Wall Street Just Exposed Why Employee Engagement Is Such A Joke In Some Companies
This article originally appeared on Forbes by Mark Murphy, Founder of Leadership IQ
A few days ago, American Airlines announced that it was going to raise the pay of pilots and flight attendants to keep pace with competitors Delta and United. Currently, American’s pilots are paid about 8% less than Delta and United while flight attendants are paid about 4% less. In the words of American’s CEO, this is about “doing the right thing.”
Now, American Airlines is a big company, so this increase doesn’t come cheap. The airline estimates it will cost it $230 million this year and $350 million annually in 2018 and 2019. But, for a company with roughly $40 billion in revenue, it’s probably not the end of the world.
That is not, however, how Wall Street sees it. American’s stock dropped about 5% on Thursday when this was announced. Morgan Stanley downgraded American’s shares and Citi analyst Kevin Crissey wrote “This is frustrating. Labor is being paid first again. Shareholders get leftovers.”
I think that Crissey and I must have different definitions of ‘leftovers’ because, according to American, they returned about $4.6 billion to shareholders (through dividends and stock repurchases) in 2016.
Imagine for a moment that you’re an employee at American. The owners of the company, the shareholders, have basically said that you’re not worth a raise. That you’re not worth being paid comparable to your competitors. That it’s horrible that labor is being paid. Of sure, it’s fine if a failed CEO like Yahoo’s Marissa Mayer gets $186 million for dumping the company to Verizon. But American’s roughly 40,000 pilots and flight attendants can’t split $230 million?
And that brings me to the point of this article; Wall Street just let it slip that they don’t think employees are worth very much. And if the ostensible owners of the company don’t value their workers, doesn’t it stand to reason that many executives won’t either?
Kudos to American’s executives for withstanding the backlash from the shareholders, but not every executive will have their fortitude.
One of my employee engagement studies found that in 42% of companies, high performers are actually less engaged than low performers. Ponder that for a minute; your best people, who drive your profit, revenue, etc., might feel less warmly about your company than your low performers.
This is not how it’s supposed to be; the theory says that high performers are more engaged, love their jobs, etc. But think about what it’s really like to be a high performer in some companies. Bosses tolerate low performers, in fact, they may even pay them the same as you. You get stuck doing all the work because you’re the type of person who won’t let things slide; meanwhile, low performers never get asked to do extra because no one wants to work with them. And now, the owners of your company, the stockholders, have a hissy fit when you get an 8% raise. In fact, they stomp their feet so loudly that they drop your stock price by 5%.
If you’re a high performer in that situation, you’ll probably feel pretty disposable. Sure, your company may hang posters that say “people are our most important asset,” but the actual owners of the company told you that you are light years away from being the most important asset.
In companies like this, employee engagement is nothing more than window dressing. Several thousand HR executives have taken the online quiz “How Good Is Your Employee Engagement Survey?”
One of the questions asks “How willing is your organization to take action to improve employee engagement based on your survey results?” The results are pretty scary. About 43% say that their company is willing to take action on every single question on their survey. But the remaining 57% are split between not really doing anything, avoiding tougher issues or flat out unwilling to act on their survey data.
As bad as those scores are, these are companies that cared enough to take a free test about their employee engagement surveys. Imagine how bad things are at the companies that don’t even bother trying to improve their employee engagement? What about those companies where the stockholders have said explicitly “stop caring about these darn employees and just give me more money!” How is employee engagement going to look at a company like that?
A few years ago, Wal-Mart was similarly dinged by Wall Street when they announced that they would invest a few billion dollars in pay increases and more training for their employees. The day it was announced their stock dropped about 3%. But for Wal-Mart, the move paid off. In the past year, their stock is up over 8%.
There are plenty of companies that do truly care about employee engagement and see the value in having highly motivated and loyal workers. But Wall Street doesn’t make it easy. It’s hard enough to make the investment of time and money to improve employee engagement; it’s even harder when the owners of the company throw a hissy fit and drop your stock by 5%.
Mark Murphy is the author of Truth At Work: The Science Of Delivering Tough Messages, Hiring For Attitude and Hundred Percenters.