GMJ Reports that Large Companies Could Boost Productivity $13 Million Annually by Creating a "Small Company Feel"

New York, September 17, 2001 -- Major corporations could improve their workforce productivity by millions of dollars by fostering a "small-company culture," according to new research published in the current Gallup Management Journal (GMJ).

For example, if the employees in a 20,000-person company were as engaged with their work as a 49-person workforce, their productivity would add as much as $12.96 million to the bottom line annually, GMJ reports. On a smaller scale, if a company with 5,000 employees could match the engagement level of a company with fewer than 50 workers, its productivity would increase by $3.24 million per year. The Gallup Organization defines "engagement" as a feeling of being fully involved in one's job.

These findings appear in the article "Think Big, Act Small," in the GMJ fall issue, now in the mail to more than 130,000 senior executives and leaders in academia, media and politics.

Gallup has measured engagement for employees at small and large companies for the past three quarters. The key findings: Engagement is highest (33% of employees) at companies with fewer than 50 workers. Engagement is lowest (22%) at companies with 1,000-5,000 employees.

In addition, at companies with 1,000-5,000 employees, 19% feel actively disengaged -- that is, fundamentally disconnected from their jobs -- vs. 12% at companies with fewer than 50 workers.

All isn't lost for large companies, GMJ reports. They can replicate a "small company feel," particularly at the work unit level. But GMJ cautions that in units of fewer than 10 people, engagement will soar or sink depending on the individual manager. That's because in small groups, each member keenly experiences a good manager's ability to communicate and motivate -- or a bad manager's incompetence.

The research into best friends turns conventional wisdom on its head. "You frequently hear managers say they hire people to work, not to make friends," says Dana Baugh, a Gallup managing consultant. "The assumption is that workplace friendships aren't necessary and may even get in the way."

When Gallup administered its 12-question employee survey -- dubbed the Gallup Q¹²  -- to a random sample of U.S. workers 18 years or older in late 2000 and early 2001, 51% of participants who strongly agreed with the statement "I have a best friend at work" were engaged, compared with 10% of those who disagreed or strongly disagreed.

Gallup has found that across companies, profitability and customer loyalty are "strongly associated with a high incidence of best friends in the workplace," says James K. Harter, a senior research director at Gallup.

Lawrence C. Kleinman, chief of human resources at software giant SAP Americas, has begun to crack the code. Using a new series of metrics designed by Gallup to identify the sources of turnover, Kleinman and Gallup created a talent management scorecard that enables Kleinman to test the revenue consequences of his human capital investment options. Their groundbreaking work is highlighted in the GMJ article "Turning Up Your Talent Engine," which appears in the fall issue.

Here's one thing Kleinman has discovered already: By increasing the percentage of top performers who stay at least three years on the job, SAP could boost sales from $86.9 million to $271.6 million.

Kleinman calls the metrics he and Gallup devised a "dashboard with dials," and the dials include such individual employee variables as aptitude for the job and length of service with the company. Says Kleinman, "I can play with the dials and see which produce the most return."

Other features in the GMJ fall issue include:

• Arthur Levitt on Grasping Intangibles -- The former SEC chairman writes that although investors need more disclosure on intangible assets, they also need the benefits of traditional accounting. He cautions against the New Economy hype that led many investors to mistake pure potential for actual payoff.
• Don't Promote Your Stars -- Too often, companies reward their top people by promoting them, but this can be a colossal mistake, especially if those people aren't a fit for management. Gallup's Don Clifton argues that rather than promoting great performers, companies should let them stay put -- but give them a heftier paycheck -- and a new Gallup poll shows that most Americans agree.
• Who's Answering the Phone? -- A company's fortunes hang on the talent of its call-center employees. That's because a mere ten seconds with a poorly trained phone rep could cost a company a customer it's been courting for years. GMJ draws attention to the critical value of properly managing, motivating and rewarding these employees in the nation's fastest growing job sector.

GMJ is an online journal published by The Gallup Organization. The annual subscription price is $95, which includes weekly e-mail columns on management and full access to all content on http://gmj.gallup.com.

The Gallup Organization, with world headquarters in Princeton, N.J., was founded in 1935 and has grown to become one of the world's largest management consulting firms. Its 3,000 employees serve in 34 offices, including New York, Washington, Boston and 10 other cities in the United States and in 20 others around the world. Gallup's core expertise is in measuring and understanding human attitudes and behavior. Gallup applies this expertise to help companies improve business performance by leveraging their employee and customer assets. Gallup also conducts The Gallup Poll, the world's leading source of public opinion.

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