The observation comes from Rajeev Pershawaria in “The Three Things That Employees Really Care About” (FastCompany, May 12, 2011). He describes an exercise he has facilitated in seminars with hundreds of executives around the world. In the exercise, he poses an imaginary dilemma:

“Imagine you are about to change jobs and have two competing offers. Both jobs pay roughly the same amount of money and are in the same industry. Both are at reputable companies. How will you choose between the two jobs? What factors will you consider while making your decision?”

Think about that for a minute.

What factors topped your list? The nature of your new job? The work culture? Coworkers? Future opportunities?

Pershawaria captures the executives’ responses on three blank flip charts that represent the three things people care about most. He then reveals the hidden titles:

Role
Environment
Development

He observes that “most managers think they know what motivates their direct reports, but when you ask them, they actually list things that motivate them.” To be effective at engaging people, managers need to talk regularly about the three buckets, listen to understand their preferences and aspirations, and label and link their work with their expectations. For example, before giving an assignment to a woman on your team who wants more experience in cross-border transactions, he recommends that you “talk to her and tell her (label) that you are doing so because it will give her the experience she needs, and explain (link) that it will help her in her career progression if she gains cross-border expertise.”

The Baldrige Criteria ask: “How does your workforce performance management system support high-performance work and workforce?” Based on Pershawaria’s work, an effective performance management system should design and deploy processes for managers to talk with employees about what motivates them, capture and validate that information with the employees, and label and link their work with their expectations.

To read more about employee motivation and engagement, click on these articles:

• Employee Engagement Boosts Organizational Performance
• A Culture That Values Employees
• Understanding Employee Requirements
• Employee Hierarchy of Needs
• MEDRAD: Win with Your People

Software company SAS has an employee turnover rate of 2.6%. The info-tech industry average is 22%. SAS has approximately 11,000 employees. If it lost employees at the industry rate, it would have to replace an additional 2,100 employees each year.

How much does it cost to replace an employee? You can find a method of calculating that cost here, but a good rule of thumb is 150% of an employee’s annual compensation (the cost of recruitment, training, lost productivity, and lost sales, etc.). I don’t know what the average annual compensation is for an SAS employee who leaves the company, but let’s say it’s $60,000. Probably low for knowledge workers and certainly low for executives and managers, but we’ll be conservative here. If it costs SAS $90,000 to replace every employee, the company’s 2.6% turnover rate compared to the industry average 22% rate is saving SAS $189 million annually!

How does SAS achieve such a low turnover rate? According to CEO Jim Goodnight, “Knowledge-based companies need knowledge workers. Looking at services that keep employees motivated, loyal, and doing their best work as merely expenses and not an investment is, I think, a little shortsighted.” So SAS keeps turnover low by investing in its employees.

In 2010, SAS topped Fortune’s Best Places to Work list for the second year in a row. According to Fortune, its perks for employees are “epic”: on-site healthcare, which 75% of employees use as their primary care; high-quality child care at $410 per month; 66,000 square-foot fitness center; tennis courts, running tracks, trails, baseball diamond, and volleyball court hosting intramural sports; solarium and salon; and billiard hall and swimming pool. Employees work 35 hours a week. SAS has no dress code, no set work hours, and no limitation on annual sick days.

When the economy tanked in 2009, Goodnight reassured employees that there would be no layoffs but there would also be no raises. He asked employees to help reduce costs and they responded by cutting SAS’s expenses by 6 to 7%. As a result, 2009 turned out to be the second or third most profitable year in SAS’s history while revenues in 2010 were up 5.3% over 2009.

As one SAS manager said, “People stay at SAS in large part because they are happy, but to dig a little deeper, I would argue that people don’t leave SAS because they feel regarded—seen, attended to, and cared for.”

Last month, Michael Lee Stallard interviewed Goodnight. In “Has SAS Chairman Jim Goodnight Cracked the Code on Corporate Culture?” he writes, “Goodnight clearly knows that he has identified a competitive edge and he’s not about to be pressured into following the crowd that he views as irrational when it comes to corporate culture. When most entrepreneurs would have gone public long ago, Goodnight decided it didn’t make sense. He didn’t want analysts on Wall Street telling him how to run his business and forcing him to cut out the elements of SAS’s culture that give it an edge.”

Innovation and world-class performance are products of a culture that values and engages employees. SAS shows us how to create that culture.

To read more about employee engagement and satisfaction, click on these articles:

• How Does Your Workplace Measure Up?
• Employee Engagement Boosts Organizational Performance
• Understanding Employee Requirements
• Employee Hierarchy of Needs
• Engage Employees to Improve Performance

The Baldrige Criteria do ask how your performance management system considers workforce compensation. According to the data, most organizations consider women worth less than men. Here’s hoping Baldrige Award winners lead the way in addressing this discrimination.

Simma Lieberman has made similar observations about excellent workplaces. She helps organizations create inclusive workplaces where employees love to do their best work and customers love to do business. In “Ten Indicators of Morale Level and Employee Involvement” (FastCompany, January 4, 2011), she lists ten “easy to observe behaviors of employees who feel good about their workplace”:

1. “There is visible interaction amongst employees in the office, hallways, and cafeteria. People actually smile and say hello to each other. You may even hear laughter.
2. You hear people speaking well of each other and their customers. Employees greet customers and stop what they are doing to provide customer service.
3. There is resource sharing across work functions, and work groups are not complaining about other departments, or work levels.
4. Employees know what other functions do, on a day-to-day level, and how each function impacts the others.
5. Employee kitchens and washrooms are clean with the right provisions.
6. There are employee initiated social activities with high levels of participation.
7. Employees are comfortable offering suggestions for improvement.
8. Employee grievances are either nonexistent, rare, or resolved quickly.
9. Employees arrive on time, and absenteeism and turnover are low.
10. Employees support each other during personal or family crises, as well as celebrate accomplishments and happy events.”

How does your organization’s workplace measure up?

To learn how an organization creates such a culture, read the Category 5 responses of Baldrige Award winners. Their award application summaries are available here.

To read more about excellent places to work, click on these articles:

• Employee Engagement Boosts Organizational Performance
• MEDRAD: Win with Your People
• Ready to Go Big
• Small Wonder
• A Baldrige Award Winner’s Health Pyramid
• AtlantiCare’s Baldrige Journey
• Baldrige Saves Lives
• A Role Model for Public Education
• The Only Baldrige City—So Far

The company owns four Rudy’s Country Store & Bar-B-Q stores and three Mighty Fine Burgers, Fries and Shakes, all in or around the city of Austin, Texas. Co-owners Brian Nolen and Ken Schiller started the company in 1993 after a successful partnership in the insurance industry. They went into the restaurant business because they liked the idea of a business where you could distinguish yourself from your competitors—which they have certainly done:

• Gross profit exceeds the industry standard
• Overall guest satisfaction ratings of 4.7 exceed the best competitor’s rating of 4.0
• Order accuracy rate of nearly 100% compared to the industry average of 87%
• A 92% record of passing health department inspections compared to 86% for competitors
• Food costs as a percent of sales 3% below those of similar restaurants
• Turnover rates better than the industry averages
• Absentee rate slightly more than 1% exceeds the 3.5% of benchmarked organizations

K&N Management’s search for excellence led them to Pal’s Sudden Service, which won the Baldrige Award in 2001. To help share the secrets of its success—a requirement of Baldrige Award winners—Pal’s established Pal’s Business Excellence Institute (BEI), which provides training and consulting. You can learn more about the Institute here.

K&N Management brings its entire management team to Kingsport, Tennessee, the home of Pal’s BEI, every year. “It’s something you have to see and experience to appreciate,” says Ken Schiller in a video on the Pal’s BEI site. “If you tell somebody about, it they really don’t believe it until they see it for themselves.”

Although several food service companies have taken Pal’s BEI training, nearly 60% of the participants in 2009 came from healthcare. “We haven’t done anything on food service in healthcare,” says Clay Rolston, marketing director at Pal’s BEI. “They’re focused on things like patient flows through the ER and how to improve patient satisfaction scores. Pal’s is recognized as a well-run business and they want to see first-hand how it works.”

K&N Management partnered with Pal’s BEI to accelerate its Baldrige journey to performance excellence. As Schiller says, “We’ve averaged about 12-14% a year in same store sales growth over this time and part of that’s in a down economy, the quality of our people is up substantially, and Pal’s really allowed us to know where the bar can be set. It gave us a benchmark that we otherwise wouldn’t even know was possible.”

To learn more about K&N Management, Pal’s Sudden Service, and other Baldrige Award winners, click on these articles:

• Seven Win 2010 Baldrige Award
• Ready to Go Big
• First Engineering & Architectural Firm Wins Baldrige Award
• Application Summaries of 2009 Baldrige Award Winners Available
• Small Wonder
• Heartland Health’s Grand Unifying System
• A Role Model for Public Education
• The Only Baldrige City – So Far

1. What makes you want to jump out of bed and come to work?
2. How do we build a culture that supports that?

Two years later, PVHS collaborated with Colorado State University to identify key staff requirements, which became the framework for its semiannual Employee Culture Survey. The requirements are:

• Teamwork and cooperation
• Safety in innovating
• Listening to each other
• Respect and fairness
• Enthusiasm
• Feedback and accountability
• Resources and participation

It’s hard to find anything unusual about this list. What is unusual is the systematic approach PVHS used to identify these requirements and how it has continued to refine the list–and what it means–ever since.

As with customer requirements, it’s easy to assume you know what is required to engage and satisfy your employees. Such assumptions are dangerous. PVHS knows what its employees require and it acts on that knowledge to improve both engagement and satisfaction.

Workforce engagement is a PVHS core competency and is measured on its semiannual survey. In 2007, PVHS was as good as or better than the top 10% nationwide in four survey questions on engagement and in the top 10% on 11 of 16 attitude areas.

Based on results, it’s clear PVHS knows what its employees want.

To find out more about Poudre Valley Health System, read its award application summary.

To read more about employee engagement, click on these articles:

• Engaging Employees to Improve Performance
• What Drives You?
• Workforce Well-Being
• Increasing Employee Satisfaction in a Time of Decline
• Why HR Needs Baldrige