CLC Engaging The Workforce Focusing On Critical Leverage Points To Drive Employee Engagement

Corporate Leadership Council
Engaging the Workforce

Focusing on Critical Leverage Points
to Drive Employee Engagement
Prioritizing Engagement-Driven Business Risks
Engaging Key Contributors
Targeting Drivers of Disengagement
Building a High-Engagement Culture, based on:

• Connection
• Contribution
• Credibility
© 2004 Corporate Executive Board

Council Staff
Contributing Consultants
Christoffer Ellehuus • Piers Hudson
Contributing Analysts
Thomas Bedington • Damian Smith
Contributing Associate
Corporate Executive Board Kate Elsam
2000 Pennsylvania Avenue NW Project Manager
Washington, DC 20006 Bruce Rebhan
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Victoria House
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www.corporateleadershipcouncil.com
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Peter Laub • Michelle Hoffmann • Charlene Hubbard
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Managing Designer
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Note to Members
This project was researched and written to fulfi ll the research requests of several members of the Corporate Executive Board and as a
result may not satisfy the information needs of all member companies. The Corporate Executive Board encourages members who have
additional questions about this topic to contact the Board staff for further discussion. Descriptions or viewpoints contained herein regarding
organizations profi led in this report do not necessarily reflect the policies or viewpoints of those organizations.
Confidentiality of Findings
This document has been prepared by the Corporate Executive Board for the exclusive use of its members. It contains valuable proprietary
information belonging to the Corporate Executive Board, and each member should make it available only to those employees who require
such access in order to learn from the material provided herein and who undertake not to disclose it to third parties. In the event that
you are unwilling to assume this confidentiality obligation, please return this document and all copies in your possession promptly to the
Corporate Executive Board.
Legal Caveat
The Corporate Leadership Council has worked to ensure the accuracy of the information it provides to its members. This report relies upon
data obtained from many sources, however, and the Corporate Leadership Council cannot guarantee the accuracy of the information or its
analysis in all cases. Furthermore, the Corporate Leadership Council is not engaged in rendering legal, accounting, or other professional
services. Its reports should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such
services are advised to consult an appropriate professional. Neither the Corporate Executive Board nor its programs are responsible for any
claims or losses that may arise from a) any errors or omissions in their reports, whether caused by the Corporate Leadership Council or its
sources, or b) reliance upon any recommendation made by the Corporate Leadership Council.
© 2004 Corporate Executive Board. All Rights Reserved. Catalog No.: CLC12KYSST
iii
Table of Contents
Advisors to Our Work • v
Special Thanks • vi
Letter to the Membership • vii
The Argument in Brief • x
Member Diagnostic • xiv
Council Essay: A Unique Point in Time • 1
Chapter I: Prioritizing Engagement-Driven Business Risks • 17

Practice #1: Strategic Engagement Gap Analysis • 21
Realizing that not all types of engagement are critical to business success, Intuit focuses
executive attention on the specific, critical engagement profiles needed to execute
strategic plans, actively prioritizing engagement activity that directly supports the
business.
Chapter II: Engaging Key Contributors • 37

Practice #2: Solid Performer Career Pathing • 41
* Harrison Company * identifies a group of solid performers who create substantial
value, but whose potential to rise in the organization is limited. To engage these key
contributors, the company creates career paths that better reflect their contributions
and needs.
Chapter III: Targeting Drivers of Disengagement • 57

Practice #3: Cultural Assessment Process • 61
Caterpillar’s Cultural Assessment Process diagnoses all barriers to engagement,
including those that are “invisible” to traditional engagement measurement tools such
as employee surveys.
Chapter IV: Building a High-Engagement Culture • 77

Creating a Connection Between Employees and the Organization
Practice #4: Leader Storytellers • 81
Continental seeks to strengthen its executives’ ability to connect employees to the
company’s overall strategy. Realizing that telling stories to communicate is highly
effective at building connections between employees and the organization, Continental
rolls out storytelling training to all executives.
* Pseudonym.
iv
Table of Contents (Continued)
Creating Opportunities for Personalized Contribution

Practice #5: Targeted Employee Contribution Cascade • 87
Alcoa’s Rigid Packing Division (RPD) recognizes that barriers to employees’
participation differ across levels of the organization. After recasting its culture and
restructuring its executive team, the RPD tailors communication style and desired
contribution to each level’s ability and readiness to contribute.
Driving Organizational Credibility

Practice #6: Values Realization System • 97
Realizing that misalignment between the company’s stated values and its actions
damages its credibility and disengages employees, Novo Nordisk more actively governs
the organization’s adherence to its values. A dedicated team of senior executive “values
facilitators” ensures leaders align to the behavioral and managerial standards of the
organization.
Chapter V: The Evolving Employment Contract • 109
Appendix • 113
v
Advisors to Our Work

The Corporate Leadership Council expresses its appreciation to all of the individuals and organizations who have so
generously contributed their time and expertise to our work. Their contributions have been invaluable, and we extend
our sincere thanks to all of these advisors. A partial list of participants is included below.
ABB Ltd Colgate-Palmolive Company Intuit Inc. SABMiller

Abbott Laboratories Continental Airlines, Inc. JM Family Enterprises SAS Institute, Inc.
ABN Amro Holding N.V. Countrywide Financial Corporation Johnson & Johnson SBC Communications Inc.
Absa Bank Limited CVS Corporation Johnson Controls, Inc. Schindler Elevator Corp.
Adobe Systems Incorporated DaimlerChrysler Corporation Jones Lang LaSalle Incorporated Schlumberger Ltd.
Advanced Micro Devices, Inc. Dell Inc. Kellogg Company S.C. Johnson & Son, Inc.
AFLAC Incorporated Department of Defense Koninklijke Philips Electronics N.V. Shell Oil Co.
Agilent Technologies, Inc. Deutsche Bank AG L.L. Bean, Inc. Solectron Corp.
Air Canada The Dow Chemical Company Lehman Brothers Holdings Inc. Sony Corp.
Air New Zealand Limited Duke Energy Corporation Level 3 Communications Southwest Airlines Co.
Alcoa Inc. E. I. du Pont de Nemours and Levi Strauss & Co. Sprint Corporation
Company
AmeriCredit Corp. Limited Brands, Inc. Starbucks Corp.
eBay Inc.
Amgen Inc. Lloyds TSB Group plc Starwood Hotels & Resorts
El Paso Corporation Worldwide, Inc.
Anglo American plc Lockheed Martin Corporation
Eli Lilly and Company Sun Microsystems, Inc.
Aon Corporation L’Oreal SA
EMC Corporation Sumitomo Chemical Company Ltd.
Arrow Electronics, Inc. Lowe’s Companies, Inc.
Ernst & Young LLP SWIFT
ASB Bank Limited Lucent Technologies Inc.
Fairmont Hotels and Resorts Inc. Taco Bell Corp.
Aurora Health Care Marriot International, Inc.
Fannie Mae TD Bank Financial Group
Aventis Pharmaceuticals Inc. MELCO Inc.
Federal Deposit Insurance The Thomson Corporation
Avon Products, Inc. Motorola, Inc.
Corporation
The Home Depot Inc.
AXA Financial, Inc. National Australia Bank Ltd.
Fonterra Cooperative Group Ltd.
Time Warner Inc.
Bank of Ireland Group NEC Corp.
Ford Motor Company
Toyota Motor Manufacturing
Bank of Montreal Nedcor Ltd.
General Dynamics Corp.
TSMC Ltd.
Barclays Bank PLC Neptune Orient Lines
General Growth Management
UniCredito Italiano
Bayer AG NIKE, Inc.
General Motors Corporation
Unilever N.V. PLC
Bertelsmann AG Nokia Corp.
Genetech Inc.
Unisys Corporation
BP p.l.c. Nortel Networks Corporation
Genzyme Corporation
United Parcel Service, Inc.
Bremer Financial Corp. Novo Nordisk A/S
The Goldman Sachs Group Inc.
United States Coast Guard
Brown-Forman Corporation Ontario Lottery and Gaming
Guidant Corporation
US Cellular Corp.
BT Group plc Parsons Corporation
Harrah’s Entertainment, Inc.
Valero Energy Corp.
Bureau of Land Management Pella Corporation
Harvard Business School
Vision Service Plan
Cable and Wireless plc The Pepsi Bottling Group, Inc.
Heineken N.V.
Vitro, S.A. de C.V.
Cadbury Schweppes plc PepsiCo, Inc.
Hillenbrand Industries
Volkswagen AG
Canadian Imperial Bank of Pfi zer Inc.
Holcim Ltd.
Commerce Wachovia Corporation
Philip Morris Companies Inc.
HSBC Holdings plc
Cargill, Incorporated Wal-Mart Stores, Inc.
Raytheon Company
IKEA International A/S
Caterpillar Inc. Westpac Banking Corporation
RBC Financial Group
InBev
Celestica Inc. W.L. Gore & Associates, Inc.
Reed Elsevier N.V.
InterContinental Hotels Group plc
CEMEX, S.A. de C.V. Xcel Energy, Inc.
Ritz Carlton Hotel Company
International Business Machines
Cigatem Xerox Corporation
Corp. Royal Bank of Scotland
CIGNA Corporation
International Paper Company RWE AG
Cingular Wireless LLC
vi
Special Thanks
The Corporate Leadership Council would like to express its gratitude to the following individuals who contributed
time and insight to the development of this study.
Robert Lee Cross Tom Kraack

McIntire School of Commerce Partner
Monroe Hall Accenture
University of Virginia 333 South 7th Street
P.O. Box 400173 Minneapolis, MN 55402
Charlottesville, VA 22904-4173 thomas.a.kraack@accenture.com
+1-434-924-6475
robcross@virginia.edu
Michelle Meissner
Director, HRD
Ed Jensen Continental Airlines
Partner, Human Performance Practice mmeiss@coair.com
Accenture
Suite 1100
75 Fifth Avenue, NW Haig R. Nalbantian
Atlanta, GA 30308 Principal and Worldwide Partner
+1-404-880-9100 Mercer Human Resource Consulting
edward.w.jensen@accenture.com 1166 Avenue of the Americas
New York, NY 10036
+1-212-345-5317
Douglas A. Klein haig.nalbantian@mercer.com
President
Sirota Consulting LLC
The Centre at Purchase Jeffrey Pfeffer
One Manhattanville Road Graduate School of Business
Purchase, NY 10577-2128 Stanford University
+1-914-696-4700 ext. 211 Stanford, CA 94305-5015
+1-650-723-2915
pfeffer_jeffrey@gsb.stanford.edu
vii
Letter to the Membership

Early in 2004, the Corporate Leadership Council heard a growing level of concern from members
regarding the topic of employee engagement. Members questioned their ability to sustain high levels
of workforce productivity, while an improving economic outlook presaged new challenges to members’
abilities to retain employees. The Council’s investigation into the subject comprised an analysis of more
than 50,000 employees at over 100 organizations, including more than 250 in-depth interviews of senior
HR and line executives.
The Council’s findings bring new clarity as to the business benefits of an engaged workforce. Our work
shows that engagement:
• Raises discretionary effort levels by nearly 60%
• Improves employee performance by up to 20 percentile points, raising employee performance
by one quintile
• Increases employees’ intent to stay with their organizations by five times
In the course of this research, the Council has identified leading organizations that are capitalizing on
the economic opportunity of an engaged workforce. The success of these organizations in capturing the
business benefits of engagement has been driven by their effective focus on four leverage points:
• Engagement-Driven Business Risks: Determining the specific levers of engagement with the greatest
economic impact and making difficult decisions about which employees to engage, and how to
engage them, in support of business goals
• Key Value Contributors: Expanding the organization’s definitions of value and the employees who
make key contributions, realizing that not all “key value creators” will be high performers or high
potentials as they have been traditionally defined
• Drivers of Disengagement: Before attempting to engage employees, focusing on uncovering and
removing the underlying drivers of disengagement in the organization, many of which are invisible
to traditional methods of detection
• High-Engagement Culture: Maximizing the effectiveness of organization-wide interventions
by focusing on the following “3 Cs” required of a culture that promotes employee engagement:
– Connection: Building a clear connection for employees between their work and the
organization’s success
– Contribution: Personalizing the organization for employees and offering them significant and
meaningful opportunities for participation
– Credibility: Ensuring ongoing organizational credibility by clarifying expected behaviors
for different roles, enforcing alignment of desired behaviors and actions, and strengthening
leadership credibility through behavioral support
The practices profiled in this report represent some of the most innovative and effective methods
discovered by the Council to date. Members seeking further guidance or alternative approaches to the
practices and tools profiled on the following pages are encouraged to contact the Council’s research team
for additional research and assistance.
The Corporate Leadership Council sincerely hopes that our findings offer members guidance in their
decisions and strategies for driving performance and retention by engaging employees. We look forward
to receiving your feedback and extend, as always, our continuing appreciation.
Washington, D.C., and London

December 2004
viii
ix
The Employee Engagement Series

Across 2004, the Corporate Leadership Council’s efforts focused on a central challenge for senior executives: improve
performance while maintaining high levels of retention. The Council addresses this challenge in two volumes.
Volume I draws on a quantitative analysis of data collected from more than 50,000 employees across more than 50
organizations worldwide to determine the business benefits of employee engagement and the drivers of engagement
in the workforce. Volume II identifies best practices in managing critical leverage points to increase and sustain
employee engagement.
A Two-Part Investigation
Central Challenge: Increase

engagement to drive performance
and retain employees
What are the business How can organizations

benefits of engagement, build scalable, yet focused,
and what drives engagement strategies to increase
in the workforce? employee engagement?
Volume I: Volume II:

Driving Employee Engaging the Workforce
yee
ing E
mplo d
n Performance and Retention ging
the Focusing on Critical Leverage Points
Driv rmance a ugh Enga force l Leverage
o
Perf tion Thr
n
o
Through Engagement ork Critica e
W ng on mploye to Drive Employee Engagement
Rete ement lysis Focusi to Drive E
g
Enga titative Anategies
an
A Qu gement S
tr
a
Quantitative Analysis Points ment
Engage
of En
ga
of the Effectiveness of Employee • Prioritizing Engagement-
Engagement Strategies Driven Business Risks
• Engaging Key Contributors
• A New Model of Employee
Engagement • Targeting Drivers of Disengagement
• Sizing the Opportunity • Building a High-Engagement
to Improve Performance Culture
and Retention – Connection
• Voice of the Workforce: – Contribution
Levers for Driving – Credibility
Engagement
x
The Argument
Key Findings
1 Engagement matters only as far as it drives employee performance and retention—the Council’s new
framework studies the impact of engagement on business outcomes.
2 Engagement is key to performance and retention—highly engaged employees experience performance

improvement of up to 20 percentile points, and are up to 87% less likely to leave the organization than
employees with low levels of engagement.
3 More than 1 in 10 employees are fully disengaged—actively opposed to their organizations.
4 There is no high-engagement or low-engagement “group”; demographic characteristics do not predict

engagement.
5 Dramatic differences between companies suggest that it is not who employees are, but how their company
treats them that goes furthest in determining their engagement level.
6 Emotional engagement is four times as valuable as rational engagement in driving an employee’s willingness
to commit to the organization.
7 Improving employee retention depends equally on rational and emotional engagement, as illustrated by the
importance of compensation and benefits in driving retention and its smaller impact on effort.
8 Managers play a crucial role in driving employee commitment, but the manager is most important as the
enabler of the most valuable forms of commitment to the job, organization, and team.
9 Among the top 25 drivers of employee engagement identified by the Council, most important is a clear
connection between an employee’s job and organizational strategy.
10 Organizations that successfully capture the economic benefits of an engaged workforce focus on four critical
leverage points:
• Leverage Point #1: Prioritizing Engagement-Driven Business Risks
• Leverage Point #2: Engaging Key Contributors
• Leverage Point #3: Targeting Drivers of Disengagement
• Leverage Point #4: Building a High-Engagement Culture
Source: Corporate Leadership Council research.

xi
in Brief
Critical Leverage Points Strategic Responses
Prioritizing Engagement-
Driven Business Risks
Returns on engagement practices require

a link between engagement and business Practice #1:
outcomes. Organizations should rely on Strategic Engagement
economics and business strategy when Gap Analysis
determining whom to engage and how
to engage them in support of business
outcomes.
Organizations must target investments

to those individuals who contribute the
most to the business, while realizing that Practice #2:
*
these people are not all high performers Solid Performer
or high potentials as they have been Career Pathing
traditionally defined.
Before any proactive organization-

level engagement strategy will succeed,
organizations must first identify and Practice #3:
remove the drivers of disengagement,
many of which are “invisible” to Cultural Assessment
traditional methods of detection, such as Process
employee engagement surveys.
Building a High-Engagement Culture

Practice #4:
The Council has identified three Leader Storytellers
essential components of a high-
engagement culture: connection, Practice #5:
contribution, and credibility. A high- Targeted Employee
engagement culture needs reliable Contribution Cascade
mechanisms to ensure employees are
consistently experiencing all three of Practice #6:
these elements.
Values Realization
System
* Pseudonym. Source: Corporate Leadership Council research.
xii
Engaging
Focusing on critical leverage
Leverage Point #1 Leverage Point #2
Prioritizing Engagement- Engaging Key

Driven Business Risks Contributors
Strategic Engagement Solid Performer

Gap Analysis Career Pathing
* Pseudonym.
xiii
the Workforce
points to drive employee engagement
Targeting Drivers Building a High-

of Disengagement Engagement Culture
The Three Cs of Culture:

Connection
Contribution
Credibility
Cultural Assessment Process Leader Storytellers
Targeted Employee
Contribution Cascade
Values Realization System

xiv
Member Diagnostic:
The Corporate Leadership Council has developed this brief self-test to help organizations evaluate
their mastery of the critical leverage points of employee engagement and to identify particular areas for
improvement. The diagnostic assesses the degree to which the organization is able to drive performance
and retention by engaging employees.
I. Prioritizing Engagement-Driven Business Risks Yes No

1. Does the organization understand the impact of different engagement levers on different
❑ ❑
aspects of its employees’ engagement?
2. Does the organization understand which types of engagement, in which parts of the
❑ ❑
organization, matter most to business success?
3. Does the organization tailor its engagement initiatives to align with changes in business
❑ ❑
strategy?
4. Does the organization have an effective process for closing engagement gaps where they
❑ ❑
represent a risk to business goals?
5. Does the organization hold managers accountable for addressing and resolving
❑ ❑
engagement-related risks?
II. Engaging Key Contributors
6. Does the organization have a clear understanding of how different employee segments
❑ ❑
contribute to business outcomes?
7. Does the organization understand different groups of employees’ definitions and
❑ ❑
expectations of rewards and opportunities?
8. Does the organization recognize and reward the different kinds of employee contribution
❑ ❑
that are most important to realizing current strategic priorities?
9. Does the organization challenge key contributors to build their skills and to improve their
❑ ❑
contributions over time?
III. Targeting Drivers of Disengagement
10. Does the organization actively identify and remove structural barriers to the engagement
❑ ❑
of all key contributors?
11. Does the organization recognize the limitations of its employee survey in identifying
❑ ❑
“invisible” drivers of disengagement?
12. Does HR have additional tools to identify all employees’ perceptions of the working
❑ ❑
environment and their relative impact on business outcomes?
13. Does the organization actively involve employees in the process of identifying and
❑ ❑
removing drivers of disengagement?
14. Does the organization have a process for encouraging timely and effective manager action
❑ ❑
to remove both “invisible” and “visible” drivers of disengagement?
xv

IV. Building a High-Engagement Culture Yes No
15. Do all employees have a clear understanding of the connection between their jobs, their
❑ ❑
individual contributions, and the organization’s strategy and success?
16. Does the senior management team recognize the power of communication to drive
❑ ❑
employee engagement across large groups of employees?
17. Does the organization emphasize the ability to build emotional commitment through
❑ ❑
communication in its executive selection criteria?
18. Does the organization train managers in building compelling messages around the
❑ ❑
company’s vision from their own experiences?
19. Does the organization’s leadership team review its structure to ensure it is not
❑ ❑
inadvertently blocking opportunities for employees to contribute to business goals?
20. Does the organization understand the different types of involvement required, at different
❑ ❑
levels, to ensure that all employees can contribute to business goals?
21. Does the organization know how to build a compelling rationale for employees’
❑ ❑
contribution to business goals with different audiences?
22. Does the organization provide sufficient information about the business to employees
❑ ❑
to allow them to contribute to business-wide goals?
Managing for Organizational Credibility
23. Do executives understand the role of organizational integrity and trust in enabling
❑ ❑
emotional engagement?
24. Does the organization have a process for defining and communicating the actions and
❑ ❑
behaviors that support the values and strategic priorities of the organization?
25. Has HR integrated integrity-related messaging into core HR processes and policies? ❑ ❑
26. Is the organization able to identify cases of misalignment between desired behaviors and
❑ ❑
employee actions?
27. Does the organization enforce alignment between actions and values? ❑ ❑
28. Does the organization regularly discuss the relevance and application of values as strategy
❑ ❑
changes?
Scoring System
Number of Overall Effectiveness of
“Yes” Responses Employee Engagement Management
23 to 28 Excellent; capturing economic benefits

of engagement
16 to 22 Good; solid performance area
9 to 15 Fair; improvement possible
0 to 8 Low; focused development recommended

xvi
1
Council Essay
A Unique Point in Time
2 Engaging the Workforce
HR practitioners, consultants, and functional experts alike are describing a labor market on the verge of tumult, with
predictions of workforce turnover ranging from 45% to more than 80%. A survey of recent headlines in the business
press reveals similar sentiments, forecasting a resurgence of the “war for talent” that may outpace that of the 1990s.
Rumors of (a Talent) War

The business press is predicting fierce competition for talent…
Percentage of the U.S. Workforce Predicted to Change Sample Talent-Related

Jobs Within 12 Months, Pending Economic Recovery Headlines, 2004
100%
83% BusinessWeek
September 29, 2003
64% 65% After the Jobless Recovery,

58% a War for Talent
48% 50%
50% 42%
Financia
l Times
4 February
Manpow 2004
er Chief
Warns of
Skilled Wo
rker Shortage
0%
i to i Accenture HotJobs AOL SHRM True Career
December October June March January Careers Journal
2003 2003 2004 2004 2004 February October
2004 2003
…as HR practitioners and consultants decry the state of the workforce
The Death of Loyalty Waiting for the Dam to Burst

“The downsizing of the ’80s, and particularly the “People are ready to leave, with their hearts and
’90s, destroyed company loyalty.” minds set on changing employment, but they’re
still coming to the same job, warming their chair.
Sir Martin Sorrell The workplace shake-up that the next 7 to 10
Group Chief Executive years will bring will make the job frenzy of the late
and Executive Director 1990s look like a practice session.”
WPP Group plc
Chief Executive Officer
HR Consulting Organization
Source: Grant, Jeremy, “Manpower Chief Warns of Skilled Worker Shortage,” Financial Times
(4 February 2004); Lavelle, Louis, “After the Jobless Recovery, a War for Talent,” BusinessWeek
(29 September 2003); True Careers; Accenture; HotJobs; America Online; Society for Human
Resource Management; Career Journal; Corporate Leadership Council research.
Council Essay: A Unique Point in Time 3
Yet, despite widespread predictions of rising attrition, few Council members are reporting much change in voluntary
turnover. A survey of member HR executives reveals that organizations expect only a small increase in attrition
for 2004.
Smoke, but Little Fire

Despite urgency in the press regarding retention, Council
members are predicting only modest increases in attrition
Average Annual Voluntary Exempt Turnover, 2001–2004(E)
Results of a Council Survey
16%
9.6%
●
Reported 8.3%
Annual
8.0% 7.7% ●
Voluntary 8% ●
●
Exempt
Turnover
0%
2001 2002 2003 2004(E)
n = 86.
Calm Before the Storm?

“I keep hearing that the war for talent has started, but our attrition numbers are stable. I am just
waiting for the other shoe to drop.”
Chief Human Resources Officer
Technology Firm
Source: Corporate Leadership Council 2004 HR Executive

Survey; Corporate Leadership Council research.
Council members report increasing anxiety regarding employee engagement levels in their organizations. Across
the past three years, more than 70% of organizations indicate that their concern about workforce engagement has
increased. Informed by comments received directly from employees, executives increasingly suspect that many of
their employees have succumbed to “spiritual” turnover; while physically present in the workplace, employees may
not be deeply engaged in their work or strongly committed to the organization.
A Different Burning Platform

Despite low attrition, HR executives report increasing concern regarding engagement levels…
Change in HR Executives’ Concern About Employee Engagement
50% 47%
Percentage
of Executives 25%
Reporting 25% 24%
24%
Level of
Concern
4%
4%
0%
0%
0%
Greatly Increased Constant Somewhat Greatly
n = 86. Increased Somewhat Decreased Decreased
…as employees express signs of burnout and executives

report a sense of disconnection with employees
Anonymous E-Mail to North American High-Technology Company CEO, Q4 2003
Company CEO
Anonymous
Employee Burnout
Dear CEO,
I write today to express some concerns about what it has been
like to work here over the last year. I love this company, I love my
job—but I’m running out of steam, and I am not alone.
Did you know that people sleep under their desks, while others
drive home after 48 hours of no sleep?
“Spiritual” Turnover
“I worry that we are losing our employees’ hearts and minds. We don’t know what they are thinking
or feeling. I can’t help but think that, even though they are still here, they have really checked out.”
U.S. High-Technology Company
Source: Corporate Leadership Council 2004 HR Executive Survey; Corporate Leadership Council research.
Labor market and organizational dynamics are conspiring to create an environment in which employees feel
uncertain about the security of their jobs, perceive limited career progression and few options in certain career paths,
and are required to manage increased complexity and responsibility in their roles. Council members report that their
workforces are stretched thin—at the very point when potential economic recovery means that organizations may
need to ask still more of their employees—forcing organizations to focus on sustaining performance levels while
retaining employees.
Stretched Thinner and Thinner

Convergence of labor market and organizational dynamics…
Shifts in Forces Impacting Employees
Forces Impacting
Employee Realities
Workforces
Little New Job Creation Alternate employment options fewer than desired
Ongoing Corporate Downsizing Uncertainty regarding job security
Rise of Offshoring Impact on future job opportunities in certain positions
Leaner Organizational Structures “Invisible promotions,” responsibility increases; title and compensation do not
Memory of Recent Restructuring “Survivor syndrome”—employees still suffering impact of workforce reductions
…has placed more strain on employees, resulting in a need

to manage both retention and performance
Percentage of HR Executives Indicating “Increase” or “Substantial Increase” in Characteristic of Work
Employees Are
Asked to “Do More 88%
with Less”
Employees Deal with

Greater Complexity 92%
in Their Jobs
n = 86.
A Dual Mandate
“We are at a unique time when the promise of growth and recovery is confronting a workforce
stretched thin after three years of turbulence. To hit our goals, we can’t just manage retention
or performance. We have to do both.”
Head of Human Resources

European Telecommunications Firm
Source: Corporate Leadership Council 2004 HR Executive Survey; Corporate Leadership Council research.
Employee engagement is crucial to performance and retention. The Council defines “engagement” as the extent to
which employees commit to something or someone in their organization. Engagement can be emotional or rational
in nature and can be centered on the employee’s job, team, manager, or organization.
Solving for Performance

Engagement is the extent to which employees
organization, how hard they work, and how long
Two Commitment Four Focal Points

“Types” of Commitment
Day-to-Day Work
Rational Commitment
The extent to which employees believe that
managers, teams, or organizations have their
self-interest in mind (financial, developmental,
or professional). Team
Emotional Commitment Direct Manager

The extent to which employees value, enjoy,
and believe in their jobs, managers, teams,
or organizations.
Organization
Employees’ commitment levels drive two key outcomes. Discretionary effort leads to greater performance levels,
while intent to stay ultimately drives higher retention.
and Retention
commit to something or someone in their
they stay as a result of that commitment
Outputs of Commitment Organizational Benefits of Commitment
Discretionary Effort
An employee’s willingness to go “above and beyond” the call of
duty, such as helping others with heavy workloads, volunteering Performance
for additional duties, and looking for ways to perform their jobs
more effectively.
Intent to Stay
An employee’s desire to stay with the organization, based on
whether they intend to look for a new job within a year, whether
Retention
they frequently think of quitting, whether they are actively
looking for a job or have begun to take tangible steps like placing
phone calls or sending out résumés.
Note: The Council’s engagement model, as well as its survey methodology, data, Source: Corporate Leadership Council research.
and conclusions, are discussed in greater detail in the companion volume to
this report, Driving Employee Performance and Retention Through Engagement.
Organizations that improve workforce engagement will see increased discretionary effort from employees, as well as
a corresponding change in performance. Specifically, employees who move from “strongly disengaged” to “strongly
engaged” demonstrate, on average, a 57% improvement in the level of discretionary effort exerted on the job. This
improvement in discretionary effort translates into a performance improvement of up to 20 percentile points.
Engagement Drives Effort and Performance

Organizations that improve engagement will see significant returns in discretionary effort…
Maximum Impact of Engagement on Discretionary Effort
Moving employees from strong disengagement to

strong engagement can result in a 57% increase in
discretionary effort.
1.57
Change in 1.00
Discretionary
Effort
Strongly Strongly
Disengaged Engaged
…resulting in higher performance across the workforce

Maximum Impact of Discretionary Effort on Performance Percentile
Moving from low- to high-

effort levels can result in a
Number performance improvement
of Employees of up to 20 percentile points.
50th 70th
Percentile Percentile
Performance Performance
The “10:6:2” Rule

• Every 10% improvement in engagement can increase an employee’s effort level by 6%.
• Every 6% improvement in effort can increase an employee’s performance by 2 percentile points.
Source: Corporate Leadership Council 2004 Employee Engagement

Workforce engagement also benefits organizations by reducing the probability of employee departure. As employee
engagement improves, their intent to leave (as expressed through activities such as thinking about leaving or sending
out résumés) also declines, translating to lower expected attrition rates. An employee who moves from the lowest
level of engagement to the highest level is 87% less likely to depart the organization.
Engagement Drives Retention

Employees with high levels of engagement are significantly less likely to leave
Maximum Impact of Engagement on the Probability of Departure
10%
9.2% Moving from strong disengagement
to strong engagement decreases the
probability of departure by 87%.
Probability
of Departure
in Next 12 5%
Months
1.2%
0%
Strongly Disengaged Strongly Engaged
The “10:9” Rule

Every 10% improvement in engagement can decrease an employee’s probability of departure by 9%.

Comparison of engagement levels, discretionary effort, and intent to stay of two pseudonymed organizations who
participated in the Council’s 2004 Employee Engagement Survey shows the benefit of high engagement. Engagement
varies greatly across organizations, but, in general, companies that manage engagement effectively can positively
impact employees’ performance and willingness to stay with the organization.
What a Difference Engagement Can Make

The much higher level of engagement at Organization A relative to Organization B…
Employee Engagement
Percentage 22.9%
of Workforce
Strongly Engaged
4.9%
Organization Organization
A B
…results in 10 times …and 5 times the level of intent

the level of discretionary effort… to stay across the workforce
Discretionary Effort Intent to Stay
42.9%
Percentage of
Workforce in 23.5% Percentage of
Highest Category Workforce in
of Discretionary Highest Category
Effort of Intent to Stay
8.7%
2.5%
Organization Organization Organization Organization

A B A B
Note: Organizations A and B are two real companies, identities disguised, Source: Corporate Leadership Council 2004 Employee Engagement
that participated in the Council’s 2004 Employee Engagement Survey. Survey; Corporate Leadership Council research.
The Council’s employee engagement survey concluded that only 11% of the workforce is highly engaged, while a
majority of employees are neither engaged or disengaged (76%) or highly disengaged (13%). Companies’ treatment
of employees has the greatest impact on engagement levels, creating both opportunities and challenges.
Shifting the Curve

Most organizations can realize substantial benefits by capitalizing on the opportunity
to increase the number of highly engaged employees in their ranks
The “Disaffected” The “Agnostics” The “True Believers”
76%
13% 11%
Highly Engagement Level Highly

Disengaged Engaged

While recognizing the importance of engagement to desired performance and retention outcomes, organizations
struggle to maximize the impact of engagement interventions, often failing to maintain scale and effectiveness
in their approach. A strategy based on high-engagement leverage points enables sufficient focus and scale. The
remainder of this study will explore four critical leverage points.
What’s Hard: The Need for Focus and Scale

Organizations experience variable returns on engagement interventions
as they struggle to achieve sufficient focus and scope of impact
Engagement Strategy Focus Versus Scale
Most organizations report a “fire fighting” approach to engagement, addressing the most obvious
pockets of disengagement as they arise. The limited scope of this approach quickly exhausts scarce
resources and often fails to demonstrate measurable business benefits.
High
A focus on engagement
leverage points yields
the greatest ROI for the
Segment-Specific High-Engagement organization.
Engagement Interventions Leverage Points
Degree to
Which Strategy
Is Focused
Attempts to Raise
Local Solutions
Organization-Wide Morale
Low
Low High
Organizational
Scale of Strategy
Some organizations are beginning to roll out broad initiatives—such as public celebrations,
communication cascades, and new benefits options—designed to boost engagement
across the workforce. Despite advantages in scope, these initiatives often fail to target
specific engagement needs of individuals and may seem superficial or generic to employees.
Organizations using “fun and games” engagement strategies are not likely to experience
meaningful or lasting business impact.

Engaging
Focusing on critical leverage
Prioritizing Engagement- Engaging Key

Driven Business Risks Contributors
Strategic Engagement Solid Performer

Gap Analysis Career Pathing
Key Insight Key Insight

Returns on engagement practices Organizations must target investments
require a link between engagement to those individuals who contribute
and business outcomes. Organizations the most to the business, while
should rely on economics and realizing that these people are not all
business strategy when determining high performers or high potentials as
whom to engage and how to they have been traditionally defined.
engage them in support of business
outcomes.
* Pseudonym.
the Workforce
points to drive employee engagement
Targeting Drivers Building a High-

of Disengagement Engagement Culture
The Three Cs of Culture:

Connection
Contribution
Credibility
Cultural Assessment Process Leader Storytellers
Targeted Employee
Key Insight Key Insight

Before any proactive organization- The Council has identified three
level engagement strategy will essential components of a high-
succeed, organizations must first engagement culture: connection,
identify and remove the drivers of contribution, and credibility. A high-
disengagement, many of which are engagement culture needs reliable
“invisible” to traditional methods mechanisms to ensure employees are
of detection, such as employee consistently experiencing all three of
engagement surveys. these elements.

17
Chapter I
Key Insight
Returns on engagement practices require a link between engagement

and business outcomes. Organizations should rely on economics and
business strategy when determining whom to engage and how to
engage them in support of business outcomes.
Chapter I: Prioritizing Engagement-Driven Business Risks 19
The Council’s research findings on the business impact of engagement are clear—high levels of engagement can
generate a performance improvement of up to 20 percentage points. The business impact of engagement creates
a clear need for engagement strategies to focus on business outcomes. However, organizations’ existing use of
engagement data—favoring it as a broad metric rather than a focused strategic tool—may not support this objective.
In this chapter, the Council assesses one organization’s practice that connects employee engagement directly to
business outcomes.
All About the Business?

Despite the powerful impact of an engaged workforce on business performance…
Maximum Impact of Engagement Maximum Impact of Discretionary

on Discretionary Effort Effort on Performance
Moving employees from strong disengagement Moving from low- to high-

to strong engagement can result in a 57% effort levels can result in a
increase in discretionary effort. performance improvement
of up to 20 percentile points.
1.57
Change in 1.0 Number

Discretionary of Employees
Effort
Strong Strong 50th 70th

Disengagement Engagement Percentile Percentile
…companies more often use engagement data for broad-brush

measurement rather than managing business strategy
Use of Engagement Data
Q: Does your organization use engagement data to accomplish the following tasks?
Nearly two-thirds of companies

65% 65% 62% do not connect engagement
53% data to business strategy.
Percentage of 43% 40%

Respondents 36%
Answering
“Yes”
Gauge Provide Identify Make the Assess Assess Assess the

General Managers Engagement Business Retention Productivity Impact of
Reaction to with of Employee Case for HR Risk Risk Strategy
HR Initiatives Feedback Segments Initiatives
n = 86. Source: Corporate Leadership Council 2004 Survey of HR Executives;
Note: Respondents were senior HR executives at Council Corporate Leadership Council research.
member companies.
21
Practice #1: Strategic Engagement Gap Analysis

• Headquartered in the Silicon Valley of California, Intuit provides software that
helps its customers manage personal finances (Quicken), business finances
(QuickBooks), and tax preparation (TurboTax).
• The company had $1.9 billion in revenue in fiscal year 2004; its employees number
approximately 7,200.
Description
Having recognized the economic impact of an engaged workforce, Intuit further concludes that business
success depends on only a subset of “highest leverage” engagement practices. To guide managers to focus
exclusively on the points of highest leverage, the company identifies the engagement profiles needed
to execute against strategic plans and provides managers with the information they need to drive the
engagement of employees.
Goals
The goal of Intuit’s approach to engagement is threefold: first, to ensure that engagement efforts have
a direct, positive impact on business operations and strategic goals; second, to enable managers to act
on the points of greatest leverage for engagement of their teams; and, third, to ensure that key points of
disengagement are remedied through manager action.
Key Differentiating Features
Intuit’s approach to employee engagement differs from standard practice in several ways. Intuit integrates
the management of engagement into the strategic planning process, focusing attention and resources only
where engagement has strategic importance. Knowing the drivers of engagement within their business
units, leaders can focus on actions that will have the greatest impact on engagement. Intuit also finds
that managing engagement at the business unit level maximizes the impact and relevance of engagement
interventions.
Results
Intuit’s leaders cite the company’s approach to managing engagement as a key factor in the company’s
profitable growth over the last four years. Business units within Intuit have utilized the strategic engagement
analysis to identify key engagement-related issues, determine the drivers of engagement, and take focused
action to realize substantial gains in employee engagement and customer satisfaction.
Practice Driver
Intuit’s CEO, Steve Bennett, believes that the engagement of the company’s employees results in service quality, high
productivity, and other behaviors needed for strong financial performance. To maximize the returns on its efforts,
Intuit prioritizes engagement-related interventions as they pertain to business strategy. In mapping engagement
levels to business objectives, Intuit avoids a common engagement management pitfall: wasted resources. Without
adequate consideration of what matters most to the business, organizations can expend effort and resources with no
meaningful impact on business results.
Sustaining a Competitive Advantage

Intuit believes its people are a critical …that the results employees achieve
source of competitive advantage… depend on engagement…
Link Between Employee
Engagement and Business Results
It’s the People • Provide high-quality

customer service
“My view is the recipe that makes • Increase product quality
great companies is really culture • Reduce costs
and leadership.” Engaged • Innovate to address Top-Line
Employees customer needs Growth, Increased
• Improve processes Profits
Steve Bennett, CEO
Intuit • Share knowledge
• Generate highest levels
of productivity
...and, therefore, that it is essential to focus on the gaps where

engagement is lowest and most important to business success
Prioritization of Effort
Focused Attention
Low Moderate “Many companies administer surveys
Priority Priority and simply zero in on the lowest-scoring
High questions. Failure to focus on how
No Action Need to Preserve
Employee engagement relates to business goals often
Needed Engagement
Engagement results in wasted effort.”
Level Moderate Highest
Senior Manager
Low Priority Priority
HR Research and Quality
Assess and Act, Mission- Intuit
Case-by-Case Basis Critical Gaps
Low High
Importance to
Business Strategy
Source: Patrick Seitz, Investor’s Business Daily (February 2004);
Intuit; Corporate Leadership Council research.
Practice in Summary
Intuit’s engagement management practices differ from standard approaches in three ways. First, the organization
uses its strategic planning process to identify the engagement levels required to support future organizational needs.
Second, Intuit analyzes engagement drivers for each business unit, mapping drivers against current engagement levels
to determine if employees are sufficiently engaged and, where they are not, to assess the size of engagement gaps.
Last, Intuit’s business unit managers focus only on the engagement gaps that are critical to achieving business goals,
building action plans to address the most pressing engagement gaps.
Knowing When Engagement Matters

Intuit manages employee engagement to be aligned
with the business, highly focused, and forward looking
Limits to Standard Practice Intuit Practice, Differentiating Features
1 Engagement is managed independently 1 Engagement data is incorporated into

of business strategy the strategic planning process and is
used to identify gaps between existing
capabilities and future needs
?
Survey Question
1. I am proud to work at Intuit
2. Overall my satisfaction with Intuit is high
3. I would recommend Intuit as a great place to work Survey Question
1. I am proud to work at Intuit
Strategic Gaps
4. If offered a similar position and compensation at 2. Overall my satisfaction with Intuit is high
another company I would stay at Intuit

5. I have the information I need to do my job
3. I would recommend Intuit as a great place to work
4. If offered a similar position and compensation at
another company I would stay at Intuit
Strategic •
6. Processes allow me to meet customer needs
Plan •
7. Policies are administered fairly
8. My career goals can be met at Intuit
9. I understand Intuit’s overall goals and direction
•
•
•
2 Survey results are presented without 2 Engagement driver analysis supports

context, obscuring any sense of which managers’ assessments of which gaps
scores are truly relevant are critical and which are less important
Survey Question Score Follow-Up
Survey Question Score Strategic Gap Follow-Up
• __________ — ?
• __________ — ? • ___________ — • _______
• __________ — ? • ___________ — • _______
• ___________ — • _______
• __________ — ? • ___________ — • _______
• __________ — ? • ___________ — • _______
3 When given a report of results 3 Guided by strategic and

that fails to indicate specific action, organizational priorities, managers
managers may be inclined design and execute action plans
to ignore the data to close specific gaps
2004 Action Plan
Owner: Parker Pritor Desired Outcome: Better-defined career development paths that are more aligned to team members’ career aspirations.
Type: Organizational Action Plan
Engagement Drivers: Main points from the feedback session:
My career goals can be met at Intuit Current career development paths, particularly those supporting a technical track, are not well understood. Currently, most
career management discussions address immediate skills gaps and are not focused on identifying long-term career goals
and paths to attain them.
Action Plan Details
Implementation Team: Parker Pritor, Peter Patel, Sue Bly, Lynn Joi Budget: $0
Action Plan Steps: Owner: Due Date:
1. Collect best practices on career paths from other business units. Bly, Joi 07-01-2004
2. Create development paths to support career growth. Patel 08-15-2004
3. Draft and communicate career management responsibilities. Pritor 10-15-2002
Source: Intuit Inc.; Corporate Leadership Council research.

Step #1: Translate Business Strategy into Needed Organizational Capabilities

Each year, Intuit’s business unit leaders use a “star model” to assess the human capital–related implications of
business strategy on dimensions such as structure, process, and talent. Leaders identify the organizational capabilities
needed to achieve strategic goals, such as leadership qualities, team dynamics, and skill requirements for employees
in the business unit. Based on the needed organizational capabilities, Intuit’s leaders create a unique “engagement
profile” for each business unit, detailing those engagement levers critical to future business success—a crucial input
in identifying engagement gaps.
Where Strategy Meets People

As part of the strategic planning cycle, Intuit’s leaders analyze
their business strategies through an organizational diagnostic...
Illustrative Strategic Plan1 The Galbraith Star Model2

1. BUSINESS
Business Unit One STRATEGY
Strategic Plan
Vision
• 20% growth to $300 million revenue
by 2007 5. TALENT 2. STRUCTURE
• Leader in financial management Skills and End-to-End
in the small business markets
• Channel revenues are 20% of the Capabilities Accountability
6. CULTURE
business
Strategy
• 3 new products a year
• Bring consumer products to small
business
• Graduate 10% of customers
to premium products 4. REWARDS 3. PROCESS
AND Operations
RECOGNITION and Systems
…to support their judgment and decisions as they anticipate the organizational
capabilities and “engagement profile” needed to deliver on strategy
Illustrative Organizational Capabilities and Engagement Profile
Star Category Needed Organizational Capabilities Needed Engagement Profile

1. Business • Clear line of sight to larger goals and strategy • Team members understand their customers
Strategy • Known for technical and business leadership • Team members confident in the strategy
• Team is easy to work with • Team understands roles and responsibilities
2. Structure
• End-to-end accountability, decisions made at the right level • Strong cooperation with other teams
• Work is well prioritized • Team fluent in all processes and process design
3. Process
• Non-value-added complexity is never allowed and management (i.e., six sigma)
4. Rewards and • Organization delivers for customer and shareholders • Team believes rewards align with value created
Recognition • Team and individual recognition drive desired behavior • Team understands incentives
• Deep technical expertise • Team members get needed training
5. Talent
• Zero vacancies in critical positions • Team members see long-term careers at Intuit
• Flexible and collaborative, communicates clearly, and drives change • Team members value knowledge sharing
6. Culture
• Embodies good corporate citizenry • Team views Intuit as a good corporate citizen
Engagement Profiles detail business-critical engagement levers.

1
All information on strategy, plans, engagement data, and action plans is illustrative. Source: Intuit Inc.; Corporate Leadership Council research.
2
Intuit uses a modified version of J.R. Galbraith’s Star Model—see appendix for details.
Step #2: Measure Employee Engagement and Determine Its Drivers in the Business Unit
Intuit surveys employees annually, measuring engagement levels with the four questions that constitute the
“employee engagement index.” Intuit also identifies the key drivers of engagement by assessing correlation between
survey questions and the employee engagement index, finding that a small subset of questions drives most variation
in engagement levels.
Finger on the Pulse of the Business Unit

HR surveys employees at each business unit on their perceptions of Intuit…
Employee Engagement Survey
Engagement is the
average percentage Employee Survey Agree Disagree
of employees who 1. I am proud to work at Intuit
agree or strongly 2. Overall my satisfaction with Intuit is high
agree with the four 3. I would recommend Intuit as a great place to work
questions deemed 4. If offered a similar position and compensation at
“The Employee another company, I would stay at Intuit
Engagement Index.”
Intuit Employee
...and analyzes the correlation of survey questions to the

engagement index to determine the drivers of engagement
Illustrative Engagement Data Analysis
0.7
0.7 Intuit discerned
that seven to ten
questions explain
70% to 80%
Correlation of engagement.
to Engagement 0.35
0.35
0
0
Survey Questions
Note: All data is illustrative. Source: Intuit Inc.; Corporate Leadership Council research.
Step #2 (Continued): Measure Employee Engagement and Determine Its Drivers in the
Business Unit
Intuit reports the aggregate engagement scores of business units or functions to executives, who also receive scores
for each team within the unit. Reports include two critical pieces of information: the specific drivers of engagement
for each business unit (determined by correlation analysis) and engagement score for each driver. Leaders can easily
understand what matters most to their teams’ engagement and how engaged employees currently are—the second
critical input to identifying engagement gaps.
Reporting on the Details

Intuit executives receive a report of engagement at the business unit and team levels…
Illustrative Engagement Report
Employee Engagement Report

Business Unit 1
Engagement Index Scores
Reporting engagement
at the department level Business Unit 1 Total 76% 13% 11%
Department A 92% 8%
allows executives to
Department B 86% 9% 5%
quickly identify best Department C 85% 8% 7%
practices as well as Department D 67% 13% 20%
problem areas within Department E 63% 18% 19%
their organizations. Department F 41% 22% 37%
Favorable Neutral Unfavorable
…as well as the engagement drivers for their business

Illustrative Engagement Drivers
Score Understanding engagement

Drivers of Engagement (% Employees
Business Unit 1 Who Agree) drivers within the business
1. My career goals can be met at Intuit 47%
unit helps executives
2. I have an opportunity to learn and grow at Intuit 56% avoid putting time or
3. I receive the ongoing training I need 61% resources toward survey
4. Total compensation is competitive 70% results that do not impact
5. In my business unit we make good decisions 73% engagement.
6. My business unit makes changes necessary to compete effectively 80%
7. I am proud of the service my business unit provides 85%
8. Intuit takes genuine interest in the welfare of communities where we do business 93%
Note: All data is illustrative. Source: Intuit Inc.; Corporate Leadership Council research.
Step #3: Assess Business Risks by Mapping Engagement Data to Required Organizational
Capabilities
Bringing together the “engagement profile” and the results of employee engagement surveys, Intuit’s business unit
managers construct an “organizational gap analysis.” The gap analysis enables managers to determine which efforts
to engage employees will have a positive impact on the business and which will not.
Sizing the
Leaders in each business unit create an organizational gap
and debate as they prioritize the strategic gaps that must
Illustrative Organizational
Organizational Gap
Organizational
Needed Engagement
Star Category Capability Identified in Relevant Survey Question
Profile
Star Model Analysis
Structure Organization is easy to Strong cooperation with My work group gets the
work with other groups cooperation it needs from
other groups to achieve our
goals
Process Non-value-added Team fluent in process In my work group we
complexity is never design and management continually improve our work
allowed (six sigma) processes
Talent Deep technical expertise Team members get needed I receive the ongoing training
training I need
Talent Zero vacancies in critical Team members see long- My career goals can be met at
positions term careers at Intuit Intuit
Culture Embodies good corporate Team views Intuit as a good Intuit takes genuine interest in
citizenry corporate citizen the welfare of the communities
it serves
1
Business unit leaders review
organizational capabilities
and engagement profiles
identified in step #1…
Intuit’s leaders identify any disparities between needed and existing levels of engagement and assess the level and type
of risk associated with the gaps. The analysis applies one final screen to the risk assessment: potential impact on the
business. Managers focus most on low-scoring survey questions that are both engagement drivers and business-critical.
Issues
analysis, which summarizes their perspectives,
be addressed before they become problems
Gap Analysis
Analysis, Business Unit 1

Risk Represented by the Gap
Survey Engagement Relative Size of Gap and
Between Existing and Needed
Score Driver? Appropriate Action Protocol
Capabilities
55% NO Failure to get cooperation from other Medium gap due to low score on
work groups diminishes results a non-driver: Action at manager
discretion
89% NO Lack of process improvement results Small gap due to high score on a
in inefficient workflow non-driver: No immediate action
needed
61% YES Misalignment of training to Large gap due to low score on

organizational needs creates shortage a driver: Create action plans to
of key technical expertise close the gap
47% YES With staff departing for better career Large gap due to low score on
prospects, key positions become—and a driver: Create action plans to
remain—vacant close the gap
93% YES Without sufficient service to Medium gap due to high score on
communities, Intuit fails to operate a driver: Monitor engagement, no
by its values immediate action needed
2 3 4
…match them to specific survey …and incorporate their …as well as the size
questions, considering the experience and judgment of the gap and the
question’s score and whether it is to assess the nature of appropriate level of
a driver of engagement… the strategic gap… follow-up.

Step #4: Build Action Plans to Address Strategic Engagement Gaps

With a clear understanding of the engagement gaps that matter to the business, managers conduct employee feedback
sessions to assess the root cause of the gaps. Teams review survey results, discuss the root causes of low-scoring items,
and brainstorm on potential solutions to low engagement. While managers encourage team members to be creative
when resolving team challenges, they recommend focusing on action items that the team can control itself and that
can be accomplished in a fairly short time frame.
Assessing the Root of the Problem

With key risks and engagement drivers prioritized, managers probe
the reasons why employees gave low scores to key drivers
Employee Feedback Session
Agenda:
Business Unit 1 Feedback Session
• Review engagement results and Team Members

compare to prior year’s scores
• Discuss team scores on the drivers
of engagement
• Recognize areas of strength
• Discuss causes of low-scoring drivers
and solutions
• Ground rules: Candid and forthright Manager
discussion is encouraged
Illustrative Root-Cause Analysis
Engagement Root Cause Potential Solutions

Driver of Low Scores (Team Brainstorm)
I receive the ongoing Internal training is difficult Identify relevant external
training I need to access and is not always classes
sufficient
My career goals can be met Team members lack clarity Define and communicate
at Intuit around long-term career career paths
path
Note: All examples are illustrative. Source: Intuit Inc.; Corporate Leadership Council research.
Following feedback sessions, managers create action plans designed to bridge strategic engagement gaps. To assist
with action planning, managers can access Intuit’s comprehensive online archive of action plans, which includes best
practices for addressing particular engagement drivers.
A Focused Plan of Action

Archived best practices help guide managers as they lead
their teams in creating and executing actions plans to bridge gaps
Illustrative Action Plan Archive
Engagement Driver: My Career Goals Can Be Met at Intuit

Desired Outcome Best Practice Created Ext.
of Action Plan Plan By
Improve clarity of career paths [View] Bo Pracht 3478
Create development plans for Gus Zyman 3887
[View]
team members
Create a skill assessment process [View] Shelly Selt 2198
Enhance leadership development Jake Dean 2303
Intuit
[View]
curriculum Manager
Implement a peer mentoring Carrie White 9099
[View]
program
Illustrative Action Plan
2004 Action Plan

Owner: Parker Pritor Desired Outcome: Better-defined career development paths that are more aligned to team members’ career aspirations.
Type: Organizational Action Plan
Engagement Drivers Main points from the feedback session:
My career goals can be met at Intuit Current career development paths, particularly those supporting a technical track, are not well understood. Currently,
most career management discussions address immediate skills gaps and are not focused on identifying long-term career
goals and paths to attain them.
Action Plan Details
Implementation Team: Parker Pritor, Peter Patel, Sue Bly, Lynn Joi Budget: $0
Action Plan Steps: Owner: Due Date:
1. Collect best practices on career paths from other business units. Bly, Joi 07-01-2004
2. Create development paths to support career growth. Patel 08-15-2004
3. Draft and communicate career management responsibilities. Pritor 10-15-2002
Team input and the incorporation of best practices give action

plans high relevance and pinpoint accuracy.
Note: All examples are illustrative; sample action plan Source: Intuit Inc.; Corporate Leadership Council research.
included in the Appendix.
Step #5: Create Accountability to the CEO and Employees to Ensure Execution of Action Plans
Intuit holds business unit leaders accountable for managing the engagement levels of their teams via a number of
channels. In an annual Organization and Talent Review, leaders discuss strategic plans, engagement gap analyses,
and action plans with the CEO and his executive team. Intuit’s CEO also conducts frequent “engagement check-ins”
with executives to receive updates on progress against action plans and assist in the identification and resolution of
any engagement-related challenges. Every action plan is posted to Intuit’s intranet; all employees can review progress
against engagement efforts. Intuit finds that transparency of information regarding engagement action plans provides
managers with additional incentive to execute action plans.
Making Execution a Priority

In the Organization and Talent Review, ...while “engagement check-ins”
senior executives discuss strategy, allow senior executives to update
engagement, and action plans… the CEO on progress…
Annual Organization and Talent Review “Engagement Check-In” with the CEO
Key Questions Key Questions

• How did you assess your engagement-related gaps? • What progress have you made against
• How will your action plans close the gaps? key drivers of engagement?
• Have you encountered any difficulties
in executing your action plans?
Senior Executive
CEO and
Selected
Senior Staff
Senior Executive CEO
…and action plan visibility makes managers

more accountable to fulfill the goals of their plans
Illustrative Online View of a Manager’s Action Plans
In the Public Eye
“Giving employees the ability to view action
plans provides managers with a real incentive
to stay on top of completing them.”
Browse Action Plans for [Parker Pritor]’s entire organization
Senior Manager
2004 Existing Action Plans: HR Research and Quality
1. Developmental—Q.31 My career goals can be met at Intuit. Define [view] Intuit
career development paths for team members. Survey Item Q.31—In
Progress
2. Organizational (Shared Plan)—Variable compensation, key metrics, [view]
policies, and processes will align with driving excellence in customer
experience and right balance for employee and shareholder. Survey Employees can view all
item(s) Q.28, Q.56— In Progress managers’ action plans.
2003 Action Plans:
1. Developmental—Increased employee satisfaction with equipment, [view only]
tools, systems and resources necessary to do their jobs effectively. Summaries highlight plan objectives
Survey item(s) Q.10— In Progress
2. Developmental (Shared Plan)—Reps feel that they are adequately
and key engagement drivers
[view only]
trained and have the development they need to be effective in their jobs. addressed.
Survey item(s) Q.7— Completed

Results
Intuit credits its strategic engagement management efforts with making substantial contributions to four years
of profitable growth. The engagement gap analysis proactively identifies challenges in business units well before
engagement levels have a deleterious effect on business results. For example, Intuit used the gap analysis process in a
business unit to identify employees’ inability to connect their jobs to overall business as a key driver of engagement,
a requirement for future success—and a problem area. Unit leaders successfully addressed the challenge, ultimately
boosting engagement scores from 77% to 87% in a year, and enjoying a concurrent 21% increase in customer
satisfaction.
Reaping the Benefits

Intuit’s strategic engagement gap analysis has allowed the company
to proactively identify and resolve issues, which has helped contribute
to increased customer satisfaction and profitable growth...
Intuit Revenue and Profit, 2001–2004
$500 ● $2,000
Net Income
●
● Revenue
$250 ● $1,000
Net Income Revenue
($ Millions) ($ Millions)
$0 $0
($250) ($250)
2001 2002 2003 2004
…as evidenced by one business unit’s success with the process
Case in Point
Situation: Surprised by low engagement scores in 2002, one of Intuit’s business units used the
strategic engagement approach to identify the proper actions to address the problem.
Action Steps Results: 2003 Versus 2002

• Conducted focus groups across all I Have a Good Understanding of Intuit’s 74%
200 employees Overall Goals and Direction 90%
My Business Unit Responds Effectively to 70%
• Identified employees’ inability Changes in the Business Environment 82%
to connect their jobs to the My Manager Shares the Business 80%
company’s strategy and goals Unit’s Strategy and Goals 86%
as primary root cause Total Engagement 77%
87%
of low engagement
• Designed and executed action 100
Customer Satisfaction*
plans to improve employee line 121
of sight 2002 2003
* Customer Advocacy Metric; 2003 score indexed to 2002. Source: Intuit Inc.; Corporate Leadership Council research.
Council Assessment:
Strategic Engagement Gap Analysis
Caveat
Organizations seeking to replicate Intuit’s results should be sure to keep the process, data
and analytics in proper context. Intuit’s leaders are careful to avoid overreliance on the
engagement gap analysis process, making sure to complement the data and tools with their
own judgment as they make their decisions.
Implementation Tips
Leverage Senior Leadership—The architect of Intuit’s approach to engagement—and a
prominent driver of its ongoing execution—is the company’s CEO. Organizations seeking
to emulate Intuit’s approach will need to secure sponsorship at the highest levels, and will be
well served to make the business case of this approach to senior leadership.
Measure the Business Units—Intuit measures engagement and its drivers at the business unit
level, rather than the corporate level. The company has found that the drivers of engagement
for one business unit may not be relevant for another.
Establish Support as a Business Process, Not an HR Initiative—Intuit recommends that HR
not serve as a gap analysis process enforcer. Instead, the company relies upon a balance of
downward management (starting with the CEO), upward pressure (creating accountability
by giving employees visibility to their managers’ commitments and progress), and
technology (for example, managers who miss key deadlines are sent e-mails—known as
“e-nags” within the company—reminding them of their commitments) to ensure
widespread adoption.
37
Chapter II
Key Insight
Organizations must target investments to those individuals who

contribute the most to the business, while realizing that these people
are not all high performers or high potentials as they have been
traditionally defined.
Chapter II: Engaging Key Contributors 39
Across the membership, organizations report concern about the productivity and predicted retention of core
performers—often termed solid performers or “B players”—particularly relative to their high-performing peers.
Organizations face three key challenges in ensuring that the contributions of employees receive proper recognition:
first, that definitions of “contribution” are too narrow; second, that opportunities for development are scarce; and
last, that differentiating based on performance can create unproductive tension and disengagement among those who
feel excluded. In this chapter, the Council examines an approach to managing these challenges.
Some Feeling the Pinch More Than Others

Organizations express concern over core performers’
productivity levels and attrition rates…
Estimated Voluntary Attrition Rates, Concern for Productivity,
Core Performers Versus High Performers Core Performers Versus High Performers
12% Core Performers 80%

64%
Average Voluntary
of Responses
Percentage
46%
Attrition
6% 40%
High Performers
0% 0%
2001 2002 2003 2004(E) Respondents Respondents
“Concerned” “Concerned”
n = 86. n = 86. or “Very or “Very
Concerned” Concerned”
About the About the
Productivity of Productivity of
Core Performers High Performers
…as organizations struggle with three key challenges

to delivering opportunity to all high-value contributors
Key Challenges in Managing Core Performers
I. II. III.
Limited Definition Limited Understanding Misaligned Performance
of “Value Creator” of Employee Needs Management Systems
Organizations define contribution Organizations assume that employee Performance management practices
narrowly, often excluding the value expectations and demands are ill-suited to maximize value and
provided by core performers uniform across the workforce realize potential of all contributors
Source: Corporate Leadership Council 2004 Employee Engagement Survey; Corporate

Leadership Council 2004 HR Executive Survey; Corporate Leadership Council research.
41
Practice #2: Solid Performer Career Pathing

* • Harrison Company* is a European retailer with more than 50,000
employees and revenues greater than €20 billion in 2003.
Description
Harrison Company’s* HR department discovers that the organization does not clearly understand the
value created by different performance/potential segments across the workforce. The company identifies
a group of solid performers who create considerable value for the company, despite their limited
potential to ascend to more senior roles in the company. To retain these key contributors, Harrison
Company creates career paths that better reflect the contribution and demands of this employee
segment.
Goals
Harrison Company’s primary goal is to retain and engage all employees who are critical to business
performance. By understanding the value of solid performers’ contributions and their expectations
of the organization, Harrison Company is able to remove a number of structural barriers to their
contribution, realizing the full value of these solid performers.
Harrison Company’s management of its solid performers differs from standard practice that the
company recognizes there can be multiple types of contribution. Previously under-recognized
employees create considerable value with:
• Their internal and external networks
• Their job-specific or company-specific skill sets
• Their execution of business-critical roles
Harrison Company also understands that rewards and career paths can differ greatly across employee
segments and that designing career paths and structures around these different needs helps retain
highly valued solid performers.
Results
Across the past three years, Harrison Company has seen steadily increasing satisfaction among
employees, particularly regarding employees’ ability to contribute to the company’s goals, their ability
to leverage their key skills, and their ability to build careers within the organization. Harrison Company
is confident that this is leading to greater retention and engagement of its solid performers and that this
stability is helping the company to grow its domestic and international businesses.
* Pseudonym.
Practice Driver
At first glance, Harrison Company* appears to have few problems retaining key contributors: overall staffing is
stable, while retention of high performers is high. Yet the company’s HR department realizes that departures of
certain employees are causing considerable harm to the business. The HR department discovers real disparity in
its information about the identity and value of different employees. While Harrison Company understands the
value created by high performers and actively manages the group, its understanding of solid performers—their
contributions and the cost of their departures—is limited.
A (Partly) Hidden Problem

In the late 1990s, Harrison Company’s HR department recognizes
that it has not fully understood the impact of all departures…
HR and Manager Perceptions of Attrition Impact
*
HR Report Manager Feedback
Attrition Analysis • Some departures are
HR Manager disrupting day-to-day
• Total attrition is low
processes and causing
• No single unit is showing higher customer problems.
than average attrition
• Replacements for some
• Attrition rate is relatively stable positions are difﬁcult
over time to ﬁnd.
• HIPO attrition is very low • Team morale drops after
certain departures.
…nor the reasons for departures among all employees

Limitations of Traditional Performance and Potential Grids
High A Known Quantity

Managers and HR spend time ensuring there is low HIPO
• • attrition and have a clear understanding of what motivates
Employee and retains these performers.
Potential •• • •••
•• •• • ••
•
•• •• •• • • • •• A Concerning Blind Spot
•
• •
• •• • • • •• •• HR has only limited information on the reasons for the
Low • • departures of solid performers and often assumes that
Low High
these individuals want the same things as HIPOs.
Employee
Performance
* Pseudonym. Source: Harrison Company; Corporate Leadership Council research.

Practice in Summary
Seeking to address the drivers of disengagement and attrition among solid performers, Harrison Company’s* HR
department investigates this employee segment’s specific needs. First, HR defines solid performers’ contributions,
enabling decisions regarding the appropriate amount of investment in these employees. Then, the company studies
the drivers of engagement for solid performers to understand how best to tailor the employment offer for them. After
examining its organizational structure, Harrison Company discovers structural barriers that have inadvertently
limited its ability to engage solid performers and meet their needs. Last, the organization revisits its performance
management process in order to lock in solid performers’ contributions over time.
Reengaging Key Contributors

Harrison Company reanalyzes solid performers’ contributions and identifies
structural barriers limiting the company’s ability to retain these performers
Harrison Company Practice in Summary
Redefine Solid Performers’ Remove Structural Barriers Maximize Lifetime Contribution

Contribution to Solid Performer Engagement of Solid Performers
Employee
of the Year
• Identify contribution types and their • Identify opportunities and barriers • Encourage career discussion
impact on the business in the current structure to engage candor
• Distinguish highly contributing highly contributing solid performers • Explain performance improvement
subgroups of solid performers from • Restructure roles to support rationale
the larger pool of “B players” engagement • Align performance assessment
• Research the compelling offer • Formalize role descriptions with contribution
for highly contributing solid and structure
performers

Step #1: Redefine Solid Performers’ Contribution

To define solid performers’ contributions, Harrison Company* determines which roles are critical to business
success, as well as the specific individuals whose solid performance bring significant benefit to the company. The
company concludes that, while they may not possess the potential to rise in the organization, some solid performers
make substantial and business-critical contributions.
What Is “Contribution?”
Harrison Company discovers that a combination of role, business strategy,
and employee characteristics creates a critical subset of solid performers
Assessment of Critical Solid Performer Subgroups (Illustrative)
Organizational Factors Solid Performer Characteristics
Certain Roles Have: Certain People Have:

• Immediate operational impact when • Built up organization-specific knowledge
empty
• Relatively high subordinate-to-manager • Particular skill coaching and developing
ratios
• Criticality during drastic change
+ HIPOs
• Built important networks over time
• Key learning moments for advancing • Plateaued in their career progression
HIPOs
Harrison Company finds a group of critical solid

performers with the following characteristics:
• Reached middle management through internal promotions
• Tenured in the organization
• Strong supporters of organization’s values

Step #1 (Continued): Redefine Solid Performers’ Contribution

With little access to promotion opportunities, many solid performers become disengaged. While highly contributing
solid performers have similar needs to high performers, they differ in their view of how the company should deliver
on these needs—for example, valuing cross-functional projects and lateral moves in contrast to high performers’
focus on upward moves.
What Do They Need?

While these solid performers want similar things from the employment
offer, they have different expectations of their delivery
Assessment of Solid Performers’ Expectations
Head of HR Analyst,
HR Research Unit
HR researches solid performer demands
utilizing:
• Employee surveys
• Exit interviews
• Employment preferences
• Manager feedback
Director, Line HR Manager
HR Research Unit
Engagement HIPO Solid Performer Output Actions

Driver Expectations Expectations
To be treated • Opportunity to • Recognition of informal 1
with respect provide input responsibilities and
New careers and job structures
into strategy expertise
that increase solid performers’
• Flexible rewards to
“opportunity to get ahead”
recognize value
To have the • Opportunities • Challenging projects
opportunity to advance • Opportunity for cross-
to get ahead upward, rapidly functional or 2
lateral movement Better manage career
To have • Variety and • Clear ownership of expectations and opportunities
interesting significant process design for lateral movement
work responsibility and improvement
• Clear accountability for
areas of expertise
* Pseudonym. Source: Harrison Company * ; Corporate Leadership Council research.

Step #2: Remove Structural Barriers to Solid Performer Engagement

Harrison Company * discovers that solid performers’ “opportunity to get ahead”—a key driver of engagement—is
limited by structural barriers. Unable (or unwilling) to move upward in the company, these performers also fi nd few
lateral growth opportunities. In response, Harrison Company introduces broad band “work levels,” in which solid
performers can hold multiple jobs over time, at the same rank. In addition, the company designates some positions
as “go-to” roles to recognize and reward deep subject matter expertise. At the same time, Harrison Company revises
reporting structures to ensure that managers have enough staff supporting them so they do not need to “fi ll-in” on
tasks inappropriate to their skill and tenure.
Breaking Down Walls

Recognizing that organizational structure prevents solid performers from
having the “opportunity to get ahead” within their current roles…
Structural Barriers to Engagement at Middle Management Level
Limited Upward Growth Opportunities

Managers can either go no higher or are not interested
in escalating responsibility
Shrinking Role Challenge B

Minimal Lateral Growth Opportunities
Minimal gaps between levels; roles separate Structure and compensation do little to
process design from implementation encourage lateral movement
…Harrison Company adjusts its structure to broaden management

bands and adds role elements designed to engage solid performers
Elements of the Revised “Opportunity to Get Ahead” at the Middle Management Level
Create “Go To” Roles Broaden Span of Control

“Go To” position holders: Harrison Company revises
• Have complete structure and policies to
ownership for a process’ ensure there is:
design and implementation • A clear separation
between management levels
• Are recognized across
the company as specialty • An appropriate number of
experts subordinates to support
managers
• Must commit to their “go
to” role for at least • Flexibility for managers
18 months to shape their roles

Step #3: Maximize Lifetime Contribution of Solid Performers

While the structural changes help to remove the barriers to solid performer engagement, Harrison Company * refines
its career management and performance management systems. A new career discussion framework drives more
candid discussions between managers and employees, encourages lateral moves for solid performers, and defines
movement requirements to help manage employee expectations.
Amending the
Harrison Company’s new talent- planning process forces
managers to be candid about career prospects…
Elements of Harrison Company’s Career Discussion Guide
1 Open Statement of Career Expectations
Career Discussion Summary Please complete after your career discussion

Mobility Code
0–12 Month Talent Move Next Move Within Continue to Improve
Pool Work Level Work Level Perform Performance
Timescales Ready 0–6 Months 6–12 Months
Now
12–24 Month Talent Pool Move Next Move Within
(if applicable) Work Level Work Level
2 Clear Criteria for Movement

CAREER MOVE READINESS: Will you be ready for a move in the next 12 months? (See attached supporting notes.)
To be ready for a move in the next 12 months, you would probably answer yes (x) to most of the following:
Have you:
r Achieved a top performance rating at r Been in your role for a minimum
your last review? of 18 months?
r Developed your skills to the required level r Gained the sponsorship of colleagues?
for your current role?
r Made contributions that have left lasting r Been recognized as practicing values?
improvements in the business?
3 Emphasis on Cross-Functional Movement
Experience: What types of businesses and roles have you experienced? Please check the relevant box(es).
Experience: What types of businesses and roles have you experienced? Please check the relevant box(es).
Role Types
Role Types Business Types
Business Types
Have
Have youyou experience
experience in these roles: Have you experience of working in:Have you experience of working in:
in these roles:
rOperational
Operational role in stores
role in Stores r The core business r The corer business
Operational role in Distribution Center r The international business r
rOperational
Operational role
role in Head Office
in distribution center
r Turning round an under-performing area
r The international
r
business
rRegional
Operational
Operational Role role in head office r A high growth business r Turning r around an underperforming area
rManaged
Regional
more thanoperational
3 people role r New acquisitions/Joint ventures r A high-growth r business
Specialist/Process role in Head Office r Other organizations external to Harrison r
rBusiness
Managed more than three
Plan Change Program or Project role people r r New acquisitions/joint ventures
r Specialist/process role in head office r Other organizations external to Harrison
r Business plan change program or project role
* Pseudonym.
Conscious of the need for solid performers to keep contributing over time, Harrison emphasizes its expectations
of steadily improving performance. Harrison communicates a clear rationale to solid performers for this ongoing
performance improvement and amends its standards for performance and rewards.
Sticks and Carrots

…while ensuring that solid performers improve their performance over time
Harrison Company’s Performance Management System
Annual Objective 1. Communicate the rationale for

Setting escalating expectations to highly
contributing solid performers
Performance 2. Build flexibility in appraisal to assess

Appraisal different types of contribution
Performance Appraisal Performance Appraisal
Compensation 3. Develop flexible approaches to rewards
Annual Manager 4. Vigorously address performance problems and

Performance increase performance standards over time
Discussion
Source: Harrison Company; Corporate Leadership Council research.

Results
Harrison Company * employees report increasing conviction that the company values their contributions. The
number of employees who perceive that Harrison values their opinions, that they can impact their work environment,
and—most notably—that their jobs make full use of their skills, is increasing. Harrison Company also notes that
engagement and retention of solid performers is increasingly important to the organization, as the company expands
into new regions and new product lines.
Realizing the Value of Solid Performers

Harrison Company finds that individuals’ belief
in the value of their contribution is on the rise…
Harrison Employee Survey Results
Q: “My opinion is valued.” Q: “My job makes the Q: “I get the chance to
most of my skills.” make suggestions for
improvements at work.”
69% 73% 66% 81%

61% 76%
Percentage of
Respondents
Strongly
Agreeing with
Statement
2002 2004
…driving increasing sales and supporting the company’s ability to expand internationally
Harrison Company Domestic Retail Sales
Critical to Growth
Indexed
“As we expand into new countries and into
1.4 different types of services, our business will rely
1.2 on the retention and productivity of our core
1.1
1.0 solid performers to keep our domestic business
profitable.”
Senior Vice President, HR

Harrison Company
2001 2002 2003 2004

Contribution Diagnostic Tool

To help members understand the identity and contribution of their B players, the Council has synthesized academic,
consulting, and HR analysis on solid performers to create the Contribution Diagnostic Tool. Members should use
the tool to define who is responsible for creating value in the organization. The first table assesses which B player
contributions are important for the business overall or for particular business units.
Not All Solid Performers

CLC Contribution
Instructions:
1. Complete the final column of the first table for the organization as a whole and for each
major business unit.
2 Sum the scores in the final column for the organization as a whole and for the major units.
3. Totals above 60 indicate that B-player contributions are particularly important for the
business or for a particular unit.
Agreement
Type of
Degree of Need Within Business (5 = high,
Contribution
1 = low)
Operational/ Our processes or practices are very different from other organizations’
Technical The external labor market rarely provides us “ready-made” expertise
Expertise Our current strategy relies on technical innovation from those with multiple years’ experience
We have a high subordinate-to-manager ratio

Management
Our employees work together very closely and departures affect morale
of People
We develop good technical but poor people managers
Organizational Our strategy is likely to change substantially in the near future

Continuity We have recently completed a period of significant change or restructuring
Leadership We are concerned about being able to advance HIPOs quickly enough
Development This is a unit or level where HIPOs often fail
Customer Our customers place a premium on the consistency of our staff

Retention Deep customer knowledge is critical to customer acquisition or retention
Organizational
We put significant emphasis on promoting organizational values
Values
We are in the process of executing against a new strategy

Execution Skills
Our work means project management skills are at a premium
Cross-Functional Our business is a hard place to form networks

Networks Our success relies on the formation of informal networks
* Pseudonym.
The second table identifies which individuals or groups of individuals provide key contributions to the business. The
organization can use this to target engagement research and efforts to the most important groups of B-players.
Are Created Equal

Diagnostic Tool
4. Calculate the average score for each type of contribution featured in the first table.
5. For average scores of more than 3.5, move to the relevant questions in the table below.
6. Answer these questions for specific employees or teams of employees.
7. Identify employees or groups of employees scoring highly for these questions and target these
individuals for engagement attention.
Agreement
Type of
Solid Performer Contribution (5 = high,
Contribution
1 = low)
Operational/ Has deep knowledge of our processes
Technical Is a teacher and advisor to others on company processes
Expertise Has designed key processes used by the organization
Builds loyalty in subordinates

Management
Has significant people management skills
of People
Is a good developer of others
Organizational Has performed solidly over many years and in different organizational circumstances
Continuity Shows readiness to change and adapt
Leadership Is a good coach of others, particularly in transferring key functional or technical principles
Development Can fill more senior roles on a temporary basis
Customer Is responsible for managing key customer accounts or constituents

Retention Has built personal relationships with important customers
Organizational
Is an ambassador of organizational values
Values
Has highly developed organizational skills

Execution Skills
Can manage large projects
Cross-Functional Has developed and maintained informal networks over long periods
Networks Uses key contacts to get work done quickly
Source: Delong, Thomas J., and Vineeta Vijayaraghavan, “Let’s Hear It for the B -Players,” Harvard Business Review (June 2003); “Letters
to the Editor,” Harvard Business Review (November 2003); Pfeffer, Jeffrey, “Fighting the War for Talent Is Hazardous to Your
Business,” Organizational Dynamics (Spring 2001); Bossidy, Larry, and Ram Charan, “Execution, The Discipline of Getting Things
Done,” Random House Business Books (5 September 2002); Harrison Company * ; Corporate Leadership Council research.
Managing “B Players”
The Council has seen a number of organizations redressing perceived inequities in the treatment of solid performers
with programs to engage highly valued solid performers.
Engaging Value Creators in the “Middle 70”

Organizations report a variety of approaches to
meeting the needs of highly contributing “B -Players”
“Oak Trees”
General Motors Corporation designates individuals with business-critical functional expertise and
deep knowledge of the organization as “Oak Trees.” Components of the Oak Tree program include the
following:
• A rigorous application process that assesses the level of expertise and relevance of expertise to the
business
• Targeted benefits and rewards for participants
Voluntary attrition among Oak Trees is less than one-fifth of that of GM as a whole.
“Core Performers”
To recognize solid performers’ contributions, Kellogg adjusted its HR strategies to offer even more
support to its core performers:
• Core performers receive development through opportunities to participate in special projects
• Kellogg reserved funding to increase bonuses of solid performers
• The company celebrates the contributions of core performers in a number of companywide forums
“Critical Positions”
Brown-Forman manages 90 critical positions that are highly important to business success:
• Many critical positions are deliberately fi lled with employees who have not yet been slated
for a leadership development position, but have unique skills and expertise
• Individuals in critical positions receive career development and management focused on
developing their expertise—not, as is the case for their HIPO peers, cross-functional exposure
Source: Kellogg Company; General Motors Corporation; Brown-Forman Corporation; Corporate Leadership Council research.
Council Assessment:
Solid Performer Career Pathing
Caveat
Harrison determines that some solid performers are critical to business success due to
their internal and external networks, their job-specific or company-specific skill sets, or
their execution of business-critical roles. However, other organizations may find that the
highly valuable solid performers in their own business may be a different subgroup.
Implementation Tips
Delicate Conversations—After some solid performers were identified as key contributors,
many of these valuable employees took offense when referred to as “solid performers,”
even in the context of discussing their careers as key contributors to the organization.
Organizations seeking to define their own key contributors need to frame these
discussions carefully to ensure that key contributors are reassured of their value, their
contribution, and their role within the organization.
Performance Management Discipline—The success of Harrison’s management of key
contributors depends on maintaining and increasing the performance levels of these
employees to maximize contribution and prevent “coasting.” Over time, organizations
should recognize that building and communicating strong performance expectations
for all types of employees will pay dividends in the form of increased contribution and
comprehension of organizational requirements.
57
Chapter III
Key Insight
Before any proactive organization-level engagement strategy will

succeed, organizations must first identify and remove the drivers
of disengagement, many of which are “invisible” to traditional
methods of detection, such as employee engagement surveys.
Chapter III: Targeting Drivers of Disengagement 59
The Council’s survey of HR executives identified a key gap in many members’ approach to engagement. While
more than three-fourths of members actively measure engagement, far fewer undertake activities to allow for a
deeper understanding of exactly why engagement levels are low. In this chapter, the Council explores an approach to
assessing the diverse—and sometimes difficult to discern—barriers to employee engagement.
Cause Versus Effect

While a strong majority of organizations measure engagement levels…
Practices to Measure Engagement
Companies That Analyze Companies That Use Organization-

Retention Data to Assess Engagement Wide Surveys to Measure Engagement
No Yes No Yes
23% 25%
77% 75%
…far fewer use practices to build an understanding of barriers to engagement

Practices to Measure Barriers to Engagement
Companies Using Discussions Between Managers Companies Using Executive-Led Focus Groups
and Direct Reports to Understand Engagement Barriers or Discussions to Understand Engagement Barriers
No Yes No Yes
31%
43%
57%
69%
= 86. Source: Corporate Leadership Council 2004 HR Executive

61
Practice #3: Cultural Assessment Process

• Caterpillar is a Fortune 100 company and the world’s leading manufacturer of
construction and mining equipment, diesel and natural gas engines, and industrial
gas turbines.
• In 2003, the company generated revenues of more than $22 billion and employed
more than 69,000 individuals worldwide.
Description
Caterpillar develops the Cultural Assessment Process (CAP) to gain a deeper understanding of the barriers
to employee engagement. The CAP offers individual business units a detailed diagnosis of employee
perceptions about the working environment that constitute barriers to engagement, guidance in creating
action plans to address engagement barriers, and an ongoing post-action plan implementation assessment.
Goals
The CAP’s goal is to provide business unit leaders with a complete picture of barriers to engagement
not possible through employee opinion surveys alone. A better understanding of the root causes behind
disengagement in the workforce allows for more targeted action plans and increased employee engagement.
Caterpillar’s CAP differs from the standard practice of identifying engagement barriers in three main
areas. First, whereas employee opinion surveys merely measure the perceptions and culture in the work
environment, the CAP provides business units with a deep understanding of the root cause behind all
barriers to employee engagement. Second, Caterpillar ensures the effectiveness and relevance of engagement
interventions by involving all employees in the identification of engagement barriers and their solutions.
Third, a series of short-term, focused action plans ensure that engagement actions stay at the top of
management’s agenda and create a continuous cycle of cultural improvement.
Results
The CAP continues to demonstrate a long-term positive impact on the business units’ work environment
and bottom-line results. For example, an international manufacturing facility used the CAP to attain a 59%
decline in attrition, a 44% decline in absenteeism, and a 74% decline in overtime pay—creating an annual
savings of $8.8 million.
Practice Driver
Recognizing that a highly engaged workforce is key to achieving ambitious growth objectives, Caterpillar adds a
“people” component to its list of critical success factors, while the company’s CEO establishes specific employee
engagement targets for each business unit. However, business unit leaders do not feel that the company’s annual
employee survey provides adequate information to overcome engagement barriers. While surveys reveal employees’
perceptions of “visible” aspects of the work environment, they fail to capture the “invisible” aspects of employees’
perceptions, such as social norms and unwritten rules. Caterpillar’s line managers need to understand employees’
perceptions of the “visible” and “invisible” aspects of the work environment to increase employee engagement.
What They Need to Succeed

Caterpillar adds a people component …which is reinforced by targets
to its list of critical success factors… for employee engagement…
Caterpillar’s Critical Success Factors CEO’s Employee Engagement Challenge
Critical Success Factors From: CEO

To: Business Unit VPs
• Growth • Six Sigma To support our growth objectives I’m
• Cost Reduction • Best Products expecting each business unit this year to
• Order Fulfillment • People—Quality Work Environment improve its employee engagement index*
scores by five points…
…prompting line leaders to identify the need

to overcome gaps in information about employee engagement
Identified “Visible” Barriers to Engagement Unidentified “Invisible” Barriers to Engagement
Employee Annual Our overtime policy is

Survey Results Action Plan never applied consistently.
• Benefits
• Compensation
• Training
• Communication
BU Head
Manager of BU BU BU
Employee Employee
* Caterpillar has created several indices, covering each of its Critical Success Source: Caterpillar Inc.; Corporate Leadership Council research.
Factors, which are measured on an annual basis.
Practice in Summary
Caterpillar’s Organizational Effectiveness and Engagement group (OE+E) creates a “Cultural Assessment Process”
(CAP) to assist business units in identifying and overcoming barriers to employee engagement. OE+E consultants
diagnose engagement barriers through a series of focus groups and one-on-one interviews with business unit
managers and employees. Candid communication with employees enables consultants to determine which “visible”
and “invisible” aspects of units’ cultures are eroding engagement. The CAP ends with a rigorous action-planning
and follow-up process to ensure that business units see action steps through to completion.
Providing a More Complete

Picture of Engagement
Caterpillar’s Organizational Effectiveness and Engagement (OE+E)
unit provides business units with a Cultural Assessment Process (CAP)
that enhances business results through increased employee engagement levels
Caterpillar’s Cultural Assessment Process*
Step # 1: Establish the Relationship Step # 2: Identify the “Invisible” Step # 3: Identify the
Between and “Visible” Components of Cultural Barriers to Engagement
Culture and Results Organizational Culture
Focus Group Survey Interviews
Three “Invisible” Three “Visible”
Aspects of Culture Aspects of Culture Survey
______
Perceptions Actions Results ______
Road Maps Communication ______
Relationships Learning
Reinforcements Reinforcements
Organizational Effectiveness and Engagement Unit (OE+E) Step # 4: Identify Solutions to

the Cultural Barriers to Engagement
• Structure A self-sustaining unit within corporate HR that—on a demand-driven
basis—offers business units an end-to-end assessment of their culture 120-Day Action Plan
________________
• Staff Eleven consultants with diverse functional and educational backgrounds ________________
(including HR, Manufacturing, Engineering, and Marketing) ________________
• Mission To help business units achieve strategic, sustainable business results
through improved culture and employee engagement
Step # 5: Create a Continuous
Power Through Knowledge Cycle of Cultural Improvement
“We have no authority over business units—our influence lies in the rigor of the Implementation
assessment process that opens managers’ eyes to misalignments between their
people and their strategic objectives.”
Head of the Organizational Action Plan
Effectiveness and Engagement Assessment
Division
Caterpillar Inc.
* Caterpillar’s Cultural Assessment Process is currently patent pending. Source: Caterpillar Inc.; Corporate Leadership Council research.
Step #1: Establish the Relationship Between Culture and Results

Caterpillar establishes a clear link between employees’ perceptions—their attitudes about the “visible” and “invisible”
aspects of the work environment—with employee actions and behavior and, ultimately, the company’s culture and
financial results. The company notes that employee actions such as increased absenteeism, attrition, and inventory
shrinkage often serve as strong signals of negative employee perceptions of the working environment that result in
undesirable employee behaviors and employee disengagement.
The Power of Perceptions

Caterpillar finds that employees’ perceptions of the workplace directly
impact their actions and the company’s financial results…
Caterpillar’s Culture Impact Value Chain
Perceptions Actions Results

Employees’ beliefs and …drive what they do, …which shape the Are we meeting
attitudes about the “visible” how they do it, company’s culture our strategic
and “invisible” aspects of the when they do it, and impact objectives?
work environment… and why they do it… financial results
Caterpillar’s Cultural Assessment Process Objective

To assess and address perceptions about the “visible” and “invisible” aspects of the workplace that
have a negative impact on employee engagement and the organization’s ability to meet strategic goals
…and thus identifies the need to react immediately to symptoms

of negative employee perceptions that inflict costs on the business
Symptoms of a Derailing Culture

It’s Perceptions That Matter
1. Absenteeism “If an employee perceives an inequity, then he/she will
2. Attrition react to it regardless of whether an actual inequity
3. High level of grievances exists.”
4. Inability to attract most qualified OE+E Presentation Material
candidates
5. Increase in injuries
6. Inventory shrinkage
Caterpillar’s Definition of Culture
7. Low level of employee idea input
8. Low levels of volunteerism “The perceived ‘right way’ we do things at the facility.”
9. Low productivity
10. Resistance to change
Source: Caterpillar Inc.; Corporate Leadership Council research.
Step #2: Identify the “Visible” and “Invisible” Components of Organizational Culture
The Cultural Assessment Process enables thorough understanding of employees’ perceptions of all aspects of their
work environment, identifying the full list of barriers to engagement. “Invisible” aspects of culture do not appear
in survey data, organizational charts, or process maps; instead, they manifest in employees’ behavior. Caterpillar
groups invisible aspects of culture into three categories: “road maps” that provide cues about what the organization
values, “relationships” between employees, and, finally, “reinforcements” by which these cultural aspects perpetuate
themselves.
Get It All Out

Caterpillar’s Cultural Assessment Process (CAP)
of a business unit’s culture to identify root causes of
“Invisible” Aspects of Organizational Culture
1. Road Maps
Symbols
Nonverbal communications that explain what is valued
Rites and Rituals
Ceremonies or events that highlight what is important
Stories and Myths
Stories that describe what the company stands for
Values
What the organization cares about most
2. Relationships
Norms and Routines
Day-to-day ways people behave and interact
Power
Influencers of opinion (not necessarily linked to position)
Structure
Relationships, communications, and power
Roles and Responsibilities
What is expected of people and their performance against expectations
3. Reinforcements
Assumptions
The unwritten rules accepted as facts
Systems and Rules
The methods that control, measure, and reward desired behaviors
Caterpillar also assesses “visible” aspects of the facility’s culture—characteristics easily identifiable in a facility’s
operations. “Communications” represent policies conveyed by management to employees, “learning” consists of
formal people-related policies, and “reinforcements” indicate how Caterpillar sustains its culture.
on the Table
assesses three “invisible” and three “visible” aspects
employee disengagement and/or strategic misalignment
“Visible” Aspects of Organizational Culture
1. Communication
Communication
Generating understanding with employees
Policies and Procedures
Rules and processes supporting desired behaviors
Measurement
Determining if the organization is on track to reach goals
2. Learning
Learning
Providing employees with needed knowledge to act effectively
Decision Making
Clarity and acceptance of decision-making structures
Leadership
Effective modeling, guiding, and coaching of desired employee behavior
Accountability
Clarity and acceptance of accountability structures
3. Reinforcements
Rewards
Rewarding desired behaviors
Recognition
Recognizing desired behaviors
Selection
Recruiting employees who support desired behaviors

Step #3: Identify the Cultural Barriers to Engagement

To assess employee engagement in a business unit, OE+E consultants meet with business unit personnel. Focus
groups, attended by individuals representing a range of functions and levels, provide insight into line employees’
perceptions, while one-on-one meetings with supervisors present unit leaders’ points of view. Caterpillar’s OE+E
consultants deliberately ask open-ended questions to generate candid conversation regarding the “visible” and
“invisible” elements of the business unit’s culture.
From Anecdote to Analysis

The OE+E consultant conducts employee focus groups and manager interviews
to assess the “visible” and “invisible” aspects of the business unit’s culture
Cultural Assessment Interview Guide (Excerpt)
Section I Section II Section III

(20,000-Foot (“Invisible” Elements (“Visible” Support
Culture Questions) of Culture Questions) Systems Questions)
• What is improving in the facility? • What are some things that are not • Do you have the materials, equipment,
written down but are accepted as fact? and training you need to do your job?
• What is disappointing or causing pain
in the facility? • Who comes to mind as the influencers • How effective is the internal
of opinion in your facility? communication and feedback system?
The open-ended nature of the • What are some significant events in
your facility in the past 12 months? • What is the recognition process?
questions offers the OE+E consultant
a better opportunity to identify • How do people know what is expected • Are managers consistent in
employee and manager perceptions of of them? their expectations for employee
the key aspects of the facility’s culture. • How does your unit reinforce desired performance and behaviors?
behaviors?
The OE+E consultant assesses
the perceptions of employees
and managers in regard to both
the “visible” and “invisible”
aspects of the facility’s culture.
Focus Group Sessions Manager Interviews
OE+E Business OE+E Manager

Consultant Unit Consultant
Personnel

Step #3 (Continued): Identify the Cultural Barriers to Engagement

Recognizing that participants in focus groups may be reluctant to speak frankly, the OE+E consultant leads three
exercises designed to create a candid discussion of the barriers to engagement in the working environment. The
first exercise identifies business unit “buzzwords” and discusses their often varied meanings. The second exercise
addresses the issue of trust; participants identify the behaviors and actions that enable people to build trust among
themselves and then consider their own level of trust in business unit managers. Last, participants assess the degree
to which business unit leaders’ behavior aligns with the messages they communicate. This exercise reveals employees’
perceptions of managers’ sincerity and integrity.
Reading Between the Lines

Focus groups comprise a series of exercises that assist
the OE+E consultant in identifying key employee perceptions
Focus Group Exercises
Establish Baseline Understanding Trust Exercise Say–Do Gap Analysis

• Participants share and compare • Participants identify behaviors that • Participants discuss perceptions of
perceptions of words commonly used inspire trust, then compare trust factors the gap between what leaders say is
in the facility. against current level of employee/ important versus what they actually do
supervisor trust.
• Purpose: To identify perceptions of • Purpose: To identify employees’ level • Purpose: To identify perceptions of
communication clarity. of trust in management. management’s ability to “walk
the talk.”
Policies
Well-Understood Words with Does Well At
Words Mixed Meaning Say Do Gap
• Respect
• Load Factor • Quality Set disciplinary Change the Not for everyone
Needs Improvement action policies policy, it’s applied
• Six Sigma inconsistently
• Consistency
• Core Value • Follow Through
Write the policies They implement No credibility
them as they please
• Honesty
Focus Group Overview

• Between 9 and 12 employees in each focus group
• Each focus group session lasts approximately 90 minutes
OE+E Consultant
• Employees are selected by the management team representing
different functions of the organization to meet a 95% statistical
confidence level for data collected
Verification of Qualitative Data
1. Walk-Around Verification 2. Quantitative Verification
OE+E consultant verifies dominant OE+E consultant verifies
themes raised in the Focus Group themes raised in the focus group • Employee opinion survey data
sessions and interviews through sessions and interviews through • Productivity data
visual observations. analysis of quantitative data. • Safety record data

Step #4: Identify Solutions to the Cultural Barriers to Engagement

Armed with results from the assessment process, the business unit leaders convene an Action Planning Team,
tasked with identifying solutions to the most significant causes of disengagement. The group of between 12 and 40
employees, representing line workers and management, screens a list of potential action steps, ultimately prioritizing
between 10 and 12 items.
From Assessment
An Action Planning Team provides
team with a prioritized list of
CAP Action-Planning Steps

1 The OE+E consultant presents the main
findings of the CAP to the business unit…
Executive Summary
1. Lack of understanding and shared vision
2. Lack of consistency in policy application
3. Some leaders are not “walking the talk”
4. Lack of personal growth opportunities
5. Limited recognition of desired behaviors
6. Perceived lack of support tools and equipment
7. Inadequate two-way communication
2 …while an Action Planning Team identifies

a prioritized list of action recommendations…
• Twelve to 40 participants across functions

• Desired 1:2 ratio of managers to employees
3 …and the business unit management team • Participation of positive and negative “influencers”
decides on a 120-day action plan of opinion
120-Day Action Plan

Caterpillar’s Seven Typical Follow-Up Actions
Action Plan Areas
Leadership Greater consistency in management
Strategy Communicate vision, mission, and strategic objectives
Policies and Procedures Clarify and communicate overtime policy
Communication Improve bottom-up communication channels

Training and Development Improve functional career development opportunities
Operations Increase flexibility around production scheduling
Enhance sense of belonging through communications
Organizational Culture
and events Source: Caterpillar Inc.; Corporate Leadership Council research.
The Action Planning Team provides input to business unit managers, who create a formal action plan with a 120-day
deadline. Caterpillar finds that employees’ direct involvement in the action prioritization process helps the business
unit ensure that employees have realistic expectations of overcoming engagement barriers.
to Action
the business unit management
suggestions for the 120 -day action plan
Action Prioritization Process
Data Input
About 150 Action Ideas
• Results from employee opinion survey

• Results from cultural assessment
• OE+E Consultant recommendations
• Action Planning Team recommendations
Action Filtering Process
• Need-to-do actions, not nice-to-have

• Actions controllable by business unit
• Actions that can be completed within 120 days
Prioritized Action Recommendations

About 10–12 Prioritized Recommended Actions
A/C/E Score “ACE” Action
Compensation Total
Prioritization Tool
Give everyone a raise or no one a raise 79
Leadership Total
Each member of the
Action Planning Team
Set clear expectations of behavior; develop metrics;
communicate results; hold accountable
115 rates each action idea
on a scale from 1–5 to
Team/EE Involvement Total
prioritize the action ideas:
Empower production teams to make decisions on line
movement and cross-training plan
77 5 = Absolute action
3 = Consider action
Validate and communicate metrics/values in capacity
charts 67 1 = Execute later

Step #5: Create a Continuous Cycle of Cultural Improvement

OE+E consultants conduct a short employee survey at the 120-day mark to collect employee feedback on progress
against the action plan. Consultants present feedback on the success of action plan implementation to business unit
leaders, who in turn determine if they have successfully achieved goals. When work remains to be done, business
units typically implement a second 90- to 120-day action plan.
A Virtuous Cycle of Culture Improvement

At the end of the 120 days, a post-implementation assessment
is conducted to identify actions yet to be addressed
The Post–Action Plan Implementation Assessment Process
1 120-Day Action Plan Adopted

• Organization-wide communication
of (new) action plan and priorities
• Clear ownership of actions identified
120-Day Action Plan
________________
________________
________________
OE+E
After the post-120-day Consultant
action plan assessment, BU
HR
Manager
business units typically
identify remaining
4 Identification of New Action Areas actions for a final, 2 Implementation of Action Areas
• OE+E Consultant presents results from the more limited, 90- to • HR, CAT University, and the OE+E provides
post–action plan implementation 120-day action plan implementation support and best practice
• Business unit management team decides solutions
on a new list of actions, if needed • Employees are updated about progress toward
implementing actions
3 Post 120-Day Action

Plan Assessment
• OE+E conducts short online survey of employees’
perception of success in implementing action areas
• OE+E obtains qualitative feedback on all action items rated
the same or worse since the assessment began

Step #5 (Continued): Create a Continuous Cycle of Cultural Improvement

Throughout the implementation of the 120-day action plan, the OE+E consultant updates employees in the business
unit through a monthly newsletter, reporting progress made toward implementing the plans. Caterpillar considers
the high level of transparency and two-way communication between business unit management and line employees
throughout the Cultural Assessment Process crucial to successful completion of action plans.
A Sense of Urgency
The OE+E consultant informs all employees in the business units on a monthly
basis of progress against the goals set out in the 120 -day action plans
120-Day Action Plan Newsletter*
Caterpillar’s monthly
action plan newsletter
highlights the time
remaining to implement
the 120-day action
plan to ensure that
employee engagement
actions stay on top of
management’s agenda.
Updates on actions *
implemented and actions
soon to be started gives
employees confidence in
management receptivity
to their input.
* All names in newsletter are pseudonymed. Source: Caterpillar Inc; Corporate Leadership Council research.
Results
Across the 75 Cultural Assessment Processes that Caterpillar has conducted to date, the company reports high levels
of satisfaction with results. For example, an international manufacturing facility experienced a notable turnaround
due to the CAP process. Once plagued by low employee job satisfaction, high attrition, and frequent absenteeism,
after a CAP diagnosis and action-planning effort, the facility reported a 59% decline in attrition, a 44% decline in
absenteeism, and 74% decline in overtime pay, creating an annual savings of $8.8 million.
Returns on a Healthy Culture

Caterpillar’s Cultural Assessment Process has a long-term
positive impact on business unit’s culture and bottom line…
Case in Point: International Manufacturing Facility

Situation: In 1999, a newly acquired manufacturing facility in the United Kingdom experienced low levels of employee
job satisfaction and high levels of employee attrition and absenteeism.
Action: Through the CAP, the root causes of the problems were identified to be a lack of employee trust in management,
a disconnected leadership style, and inconsistent communication and application of company policies. The facility’s
management team decided on a 120-day action plan targeted at those problems.
Attrition Absenteeism Overtime

(Indexed) (Indexed) (Indexed)
Business Unit
1.00 1.00 1.00
Annual Savings:
$8.8 Million
0.56
0.41
0.26
Before 18–24 Months Before 18–24 Months Before 18–24 Months

the CAP After the CAP the CAP After the CAP the CAP After the CAP
“Investors in People Award” 1 “Manufacturing Excellence Award” 2 “Employer of Choice Award” 3
2001 2002 2003
…and is gaining companywide popularity with business unit managers
A High ROI Exercise

“The overall cost of the assessment and follow-up was far less than the Caterpillar has conducted 75
value it generated to the company and employees. It greatly contributed to CAP engagements to date and
a feeling of renewal by employees in having a positive influence on where has expanded applications of
their company goes.” the CAP beyond manufacturing
President of International operations to encompass
Manufacturing Facility acquisitions, suppliers, and
Caterpillar Inc. international operations.
1
Annual award given by the “Investors in People” group, United Kingdom. Source: Caterpillar Inc.; Corporate Leadership Council research.
2
Annual award given by the “Institution of Mechanical Engineers,” United Kingdom.
3
Annual award given by the “Investor In Northern Ireland,” United Kingdom.
Council Assessment:
Cultural Assessment Process
Caveat
The Cultural Assessment Process (CAP) is an effective tool for organizations that find
they do not adequately understand engagement barriers. However, because of the time and
resources required to successfully see the process through, the Council finds that the CAP
is less relevant as a method of monitoring engagement over time. Organizations are well
served to pair the CAP with a more traditional pulse survey to monitor engagement on an
ongoing basis.
Implementation Tips
Demand-Driven Process—Caterpillar has learned that the CAP is only successful in
identifying and overcoming engagement barriers when the organization devotes the
necessary time and resources required of the process. For that reason, Caterpillar has
designed the CAP to be a demand-driven process, so that only organizations that are
prepared to dedicate the needed time and resources (e.g., not going through major
organizational transformation such as a merger, acquisition, or downsizing) will be eligible
for the CAP.
Employee Involvement—The success of the CAP in identifying and overcoming barriers to
engagement depends in large part on the active involvement of employees and managers
in the process. However, organizations should be aware that active involvement of the
workforce in diagnosing and identifying solutions to engagement barriers also increases
the need for transparency, communication, and implementation of follow-up actions.
Increasing employee involvement in identifying engagement barriers and solutions but
failing to effectively implement or communicate follow-up actions is likely to result in a
negative impact on the working environment.
Note to the Membership

Members interested in information on Caterpillar’s patent-pending Cultural Assessment
Process (CAP) and/or potential licensing of the process are invited to contact Caterpillar’s
Organizational Effectiveness and Engagement group; contact information follows below.
Caterpillar Inc.
Organizational Effectiveness + Engagement
Peoria, IL
+1-309-675-1000
77
Chapter IV
Key Insight
The Council has identified three essential components of a high-

engagement culture: connection, contribution, and credibility. A
high-engagement culture needs reliable mechanisms to ensure
employees are consistently experiencing all three of these elements.
Chapter IV: Building a High-Engagement Culture 79
The Council’s Employee Engagement Survey * identifies the 25 top drivers of engagement; across all 25 drivers, three
themes emerge regarding the type of organizational culture most generally conducive to high levels of engagement
among employees.
• Connection—The culture emphasizes the importance of the individual’s work to the organization’s success.
• Contribution—The culture respects individual strengths and assigns employees to interesting and impactful roles.
• Credibility—The culture must position the organization as worthy of this contribution.
The Three-Part High-

Engagement Culture Imperative
Most of the top drivers of engagement * rely on a high-engagement
culture, which can be characterized by connection, contribution, and credibility
Top Drivers of Engagement* Relating to High-Engagement Cultures
Connection Contribution Credibility

• Understanding of the Connection • Understanding the One Job’s • Manager Demonstrates Honesty
Between Work and Strategy Importance to Organizational Success and Integrity
• Manager Clearly Articulates • Manager Clearly Explains Job • Organization Has Reputation
Organizational Goals Importance at Onboarding of Integrity
• Manager Identifies and Articulates • Manager Demonstrates Strong • Manager Accepts Responsibility
a Long-Term Vision for the Future Commitment to Diversity for Successes and Failures
• Manager Sets Realistic Performance • Manager Has a Good Reputation Within
Expectations the Organization
• Manager Puts the Right People in the • Manager Defends Direct Reports
Right Roles at the Right Time
• Manager Inspires Others
• Manager Accurately Evaluates Employee
Potential • Manager Places Employee Interests First
• Manager Respects Employees • Manager Appropriately Handles Crises

as Individuals
• Manager Trusts Employees to Do Their
• Manager Encourages Employee Job
Development
• Manager Lets Upper Management Know
• Importance of Projects to Employees’ of Employee Effectiveness
Personal Development
• Manager Provides Job Freedom
*
The 2004 Corporate Leadership Council Employee Engagement Survey of 50,000 employees at more
than 50 organizations assessed 300 drivers of engagement. Top drivers of engagement ranked in the top
25 of 300, and each represents the potential to increase employee commitment by 20% to 30% or more.
81

Practice #4: Leader Storytellers

• Headquartered in Houston, Texas, Continental Airlines, Inc., is the sixth-
largest airline in the United States.
• The company had approximately $8.9 billion in revenues in 2003 and
37,700 employees.
Description
Continental realizes that the ability of its CEO to connect with employees on an emotional level is one
of his greatest strengths as a leader. Seeking to develop other executives’ leadership skills, Continental
determines that the CEO’s practice of telling stories to communicate is highly powerful and that it can
be taught to other leaders. The company rolls out storytelling training to all of its executives.
Goals
Continental’s main goal is to increase leaders’ abilities to forge connections with their employees,
generating emotional commitment from their teams and gains in performance and retention.
Continental’s approach differs from standard practice in two ways. First, the company believes that
effective communication not only requires facts and logic, but also speaks to employees’ emotions.
Second, Continental believes that storytelling is not an innate talent of a few leaders, but is a skill that
can be taught to all executives—in four hours, at that.
Results
More than 95% of course participants believe the program has made them more effective
communicators. The response of Continental’s 460 executives to the training has been so positive that
the company has decided to roll out the training to all 4,000 of its managers.
Practice Driver and Summary

In 1994, Continental caps a long period of declining performance with its eighth straight year of losses. At the
time, incoming CEO Gordon Bethune recognizes the importance of engaging employees to restore the air carrier
to profitability. Over the subsequent years, as Bethune leads the company to improved performance, his colleagues
count his ability to engage employees emotionally through stories as one of his primary strengths as a leader.
Wanting to extend the power of storytelling beyond the CEO and develop the communication skills of its executives,
Continental creates a four-hour storytelling class, entitled “Leading to Win.”
There’s Nothing Like a Good Story

Recognizing the need to address ...and the power of engagement
declining business performance... in support of operations...
Continental’s Net Income, 1990–1994
The Value of Engagement
1990 1991 1992 1993 1994
$0 “In order for our operations to run properly, we
($39) need all of our people to be putting in their
($125)
best work every day. We have people who want
Net Income
($ Millions)
($306) to get the job done. If you don’t have that edge,
you’re going to be an also-ran.”
($700) ($613)
Gordon Bethune, CEO
Continental Airlines
($1,400) ($1,272)
…Continental decides to replicate its CEO’s …and rolls out training for leaders
storytelling ability across the company...
Training Summary
Follow the Leader
Storytelling Training
“Continental’s culture of Working Together is key to being
a great airline. Communicating our cultural initiatives and • Course title: “Leading to Win”
business strategy through stories increases our workforce’s • Course lasts four hours
understanding of what we need to do to be successful.” • 460 Directors and Vice Presidents each
participate in one of 20 sessions
Larry Kellner, • Course will be rolled out to all 4,000
President and Continental managers
Chief Operating Officer • Training is taught by Continental’s Director
of Human Resources Development
“We’ve all retold Gordon’s best stories over and over, but our • Total cost of developing the training
executives can’t approach his level of leadership unless they are is $5,000
telling their own stories.”
Director of Human
Resources Development
(HRD)
Source: Continental Airlines, Inc.; Corporate Leadership Council research.

Step #1: Teach the Basics of Storytelling

The course commences with a short discussion, led either by CEO Gordon Bethune or President Larry Kellner, of
Continental’s business strategy. The executives communicate by “telling tales” to demonstrate storytelling as an
effective way to generate emotional commitment. The course instructor introduces a two-part framework for telling
stories that teaches students to incorporate their own values into story content and to use emotions and symbols in
addition to logic and data when delivering stories to an audience. Continental also provides preparation checklists to
assist fledgling storytellers in designing and delivering stories.
Learning to Lead with Emotions

Gordon Bethune or Larry Kellner begins …after which an HR instructor offers
each class by using stories to discuss an introduction to storytelling
Continental’s business strategy… content and delivery…
Leading by Example Content Considerations Delivery Considerations

in Storytelling in Storytelling
“We get some hard-edged executives who
may not buy into emotional leadership. But Effective content shares the values Effective delivery embraces many
when Gordon starts talking, he turns the of the speaker with the audience elements of communication.
class into a group of friends in a huddle. Beliefs Facts
Everyone points to him and says ‘I want to What is important, or Numbers, logic, and
be a leader; I want to be like that.’” desirable, or worthy to organization that appeal to
you personally? your listener’s rational self
Director of HRD Emotion
Continental Airlines Action Enthusiasm, inspiration, and
What are the values persuasion that appeal to
that guide your behavior your listener’s feeling self
and decisions?
Symbols
Metaphors, vision, and
images that appeal to
your listener’s visual self
…and tools to help executives craft and tell their own stories
Storytelling Preparation Checklists
Content Preparation Checklist Delivery Preparation Checklist

Participants: As you prepare your story, ensure that Participants: As you prepare to tell your story, ensure
the story’s content: that your delivery:
Illustrates and exemplifies our definition of success Is sincere
Focuses on team values Includes dialogue
Is based on a single, well-defined plot Is enthusiastic, dramatic, and engaging
Is brief and simple Describes characters and settings
Begins with normalcy Paints vivid pictures with words
Includes a challenge or problem to be solved Acknowledges how the audience is responding
Has a defining moment and adjusts accordingly
Ends with something resolved, changed, or learned Expands the link between the story and our
Will be meaningful to everyone in your audience business when necessary

Step #2: Develop Managers’ Storytelling Abilities Through Practical Exercises

Class participants begin to test their storytelling skills by preparing an anecdote of their own for delivery. Participants
identify an event from their own experiences, construct a story around it, and audition their story with fellow
storytelling trainees. Subsequent exercises challenge participants to modify story content, based on understanding
different audiences’ motivations, priorities, and touchstones, as well as the different objectives or lessons that a
single story might accomplish. The training concludes with a challenge to participants to use stories in their routine
interactions with employees, in hopes of instilling a permanent habit of communicating through stories.
Putting Theory into Practice

Course participants build skills by creating and telling a story to peers, receiving
feedback, and learning to adjust stories for specific audiences and objectives…
I. Design a Story II. Tell the Story and III. Tailor the Story for IV. Tailor the Story for
Receive Feedback Specific Audiences Specific Objectives
• Identify a true event that can • Deliver your story to class • Consider how the story • Consider how your story
become a compelling story participants and serve as an should be tailored to could be used to teach
audience for their stories reservation agents, flight different lessons
• Determine how the story
• Assess your listeners’ overall attendants, and mechanics • Could it demonstrate our
relates to current challenges
or opportunities reactions to the story, • Consider motivations culture, or how we compete?
including emotional and and priorities of • Could it motivate your
• Prepare the story using the
motivational impact different audiences team or teach a new way of
content preparation checklist
• Parse story content for • Identify critical touchstones thinking about our work?
• Practice telling the story
pacing and flow and taboos of audiences • Craft two new versions of
using the delivery
preparation checklist • Review story delivery for • Modify the story, creating a the story and share them
speaker empathy, tone, version for each audience with other participants
and cadence
Storytelling Basics Advanced Storytelling
…with the goal of integrating storytelling into daily management practice
Bringing Storytelling Back to the Office

• Upon returning to your business today, use a story to communicate business strategy
to a team member
• For the first week following completion of the course, convey any important message
with a story
• For the 30 days following the course, tell a story each day

Results
Executives participating in Continental’s storytelling class report overwhelming satisfaction with the course;
more than 95% indicate that they have improved their communication skills. In part due to strong leadership and
emotional engagement, Continental has reported positive financial results—particularly relative to peers—across
the last three years. CEO Gordon Bethune continues to use stories as a highly effective means of transmitting the
company’s values and teaching the behaviors expected of employees.
Words Matter
The course has been well received by participants
and has helped leaders drive engagement in their business units…
Summary of Course Feedback Connecting with the Team

“This course helped me to be a more credible communicator” “An integral component of being a successful leader
is learning how to communicate with your team.
Storytelling has become the main staple in our
True communication. We are able to communicate complex
Neutral industry or strategic issues by presenting them in a
False format people can relate to.”
4% 0.5% Senior Vice President of
Marketing
95.5% Continental Airlines
…which, in turn, drives successful operations at Continental
Operating Profit and Loss The Power of Stories

of Major Airlines, 2001–2003
“Consider a flight attendant, looking to close the
airplane doors and get ready for takeoff, but she’s five
meals short. She knows that those passengers think
$1,000 getting where they’re going on time is more important
than meals—and she knows she’ll be rewarded if
2001 2002 2003 they get there on time. She’ll figure she can find five
$0 investment bankers on the plane who’ll trade their
Operating
Profit/Loss meals for free drinks and she’ll solve the problem that
($ Millions) way. The difference is that she now has the ability to
solve that minor problem—we want her to solve that
($2,000) problem. We figure that’s her job.”
Gordon Bethune
($4,000) Continental From Worst to First: Behind
the Scenes of Continental’s
Other Major Airlines Remarkable Comeback
Source: Bethune, Gordon, with Scott Huler, From Worst to First: Behind
the Scenes of Continental’s Remarkable Comeback, Wiley, 1999;
Continental Airlines, Inc.; Corporate Leadership Council research.
Council Assessment:
Leader Storytellers
Caveat
Continental determined that its primary goal—developing leaders’ ability to communicate
and connect effectively to engage employees—was best achieved by teaching storytelling.
Organizations should consider the fit between their culture and leadership style before
deciding to replicate Continental’s storytelling training, lest the attempt to connect with
employees appear insincere or forced.
Implementation Tips
Support from the Top—Continental’s CEO or president led the introductory portion of
each storytelling course, in part to demonstrate their belief in the value of the training.
Organizations should make sure that senior leaders support, visibly, the training’s goals in
order to improve the likelihood that training produces lasting change. This is particularly
relevant in organizations where line managers tend not to value softer skills.
Made, Not Bought—After considering using an external vendor to supply storytelling
training, Continental decided to create the course in house, making it effective and relevant
by tailoring the training to company culture and strategy. Organizations should evaluate
training offerings’—internal or external—overall goal and fit with culture.
Practice, Practice, Practice—The success of Continental’s training depends on the
degree to which participants adopt the new style of communicating and incorporate
storytelling into daily practice. Continental’s program emphasizes immediate and daily use
of storytelling following the course to raise the effectiveness of the training in producing real
change.
87

Practice #5: Targeted Employee Contribution

Cascade
• Alcoa Inc. is the world’s largest producer of alumina and aluminium, with
operations in bauxite mining, alumina refining, and smelting. The company employs
approximately 120,000 employees and generated annual revenues of more than
$21 billion in 2003.
• The Rigid Packaging Division (RPD) of Alcoa is the United States’ leading producer
of aluminum rigid container sheet for the packaging and consumer products
market. RPD has 4,700 employees and is part of Alcoa’s $4.6 billion flat-rolled
products segment.
Description
Alcoa’s RPD, experiencing poor results and low returns on capital, realizes that a turnaround of the business
requires contribution from all employees. Recognizing that barriers to employees’ participation differ
across levels of the organization, the RPD tailors organizational structure, communication, and desired
contribution to each employee level’s ability to contribute.
Goals
The RPD seeks to spur the contribution of every employee by providing all levels of employees with a sense
of ownership for the business’s challenges and opportunities to participate in the design and execution of
solutions to those problems. To succeed, the RPD must avoid a “one-size-fits-all” approach to employee
contribution in favor of targeting the specific needs, knowledge, and perspectives of different workforce
segments.
The RPD’s “Targeted Employee Contribution Cascade” differs from traditional approaches to involve
employees in the business’s goals and challenges because it recognizes that change must be relevant and
managed in a way that is tailored to each level in the organization. For example, while organizational
structure may represent the key barrier to greater employee contribution at the most senior levels of the
organization, the contribution of frontline employees depends on precise, accessible communication of how
the business competes in the market and how each employee contributes to organizational success.
Results
Between 2000 and 2003 the RPD successfully reverses its business results, almost doubling the unit’s return
on capital (ROC), transforming it from one of the worst performing business units in the company to one
of the most successful. The RPD attributes the successful turnaround to the greater contribution of all
employees and the shift in the business unit’s culture.
Practice Driver
In the late 1990s, Alcoa’s Rigid Packaging Division (RPD)—operating in a market characterized by overcapacity and
fierce competition—is falling short of corporate targets, leading Alcoa’s CEO to consider divesting the RPD entirely.
The RPD’s new president launches a “competitiveness plan” using headcount reductions and process adjustments
to revive the business, but results are disappointing. An external consultant, tasked to analyze recent failures and
to devise a new turnaround plan, judges that the leadership team should take a more “hands-on” role in business
operations. However, the unit president determines that the “command and control” style of leadership is actually
driving poor results; to succeed, the unit needs to commit to breaking the “boss-centered” culture.
Reversing a Downward Trend

In 2000, Alcoa’s Rigid Packaging Division faces failure in its
efforts to reverse poor results or generate new ideas...
Rolled Cansheet Demand Versus Industry Capacity CEO’s Assessment of the RPD
Internal Assessment
Demand • 50% shortfall in target financial returns
Market • Shrinking revenues (14% of Alcoa-wide
Oversupply revenues in 1996, now 5%)
• Poor employee morale
External Market Assessment

• Consolidation of competitors
• Consolidated customer base
Conclusion: Consider sale of unit

1995 2000 2003
…and the business unit president begins to reassess the strengths

and weaknesses of the current organizational culture
RPD Assessments of Potential Actions
Consultant Assessment Consultant

• High levels of operational expertise among leaders Recommendation
• Good discipline from employees executing on leaders’ Business unit president
The new business unit directions should change leadership
president enlists an external • High levels of pride in meeting function and plant targets style to match existing
consultant to assess the culture.
unit’s culture, while he also
evaluates why a recent President Assessment President’s
“competitiveness plan” did • Little proactive identification of process improvement Conclusion
not succeed. from employees The business needs to
• A risk-intolerant culture, which punishes employees move away from our
for mistakes “boss-centered” culture.
• Low levels of cross-business collaboration
Source: Alcoa Inc.; Corporate Leadership Council research.

Practice in Summary
The RPD recognizes the need to manage different contribution challenges across all levels of the organization.
The leadership team defines a simple vision for employee contribution and applies this to its own team structure.
The unit then focuses on engaging managers by giving them greater ownership for businesswide problems and
having them design the necessary roles of employee contribution. Finally, the RPD encourages frontline employee
contribution by ensuring that employees understand the businesswide challenges and have opportunities for two-way
communication and local-level idea generation.
The RPD successfully shifts to a culture of employee contribution
by tailoring contribution strategies to each level of the organization
Contribution Strategy Pitfalls and Alcoa Practice
Standard Practice Pitfalls Alcoa Practice

Leadership team Leaders devolve few Restructure Leadership
Leadership defines approach of their powers; to Enable Contribution
Team to employee their structure • Understand drivers of low
involvement and inadvertently blocks contribution
communicates down individuals’ efforts to • Remove structural barriers
to lower ranks contribute to contribution
Managers try to In the face of Involve Managers in

Middle find opportunities pressing business Defining Contribution
Management to contribute and targets, managers’ Strategy
build opportunities efforts are • Involve managers in
for subordinate piecemeal and often business problem solving
involvement disconnected from • Link contribution behavior
business strategy to business strategy
Employees have Employee Build Contribution
Frontline access to broadly suggestions are low Opportunities in the
Staff available forms in quality; managers Wider Workforce
of contribution, rarely follow up on • Communicate the rationale
for example, via suggestions for employee contribution
suggestion boxes • Raise frontline business
acumen

Step #1: Restructure Leadership to Enable Contribution

The RPD’s leadership team conducts an extensive analysis of its work style—from current leadership philosophy
and their interactions, to missteps across recent years and past attempts to improve results. The group determines
that employees’ lack of participation in decisions and reluctance to take action for (justifiable) fear of punishment
for errors are significant barriers to engagement and financial success. The RPD’s leaders establish a vision for the
unit’s new culture, called the “New Business Owner Mentality” (NBOM). All employees, regardless of rank, will be
expected to behave as business owners, challenging long-held assumptions and increasing the level of risk taking.
Our Own Worst Enemy

Alcoa’s first step is to ensure that leaders understand the role
of employee contribution in achieving the unit’s financial goals
RPD’s Analysis of Current Cultural Gaps
Q: How do we currently lead? Business Needs Cultural Barriers

Leadership team participates in a 360-degree review.
• Find new areas for cost • Lack of Proactive
cutting Action—Employees
• Address and resolve wait for direction
quality issues • Organization Silos—
Focus only on own goals
• Fix delays to customers • Poor Customer
Q: How do we currently interact? • Add new product lines Focus—Little
External consultant reviews leadership team dynamics. to some plants understanding of
customer needs
• Increase total output
• Risk-Intolerant
of all plants
Culture—Errors are
• Identify possible new punished
streams of revenue • Poor Engagement—
Low commitment post-
Q: Where have we gone wrong? layoffs
Team reanalyzes competitiveness plan failures.
The New Business Owner Mentality (NBOM)

Everyone should act like they bought the company yesterday:
Q: What types of solutions might we need?
• Challenge everything
President refocuses on key financial “survival points.”
• Focus on the entire enterprise, including revenue, cost,
and working capital
• Except for health and safety, increase the risk profile of
the business, be aggressive

Step #1 (Continued): Restructure Leadership to Enable Contribution

The leadership team, realizing the significance of its role in the culture shift, applies the NBOM to its own activities
and behaviors. The RPD’s leaders revisit their decision-making processes, communication channels, team member
dynamics, and change-management skills. The RPD’s president determines that not all leaders are well equipped,
or willing, to participate in the cultural change; some executives depart from the company entirely, while others
take new roles within Alcoa. The leaner RPD leadership team also makes a number of highly visible changes to
its operations, most notably moving its headquarters from a downtown office tower to one of the unit’s plants to
symbolize their commitment to supporting the business lines’ contribution to business goals.
Leading by Example
The leadership team demonstrates its commitment to employee
contribution by applying the New Business Owner Mentality to itself
RPD Leadership Team Actions
New Culture: Leadership Team

Considerations Impact of New Culture on Leadership Team
Decision Making Reduced Team Size No-Fault Exits
Decision-making speed and process
EXIT
Structure for cooperation between units
Readiness of team members to change
Flow of Critical Information

Flow of information between business unit
president and leadership team Less Cumbersome Executive Relocation
Reporting Structure to Manufacturing Plant
Nature of reporting between line and January April July October
senior leadership team

February May August November
March June September December
Flow of information between team members
Relationships
Perception of the leadership team in
managers and employees’ eyes Skills Redeployment HR Restructuring
Relationship between business unit
president and team HR
Structure to help support line
managers’ success
Skills
Level of appropriate skills for change

Step #2: Involve Managers in Defining Contribution Strategy

Realizing the key role of middle managers in cascading the NBOM to frontline operations, the leadership team asks
these managers to expand their contribution to the business. To promote the widespread adoption of new behaviors,
the RPD involves the top 50 managers in solving the current financial problems via a series of meetings that
encourage behaviors consistent with the NBOM, with managers working in cross-functional teams to address specific
RPD problems. Although this challenges many managers to improve the effectiveness of their suggestions, as well as
deepen their commitment to wider employee contribution, managers find that the RPD’s greater reliance on their
contribution strengthens their own commitment levels.
Managing for Buy-In

RPD Leadership Meetings involve the top 50 managers in solving businesswide
problems, building their understanding of employee contribution
RPD Leadership Meetings
Spring 2001 Fall 2001 Winter 2002
First Problem-Solving First Follow-Up Meeting Second Follow-Up

Meeting Meeting
Briefing on the 10%
12%
17% 17%
20%
25%
Rearticulation of the
business problem 2%
New Business Owner Mentality

Key
Alcoa uses the leadership meetings
Activities Cross-function Report on progress of Assess how successful and the business successes to articulate
problem-solving change and key successes culture change has been a more detailed definition of the NBOM.
groups
Structured dissent
on problem
solutions RPD’s Cultural Beliefs
Involves managers in Uses experiences of real Assesses and reinvigorates • Urgency starts now (speed)
contributing to business- business successes to managers’ buy-in for ongoing
Purpose wide problem solving as define the role of employee employee involvement and • Think RPD (interdependency)
“New Business Owners” contribution in the RPD contribution and begins to • Step up (results through Alcoa
define needed behavior Business System)
The organization must allow The design of opportunities Employee contribution can • Expect excellence every day
managers opportunities for for employee contribution involve extra manager effort (high standards)
cross-business contribution must be grounded in and can therefore erode
Teaching • Speak up (continuous feedback)
before they can understand real examples of how over time without ongoing
its role in the organization contribution drives business reinforcement
• Proudly invested (ownership)
success
Set of solutions for each Leadership model to guide Action plans for sustaining
Key Output manager to introduce in his manager behavior in the new culture change
or her unit environment
Informal networking events Individual feedback for every Identification of potential

Supporting participant future leaders
Elements

Step #3: Build Appropriate Contribution Opportunities in the Wider Workforce

The RPD next cascades the NBOM to frontline employees to encourage their contributions to the business. The
RPD’s first task is to educate employees on the business and how they each contribute to it, thus creating a clear
rationale for their enhanced involvement. Leaders share more customer, financial, and market information with
employees than they had previously, raising employees’ engagement levels and trust in leaders while conveying the
urgency of the unit’s situation. Leaders carefully tailor communication to audiences and collect extensive feedback to
assess employees’ understanding of the message. HR uses focus groups and workplace feedback technology to fi ne-
tune messaging.
It’s Not What We Say, It’s What They Hear

To encourage the new culture of broad participation, the RPD’s leadership
team must present a compelling rationale for change to employees
RPD Culture Communication Measures
1 2 3
Increased Visibility Continuous Improvement Opportunities
of Senior Leaders of Messaging for Feedback
Town Hall Meetings—In mid-2001, Focus Groups—After the meetings, Electronic Polling—HR introduces
senior leaders conduct town hall HR conducts more than 20 focus groups polling technology to allow managers to
meetings with groups of 250 from with attendees to improve meeting gather anonymous employee feedback.
different levels and roles. communication effectiveness over time.
Did you understand the messages?

Did you feel able to challenge leaders?
How empowered
are you to solve
key problems?
Key Components Key Components Key Components

• Detailed customer, company, • Honest feedback on leaders’ • Demonstration of manager interest
and industry information credibility in employee input
• Significant time for questions • Information from employees • Anonymous, instant feedback
and answers on message effectiveness
Key Benefit Key Benefit Key Benefit

Opportunities for employees HR helps continuously improve Managers have measures of their
to question leaders messages after every meeting employees’ reaction to the culture change

Step #3 (Continued): Build Appropriate Contribution Opportunities in the Wider Workforce

The RPD keeps employees apprised of business conditions through a variety of channels. Manager communication
cards give managers snapshots of key metrics, competitive assessments, and other information to guide
communications with their teams. The RPD sends a Homepage Newsletter to employees’ homes, educating them
on the broader cansheet market. Managers incorporate “Return on Capital Sessions” into meeting agendas, giving
employees frequent opportunities to discuss their ideas and suggestions with managers. HR aims to incorporate these
opportunities into the daily workflow, emphasizing techniques that do not require additional resources.
It’s Everybody’s Business

To ensure employees’ contributions are of a high quality, HR educates
employees on the whole of the business’s, and market’s, challenges...
RPD’s Employee Education Channels
HR Manager MA
IL
US MAIL 12
YZ
JX
Weekly Manager Communication Cards Homepage Newsletter

Managers receive weekly “headlines” from across the business The newsletter goes to employee homes, educating employees
to communicate to employees. and their families on the beverage and food market.
Getting the Big Picture

“Some workers’ whole families have worked in these plants, they’ve seen hundreds of ‘business crises’ before. They
don’t believe you unless you show them the complete picture of what is going on.”
HR Director, RPD Division
...and then creates opportunities for employees to suggest business improvements

RPD’s Return on Capital Idea Generation Methodology
Meeting Agenda Idea Generation Methodology

1. Sponsorship—Reiterate employees’
• Weekly Goals role in cost-cutting and ROC.
• Progress Updates 2. Brainstorm—Progress around the
group, getting an idea from each
• Upcoming Executive Visit
person, until ideas are exhausted.
• Return on Capital Ideation 3. Multi-Vote—Have employees vote
on what they think the best ideas are.
RPD Team
4. Plan and Report—Set a calendar of
Manager activities and indicate when you will
report back.

Results
More than 96% of the RPD’s leaders report positive changes to their leadership style in the year of the NBOM’s
introduction, with employees across the company echoing the affirmative feedback. The RPD and Alcoa’s Chairman
are confident that these behavior changes were integral in nearly doubling the RPD’s return on capital between 2000
and 2003; the RPD transformed from one of the most poorly performing units at Alcoa to one of the strongest,
demonstrating operational, cultural, and financial success. The RPD was recognized as the best unit within Alcoa,
winning the companywide “Chairman’s Award” in 2003.
Changes in Attitudes
The RPD’s efforts have driven a significant shift
in manager and employee behavior since 2001…
Leadership Survey Results
Q: It has been a year since we introduced the new beliefs. Q: It has been a year since we introduced the new beliefs.
How would you characterize the changes you’ve Do you feel challenged to participate in the
made in your personal leadership? “New Business Owner” turnaround?
Major Positive 100%
Minor Positive Change 100%
Change 86%
40%
Percentage of
56% Respondents
Answering 50%
“Yes”
4% 0%
Not Much Staff Supervisors
Change
…which has led to substantial improvements in results

and public recognition from Alcoa’s CEO
Financial Results RPD
A Change in Fortunes
Return on Capital, 2000–2003 (Indexed)
“…By shifting the culture of the unit to one where
employees feel accountable and involved, the RPD
has almost doubled its Return on Capital, and its
production facilities are now some of the best examples
1.9 1.8 of the Alcoa Business System in the company.”
1.5 Chairman, Alcoa Inc.
1.0
Excerpt from his speech
to present the RPD with
the “Chairman’s Award”
for being the year’s most
2000 2001 2002 2003 effective unit in the
company

Council Assessment:
Targeted Employee Contribution Cascade
Caveat
The Rigid Packaging Division’s precarious financial situation led it to make dramatic
changes to its culture, using contribution as a lever to drive employee engagement.
Organizations should plan their own contribution strategies with an eye toward the risks
inherent to wholesale organizational upheaval; making drastic changes to an organization’s
culture and leadership team can be ineffective or disastrous, if planned or executed poorly.
Implementation Tips
Senior-Level Sponsorship—The RPD’s efforts benefited from the unit president’s belief in the
links between employee contribution, engagement, and business results. HR departments
wishing to drive engagement through a greater level of employee involvement should identify
senior executives who promote the need for greater employee contribution and model
behaviors consistent with the new levels of contribution.
“No-Fault” Exits—The RPD’s leadership team removed managers who resisted the
desired changes. The RPD engineered no-fault exits that did not attribute blame to
or restrict managers from other opportunities within Alcoa.
External Viewpoint—Despite the difference in opinion between the external consultant and
the unit’s president concerning the correct course of action for the unit, the RPD does believe
in the value of incorporating an external party’s feedback into the engagement strategy. The
consultant’s observations particularly helped team members understand the “boss-centric”
culture that leaders had inadvertently promulgated. An external party can often assist an
organization in identifying the ingrained elements of culture that may not be obvious to
internal leaders.
97

Driving Organizational Credibility
Practice #6: Values Realization System

• Headquartered in Denmark, Novo Nordisk is a European pharmaceutical
company and a world leader in diabetes care
• In 2003, the company generated revenues of more than DKr 26.5 billion
($4.5 billion) and employed more than 18,000 individuals worldwide.
Description
Realizing that misalignment between the company’s stated values and its actions would damage its
credibility with employees and thus diminish its ability to attract, retain, and engage employees, Novo
Nordisk translates the company’s values into specific behaviors and creates systems to measure and
govern the organization’s adherence to these standards.
Goals
Novo Nordisk’s primary goal is to strengthen organizational credibility, and thus engagement of
employees, by ensuring that the actions of company leaders are aligned with the company’s stated
aspirations. The secondary goal is to provide employees with a credible and specific set of values that
effectively guide them to make the right decisions.
Novo Nordisk’s approach to values-based management is unique in four ways. First, the company
has created an integrated charter that clearly defines specific behavioral expectations for employees,
managers, and executives related to its values. Second, the company actively reinforces expected
behaviors by integrating its values into key HR processes and programs. Third, Novo Nordisk has
designated senior executives as Values Facilitators, a full-time position, who actively support the
values and hold leaders accountable for living them. Fourth, the company creates accountability for
living its core values through constant, open communication with internal and external stakeholders.
Results
Novo Nordisk’s efforts to constantly reinforce its values have had a positive impact on the credibility
of the organization’s employment brand. In 2003, 85% of Novo Nordisk employees agreed that
management is living the values of the company in practice; Novo Nordisk has been an employer
of choice among university science graduates in the past two years. The company also credits its
values-based management with contributing to three years of revenue growth that strongly outpaced
competitors’.
Practice Driver
A company with well-established and publicized corporate values, Novo Nordisk confronts startling evidence in
the early 1990s that employees are not behaving in accordance with these values. After nearly losing an FDA license
to market a new insulin product in the United States due to product quality shortcomings, the company realizes a
need to revisit its method of teaching and transmitting its values. In recognition of the benefits of strong alignment
between business operations and values—in the form of high employee satisfaction, reduced intent to leave, high
levels of employee commitment, and financial results—Novo Nordisk aligns operations with values throughout the
organization.
The Cost of Values Misalignment

Despite its ambition to be …Novo Nordisk finds day-to-day
a values-based company… actions do not exemplify values…
Novo Nordisk Vision Statement (Excerpt) Novo Nordisk Values
Our Values
Vision Statement 1. Accountable
2. Ambitious
(Excerpt) 3. Responsible
We will be the world’s leading 4. Engaged with stakeholders
diabetes care company 5. Open and honest
Our values are expressed in all 6. Ready for change
our actions
We will achieve competitive business
results In 1993, Novo Nordisk almost loses an FDA license because of
product quality issues, despite value statement that underlines
the importance of setting ambitious product quality standards.
...with damaging effect on its ability to attract, retain, and engage

employees, as well as on the company’s bottom line
Impact of Communicating
and Supporting Company
Values on Key Talent Metrics
A Competitive Factor
“In a competitive labor market, values are increasingly
Organizations That Communicate
and Support Company Values and Visions a determining factor of the ability to attract and
retain talented people. As a relatively small company,
Organizations That Do Not Communicate
and Support Company Values and Visions we cannot compete on the size of the workforce.
Rather, we intend to compete on the quality of our
40% employees and the corporate values.”
39%
32%
Lars Rebien Sørensen
Novo Nordisk A/S
16%
7% 6%
Employees Employees Are Employees

Seriously Dissatisfied Don’t Feel
Thinking with the a Strong Sense
of Leaving Organization of Commitment
Source: Mercer, “People at Work Survey,” 2003; Novo Nordisk
A/S; Corporate Leadership Council research.
Practice in Summary
Organizations seeking to leverage values systems to strengthen their credibility and employment brands typically
confront four risks: 1) “Definition Risk,” the failure to provide employees with specific behavioral guidance that
reflects the values; 2) “Integration Risk,” key policies and processes do not incorporate the values; 3) “Alignment
Risk,” the absence of a mechanism to correct behaviors inconsistent with the values; and 4) “Sustainability Risk,”
the dilution of values over time because of failure to enforce accountability for living the values. Novo Nordisk
addresses each of these risks by translating the company’s values into specific behaviors and measuring and governing
adherence to these standards.
Increasing Returns on Values

To reap the benefit of its values, Novo Nordisk constantly reinforces
and holds managers accountable for living the values
Novo Nordisk’s Approach to Managing the Four Values’ Derailment Risks
Definition Risk Integration Risk Alignment Risk Sustainability Risk

Values are irrelevant to Expected behaviors are not Actions become misaligned Values are neglected
Values’ the strategic objectives reinforced because values with values because there over time because the
Derailment of the company or fail to are not integrated into key is no mechanism to identify business fails to hold itself
Risks give adequate behavioral policies and processes. and correct worldwide accountable for living the
guidance related to the cases of misalignment. values.
values.
Step #1: Translate Values Step #2: Reinforce Values Step #3: Assess Behavioral Step #4: Report Values’
into Behaviors and Actions at All Employment Levels Alignment with Values Alignment to Internal and
External Stakeholders
Novo Nordisk Novo
Response Employee Manager Executive
Nordisk
Sustainability
Report
Global Values
Facilitation Team
Perceived Benefits from Implementing

and Supporting Values
• Sharper focal point for decision making (e.g., less confusion) • Increased customer loyalty
• Employees know what decisions to expect from the management team • Stronger attraction of new employees
• Customers know what actions to expect from the company • Improved employee satisfaction and retention
• Increased morale, pride, and team identity • Stronger market and employment brand
Source: Novo Nordisk A/S; Corporate Leadership Council research.

Step #1: Translate Values into Behaviors and Actions

Novo Nordisk’s management team overcomes “definition risk” by examining the relevance of its current set of values.
The company identifies the need to link expectations for behavior, decisions, and policies to its values for employees
at all levels of the organization. Novo Nordisk drafts a formal position on its values and defines behaviors expected of
employees and the company for living the values in practice, known as the “Novo Way of Management.” This charter
has three parts: definition of the company’s six core values, a “Business Conduct Commitment” describing the
expectations of the company’s actions, and 10 “Leadership Fundamentals” that outline clear behavioral expectations
for company leadership.
Assessing Values’ Effectiveness

Novo Nordisk’s management team identifies key actions
to strengthen the effectiveness of their values…
Management Team Values Meeting
Values Effectiveness Checklist

Relevance—Are the values relevant to the history of the company?
Strategy—Are the values linked to the mission and goals of the company?
Adaptability—Are the values adaptable to changing circumstances? COO EVP HR
Applicability—Are the values applicable across a global organization?
Embeddedness—Are employees aware of the values?
Clarity—Are the values easy to understand and apply in practice?
Alignment—Are we conducting business in accordance with the values? CFO CEO
…and creates an integrated charter that clarifies behavioral

and business management expectations linked to its values
The “Novo Way of Management” Charter*
The Six Values The Three Business Conduct The 10 Leadership

Accountable Commitments Fundamentals
Each of us shall be accountable—to the Financial Responsibility 1. Each unit must share and use better
company, ourselves, and society—for the We will work to continuously improve practices.
quality of our efforts, for contributing to our financial performance by setting 2. Each unit must have a clear definition
our goals and for developing our culture high objectives for growth and value of where accountabilities and decision
and shared values. creation… powers reside.
Ambitious 3. Each unit must have an action plan to
We shall set the highest standard in Environmental Responsibility ensure improvement of its business
everything we do and reach challenging We will work to continuously improve performance and working climate.
goals. our environmental performance…
4. Every team and employee must have
Responsible
updated business and competency
We shall conduct our business in a Social Responsibility targets and receive timely feedback on
socially and environmentally responsible
We will work to continuously improve performance against these targets.
way and contribute to the enrichment of
our social performance… 5. Each unit must have an action plan
the communities in which we operate.
to ensure the development of teams
Engaged with Stakeholders and individuals based on business
We shall seek an active dialogue with our requirements and employee input.
stakeholders to help us develop
and strengthen our business.
* Complete version of the “Novo Way of Management” charter can be Source: Novo Nordisk A/S; Corporate Leadership Council research.
found in the appendix.
Step #2: Reinforce Values at All Employment Levels

To circumvent “integration risk,” Novo Nordisk weaves values into all HR and company activities on an ongoing
basis, realizing that stand-alone communication campaigns around values will not suffice. Novo Nordisk adjusts
messaging content to different audiences, given that employees, managers, and executives each have different
responsibilities vis-à-vis values. For example, while values-related messaging to line employees concentrates on
teaching values, managers and senior leaders are instructed to act as role models for how to live the values and
manage the business according to company values.
Hardwiring Values
Novo Nordisk constantly reinforces its values at all levels by
teaching, communicating, and enforcing behavioral expectations
Employment-Level–Based Value Reinforcement
Manager Executive
Employee (Acting as a role (Managing the business
(Learning the values) model for how in alignment with
to live the values) the values)
Onboarding: All new hires participate “New Manager Program”: All new “Leadership Foundation”: Through case
in a presentation of the Novo Way of managers are taught by experienced leaders studies, group discussions, and role plays,
Management charter. Company managers through simulation exercises and classroom this course strengthens new executives’
Learning/ give examples of desired behaviors linked presentations on how to act as role models (vice presidents’) ability to manage a
Training to the values through Novo-specific stories for values. business unit in accordance with the
and examples. Leadership Fundamentals.
“From Vision to Results”: All managers
must participate in this course, which
strengthens their ability—through business
simulations and practical workshops—to
make everyday business decisions that
support values.
Communication: Through its intranet and monthly newsletter, Novo Nordisk regularly communicates actions taken by the company
or individual employees, which serve to illustrate how to live the values in practice.
Communication Leadership Forum: Annual gathering of

the top 300 executives to celebrate and
discuss companywide actions and challenges
related to the company’s values.
Events: Events that confirm or celebrate the company’s commitment to its values—e.g., the Take Action program, which provides employees with a
formal opportunity to initiate individual or team activities in the name of sustainable development.
Rewards and Recognition: Reinforcement of behaviors that support the values through
informal and formal performance feedback as well as bonus incentives.
“Values Facilitation”: Corporate-led unit tasked to assess the extent to which business
Enforcement unit leaders are managing the unit according to the Novo Way of Management charter.
Employee Survey: “Vision and Values” section in employee opinion survey (E-Voice) measures the level of application of the values throughout
the organization.
Step #3: Assess Behavioral Alignment with Values

To ensure that business unit leaders comply with the Novo Way of Management charter, Novo Nordisk creates a
“Values Facilitation Team” with 15 executives serving as facilitators. These facilitators assess each business unit every
two to three years; facilitations are also initiated at the request of business leaders or the CEO. For a period of five to
seven days, the facilitator interviews employees to identify areas of misalignment with the Novo Way of Management
charter, using insights generated to create an action plan to mitigate “alignment risk.” The company indicates that the
facilitation team provides highly effective guidance for managing the business in accordance with values.
Are You Walking the Talk?

An internal Values Facilitation Team assesses the extent to which leaders in business
units are managing in accordance with the Novo Way of Management charter
Novo Nordisk Value Facilitation Process
1–2 months Prior to Assessment
1. Deployment 2. Assessment Planning 3. Assessment Interviews
• Business unit assessments Facilitator clarifies assessment expectations Facilitator interviews employees in the
every two to three years and request with business unit leader business unit to identify application of Novo
Way of Management charter
• CEO request
• Heads of the business
units request
4. Assessment Reporting
Novo Nordisk Values Facilitation Team Facilitator analyzes results from assessment
to identify key areas of misalignment with 5–7 Day
Structure: Independent unit within the holding Intervention
charter
company (not part of HR) Unit
Facilitation Report
Staff: Team consists of 15 facilitators of seven different

nationalities recruited from line executive ranks who
frequently rotate back into line positions
Tasks: Conduct business unit values assessments to
ensure compliance with the Novo Way of Management 5. Action Planning
charter and assist with annual organizational audit of
Facilitator agrees with manager about
business units follow-up action and timeline for completion
Facilitation
Action Plan
Not Just Nice Words on Paper

“Our values are the lifeblood of our business. If we did not actively ensure that our leaders are effective role
models of how to live the values in practice, then our employees would never be able to commit to this
organization, and the values would eventually just end up being nice words on a piece of paper.”
Business Unit Manager
Novo Nordisk A/S

Step #3 (Continued): Assess Behavioral Alignment with Values

Facilitators measure the alignment between manager and employee behavior and company values within the business
unit, using the three components of the Novo Way of Management charter as a guide. Facilitators discuss fi ndings
with business unit leaders, identifying areas of strong and weak alignment with the company’s values. Together, the
two create an action plan to address any areas of concern. Action plans include clearly defined next steps and hard
timelines to effectively offset values “sustainability risk.”
Assessing Values Alignment

The facilitator assesses the extent to which the business unit is being
managed according to the Novo Way of Management charter…
“Novo Way of Management” Assessment Interview
Assessment Questions, “Values” (Excerpt)

• Has there been any effort from unit management to support the importance of living the values?
• Are there clear examples of how the values are applied to practices and decision making in the unit?
Assessment Questions, “Business Conduct Commitments” (Excerpt)

• Are environmental considerations clearly integrated in management decisions?
• Has the unit engaged in activities related to environmental and bioethics dialogue with relevant
stakeholders?
Assessment Questions, “Leadership Fundamentals” (Excerpt)
• What are the mechanisms to discuss and clarify possible issues of relevance to improving the working climate?
Business Unit Facilitator • Are there actual plans to improve the working climate?
Employee • Are the plans considered effective to ensure improvements?
…and agrees on necessary realignment actions with the business unit manager
Facilitation Action Plan (Illustrative)
Novo Way of
Management Action Agreed Action Points Deadline
Need Help? Area Realigning with Values?
The audited leader Improve communication with relevant external
Value
stakeholders
June 30 The facilitator regularly
works with the assesses progress against
business unit’s HR Business Conduct Improve employee awareness of Novo Nordisk’s goals and decides to what
April 30
partner to implement Commitment bioethics policy and the related targets extent the action point has
follow-up actions. Leadership Ensure that development plans include clear been completed.
April 30
Fundamental #5 actions and deadlines on improvement areas
Come up with a plan to address climate survey
Leadership
issues, including communication of business March 15
Fundamental #3
priorities to employees

Step #3 (Continued): Assess Behavioral Alignment with Values

An organization with global operations, Novo Nordisk is highly aware of the need to ensure values are relevant to all
geographies. The company adapts values to local cultures by balancing corporate-wide mandates for values alignment
with local solutions for implementing the mandates, thus creating needed flexibility for cultural differences. The
employee opinion survey measures fulfi llment of corporate mandates across the global business units. Values
facilitators—themselves a cross-cultural group—play a critical role in teaching local leaders how the company’s
values apply to them.
Global Values Alignment

Novo Nordisk reinforces its values worldwide
through its team of global facilitators…
Novo Nordisk Global Facilitation
Novo Nordisk Global Facilitation Team Novo Nordisk’s Canadian facilitator,

living in Toronto
Structure: 7 out of 15 facilitators have a
nationality other than Danish and are stationed at Background
facilities in Canada, Greece, Japan, Spain, France, • Worked 16 years with Novo Nordisk
and the United States. in Canada, Denmark, Ireland, and
Egypt
Benefit: A regional facilitator can effectively • Previous positions as national sales
teach local leaders how to apply the Novo Way manager, general manager of an
of Management charter in practice given his or affiliate, and director
her knowledge of the local culture and Novo of sales effectiveness task force
management experience.
• Joined facilitation program in 2004
…and by constantly balancing corporate mandates around global

values alignment with local implementation authority
Novo Nordisk Global Values Alignment
1 Global Leadership Conference 2 Local Implementation 3 Global Employee Survey

Novo Nordisk communicates worldwide …but leaves it to the local leadership teams …while HR measures the worldwide
values alignment priorities… to decide on specific alignment actions… results of the alignment actions taken
E-Voice
Immutable Values, Customizable Application

“Our values must always be adhered to even if it means that we will have to refrain from locally
accepted business management practices. However, we accept that local rules, regulations, and
traditions will alter how we adhere to our values.”
SVP of Facilitation and Development
Novo Nordisk

Step #4: Report Values Alignment to Internal and External Stakeholders

The head of the facilitation team provides semiannual updates to the CEO on the state of values across the company,
and the two identify corporate-wide values issues and appropriate next steps. In turn, Novo Nordisk’s CEO reports
each year to the board of directors the extent to which business units across the company are adhering to the values,
discussing emerging priorities and new areas of focus within the existing values. Novo Nordisk also publishes results
on alignment with values to external audiences in its annual “Sustainability Report,” which details performance on
the three components of the Novo Way of Management charter.
Companywide Accountability
for Living the Values
The facilitation team updates …while the CEO reports on alignment
the CEO on areas of to the board of directors…
values misalignment…
Annual Board Discussion About
CEO Novo Way of Management Update Novo Way of Management
Six-Month Update— Agenda

Novo Way of Management 1. Living the Values: Update on how well we are
managing the business according to our stated values.
1. Companywide areas of values 2. Values Health Check: Discussion about how well
misalignment the Novo Way of Management charter is supporting
2. Regional-specific misalignment issues our strategic objectives as the business develops.
CEO SVP of Values 3. Progress of realignment actions since
Facilitation last update 3. Refining Values: Introduction of new values focus
4. Companywide misalignment areas that areas to support strategic objectives.
need a corporate-wide response
Chairman CEO
Board Members
…and the company uses annual reports to hold itself accountable

to internal and external stakeholders for living its values
Novo Nordisk Annual Sustainability Report
Sustainability Report 2003

Performance highlights
2003 2002
Novo Nordisk’s Sustainability Report contains: Financial
Net turnover DKK million 26,541 25,187
• Triple Bottom Line Results: Social, Operating profit margin
Growth in operating profit
%
%
24.1
6.8
23.7
6.5
environmental, and economic performance Return on invested capital % 19.1 20.1
Cash to earnings (three-year average) % 32.0 34.9
metrics
Environmental
• Employee Survey: Data indicating the extent Water consumption 1,000 m3 2,621 2,044
Energy consumption 1,000 G 2,299 2,083
to which employees feel that the company is EPI for water1 110 116
EPI for energy2 124 115
living its values
Social
Number of employees 19,241 18,372
Employee turnover rate % 7.1 6.4
Frequency of occupational injuries2 Per million working hours 5.4 8.9
Frequency of occupational illnesses2 Per million working hours 1.1 1.1

Results
Novo Nordisk’s values management system has been received warmly by current and prospective employees.
Employee survey data reveals that the company’s staff increasingly agrees that management lives the core values in
practice, while Novo Nordisk ranks as the employer of choice among Danish university graduates. In addition, the
company has demonstrated revenue growth rates well above those of its competitors. Moreover, Novo Nordisk earned
the top place among pharmaceutical companies on the Dow Jones Sustainability Index. The company indicates that
strong business ethics are an increasing source of competitive advantage.
The Value of Values

Novo Nordisk’s continual efforts to reinforce its values have had a positive
impact on employee trust and attraction toward the organization...
Percentage of Novo Nordisk Employees Agreeing That Most Preferred Employers in Denmark Among
Management Is Living the Core Values in Practice Business, Engineering, and Science Students
82% 85%
78%
2002 Ranking 2003 Ranking
1. Novo Nordisk A/S 1. Novo Nordisk A/S

2. A.P. Moller Maersk Group 2. Bang & Olufsen
3. Carlsberg A/S 3. A.P. Moller Maersk Group

2001 2002 2003
...while reinforcing the competitiveness of the business
Three-year Revenue Growth, Novo Dow Jones Sustainability World Indices

Nordisk Versus Competitors Pharmaceutical Company Ranking, 2003
1. Novo Nordisk Launched in 1999, the

19.5%
Dow Jones Sustainability
2. AstraZeneca PLC Index is the first global
3. GlaxoSmithKline plc index tracking the financial
performance of the leading
4. Novartis AG sustainability-driven
5. Pfizer Inc. companies worldwide.
5.3%
3.6% 6. Schering AG
2.5%
7. Johnson & Johnson
Novo Aventis Eli Lilly Wyeth
Nordisk
Strengthening Our Credibility
“In the light of the increasing focus on business ethics in the pharmaceutical industry, we feel that it is more important
than ever that we are living our values.”
Novo Nordisk, Sustainability Report 2003
Source: Novo Nordisk A/S; “The European Graduate Survey”

2002 and 2003, Universum Communications.
Council Assessment:
Caveat
While the Novo Nordisk case speaks directly to maximizing the benefits from value systems,
the Council believes that the case emphasizes a wider point about establishing and sustaining
organization-wide credibility by aligning stated company aspirations with management actions.
Even organizations that do not have a formal values system face the challenge of ensuring that
employees believe in their employer’s integrity, a key engagement driver. A formal organization-wide
values system is one means of communicating companywide aspirations to guide management and
employee behaviors and create high levels of employee engagement.
Implementation Tips
No One-Off Solution—To experience long-term benefit from values systems, organizations must
actively manage all four value derailment risks. Addressing instances of misalignment between
values and actions on a case-by-case basis will not generate maximum return on investments in
values systems and company brand.
Employee Involvement—Direct involvement of employees in identifying cases of values misalignment,
as well as prompt company response and communication of alignment actions, are key to ensuring
organization-wide belief in the company value system.
Global Application—Organizations with global operations should introduce adequate flexibility
in the definition of values and the system to monitor alignment with values, allowing for cultural
differences.
109
The Evolving
Employment Contract
Shifts in the Employee–Employer Contract
The Council’s work on Employee Engagement provides new insight into the evolution of the employee contract. The
employment contracts of the past decades focused on the shifting composition in the “give/get” of the employee–
employer relationship. The early relationship was dominated by the security provided to employees in return for
their hard work. More recently, the employment contract has evolved, with opportunity for career advancement
dominating employees’ demands of their employers and employers offering future “employability” over long-term
job security.
Feeling Nostalgic?
The past decades have been dominated by two predominant employment contracts
Evolution of the Employment Contract
“Loyalist” “Free Agent”

“We expect loyalty and we provide “The work you do will be interesting,
loyalty in return. If you work hard, and you will learn new skills while
and receive satisfactory performance you are here. Your employability will
ratings, your job is secure.” be high, although perhaps not at this
employer.”
Time
Source: Charness, B.G., D.I. Levine, ”Changes in the Employment Contract? Evidence from a Quasi-Experiment,”
Journal of Economic Behavior and Organizations, 1379 (2001); Corporate Leadership Council research.
The Evolving Employment Contract 111
The Council’s research on engagement has identified a new, more recent shift in the nature of the “transaction”
between organizations and their employees. In fact, employees today are unanimous in their demand for a new form
of participation in the business—a personal mission to give back to the company. In deciding to devote extra effort
to their jobs and in going above and beyond the call of duty, employees are driven by a self-interest grounded in the
“fairness” and “good” of the organization and by the opportunity to make meaningful contributions in support of
personal and organizational goals.
Revealing a New Face

New understanding of the relationship between employees and their
employers enables reconsideration of the employment contract
Eras of the Employment Contract
“Loyalist” Era “Free Agent” Era “Mutual Self-Interest” Era

• Steady work • Employees own responsibility • “Targeted” agency—freedom to contribute
• Regular bonuses for their skill development
• Shared obligation to match employees’
• Pensions • No guaranteed employment unique skills to the needs of the organization
• Insurance • No guaranteed bonuses, • No guaranteed employment
pensions, or benefits
• Employer is “in charge” • No guaranteed bonuses, pensions,
of employee career • Contingent work or benefits
in abundance
• Lifetime employment • Increased performance and productivity
• High risk tolerance expectations
• Reduction in costs
and uncertainties of • Skills training designed • High value on transparency of information,
external labor market to maximize desirability clarity, and trust
through mutual to other companies
• Emphasis on diversity—social signals in the
obligation • External labor market workplace are critically important
increasingly navigable
• External labor market remains navigable, but
perceived high switching costs born of high
value put on “relationship” intangibles
Job Security Permanent Employability Meaningful Contribution
Time
Source: Charness, B.G., D.I. Levine.,”Changes in the Employment Contract? Evidence from a Quasi-Experiment,” Journal of Economic Behavior
and Organizations, 1379 (2001); McShane, S., “The Psychological Contract,” Organizational Behavior, 2004; Pfeffer, Jeffrey, The Human
Equation, Harvard Business School Press, 1997; “The Meaning Behind the Message: Climate Perceptions and the Psychological
Contract,” Kickul, J., and M. Liao-Troth, Journal of Organizational Behavior 18, no. 2 (2001); Corporate Leadership Council research.
113
Appendix
Intuit
• Guidelines for Using the Star Model • 114
• Sample Action Plan • 115
Novo Nordisk
• Novo Way of Management Charter • 116
Top 50 Drivers of Engagement • 119
CLC Member Resources Guide • 120
Guidelines for Using the Star Model
Organization and Talent Assessment

Galbraith Star Model
Organizational Assessment
Instructions: Evaluate the organizational implications of your three-year plan, considering the six dimensions of the model:
• Use your judgment to diagnose and assess the aspects most relevant to executing your strategy
• Examine your current state and required future state, and identify the most critical gaps
• Create action plans to address critical gaps
• Have data ready to support your assessment
Business Strategy • What are your major growth initiatives?

(Company and Business Unit) • Any changes to the three core processes?
• Which talents do you consider strengths • Any initiatives that span business units?
in your current leadership bench?
• What is your strategy to close
• What are the organizational
skills gaps? • Three Stakeholders, Big Y’s, Aligned X’s
Line of Sight, Three Core Processes… implications for how you design
• What is your talent mobility strategy?
and execute on your major
initiatives?
Talent Structure
(Skills and Capabilities) (End-to-End Accountability)
• Leadership Assessment, Skills Culture • Organizational Design: Levels, Span of Control…

and Competencies, Job Diversity
(Values, Mind-Set, and Behaviors) • Centers of Excellence, Functional Expertise
• How aligned are people’s goals • Social Architecture, Operating • What systems and
with the organizational strategy Values, Change Management processes are required
and priorities? • “Boundarylessness”… to execute? And where
• How embedded is performance will you get them?
management in your • What are your major
organization’s DNA? process excellence and
customer initiatives?
• What behaviors do you
Rewards and want to keep, and what Processes
Recognition do you want to change? (Operations and Systems)
• Which operating
values are culturally
• Benefits, Pay, and Incentives • Process Excellence: Talent Acquisition,
• Recognition, Building for Future Security embedded, and which Developing Existing Talent, Mobility…
are not? • Simplicity
Source: Intuit Inc.

Appendix 115
Sample Action Plan
Action Plan for: [Stephanie Martin]

Action Plan Owner: Stephanie Martin
Additional Shared Owners: Phil Snet and Bill Joyner
Submitted on: 6/5/2004 2:13:27 AM Last Updated on: 6/5/2004 2:13:27 AM
Type of Action Plan: Desired Outcome of This Action Plan: Action Plan Step #4: Owner: Due Date;
Variable compensation, key metrics, policies, and Synchronize process library with K@W tool to provide centralized access Joyner 01-01-2005
Organizational Action Plan
processes will align with driving excellence in customer to processes
experience balancing employee and shareholder needs. Action Plan Step #5: Owner: Due Date:
The GPTW® Survey Question(s): Main Points and Agreements from the Feedback Enable Callidus tool with new variable comp metrics Martin 01-01-2005
Resources/Work Processes Session(s): How will action plan success be monitored and measured?
Q.28–Processes and procedures allow me Metrics drive us to provide a suboptimal customer Monitored through regular focus groups, Customer and Employee CompStats. Measured by Net Promoter
to effectively meet my customers’ needs. experience. Policies and processes are not clearly Index for STS.VOE interim surveys.
understood and vary depending on the source of the
Customer Contact Comments:
documentation.
Q.56–My performance metrics are focused
Shared Owners of this action plan:
on the right outcomes.
Original Owner: Stephanie Martin
Shared Owners: Phil Snet, Bill Joyner
Action Plan Details Managers Sent a Copy of Action Plan:
Implementation Team: Budget–Total Cost of None
3–4 Ses. 1 Coach. Stephanie Martin, Phil Snet, Bill Joyner completing this action plan:
GB process developer/analyst tbh $5000.00 (dollars) Action Plan Progress Report
Action Plan Step #1: Owner: Due Date: Current Status: Describe Your Results or the Impact You’ve
Create process library database Snet 07-01-2004 In Progress Had:
Action Plan Step #2: Owner: Due Date: Estimated Percent Completion: Describe Any Obstacles You’ve Experienced
Focus groups w/reps on greatest areas of pain in policies, metrics, Martin 08-15-2004 0% in Working on This Action Plan:
variable comp
Action Plan Step #3: Owner: Due Date: What Learning (Insights, Reflections, Wisdom) Have You Gained While Implementing Your
Work w/KCS team to develop and implement key metric expectations Martin 10-15-2004 Action Plan:
to reflect impact on Net Promoter Index, and implement realignment of
processes to drive consistent SE behavior
Source: Intuit Inc.

Novo Way of Management Charter
Values
Accountable
Each of us shall be accountable—to the company, ourselves, and society—for the quality of our efforts,
for contributing to our goals, and for developing our culture and shared values.
Ambitious
We shall set the highest standard in everything we do and reach challenging goals.
Responsible
We shall conduct our business in a socially and environmentally responsible way and contribute to the
enrichment of the communities in which we operate.
Engaged with stakeholders

We shall seek an active dialogue with our stakeholders to help us develop and strengthen our
businesses.
Open and honest

Our business practices shall be open and honest to protect the integrity of the Novo Group companies
and of each employee.
Ready for change

We must foresee change and use it to our advantage. Innovation is key to our business and therefore
we will encourage a learning culture for the continuous development and improved employability of
our people.
Source: Novo Nordisk A/S.

Appendix 117
Novo Way of Management Charter (Continued)
Commitments
Financial responsibility
We will work to continuously improve our financial performance by setting high objectives
for growth and value creation and deliver competitive performance in these areas. We will
maintain an open dialogue with our stakeholders and comply with international reporting
standards.
Environmental responsibility
We will work to continuously improve our environmental performance by setting high
objectives and integrating environmental and bioethical considerations into our daily business.
We will maintain an open dialogue with our stakeholders and report annually on our
environmental performance.
We subscribe to the International Chamber of Commerce’s Charter for Sustainable

Development. We support the United Nations Convention on Biological Diversity.
Social responsibility
We will work to continuously improve our social performance by setting high objectives and
integrating social, human rights, and health & safety considerations into our daily business.
We will maintain an open dialogue with our stakeholders and report annually on our social
performance. We support the United Nations Universal Declaration of Human Rights.

Novo Way of Management Charter (Continued)
Fundamentals
1. Each unit must share and use better practices

2. Each unit must have a clear definition of where accountabilities and decision
powers reside
3. Each unit must have an action plan to ensure improvement of its business
performance and working climate
4. Every team and employee must have updated business and competency targets
and receive timely feedback on performance against these targets
5. Each unit must have an action plan to ensure the development of teams and
individuals based on business requirements and employee input
6. Every manager must establish and maintain procedures in the unit for living
up to relevant laws, regulations, and group commitments
7. Each unit and every employee must know how they create value for their
customers
8. Every manager requiring reporting from others must explain the actual use of the
reports and the added value
9. Every manager must continuously make it easier for the employees to liberate
energy for customer-related issues
10. Every manager and unit must actively support cross-unit projects and working
relationships of relevance to the business

Appendix 119
Top 50 Drivers of Engagement
Top 50 Lever Top 50 Lever

for Intent to for Intent to
Rank Lever Stay? Rank Lever Stay?
1 Employee Understanding of Connections 26 Helps Attain Necessary Information, Resources,
Between Work and Organizational Strategy and Technology
2 Importance of Job to Organizational Success 27 Makes Sacrifices for Direct Reports
3 Employee Understanding of How to Successfully 28 Quality of Informal Feedback
Complete Work Projects and Assignments 29 Career Advisor Effectiveness
4 Internal Communication 30 Encourages Employee Development
5 Demonstrates Strong Commitment to Diversity 31 Persuades Employees to Move in a Desired
6 Demonstrates Honesty and Integrity Direction
32 Accurately Evaluates Employee Performance
7 Reputation of Integrity
33 Identifies and Articulates a Long-Term Vision for
8 Adapts to Changing Circumstances the Future
9 Clearly Articulates Organizational Goals 34 Inspires Others
10 Possesses Job Skills 35 Places Employee Interests First
11 Sets Realistic Performance Expectations 36 Flexibility
12 Puts the Right People in the Right Roles at the 37 Provides Job Freedom
Right Time 38 Is Intelligent
13 Helps Find Solutions to Problems 39 Clearly Communicates Performance
14 Breaks Down Projects into Manageable Expectations
Components 40 Appropriately Handles Crises
15 Accepts Responsibility for Successes and Failures 41 Creates Clear Work Plans and Timetables
16 Encourages and Manages Innovation 42 Ability to Obtain Necessary Information
17 Accurately Evaluates Employee Potential 43 Importance of Projects and Assignments
18 Respects Employees as Individuals to Employees’ Personal Development
44 Trusts Employees to Do Their Job
19 Demonstrates Passion to Succeed
45 Clearly Explains Job Importance
20 Cares About Employees
46 Customer Focus
21 Has a Good Reputation Within the Organization
47 Future Orientation
22 Innovation 48 Lets Upper Management Know of Employee
23 Is Open to New Ideas Effectiveness
24 Defends Direct Reports 49 Listens Carefully to Views and Opinions
25 Analytical Thinking 50 Is Open to New Ideas
Note: The Drivers of engagement are listed in order of their ability to increase discretionary effort.
Drivers marked with a check ( ) are also one of the top 50 drivers of increasing intent to stay.
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Corporate Leadership Council

Engaging the Workforce

Prioritizing Engagement-Driven Business Risks

Engaging Key Contributors

Targeting Drivers of Disengagement

Building a High-Engagement Culture, based on:

© 2004 Corporate Executive Board

Chapter I: Prioritizing Engagement-Driven Business Risks • 17

Chapter II: Engaging Key Contributors • 37

Chapter III: Targeting Drivers of Disengagement • 57

Chapter IV: Building a High-Engagement Culture • 77

Table of Contents (Continued)

Creating Opportunities for Personalized Contribution

Driving Organizational Credibility

Chapter V: The Evolving Employment Contract • 109

Advisors to Our Work

ABB Ltd Colgate-Palmolive Company Intuit Inc. SABMiller

Robert Lee Cross Tom Kraack

Letter to the Membership

Washington, D.C., and London

The Employee Engagement Series

Central Challenge: Increase

What are the business How can organizations

Volume I: Volume II:

2 Engagement is key to performance and retention—highly engaged employees experience performance

3 More than 1 in 10 employees are fully disengaged—actively opposed to their organizations.

4 There is no high-engagement or low-engagement “group”; demographic characteristics do not predict

• Leverage Point #1: Prioritizing Engagement-Driven Business Risks

• Leverage Point #2: Engaging Key Contributors

• Leverage Point #3: Targeting Drivers of Disengagement

• Leverage Point #4: Building a High-Engagement Culture

Source: Corporate Leadership Council research.

Returns on engagement practices require

Engaging Key Contributors

Organizations must target investments

Targeting Drivers of Disengagement

Before any proactive organization-

Building a High-Engagement Culture

Leverage Point #1 Leverage Point #2

Prioritizing Engagement- Engaging Key

Strategic Engagement Solid Performer

Leverage Point #3 Leverage Point #4

Targeting Drivers Building a High-

The Three Cs of Culture:

Cultural Assessment Process Leader Storytellers

Values Realization System

Source: Corporate Leadership Council research.

I. Prioritizing Engagement-Driven Business Risks Yes No

Engaging the Workforce

23 to 28 Excellent; capturing economic benefits

16 to 22 Good; solid performance area

9 to 15 Fair; improvement possible

0 to 8 Low; focused development recommended

Rumors of (a Talent) War

Percentage of the U.S. Workforce Predicted to Change Sample Talent-Related

64% 65% After the Jobless Recovery,

…as HR practitioners and consultants decry the state of the workforce

The Death of Loyalty Waiting for the Dam to Burst

Smoke, but Little Fire

Calm Before the Storm?

Source: Corporate Leadership Council 2004 HR Executive

A Different Burning Platform