This Band of Ethical Heroes (2/3) - Taking Action

Last month's post introduced the idea of joining the many ethical heroes at work and in our communities. As the recent events at the Boston Marathon and the West, Texas catastrophe remind us, would be heroes are needed everyday. Some of the feedback that I received suggested that many of you feel that you are ready to join, but have not been called into action yet. In this post I walk you through some great research on the steps that people go through before engaging in new behavior. My intention is to have you judge where you are in this continuum and to consider what you might do to go one step further to being an ethical hero. And to be clear, I am right there with you - I want to do more, I want to be better, and I want to make a difference. How can you and I be seen as heroes in our own right? What would it take? How can we prepare to take action?

Steps Along The Way to Changing Ourselves

Really, the only person who can change how you act or how you see yourself is you. People may try to get us to change, and sometimes it feels like we are being forced to do something, but we often resist those efforts. We can seem to go along with what somebody wants us to do, but that doesn't mean that our hearts are in it or that we won't stop when no one is looking. If we say "I won't become that person!" then it is almost impossible for another person to change us. But what about those situations where we decide that we might want to change things up, and yet we don't seem to motivate ourselves? Perhaps all those New Year's resolutions come to mind, or the honest promise to exercise more: we can find ourselves stuck in that "someday, but not today" mode of thinking. I know when it came to my decision to "do more good" I found that the decision to be different was not the same as actually becoming different. It turns out that most people go through this phase, and it is really a part of how we change ourselves. 

There is a ton of research from Jim Prochaska (at the University of Rhode Island) that explains how we change ourselves. This process can be boiled down to the six stages of change shown above. First, we go through some thinking stages, where we might get from a very negative position (I won't) to a less negative position (I might). Even further along these lines is when we start thinking about how to prepare and when we will start (I will). Dr. Prochaska's research indicates that people move from I won't to I might to I will when they see good reasons for changing, or what he calls PROs. No one else necessarily knows how we feel about these first three stages because the stages are all inside our heads. However, if we do decide to tell other people in our lives about how we are thinking, our movement up the ladder becomes more likely. When we start blogging about wanting to do more good (ahem), we create a bit of pressure to live up to what we publicly said we would do because we usually want to be consistent with our words. Furthermore, if we start thinking about all the benefits of changing our behavior, then we are inclined to be more motivated to act.

Actually taking action is obviously different from just thinking about a change, but even here there are stages. We can actually dip our toe in the water by trying something different (I am), but that does not necessarily stick. If it does, then we engage in this new behavior more frequently until it becomes routine (I have). Further, if we begin to define ourselves based on this behavior (I do), then we are highly likely to maintain that behavior on an ongoing basis. One of the fascinating aspects of Dr. Prochaska's research is that moving through these behavioral stages has less to do with discovering PROs and more to do with eliminating CONs - overcoming obstacles that we feel prevent us from taking action. In other words, even when we picture ourselves looking great on the beach, getting compliments, feeling good about ourselves, we can still find ourselves stuck on the couch with potato chips instead of exercising because we have not dealt with CONs. 

Becoming the Ethical Hero

Every potential change in our lives has some specific downsides. Exercising means finding time, doing less of other things, getting over some initial aches, and so on. Yet, what about our concept of being an Ethical Hero? If it seems great to be the one who speaks up, stands out, and makes something good happen or prevents something bad from happening, then what could possibly hold us back from doing it?  The answer: our perception of what others expect of us.

The moment when we hear our voice speaking up or see ourselves breaking rank with others, we move away from how the rest of the world is used to seeing us. "What does Paul think he is doing, writing about ethics? He is no saint! I can tell you stories about him!" The funny thing is that no one needs to say those things aloud. For me, I hear those voices in my head as if others were saying them. "They" (me) are telling me how my behavioral change is wrong for me, how it doesn't fit me, how I should just stay the same. I am guessing that all of us hear those negative voices in our heads, and it stops us dead in our tracks. We end up mentally debating why we should versus why we should not, and in the meantime nothing gets done. How can we get beyond that? Here are three techniques for moving yourself from the thinking stages to the doing stages.

1. Imagine how you will feel 10 minutes, 10 months, and 10 years later. Suzy Welch created a technique for sorting out short-term emotions from lasting ones. It is called 10/10/10, and it has been highlighted in her 2010 book and in Chip & Dan Heath's new book Decisive: How to Make Better Choices in Life and Work. Here's how it works. You are about to head into a meeting with your coworkers, unsure if you should say that you are no longer comfortable that your current business practice is ethical. You are afraid of their reaction and how they will treat you from that point on. Your career and your personal friendships are on the line. Do you speak up about your concerns? Well, imagine how you will feel if you do say something, but not at that moment. After all, that moment will be a bit scary - you know that. But what about 10 minutes later? You think, "I will feel glad that I spoke out, no matter how they react. It will be done, and I will feel pride in that." What about 10 months from now? You think, "Well, if others agree with me, then we can have a better procedure in place by then. If no one agrees with me, then I will have had 10 months to consider if I still want to be here. That's not so much scary as exciting." What about 10 years from now? You think, "Either this moment is long forgotten, or it is the moment where I changed everything... certainly not scary!" Separate the immediate feelings that can prevent action from the future feelings, which are likely more important to you.
   
2. You want to go where nobody knows your name. If you aren't sure how your family and friends will react to seeing you doing something new, then get yourself in a new circle who don't know your from Adam (or Eve). Start out by compartmentalizing this new you. You might find a charitable event where a lot of other people volunteer time, and ask them if there are other opportunities to do more of the same. You might search the internet about an interesting social cause that might have a local chapter or local event coming up. For that matter, you might just want to plan out your next trip to the supermarket with a promise to make a stranger smile: give up your spot in the checkout line, help someone take groceries to the car, or buy a child a balloon. It doesn't matter how elaborate your action is. The important aspect is that you get some strangers to see you as that nice person.
3. Be the actor in the movie. If you are still feeling anxious about changing from your typical self, then take on the role the way an actor in a movie would. Give yourself the command "Action!" and then play the part of the ethical hero. When if feels odd to speak out or stand out, you can remind yourself that this is what acting feels like. Relax, and see how others around you respond to your script. Look them in the eye, the way an actor would, with confidence. You will be amazed how people take you seriously even when you don't feel as calm as you seem. Later on you should review what you did, how you sounded, and the impact that you had on others around you. Even if it felt like you were acting like someone else, it was in fact you all along.

So, the next time you see an opportunity to act like the new you - the person you want to become - take a moment to consider what things might hold you back. Once you have that list, then you can see how many solutions you can generate to overcome those concerns. If you are hearing people's voices in your head, telling you that you cannot be different from the person they are used to, then pull out the 10/10/10, find a new setting, and act out the part. Do not miss the chance to follow through on a decision that you might or you will. Feel the thrill of becoming the person who can say "I am, " or "I have," or "I do."



 This post is not intended to represent any person or organization other than Paul M. Mastrangelo.

This Band of Ethical Heroes (1/3) - Sleeper Agents

Imagine a movie set in a world where chaos and evil are everywhere, ethics are just about not getting caught, and one person is fighting for change. As our hero faces obstacle after obstacle, he comes across other rebels, and they form a rag-tag team that fights for justice and truth. Is this a trailer for a fantasy action thriller, or is it your reality and mine as we seek ethical behavior and social justice in our everyday world? 

Okay, our world still has ethical and moral standards, there are many sources of good left to be found, and we rarely have to act like action heroes to do the right thing. Still, "doing good" is under attack. 

Look at the business world. Despite a growing sense of corporate responsibility, companies face tremendous pressure to make continuously more money, and that pressure leads to behaviors that do not always meet ethical and moral standards. The large scale examples are obvious (e.g., Enron, BP and its suppliers, NECC), but even poor customer service and poor product quality are arguably failures to do what is right. Look at how workers and students treat peers - Bullying and cyber-bullying alienate people to the point where they consider suicide, school shootings, or workplace violence. (These last three links lead you news stories in the past few months alone). Even the most respected and virtuous of our organizations - the Catholic Church, Penn State University, the Boy Scouts of America - have difficulty policing their own members to ensure pedophiles do not abuse children (See Frank Bruni's Op Ed in the September 10, 2012 NY Times). 

Don't kid yourself. You and I are called to be ethical heroes everyday. We are likely to be surrounded by people who pretend to be unaware, or who decide it is not their problem, or who show passive complicity with a wrongdoing. Do we step up? Do we break the silence? Do we ask if anyone else feels uncomfortable? Do we say "No, I have a problem with this" without waiting for someone else to take action? We all like to see ourselves as the hero in the story, but being the hero requires more than fantasizing. We all want to believe that there is a hidden team for good out there, but they will not recognize us as part of that team unless they see that we are worthy. 

There are three phases in becoming an ethical hero. First, an ethical hero must be able to recognize what is good even when isolated from any support, like a sleeper agent. Second, an ethical hero must take action in supporting good, even when surrounded by reasons for not acting. Third, an ethical hero must transform from a lurking sleeper agent to a public beacon for other agents. This post describes the ethical hero as sleeper agent.

Ethical Sleeper Cells

After the attacks of September 11, 2001, the terms "sleeper agents" and "sleeper cells" were frequently used in describing the mission of the terrorist group Al Qaeda. I detest their mission of violence, but I am fascinated by their organizational structure. Their vision was formed by centralized top leaders, but the vision was executed by many decentralized local leaders who often had limited communication opportunities to stay coordinated. Think about that. In an environment with an increasing number of changes and variables, a loose organization of poorly connected agents exceeded their lethal, unspeakable goals. Well, what we need is that kind of organization, but with a morally "good" cause. In order to create "ethical sleeper cells" who loosely connect to ensure that people do the right thing in their everyday lives, there needs to be the same unified alignment. With so much work done in isolation, it is easy to lose direction either consciously (e.g., giving up the fight for lack of visible progress) or unconsciously (e.g., thinking your actions are right when they are not). To be that hero, that lone wolf who builds a connection of other isolated agents of good, there needs to be a code that the agents identify with and align to. If you are living the code, then you are connected to other agents even if you don't know it.

There are many possible ethical codes from philosophy and religion, but I learned a process for making ethical decisions back in my high school. I have never seen it anywhere in books, and I have lost contact with Mr. Poissont, who taught me the concept. (If anyone recognizes this, please let me know!) Still, this process is one I would recommend for anyone who is uncertain about what is the right thing to do, and I believe this is the code that an isolated ethical sleeper agent needs to ensure alignment to good.

I.C.O.C. = Issue, Circumstances, Options, Consequences


There are four considerations in deciding how to act ethically in any given situation. One should consider the Issue in general, the Circumstances surrounding the decision, the Options that one has in choosing to act, and the Consequences of one's actions.

1. Issue. We frequently debate the morality of issues, such as gun control, abortion, or capital punishment. Even the basic morals that we teach our children can be considered to be general issues: Don't take things that are not yours, Treat others the way you want to be treated, etc. There is not always a clear consensus on issues, but most of us tend to know when we could do something that other people may not agree with. Let's face it; Many moral issues tend to be polarizing, and the two sides often debate to the point of demonizing each other. Let's sidestep all the debating for the sake of explanation. Why not define the ethical stance on an issue so that if anyone considers a specific behavior to be ethically wrong, then that behavior cannot be a universal truth. So, murder is wrong, and we should generally avoid killing another person. Likewise, there are positive ways of expressing what is ethical. For example, we should generally respect the fact that life is precious and cannot be rekindled once it is gone. Ethical heroes keep an open mind and try to find common ground when judging an ethical issue.                                                                                                                
2. Circumstances. Most people agree that even when a behavior is ethically wrong, there are situations where that same behavior can be considered as not wrong. If someone were to be attacking a child with intent to kill the child, few people would find us at fault if we killed the attacker. Even though murder is wrong, killing someone to save an innocent life is a circumstance that alters the evaluation of the issue. Again, the infinite list of circumstances that surround an ethical issue will not always produce a universally accepted "exception" to the rule. However, the possibility of circumstances affecting the decision is itself well accepted. When faced with an ethical dilemma, remember that our circumstances may open a door that we generally consider to be closed. (We are wise to remember this aspect before harshly judging other people's actions.) Ethical heroes examine the unique aspects of the situation and carefully weigh what should and what should not affect the ethical decision at hand.                                                                                                     
3. Options. The number and type of options that we have available also affect the ethics of our actions. Choosing to do something when there are countless available alternatives is different from doing something because there is no alternative. Therefore, one of the best things we can do when facing an ethical dilemma is to generate as many options as possible. A creative solution, or "third way," can produce an ethical outcome when none had previously seemed available. Ethical heroes should be sure to review and create as many options as possible.                                                                                                                                                                                       
4. Consequences. Breaking the rules in order to achieve good is a fourth consideration for an ethical decision. Stopping at every stop light is hardly the right thing to do if it keeps our dying passenger from reaching a doctor. The end can justify the means, and the end can condemn the means. Such was the case at Penn State University, when people who knew of the abuses allegedly met the minimum requirements of what they should have done (legally, for example) but failed to do more when no changes were made. It seems that we can very easily misjudge consequences. Murderers can believe that the world is better off with their victims being dead (e.g., the attacks of September 11, 2001), and the pious can believe that they tried to do something even when much more was needed of them (e.g., Catholic church officials failing to expose sexual predators). Ethical heroes think critically about the consequences of their action and their inaction, even when (especially when) it would be easier to look away and hope for the best.                                                                                               

When you recognize that you are facing an ethical issue, and you or the people around you are not sure what the right thing to do is, work through the issue, the circumstances, the options, and the consequences as if they were the script for the ethical hero. I am reminded of the David Crosby song "Hero" and the line that says "He never wondered what was right or wrong. He just knew. He just knew."  If we want to form a band of ethical heroes, we need to know, too. Life won't be as simple as a movie hero's decision, but at least we can work through this process and then make our stand. 

NEXT:  The difference between knowing what is right and doing what is right.


This post is not intended to represent any person or organization other than Paul M. Mastrangelo.

This Little Light of Mine

After a long hiatus, I am writing today with a slightly different purpose. This past year I have focused on approaches to changing organizations, mostly from an HR perspective. Since November, I have been focused on a different form of change. My wife has been diagnosed with cancer, and I see change in a more personal light. I am seeing how short term and long term goals must be changed. I am seeing how personal identities must be changed. I am seeing how fast and how painfully slow change can be. I am seeing how I need to change.

I believe these changes have been brought to my life as a wake up call. "Yo, this is God. What are you doing with your life? Your life full of conveniences, mobile technology, and career mindedness? There is more going on in this world. You have a higher purpose. What you thought was important may not be so. Check yourself." 

It's one thing for me to write about spreading change across many, but it is another thing to be doing it. Furthermore, what change is worth spreading? For what cause do I believe in so much that I am willing to go public and attempt to influence others? How can I do more?

I am inspired by positive responses to the recent tragedy in Newtown, Connecticut, where Ann Curry suggested that people engage in 26 acts of random kindness in honor of the 26 innocent victims in Sandy Hook Elementary School. Passing on kindness is not new. Recall the public campaign Pass It On. These consist of the same infectious change techniques that I have written about (e.g., here and here and here) and that have been discussed by Malcolm Gladwell, Robert Cialdini, and others. I am also inspired by Corporate Rebels United, which I have Tweeted about recently. This is a small cross-organizational organization consisting of individuals who want to spark innovation across all of their employers- almost like a secret society for spreading creative thinking. 

Just after the sad news from Newtown came more sad news on Christmas Eve from Webster, NY - just a couple miles up the road from where I live, the town in which I send my son to school, the place where my wife goes to shop and my daughter has sleep overs with her friends. A deranged man set fire to his house to lure fire fighters into range so that he could shoot them. Two men lost their lives (Michael Chiapperini and Tomasz Kaczowka), and two more were critically injured (Joseph Hofstetter was shot in the pelvis and Theodore Scardino was hit in the shoulder and the knee).

Ladies and gentlemen, we need more "good" in our world. *I* need more good in the world, and *I* have not done enough about it. A candle that is covered gives no light and eventually dies out. A candle that is visible can light up a room, especially when that one flame can light an infinite number of other candles. 

So, why can't I form an organization of individuals committed to spreading good into organizations, far and wide? We need more good. We need more drivers who stop traffic to let others make a left turn. We need more shoppers who offer their unused coupons to others in the store. We need more volunteers who help isolated people in need of attention. We need more coworkers who remind us of the right way to do our business. We need more citizens who band together with people who differ in opinion, but share a common interest in improving our communities. We need a secret society whose purpose is to infiltrate all organizations in order to create more good. Where there is more good - more visible acts of goodness - there will be more faith, more hope, and more charity. 

This year expect stories, ideas, and (hopefully) my own experiences related to spreading what is good. It starts with me. I am praying daily, and I keep asking for the courage to act. Thinking about good is not enough. This tiny, barely significant little light of mine. I'm going to let it shine. Let my flame light yours, and go do the same. 

Post your efforts using #ChangeAtWork tweets at https://twitter.com/paulmastrangelo and/or posts on http://www.facebook.com/ChangeAtWork ... Be the change at work!



This post is not intended to represent any person or organization other than Paul M. Mastrangelo.

10 Next Practices for Creating Return on Investment from Employee Surveys

Many organizations survey their employees regularly, but they have different reasons for maintaining the survey process. Often leaders just want to assess employees’ satisfaction or engagement. Their logic is that research suggests that those metrics are leading indicators of performance, so it seems wise to measure them. As they say “what gets measured gets done.” Sure enough, the prevailing wisdom is that organizations need to identify “drivers” of employee engagement in order to find ways to maximize that score. By maximizing engagement, revenue will increase, efficiencies will be implemented, and profits will rise. It’s all very nicely packaged – survey to measure engagement, take action to improve engagement, repeat. The problem with this logic is that it assumes that all of the organization’s problems can be solved by having employees try harder (i.e., commit more time and effort to what the organization needs). What about aligning efforts, collaborating across silos, and being nimble? I see many organizations that have high levels of engagement, but still suffer execution problems. Does this mean that the employee survey is not worth the effort?

 

There is a growing set of progressive organizations that get return on their survey investment, but they treat the employee survey quite differently. Ask them why they survey, and they do not talk about putting all their energy into maximizing employee engagement. Instead, they talk about the survey as an investment that lets them learn about themselves so that they become better at what they do. At first blush, this sounds the same as what you would hear in any company that uses employee surveys. However, for the vanguard organizations, the emphasis is not on improving survey participation, not on increasing survey scores, and not on achieving 100% engagement. No, these metrics are good dashboard indicators, but they are not end goals. The reason these organizations survey their employees is to directly improve business performance by addressing opportunities and threats. Further, the survey is not just about employees telling leaders what is working and not working. Rather, the survey leads to a collaborative process of solving problems that creates return on investment – leaders and representative employees targeting the right actions in the right places with the right people in order to make the organization better. Oh, and along the way, the employees who were frustrated by their inability to more effectively do their jobs become completely bought into the process and more engaged in their jobs. Use the survey to improve performance, and as a byproduct, you will get improved engagement. See the difference?

Here are 10 techniques that are "Next Practices" for creating ROI from the employee survey.

 

1. Use the survey to create a dialog that identifies where your organization wants to be and where it currently is. Which gaps are most important right now, given the current business context? Survey analytics (e.g., norms, driver analyses) are helpful, but they should be conducted after ascertaining what topics are most related to opportunities and threats that face the organization. If prices are dropping in your industry, then topics related to cost efficiencies may be the most important feedback the survey provides. This focus on business outcomes also applies to departments and subunits. Instead of the IT department blindly focusing on improving engagement scores, for example, why not have them work to improve the speed of product specification changes so that Supply Chain can reduce the warehouse costs of keeping unwanted product? The survey provides an opportunity to improve coordinated effort by examining inside information about how your organization works. Think about how valuable your competitors would find this data, and then find a way to fully realize its potential for yourself.
2. Spend more time on the creation of action goals. Use the survey to prioritize one or two goals that will be evaluated based on organizational performance metrics other than the survey (e.g., measures of efficiency, sales, profit, cost savings, customer behavior…), and be sure to define what successful goal attainment looks like (e.g., a 50% reduction in Lost Workdays within 6 months). While many organizations realize that ROI comes from post-survey actions rather than the survey itself, they typically set targets as if the survey scores are the end goal. A goal to improve the engagement scores of the customer service employees is not obviously and directly related to improving the performance of the customer service department. As soon as things get busy or another initiative rises to prominence, the employee survey goals will be forgotten. A better post-survey action would focus on a clearer performance indicator, such as the ability for employees to solve customer problems without waiting for approval. Furthermore, the target should not be to improve that survey question by 5 percentage points. The ultimate target is to reduce the number of customer service calls escalated to senior representatives or to reduce the number of cancelled customer contracts. Yes, the survey is a leading indicator of performance, but evaluating your actions should be based on the actual performance metric.
3. Use a series of action plans that are designed to attain the same goal. Start with simple, low-budget actions that are easy to implement and can be evaluated quickly. Then, progress to more complex actions as necessary. Early successes can be used to gain support for more complicated changes. Creating post-survey actions can easily become an exercise in checking the box. Did you write a plan? Did you try to implement the plan? Did you cover your butt so you cannot be blamed for lack of trying? It would make more sense to have fewer leaders responsible for reaching a specific improvement goal, but to assure that these leaders do not stop until the goal is reached. Creating one action plan to create a change seems half-hearted. When President Franklin Delano Roosevelt was planning a US recovery from the Great Depression, he famously designed multiple plans and vowed to keep whichever ones worked while scrapping those that did not work. Post-survey actions should be planned in a similar fashion, with simple efforts coming first followed by more complex efforts. If problems are completely solved with a quick solution, then great. If problems are only partly addressed with a quick solution, then use the momentum to built employee support for a better solution. If problems are not solved with a quick solution, then use the failed efforts to better understand what will work.
4. Use words and phrases that will clearly communicate to employees what they are supposed to do differently and to what standards. Eliminate any ambiguity about what you are asking them to do. Much has been made about the need to communicate why changes are necessary, and indeed individuals will be more motivated to change their behavior if they believe it will lead to something better. However, motivation needs to be directed with specific instructions for what the new behaviors and new standards are to be. Assuming that the definition of success has been defined at the aggregate level (the total organization), that target must also be translated and refined down to lower levels of the organization and the individual employees themselves. Furthermore, the reward system, the training/development opportunities, and the priorities of the management chain must align with these goals. Only then will employees know that the organization is serious about change initiative.
5. Involve as many employees as realistically possible for action planning and execution. In large groups, try using peer-nominated teams to create plans. Volunteers and assigned champions are not always perceived as being in touch with the larger group. Research has consistently shown that individuals are more likely to commit to be part of a change effort when they see themselves as having a role in the process. While survey posters and campaigns often tout how employee feedback will contribute to a better workplace, the decisions about how to react to the feedback often appear to be removed from employees. Really, the people who are in the best position to determine how a change can be accomplished realistically. Leaders should be collaborating with employees to unearth great ideas and to create buy-in to the process.
6. Have employees help you communicate what they have done in support of the goal. In a change project leaders send out emails, hold chat sessions, and convene town hall meetings in an effort to communicate what is being done. These are good practices, and they should be continued if not increased. Continually sharing successes as well as missteps that need correcting builds a climate of openness and trust. What many leaders (and communication VPs) overlook is the opportunity to project how there are many employees joining the effort to achieve the goal. By showing the groundswell of support, you build the social norm and pressure the doubters to join the campaign. Having lower level employees showcased as examples of “peers” who are making the change real will have even a strong effect on those doubters.
7. Use short notes or meetings to provide ongoing feedback to individuals (or groups) about their progress toward the goal compared to others’ progress. Here is where front-line supervisors can really help support an organizational change. One easy example comes from research on social norms. Let’s say there is a new procedure being introduced in a factory. Have the supervisor show a direct report her assembly time in comparison to the organization average. If she is below average, then the feedback will show her that her peers have progressed more quickly, and that she is in fact holding them down. This creates pressure to work harder or get help. If the employee is actually above the group average, then the supervisor has to use a different tactic so that she doesn’t relax her efforts and reduce productivity. This can be done by reminding the employee that she is doing exactly what she should be doing. Even a simple happy face J or sad face L will work can send an evaluative message that also creates pressure to keep up the hard work.
8. Remember that your organization may include employees from different jobs, backgrounds, and cultures. Often these situational differences affect how people perceive the workplace and changes to the workplace. Find a way to get honest feedback from all segments of the population. Note that people from different cultures have a different approach to taking employee surveys. In Japan employees use the midpoint on a survey far more frequently than do Americans. Their scores will be lower even though their perceptions may be just as favorable. Employees in Latin America are far more likely to use the top level response, suggesting high favorability. Likewise, you tend to see higher scores among Sales and HR functions, and you often see lower scores from ethnic minorities. How do you know if these highs and lows really represent true feelings about the work environment (and are not just a methodological phenomenon)? Well, follow up with these employees to see if they have the same joys/frustrations as found elsewhere, or if perhaps they experience a different situation.
9. Be persistent with the goal, but flexible in how it is achieved. Some people will need to change their thinking before they change their behavior, and they may need to discover their own way of helping out while maintaining their social stature and sense of worth. Think about the last time that you truly vowed to eat less, work out more, or stop smoking. Did you have setbacks? Did you have to figure out a way to change your routine in order to “trick yourself” into achieving your goal? Well, the same can hold true for employees who have cognitively committed to an organizational change, but have yet to behaviorally commit to change. Being transferred, even temporarily, to a group who has changed their behaviors can help these folks make the switch. Suggestions from peers and some form of “support groups” can also help.
10. Make sure to include methods that will sustain new behavior even after the goal has been achieved. Consider whether recognition, reward systems, and new goals will continue to motivate employees to keep up the good work. Changing the way you do things can be very tiring, especially if you work in isolation from other peers or even your supervisor. To make a lasting change, the very culture of the organization has to help maintain an individual’s effort. Have employees help you see their point of view, their situation, their environment, and you may realize that the “organization” has not changed in a way that supports the organizational change facing employees.

 

This content is protected by the 1976 Copyright Protection Act of the United States of America. The proper citation for this blog is as follows: Mastrangelo, P. M. (date posted). Title of Post. The First Domino, available at http://the-first-domino.blogspot.com. This post is not intended to represent any person or organization other than Paul M. Mastrangelo.

Engagement In My Dreams

Last night I had a dream about meeting two Chief Human Resources Officers (CHROs) from two separate companies. We were at an airport bar waiting out a lengthy flight delay while fortifying our bodies with the local brew. On my right was the CHRO from a company called Ideal, Inc. They were very successful as a B2B service provider, but they were not very flashy in marketing or employment branding. They had good profit margins, although not close to the highest in the industry, probably because they believed in overstaffing projects. Their customer retention was at 93% annually, which was the envy of their competition. They favored hiring applicants with specialized degrees and at least a year of experience in the business. Because of their overstaffing philosophy, newcomers were able to join an established team of experienced employees on actual projects. The team members’ performance was partly based on how well they developed the new employee over the first two years. Then, the new employee was given more leadership responsibilities and the task of supporting another team that offered different services. In this way the employee collaborated with more staff, learned about other services, and potentially brought back ideas to his or her home team. Another characteristic at Ideal was that 90% of employees had customer facing duties. Indeed, employee performance ratings were also partly determined by customers’ ratings from 360 feedback surveys and their responses to phone discussions with team leaders about delivery.

I was intrigued as I grabbed the last of the pub mix, so I asked the Ideal, Inc.’s CHRO about how they maintained employee engagement.

The CHRO smiled and said “Engagement just happens. We don’t worry about creating it. Our employees meet challenges from our customers as well as facing challenges from internal changes in technology, delivery and so forth. In HR I try to foster our leaders’ two-way communication with employees about these challenges. If HR helps leaders and employees collaborate to solve problems and eliminate frustrations, then the company’s performance improves and the employees know that they are the key to making it happen. Engagement is a byproduct of getting good employees—ones who love what they do—to partner with democratic-style leaders who see themselves as working for their employees. We occasionally arrange lunches or happy hours to celebrate achievements or sometimes to let off steam about what we do, but helping people do their job is our engagement strategy.”

At this point in the conversation, the CHRO on my left nearly dropped a full glass of IPA. This was a CHRO from a different B2B service provider called AveragCo.

"Wow. That is not my experience as a CHRO at AveragCo. As a company we are always looking to make our employees have fun at work, balance their personal lives with work duties, and promote our brand. You know, half-day Fridays, contests, giveaways. I guess we have to, really. I mean our engagement scores are high, but I never feel as if our employees are excited by what we do. We have more layers at AveragCo, and less than half of our employees are customer facing. They get their performance ratings from objectives that are cascaded down from the top. That seems like a good idea, but employees complain that the measures we use are at a level too high to indicate good or bad employee performance. Like today, I had a guy complain about his rating because the customer he works with was the first to transition to new software we provided from a new third party supplier. He worked like a dog tracking issues and bugs, but he had no power to make our supplier move more quickly to make the fixes. Naturally, this customer gave us some lousy ratings, which means this employee got a lousy rating. The only recognition we provide is through bonuses, so he felt punished for working twice as hard. Lucky for us the job market is so horrible, huh?”

Now it was the Ideal Inc. CHRO who nearly spilled the suds.

“Well, no wonder you have to worry about engagement at your company! If your employees feel stuck in their jobs, they are powerless to improve performance, and they are de-motivated by the company’s performance process, then of course they will unplug.”

The AveragCO CHRO shrugged and said, “Well, we have a different hiring philosophy than you do. We hire young, smart people and work them hard until they decide they have had enough. It keeps our salaries lower, and our profit margins higher. I know it sounds a bit cruel, but sometimes a business strategy does not focus on developing talent.”

“Wait, a minute,” said the Ideal, Inc CHRO. “I thought you said that you were constantly working to engage your workforce? And you just said that you were lucky that the job market isn’t better. What is the ROI for your engagement strategy, if you can call it that?”

I cringed a bit. I didn’t want to have an HR bar brawl emerge in front of my eyes, especially as I was in the middle of the two of them. Luckily, the AveragCo CHRO seemed to ponder the words as if never really thinking about it before.

“Hmm. ROI on engagement. Well, we use a survey that has been researched by the vendor. High engagement corresponded with higher profit, higher revenue, and better performance. So, we just worry about keeping our engagement scores as high as possible.”

There was a pause and a sip of beer (still no more pub mix) before we heard more about AveragCo.

“It is funny, isn’t it? We actually feel that our turnover is not high enough! Yet, the only thing that our leaders come to HR about is improving engagement. For us, that is mostly about intention to stay, because this is the easiest correlation for us to make within HR. We know that higher engagement is associated with lower turnover, but… you’re right. That’s not our problem. Energy level, collaboration, performance… those are our problems.”

The Ideal CHRO then said something that really stuck with me.

“Maybe you are engaging people the wrong way. The fun and the work/life balance might promote staying at the company, but it is probably taking away from being absorbed in one’s work. We’ve got this guy in our office who genuinely loves his work—forgets what time of day it is, always looking to help other employees, always thinking that there must be a better way for us to get things done. I asked him why he does these things. He said the work is something that fits what he does well and what he likes to do. Plus, his boss trusts that he is going to make good decisions that help the company succeed. He said it’s like everyone is a leader at different times, and everyone is a follower at different times. When he comes up with an idea that will save time or create a new service, his boss becomes the follower who helps make that idea a reality. Then, his boss becomes the leader again by setting up tests to see if the idea should be adopted or discarded. They are completely aligned on the same goal, so there is no need for formal ‘you do what I say to do’ leadership.”

“But how can HR make that happen?” asked my new friend from AveragCo.

“We hired a good fit for the job, but also a good fit for what the job would become in the future. We developed our leaders to change the way that they lead. Leadership, at Ideal, is about sharing information and decision making. The leader’s job is to foster teamwork, encourage new directions, and help individuals play their roles… and to change those roles when an opportunity pops up. Think of the Beatles, right? John Lennon formed the band and was the leader, but he brought in Paul McCartney because it made the band better. He let everyone write songs and use different instruments. He was completely open to new possibilities, some of which he would not have chosen.”

“John Lennon hated ‘Ob-La-Di Ob-La-Da’ you know,” I proudly pointed out, feeling good to add such value to this conversation. I grabbed at the pub mix the bartender just placed in front of me.

"My point is,” continued our Ideal spokesperson, “if you want to have the best band in the world, then you bring in good people, you trust them, and you partner with them to accomplish your shared goal. If you want to improve organizational performance, you do the same thing. The goals you set for your employees and the sharing of leadership to help them succeed will create employee engagement and make your company more… Ideal like.”

That’s when I woke up, still tasting the salty peanuts and spicy snacks. I wonder if the AveragCo will become more Ideal, or if only in my dreams.
This content is protected by the 1976 Copyright Protection Act of the United States of America. The proper citation for this blog is as follows: Mastrangelo, P. M. (date posted). Title of Post. The First Domino, available at http://the-first-domino.blogspot.com. This post is not intended to represent any person or organization other than Paul M. Mastrangelo.

Using Twitter at the SIOP Conference for a Better Learning & Networking Experience

The Society for Industrial and Organizational Psychology (SIOP) is holding its annual conference from April 26-28 in San Diego, California. This professional society is dedicated to the science of psychology applied to work and organizational settings, with sessions focusing on HR, OD, and personnel research and practice. This posting is to help those of us who are SIOP members (and those of you in HR and OD who are not SIOP members) connect better during and after the conference. Specifically, if you are new to Twitter or to Twitter Chats, then this posting will help you ramp up and have a better learning and networking experience.

First, I would like to encourage folks to use Twitter while at the SIOP conference to share ideas about sessions, note memorable moments, and share comparisons of ideas across sessions. By attaching the hash tag #SIOP, anyone can filter tweets to see all the latest conference comings and goings. If you have not used Twitter before, my experience from last year is that the conference tweets were really helpful in making the large conference feel smaller. I met folks for coffee, and followed people with similar interests to my own.

In Case Twitter is Greek to You...

Would you like to experiment with Twitter at the conference? That's what I did last year. All you need is a free Twitter account and to connect with me (click here). Once you have a Twitter account, nothing really happens until you follow others (for example, you can follow SIOP by searching for @SIOPtweets on Twitter and then clicking on "Follow"). Then, anything that is tweeted by a person/organization that you follow will automatically come to your Twitter account. At a conference (or any live event for that matter), you can use your smart phone app to post messages on Twitter (which are known as tweets... yeah, it's corny, but you get used to it).

You can tweet messages outward by clicking on the "Compose New Tweet" button and typing in a message. All tweets must be 140 characters or less, and that includes any "hash tags," which are like labels that people use to search for a topic. If everyone at the SIOP conference uses the #SIOP hash tag when posting about the conference, then anyone on Twitter can search using that hash tag and see all the postings. Learn more about Twitter here.



Twitter Chat Session


Second, I would like to announce that I will moderate a Twitter Chat session on the last day of the SIOP conference, which is Saturday April 28, 6:00-7:00 PM Pacific Time (just after the ending session by Albert Bandura!). Some discussion points will be:


- Q1 Reactions to Bandura's presentation


- Q2 Most helpful sessions at conference (so others can request papers, get audio record)


- Q3 Contradictions and unresolved issues


- Q4 Suggestions for next conference


- Q5 Seeking collaboration for research and/or 2013 submissions


- Q6 Other thoughts/ideas/comments


Again, if you have no experience with a Twitter chat session, don't worry... I have only participated in one myself, but it is REALLY easy to join and if you are bored to tears, it is really easy to leave.

A Twitter chat is nothing more than a preplanned time for interested parties to search for the tag that will be used for the chat session. In this case, I will use the same #SIOP tag. So, if you search for #SIOP between 6:00-7:00 pm PDT on April 28, then you will see all the postings as they happen. In fact, you can search and read the postings afterwards, too.

If you want to not only read these postings, but contribute to the discussion, all you have to do is (again) tweet your response to the current topic and include the hashtag #SIOP. It's that easy. When you see a tweet that you want to comment on, you can just hit "Reply" and Twitter automatically includes the @ symbol followed by the person who tweeted.

I will moderate the chat session by introducing questions/topics by number (as in the Q1 to Q6 list above) so that participants can include the number in their tweet as well. If you see my tweet, you can just reply and include the topic by number. For example:

• paulmastrangelo: Q1-What did you think about Albert Bandura's speech?
• you: @paulmastrangelo Q1-That guy rocks!
• somebodyelse: @paulmastrangelo Q1-Ugh! Wish I stayed! What did he talk about?
• anotherdude: @somebodyelse @paulmastrangelo Q1-Way more than social learning.
• paulmastrangelo: Q2-What were the most helpful sessions you saw?
• lateperson: Q1-His joke was really funny!

A Twitter session can be difficult to follow, and some sidebar conversations will pop up. But with the tags, the topic numbers, and the replies to specific people, it manages to work out well.

Hoping you will join and spread the word!!! (Follow me at @paulmastrangelo)


This content is protected by the 1976 Copyright Protection Act of the United States of America. The proper citation for this blog is as follows: Mastrangelo, P. M. (date posted). Title of Post. The First Domino, available at http://the-first-domino.blogspot.com. This post is not intended to represent any person or organization other than Paul M. Mastrangelo.

Calculating ROI for Engagement Surveys: Understanding the Potential of Analytics (Part 2)

Last month I provided an overview of analytic techniques described in the 2011 book Investing in People: Financial Impact of Human Resource Initiatives by Wayne Cascio and John Boudreau. This month’s posting will show how to use a few of these techniques to examine the costs and benefits of running an employee engagement survey.


Employee engagement is a concept defined as the logical commitment to an employer, an emotional commitment to that employer, and extra effort and energy expended for that employer. In simpler language, engagement is the head, heart, and hands of the workforce (See Mastrangelo, 2009, article in OD Practitioner, also available at HR.com). Typically, engagement is measured via an employee survey, where specific items are used to assess the attitudes, intentions, and behaviors that define the concept. One reason that employee engagement surveys are so common is because of research that showed how engagement was a leading indicator of two business outcomes. The first is what Cascio and Boudreau refer to as “participation membership” because it pertains to an employee’s decision to continue to work for the employer and to show up to work on time and ready for duty. The Corporate Executive Board (CEB: www.executiveboard.com) refers to this as Intent to Stay, and these intentions are excellent predictors of subsequent turnover. The second outcome linked to engagement is what the authors call “work strategies” because it pertains to effort and job performance. CEB refers to this as Discretionary Effort, and it is highly related to an employee’s energy level and proactive behavior at work. Obviously, if you have a survey measure that predicts who shows up and who pitches in everyday, you can detect and rectify problems as well as improve on mediocrity. How much value can the survey create? Let’s answer this question first for turnover costs and then for performance.


Survey Value from Preventing Turnover

The CEB’s Corporate Leadership Council examined data from approximately 50 large companies in 2004, and published what I consider a starting point estimate for the value of the survey. Their “10:9 Rule” states that every 10% improvement in commitment (measured through an engagement survey) can decrease an employee’s probability of departure by 9%. If you have no data from your own organization, than this finding does provide some help in estimating the potential turnover savings. If you know, for example, that each employee departure costs the company 2.5 times his/her salary in replacement costs and lost productivity in the subsequent year, then you can calculate savings based on the assumption that you can raise commitment scores by 10% in one third of the operating units. Even if you use the average salary at your company, you have an estimated monetary value based on turnover alone. The problem is that your estimate will be based on many assumptions. First, the “10:9 Rule” came from one set of companies that were studied a few years ago. Your organization is quite likely different from the “average” in this study. You would have a better estimate if you used your own organization’s data to statistically regress turnover on prior survey scores. You also might find that there are different “Rules” for different locations or jobs within your organization. Furthermore, employees from different jobs can have a much different replacement cost. The departure of highly trained employees in complex jobs costs far more than will the departure of employees in simpler jobs that require minimal skills – not to mention different job markets in different geographies. Thus, the calculation of costs could become much more complex.


Before leaving this topic of preventing turnover, it deserves mentioning that most organizations in 2012 are not experiencing too much turnover. In fact many companies tell me that there is not enough turnover. Employees who would have left the company if the economy was better have been forced to remain in jobs that they don’t want or that do not match their skills. Their performance may be enough to keep their jobs, but not enough to fulfill expectations. If your company is in this situation, turnover costs may only be a concern among high potentials and key performers.


Survey Value from Improving Performance


The same CEB Corporate Leadership Council data from 2004 led to their 10:6:2 Rule, which states that every 10% improvement in commitment can increase an employee’s effort level by 6%, which can improve an employee’s performance by 2%. Once again, I would only rely on this rule in the absence of data specific to your situation. For example, you might choose to look at the individual employee as the unit of analysis in your company’s data set and correlate individual survey scores with individual performance measures. With this analysis you would be able to show that increasing the survey score by one standard deviation would result in an increase in performance equal to the standard deviation of performance multiplied times the value of the correlation r (for example, +.35). Your estimation would be more accurate if you could use an objective measure of performance (e.g., production numbers, sales figures) that was observed at least six months after your survey scores were calculated. Note that you still do not have a monetary figure that would show the benefits of acting on the survey. To take that next step, you could rely on the rule of thumb that the difference between average performance at the 50th percentile and one standard deviation above average at the 85th percentile is equal to an increase in performance that equates to 40% of the total annual salary for that group of employees. If an increase in survey scores of one standard deviation would suggest a performance improvement equal to .35 of a standard deviation, then the monetary benefit would be .35 multiplied times 40% of the total annual salary multiplied by the number of employees whose engagement improves by a standard deviation.


Many companies choose not to connect survey scores with the performance of the individual employees who provided those scores. In those situations, you can still estimate the value of improving group performance. Instead of using the individual unit of analysis, you would aggregate survey scores for groups of employees and then correlate these figures with the groups’ aggregated performance scores. In these situations, you may be able to create more accurate monetary values because you probably have access to the difference in revenue or profit for these groups; therefore, you can calculate the difference between the average monetary value and the value for the group that is one standard deviation above the average. As long as you have a large number of groups to calculate your correlation (I would say 30 is the bare bones minimum), then once again you can calculate the monetary value of raising group survey scores by one standard deviation.


Before leaving this topic, I need to state that correlations and percentile distributions assume that the data form a normal distribution (or bell curve), and often this assumption is not met in survey data or performance data (both of which tend to be skewed toward the favorable end of the scale). Some other statistics may be required. Furthermore, there are far more complex techniques for calculating the monetary value of one standard deviation above the average performance rate. The 40% rule is by far the easiest to explain, and many believe it is reasonably accurate. Still, a lot of industrial/organizational psychology papers have been written on the dollar value of SDy, as it is known in those circles. As I said, in some cases you can get a more accurate figure with your company data (e.g., the standard deviation of individual sales employees’ revenue totals, the standard deviation of revenue across retail branches).


Return on Investment


Note that even if you calculate the benefits of improving survey scores, you have not shown ROI until you demonstrate that these benefits are greater than the monetary costs of running the survey and creating the actions that will improve engagement. You may want to consider the cost of outsourcing the survey administration and reporting, the cost of employees’ time to complete the survey, the cost of HR managers’ time to prepare for administration of the survey and interpretation of results, and the cost of leaders’ time and resources to make changes. If that sounds depressing, then consider the fact that the “shelf life” of these investments may last multiple years. Imagine if you keep a third of your high performers from leaving the organization for 3 years, and that their performance increases in year 1 and is sustained for year 2 and year 3. Now, your costs are offset by multiple years’ worth of benefits. The bottom line (no pun intended) is that calculating ROI for an engagement survey can be complicated and fraught with assumptions. Let's end on a simpler thought.


Perhaps the easiest approach, if you are looking to justify a survey project, is to estimate the total cost of administering and interpreting the survey, and then divide that figure by the number of managers who will be expected to take action on the surveys. For example, if your total estimated costs for the survey are $500,000, and you expect just 100 leaders to be held accountable for making improvements based on the survey, then your break-even point occurs when each manager saves or earns $5,000 during the same fiscal year. That is not an intimidating figure for a motivated leader. In fact, managers may enjoy collaborating with their employees to discover problems and solutions that will reach or surpass that $5,000 figure. For that matter, employees may enjoy the challenge of helping managers reach or surpass this goal. This is the type of analytic measure that leads to business outcomes, and that’s what leaders want to see.




This content is protected by the 1976 Copyright Protection Act of the United States of America. The proper citation for this blog is as follows: Mastrangelo, P. M. (date posted). Title of Post. The First Domino, available at http://the-first-domino.blogspot.com. This post is not intended to represent any person or organization other than Paul M. Mastrangelo.

The Next Big Thing in HR Is Already Here: Understanding the Potential of Analytics (Part 1)

Fads exist in fashion, music, food, travel, and also in business. Some fads become footnotes in history, while others have a lasting impact, perhaps better labeled as a breakthrough instead of a fad. Ultimately, if an idea proves to be more useful than any existing competing idea, it not only survives, but spreads as a best practice. Management by Objectives, balanced scorecards, and employee engagement are some of the memorable “must have” ideas that have left a lasting mark in the HR field. Now in our second decade of the century, many HR managers have been asking me “What is the next big thing in HR?” I do believe that we are about to see a revolutionary change in how HR contributes to organizational success, and I believe that this change is upon us now. What is yet to come is how we choose to use this breakthrough.

The big idea is analytics. You have probably heard this term quite a bit. The Obama campaign is touted for maintaining metrics on everything (see USA Today, February 7, 2012 article). IBM touts data mining capabilities that ease traffic and reduce energy consumption. Wayne Cascio and John Boudreau have an excellent 2011 book that details multiple analytic techniques (see Investing in People: Financial Impact of Human Resource Initiatives). As recently as 15 years ago, you had to look for data, and many who suffered from a statistics phobia chose not to. Now data is everywhere (not always accurate perhaps, but that topic is for another day). Google let’s you view trends of search terms used. Klout let’s you measure a person’s influence on social media (Learn more here). Websites let you track who visits the site, how long they have stayed on the page, and how they found the site. Human Resource Information Systems (HRIS) are commonly used in businesses of all sizes. With so much information available, organizations that learn how to analyze available data will be able to see opportunities and threats more quickly than ever before. The same holds true for individual employees. Learn to use analytical skills, and you will have a big career advantage. So what is “analytics” and how can you use it in your job? Let’s explore these questions.

What Does Analytics Mean?

At a basic level, analytics is about working with numbers. To measure something is to assign a number that represents some quality of interest. This is the stuff of metrics, and once you have a metric, you will likely be interested in comparing that metric within your organization as well as outside your organization (i.e., benchmarking). Before you can make a comparison, however, you have to make sure that all of your numbers are created in the same manner. This is not as easy as it sounds. Some things are more easily quantified than others, there are multiple ways to quantify any one concept, and there are typically debatable assumptions about how you quantify any concept. Don’t let these obstacles scare you; analytics is about art as well as science, and tackling these obstacles is where you can use your creativity. Any concept that you can define in words can be measured. The trick is to consider how you will assign numbers in the most meaningful way. You might measure turnover as simply as assigning a 0 to each current employee and a 1 to each individual whose employment has been terminated. Alternatively, you could separate terminations by voluntary versus involuntary by assigning a 1 and a 2, respectively. Another way to study terminations is to record the number of months that each employee was employed. These are all individual level metrics, but usually turnover is measured at the unit level. Generally, the number of turnover incidents within a company (or subunit) per time period divided by the average workforce size during that period (expressed as %). Of course the size of the workforce fluctuates by season for many companies, so an annual turnover rate uses the average of each month’s average workforce. My point here is that you may be able to learn volumes about turnover patterns and prevention, but you have to be able to create the right measure in the most accurate manner for your particular purpose.

At the next level, analytics is about the relationship among numbers. Sometimes companies are looking to test for a causal relationship, where one variable has a direct effect on another variable. For example, you might want to show that the new leadership training program improves leadership decisions for the organization beyond what they would have been without the training program. In this case, you need to eliminate other possible contributing factors, such as a leader’s experience, prior training, level of difficulty, etc. Researchers show a causal relationship via an experiment, where one variable (e.g., training vs. no training) is manipulated, several variables are held constant (e.g., the study only includes US leaders with 2-4 years of supervisory experience at this company), and some variables are monitored (e.g., knowledge measured from a test, peer and direct report performance ratings, revenue generated). If you can assign trainees to the two conditions in a random or matched manner, then you have a strong test of causality. However, if the assignment of trainees is neither random nor matched to keep each condition equivalent, then you have a weaker test of causality (known as a quasi-experiment). Of course there are times when companies do not need to show a causal relationship just so long as they can see a predictive relationship: the ability to measure one variable that is a leading indicator of some other variable. Do interview scores predict the best hire? Do engagement scores predict financial outcomes?

Finally, analytics is about money, as in Return on Investment. If you decide to implement the training program that has been found to improve leaders’ decisions, that does not automatically mean that the outcome will produce more money than the training program itself cost. The level of detail here can be incredible. Consider the following cost and benefit metrics:

Financial Costs of the training program

• Time of all HR staff to identify the program and/or trainer
• External consulting fee plus all travel and equipment involved for the trainer
• Cost of the trainees’ time based on what they would have been doing otherwise
• Cost of the trainees’ travel and equipment involved for the trainees
• Facilities cost, including any food or beverage provided
• Cost of replacement or substitution of the trainees, including reduced quality/quantity for customers (!)

Financial Benefits of the training program

• Monetary value of trainees’ individual improvement in performance (!)
• The “shelf life” of that improvement; when improvement ceases to add value (!)
• The interaction across trainees’ improvements that can create a multiplicative effect for the organization (!)
• The improved reputation, branding, or marketing advantage as a result of improvements (!)

How Are Analytics Used?

Analytics are used for three primary reasons:

1. Cost Assessment: To improve understanding of a problem or potential problem by creating a detailed method of estimated cost of current operations (and/or cost of change/improvement effort)
2. Decision Making: To make decisions about a potential course of action that could solve/improve a problem based on what is expected to be the benefit in the future (i.e., estimated future value despite uncertainties at the current point in time)
3. Evaluation: To evaluate the ratio of benefits (monetary value of making a change/improvement effort) divided by the investment (total cost of making the change/improvement) for decisions made in the past

I created a short list of techniques (listed in Cascio & Boudreau, 2nd edition, 2011, on p. 33 and described on pp. 33-46) and categorized them into these same three reasons for analytics. Note that some of these techniques can be applied to more than one of these reasons.

1. Cost Assessment

a. Types of Costs (Fixed, Variable, Opportunity) examines types of “elements” that are added up to understand the monetary cost for an organization.

i. This might be used to assess organizational performance, for example, or it might be used to help one gather all of the elements necessary to calculate investments for cost/benefits analysis (ROI).

b. Time Value of Money: As so much of the analytics in business should ultimately be expressed in terms of financial value, one must recognize that a unit of money (e.g., 1 US dollar) can produce more money in the future if it is just held in an account that produces interest. Hence, the Present Value is different from its Future Value because of compounding interest. Likewise, a Future Value (assuming the compounding interest over a span of time) is greater than the Present Value needed to produce it; this is known as Discounted Cash Flow Valuation, which is how much money now is needed to produce a future value.

i. This relates to analytics because the “payoff” for some change or improvement may come over the course of years. One must recognize that NOT investing money in a change/improvement still can provide money back to the organization.

ii. As a result, what seems like a good ROI for a change/improvement effort may be no better than if the company did nothing with that investment other than keep it in an interest bearing account.

c. Value of Employee Time: Typically, the value of an employee is difficult to assess, particularly for complex jobs. However, the accepted practice is that the monetary value of employees’ time is equal to the sum of a) the mean salary for the group in question plus b) the mean cost of benefits provided for that group multiplied by a Full Labor Cost Multiplier (which is nothing more than a portion of the fixed and variable costs invested so that the company can employ workers, such as rent of office space, manufacturing equipment, etc.)

i. The value of employee time may be used in multiple ways, including estimating the current process (potential problem), the cost of initiating a change/improvement effort, or the benefit (i.e., predicted value) of an alternative.

2. Decision Making

a. Utility as Weighted Sum of Utility Attributes: in a situation where one wants to decide among multiple alternatives for action, it is helpful to examine the anticipated value (or benefit) of each action as well as the probability that the action will result in the desired benefit or outcome. The concept is that the action which has the highest product of value multiplied by probability is the best course of action.

i. Multi-Attribute Utility Theory (MAUT) is a formula that one uses to analyze ratings of various outcomes for a business as well as the likelihood (probability) that each of several courses of action will bring about each outcome. For example, if a company wants to increase market share by 25% within two years, it may have multiple options for achieving that goal. MAUT uses stakeholers' estimations of value and likelihood of payoff to numerically rate the best course of action.

ii. Can be used to help leaders decide upon a course of action in the absence of financial estimates or existing evidence

b. Conjoint Analysis: in a situation where one needs to know the psychological value placed on a set of attributes or features in order to compare these ratings or rankings with the actual monetary value of each attribute or feature.

i. By presenting a set of employees with paired comparisons (would you prefer A or B?) that would produce a ranking of most selected to least selected options (similar to policy capturing research), then it is possible to choose, for example, which employee benefit might be added or dropped to save costs while providing the highest psychologically valued option.

3. Evaluation

a. Cost Benefit Analysis

i. A comparison of the monetary benefits for a prior action divided by the monetary investment for that prior action. If $1.5 million was created from an investment of $1 million, than the ROI is 50% (as it yielded 1.5 times the initial investment)

1. Can be used to compare different types of actions that produce different types of outcomes, such as a program that reduced employee drug abuse versus a program that increased employee engagement

b. Cost Effectiveness Analysis

i. A comparison of the monetary cost to produce a specific outcome. If one program to reduce drug abuse cost $100 per prevented workplace incident while another program to reduce drug abuse cost $85 per prevented workplace incident, than you know which yielded the more effective use of money

1. Cannot be used to evaluate programs for different outcomes

c. Techniques for understanding uncertainties within estimate values for costs/benefits

i. Sensitivity Analysis: Examines what attributes affect estimated value (utility)

1. For example, the monetary value of improving an employee selection process depends on the validity of the selection process in predicting successful hires, the average passing rate for applicants taking the selection process, and the monetary value of improved performance beyond that of the prior selection process

ii. Break Even Analysis: inserts assumptions for each of these attributes using the minimum agreed value of each

1. To avoid endless debate, the analysis might assume a validity coefficient of .25, and average passing rate of 60%, and a value of improved performance of 20% of average salary for the job in question.

2. If using these minimum values, the benefits of the change more than pay for the costs, then any improvements in these attributes (e.g., higher validity) would just improve ROI.

a. Note that this technique can also be used as a decision making process if there is research or prior knowledge about the change/improvement effort BEFORE it is implemented at this particular company.

Click here to read how to estimate ROI for an employee survey.




 

This content is protected by the 1976 Copyright Protection Act of the United States of America. The proper citation for this blog is as follows: Mastrangelo, P. M. (date posted). Title of Post. The First Domino, available at http://the-first-domino.blogspot.com. This post is not intended to represent any person or organization other than Paul M. Mastrangelo.