Developing a Clear Line of Sight .................. 4 Review and Modify Goals ............................. 4 Technology Tools........................................... 4 Reporting ...................................................... 4 Automating Goals Management ................... 5 Launch Goals-based Reviews ...................... 6 Cascading Goals........................................... 6 Summary ........................................................... 7

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Alignment Drives Employee Engagement and Productivity

By a two to one margin, companies surveyed in a Taleo Research study reported the largest risk to their companys bottom line and brand is low employee engagement and productivity. Why are low engagement and productivity1 an increasing threat? Because, in an economic downturn companies are doing more with less and cannot afford to have suboptimal performance from any employee. In 2006, the cost of lost productivity in the US was estimated at $554 billion dollars.2 This loss of productivity was calculated when the US had a relatively strong economy: employment was up, salaries were high, and the economic climate was upbeat. Now, consider the state of this down economy in which employees face significant pressures including fear of losing their homes, worries about losing their jobs, and concern that their retirement savings will be wiped out. With these anxieties, the loss of productivity in 2009 will likely be even greater. There is a direct correlation between engagement and productivity. Studies have quantified it by measuring these interrelated factors. 1. One study found that when employees are highly engaged, their companies enjoy 26 percent higher revenue per employee.3 2. Another study showed that highly engaged employees are twice as likely to be top performers, thus more productive.4 3. Companies with highly engaged employees also earned 13 percent greater total returns to shareholders over the last five years.5 Alarmingly, a global survey focused on employee engagement found on average fewer than one in three employees (29%) are fully engaged, 52 percent are moderately engaged, and 19 percent are actually disengaged.6

Source: The State of Employee Engagement, BlessingWhite 2008.

3 4 5 6 Driving Business Results through Continuous Engagement, Watson Wyatt 2008/2009 Playing to Win in a Global Economy, Watson Wyatt 2007-2008 Driving Business Results through Continuous Engagement, Watson Wyatt 2008/2009 The State of Employee Engagement, Blessingwhite, 2008

1 Recessionary Management: The Dos and Donts of a Down Economy, Taleo Research and Human Capital Institute, 2009. 2 Price Tag for Lost Productivity:$544B, Inc.com Magazine, Leslie Taylor Aug 21, 2006

Copyright 2009 Taleo Research

Alignment Drives Employee Engagement and Productivity

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Many drivers affect employee engagement and productivity. In fact it is hard to separate the two. Highly engaged employees are more productive, but, how do you keep employees engaged to maintain high levels of productivity on the job, even in a down economy? Goals alignment is the first step in the process. Aligning employee goals and giving them a clear line of sight to their contribution to business results will help drive improved engagement and thereby improve productivity. A clear linkage can also be made between alignment and bottom line results. Consider a study by Dr. Jac Fitz-enzan expert in HR metricsthat showed of 40 companies studied: 44 percent of the stronger performers had almost 100 percent aligned goals at the managerial level. None of the weaker performers did.7

These plans are living, breathing documents that are revised when and if the business plans change. While technology will help facilitate, manage, and report progress, it starts with a committed management team and a solid process for execution.
Management Commitment

Senior management needs to articulate the corporate strategy and create the environment to drive that strategy down through the business. Management must align business goals with the strategy and create accountability and responsibility in the execution of those goals. Next, a system of rewards and recognition should be developed to ensure those goals are met and stipulates accountability when goals are not attained. This requires a company-wide effort. There are distressing examples in which employees attain their goals and are even paid large bonuses while the company was losing money. This disconnect is recounted in the news. Consider the Merrill Lynch reports that cite this large financial institution paid out millions of dollars in bonuses as the company was going under. How does this happen? There is misalignment between strategy, business goals, and employee goals. Yet, alignment is seen by many as a difficult task. Taleo Research conducted a global survey of more than 900 HR and line of business executives to understand the challenges and priorities of talent management. When asked how difficult it is to link talent goals to business goals, 85 percent of companies reported it to be Challenging or Very Challenging.8

The Alignment Process

Strategic Plan

Review and Revise Plans

Develop Business Goals

Clear Line of Sight to Employee Goals

Alignment
Aligning Business Goals to Talent Goals

Aligning goals starts with a companys strategic plan. All successful businesses have a clear understanding of their strategy. The strategy is then reflected in business goals that align to the strategy. This requires Management Commitment at all levels since all managers not only have to develop the business goals but also have the ability to develop a Clear Line of Sight from those business goals to employees goals.
8 Global Unified Talent Management Survey, Taleo Research with Human Capital Institute (HCI), Business Intelligence, Markess International, Quantum Market Research 2008

7 LRP Publications, Dr. Jac Fitz-enz 2007

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Alignment Drives Employee Engagement and Productivity

Copyright 2009 Taleo Research

85% find linking talent management goals to corporate goals challenging

Linking Talent Management Goals to Corporate Goals 15% 26%

Very Challenging Challenging 59%

HRs Role

Not Challenging

HR is key in driving the process and selecting the tools needed to achieve alignment. How well is HR rated in driving this process? A McKinsey study asked both HR and line of business (LOB) executives Does HR lack the capabilities to develop talent strategies aligned with business objectives? Only one-quarter of the HR participants agreed with this statement, while the majority (58%) of line managers agreed. This is a gap of 33 percent. Clearly LOB managers do not see HR as being up to the task.

Successful HR executives would agree that aligning talent to business, defining roles, recruiting, developing, and measuring performance creates an environment where peoples passion for the business can grow and drive overall business performance. Alignment, nonetheless, is not just an HR issue. Although HR may facilitate the process and implement the systems to help ensure a talent strategy aligns to the business, HR cannot execute this strategy without the commitment of the line managers.

How well are you doing?

Human-resources (HR) professionals Line Managers

% of interviewees in each category who agree 02 25 60 30 36 38 36 43 47 58 58 38 64 55 07 58 60 5 100 Gap 33 9 8 28 9 22 15

HR lacks capabilities to develop talent strategies aligned with business objectives HR is administrative department, not strategic business partner HR relies too much on best practicessome of which are inappropriatewhen designing systems HR is not held accountable for success or failure of talent-management initiatives HR lacks authority/respect to influence the way people are managed Talent Management is viewed as responsibility of HR HR doesnt provide enough support to line managers

Source: McKinsey study

Copyright 2009 Taleo Research

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HRs responsibility is to understand the corporate strategyperhaps even help shape it. Then HR needs to develop a process to track and measure the progress. But all managers must be committed to the alignment of goals throughout the organization. According to research from Bersin and Associates, only 29 percent of organizations create employee goals which are aligned to the organization.9 This lack of alignment not only impinges on business outcomes, but it also negatively affects employee engagement and motivation. Employees feel valued when they see the link between what they do and the success of the department and the organization. Managements role does not end with understanding how to translate corporate strategies into business goals. Next, managers must develop the goals for their employees that link to that strategy. Key in this process is the ability to develop a clear line of sight for their employees so employees understand how they contribute to the overall business. People may sit in a meeting and agree on the goals and a course of action, but once back to their routine, they risk becoming diverted. Companies need to review progress and provide an ongoing system of measurement to sustain alignment from initiation through execution to delivery. When employees have a clear line of sight to their contribution to corporate goals and strategies, not only are people working on the right things, but they are also more engaged in their work.
Review and Modify Goals Developing a Clear Line of Sight

Periodic health checks should be built into the process at least on a quarterly basis to ensure the alignment is still on target. Companies need to examine whether: There have been changes in the economic climate. There have been changes in the competitive landscape. They have the right talent pool needed to execute the plan.
Technology Tools

Technology is now available to give companies the ability to automate, manage, and measure the goals alignment process. Automation can provide greater control over business outcomes by automating the creation, alignment, and monitoring of organizational goals. Now goals can be set at any level and employee directives adjusted to support initiatives. A goals management software solution automates the process of creating, cascading, and monitoring the process of company-wide goals. These technology tools provide the ability to set goals at any level of the organization and align employee efforts with organizational initiatives.
Reporting

Without a clear process and metrics in place to monitor the progress of achievement to those goals, even employees with the best intentions can lose their line of sight and alignment breaks down. Reporting and analytical tools should assist companies in tracking: How many employees have goals in place (not just managers)? What percentage of those goals is aligned to the corporate strategy? Which of those goals are critical? How are employees progressing in achieving those goals? Commitment plus technology to measure the progress are necessary to keep managers on the right track.

Although an organizational strategy should not change in the short term, business and economic conditions can certainly require reshaping business plans. In a Recessionary Management survey conducted by Taleo Research and The Human Capital Institute (HCI), 59 percent of 345 companies surveyed said they needed to revise their work plans in order to achieve alignment given the current economic environment.10

9 High Impact Talent Management and High Impact Performance Management research, Bersin & Associates 2006 and 2007 10 Recessionary Management: The Top Dos and Donts for Managing Talent in the Current Downturn, Taleo Research and Human Capital Institute, 2009

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Alignment Drives Employee Engagement and Productivity

Copyright 2009 Taleo Research

Employee/Business Goal Alignment

56 1 3

Employee Has Goal Plan No Yes

Employee Goal Plan Approval Status Approved In Progress Not Approved

45

42

# Employees

# Employees

28

Goal Criticality Critical Not Critical

Employee Goal Is Aligned No Yes

33

98

# Employees

# Employees

52 28

# Employees

Goal Percentage Complete

100 80 60 40 20 0 03-Mar 04-April

Goals Due By Month

19

25 # Employees

0-25% 25-50% 50-75% 75-100%

05-May

06-June

07-July

09-Sep

10-Oct

12-Dec

Month Goals Are Due

Example of Goals Alignment Reporting

Automating Goals Management

Goals management supported on a technology platform should provide the ability to define: Themes or categorization of goals that can be reported on or used in a Balanced Scorecard or for reporting goals related to finance, customers, or development. Business goals that are qualitative or quantitative statements of an organizations intent or objectives such as Increase operational efficiency 5%. Projects that are discrete efforts by the organization such as Evaluate, select, and implement talent management solution. Project milestones as elements that mark the completion of a specific work package or phase.

Much work today crosses the traditional departmental or cost center structures of an organization. Goals management software needs to provide the ability to establish an alternative to traditional organizational hierarchy thats used for goals management. For the purpose of goals management, multiple departments or cost centers may share the same goals. These goals need to be summarized and managed across multiple groups. Just as business strategy is overarching and not siloed by department, the goals alignment platform should be flexible and configurable to match business operations.

Copyright 2009 Taleo Research

Alignment Drives Employee Engagement and Productivity

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Copyright 2009, Taleo Corporation 2009 Copyright, Taleo Corporation

Launch Goals-based Reviews

Individual employees can also have goals, which like business goals, are qualitative or quantitative statements of the employees intent or objectives. Individual goals require collaboration between the manager and employee to develop goals for a given period. Employee and manager need the ability to collaborate on the employees goal plan and acknowledge when both are satisfied with the plan. Instead of an obligatory annual or semi-annual view, the agreed upon goals and progress should be easily accessible and visible throughout the work year.
Cascading Goals

31% When an employee is aligned with a project, individual efforts directly contribute to the completion of the project. In other words, the project and the employees goal should be 100% complete simultaneously.

Goals management software can now show in real time how the goals are aligned and executed from the strategy to the business goals and from the departments to the manager and employees.
Strategy

Cascading goals form the basis of alignment, and provide the employee with the clear line of sight to view how work efforts benefit the organization. For example, for a business goal of Increase operational efficiency 5%, a call center employee might have a goal of Resolve 80% of first level support calls within 5 minutes.

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Business Goals

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Department Goals

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Managers Goals

Employee Goals

Source: Taleo Research

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Alignment Drives Employee Engagement and Productivity

Copyright 2009 Taleo Research

When talent management applications and practices align with corporate strategies, goals are met and sustained. David Ulrich, The HR Value Proposition (modification of quote)

Steps to Achieve Alignment 1. Obtain senior management commitment. 2. Set the corporate strategy. 3. Develop business goals from the strategy.

Summary
Studies have proven that goals alignment and engagement improve productivity and company performance. When employees are engaged and aligned they can have a major impact on the bottom line of a business. Achieving and maintaining alignment requires management commitment, a clearly defined process and the discipline to stay on course. Technology can provide the tools to measure and monitor your progress.

4. Obtain consensus on business goals. 5. Set departmental and/or manager goals from business goals and enter into system. 6. Set employee goals with a clear line of sight up to business goals and strategy (cascading goals). 7. Set measurements, accountability, and responsibility. 8. Develop reporting structure to review progress through reporting and analytics. 9. Hold regularly scheduled meetings to review progress. 10. Adjust plans based on external or internal factors.

Value from Engagement and Alignment

Copyright 2009 Taleo Research

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CONTACT www.taleo.com info@taleo.com 1.888.836.3669 U.S. 1.888.922.5665 International 1.888.561.5665 Customer Service ABOUT TALEO
Leading organizations worldwide use Taleo on demand talent management solutions to assess, acquire, develop, and align their workforce for improved business performance.
Copyright 2009 Taleo Corporation. All rights reserved. No portion of this document may be reproduced in any form without the prior written permission of Taleo Corporation. Taleo and all Taleo product and service names mentioned herein are trademarks or registered trademarks of Taleo in the United States, France, The Netherlands, U.K., Canada, Australia, and several other countries. All other product and company names mentioned herein may be the trademarks of their respective owners.

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