Four reasons CEOs don't act to improve people management

A question cropped up for me while pondering the very high levels of employee engagement enjoyed by some firms but not others. According to Gallup's assessment of exceptional workplaces, they enjoy employee engagement levels of 70% compared with the global average of 21% and still quite impressive relative to the US average of 35%. This means that such firms with the highest engagement levels have 14 engaged employees for every actively disengaged employee, or over 13x the global average.

My question feels all the more important for business leaders in Europe, since this region has the lowest level of employee engagement: just 14%. There's a lot of variability in engagement levels between firms, countries and regions.

That leads to my question:

Why are business leaders not behaving consistently when it comes to employee engagement?

We know from a number of studies that high engagement materially improves profitability, absenteeism, patient safety, employee turnover, product quality and productivity. If business leaders are all focused on improving these same metrics, then what's causing such variability?

Five academics from Cambridge, Oxford, Harvard, LSE and Stanford jointly weighed in on this topic in an article published in the Journal of the European Economic Association. According to them, about a third of the differences in productivity between firms in the US and UK was related to management practices. This led them to wonder why management practices varied so much when it was clear that certain practices boosted performance:

If the persistent performance differentials observed are more than design, then they do pose an important question as to why seemingly profit-enhancing practices are not universally adopted.

They came up with four reasons:

1. Perception. Business leaders may simply not even know their firms are badly run since there are many reasons for underperformance. That said, lots of firms are measuring engagement levels these days.
2. Inspiration. Even if business leaders know their firms are poorly managed, they may not know what to do to concretely change things for the better.
3. Motivation. The two points above relate to data-driven insight and knowledge about effective solutions. Even if leaders are fully informed, they may lack the drive or incentives to adopt better practices, especially if the pay-off isn't immediate, or if the solution is expensive. They may think about this as discretionary rather than necessary investment to future-proof their organisations.
4. Persuasion. Even if business leaders have all the information they need and are motivated to act, they may still not do the right thing because cultural change is a complex matter of persuading many people in the organisation to feel, think and act differently at roughly the same time.

This seems like a good roadmap for CEOs, especially the new-ish ones who might be most motivated to make their mark. That said, maybe it's also for long-standing CEOs who are looking to spice things up with a new initiative for an age-old problem. Where are they all on the 4-stage journey I wonder?

While wondering this, I got a sense of the problem from the excellent Listen Up report published by the Resolution Foundation earlier this year. Here's what one of the people interviewed for the report said:

It seems to be all about how competitive we can be in this market that we’re in, but they’re just forgetting about the people on the ground that are actually generating this money. We just work at 150 miles an hour, and it just keeps going and going and going.

Bad management was a common cause for complaint. Here's what the authors of the report say about bad management:

When we unpacked this further, this generally meant one of two things. First, for some of our participants, bad management looked like lack of care. Just as most enjoyed the human elements of their work, they disliked systems (and colleagues) that dehumanised them. For some, they felt their jobs were over-bureaucratised and that they were treated like a cog in a machine. Somewhat relatedly, participants often complained about being driven too hard by management. Work intensity was sometimes acutely felt, consistent with studies that have shown that the pace and volume of work has increased considerably over the years, and that this can have a serious effect on wellbeing in the workplace.

Everyone deserves the gift of a great manager: a manager who cares about them, coaches them and brings out the best in them as a result.

Turning back to the four reasons for inconsistent action. The data are not hard to find to perceive the problem. Aside from your explicit or implicit measures of engagement, your people will be telling you through anonymous online posts, absenteeism, presenteeism, product and service quality and, ultimately, resignations of the people you really don't want to lose. A few manager-as-coach solutions inspire action. The evidence of the upside surely provides all the motivation needed to make a targeted investment in managers' skills.

Finally, rather than needing to be persuaded to upskill, most managers crave investment in their abilities to boost performance and well-being. Back in 2016, an article in Forbes summarised a study of hundreds of managers:

87% of managers agree they wish they had received more training.

Let's be honest, if managers resist the opportunity to develop their people management skills at any point in their career, they're singling themselves out as part of the problem rather than the solution, aren't they?