Hand a manager a report, and the first questions you’ll likely hear are: “How are we doing? “Are we getting better?” There are several ways to answer inquiries like these, but only a few of them are useful. For example, it is common to compute the average of all items in a report and call it an “overall” measure of the stakeholder’s experience. This approach makes about as much sense as measuring the height, weight, age, arm length, and number of teeth of a group of people, totaling the measures, and dividing by the number of measures (five) calling it a “person summary.” The fact that the “summary” of two people can be identical, but exactly how they got there very different exemplifies the point of this potential error.
When the question is about a trend – Are we getting better? Worse? Are we staying the same? – A useful way to answer is to calculate a targeted “index” of the stakeholder’s experience. An index number allows you to compare a phenomenon you care about (e.g., employee attitudes or customer attitudes) to a strategic starting point in time in order to identify a trend. This is a very useful tool in business as it allows leaders to answer each of the two questions advanced at the beginning this article.
Index numbers are so prevalent in everyday life that they can often go unnoticed. One such number is the Consumer Price Index (CPI). It is a composite number that represents the price of a “market basket” of all goods and services purchased in the United States. Its purpose is to facilitate price comparisons across time in order to identify trends. Are prices going up, down or staying the same? Index numbers have a distinct advantage over other commonly-used metrics (e.g., Net Promoter Scores, Percentages, Simple Average of Items, etc.) in that they are precisely targeted toward key organizational outcomes with the differentiating ability to provide easily digestible and
broadly meaningful information that takes into account changes over time.
While the following discussion focuses on the ins-and-outs of an Employee Experience Index (EEI), the discussion applies equally well to creating any other Stakeholder Experience Index (SEI). Like the CPI, a SEI is a composite measure representing important attributes of a stakeholder’s experience (e.g., customers, employees, managers). The starting point of constructing a Stakeholder Experience Index is the identification of the core behavior(s) of the stakeholder that are to be predicted such as the stakeholder’s active loyalty. The second step is to identify the key aspects of the stakeholder’s experience that are related to the desired behavior(s). The following discussion on the EEI will serve as an introduction to the development and use of a Stakeholder Experience Index.
The Employee Experience Index
Generally speaking, a company needs to keep three primary promises to its employees –Providing Clear Direction, Creating a Sense of Community, and Giving People the License to Succeed and employees need to keep three promises in return – Brand Awareness, Positive Spirit, and Full Engagement. The assumption is that keeping these promises significantly increases the likelihood that employees will be actively loyal (e.g., work hard on behalf of the company, speak well of it and recommend it to friends and family as a place to shop and/or work).
Because the EEI measures only the aspects of the promises that are related to crucial organizational outcomes, it is a rock solid barometer of the quality of the employee experience and a leading indicator of voluntary employee turnover.
The Employee Experience Index is a composite measure that quickly and meaningfully tracks changes in the quality of the employee experience. The EEI is:
- Derived from important elements of the key promises to and from employees
- Measured using an Employee Experience Survey
- An effective predictor of employee turnover, commitment and brand delivery potential
- An easy way to determine whether a company is delivering a compelling employee experience
Like other indicators of success such as sales and profit, the EEI provides a snap shot of how a company is doing in the eyes of its employees and whether it is improving, getting worse or staying the same.
Employee Promises and the EEI
While the EEI is a composite of three Promises to and three Promises from Employees, other aspects of the employee experience may be included if they have a demonstrable relationship to active loyalty. On this basis, other attributes that have been included are employee pride and commitment. For purposes of illustration, groups and examples of categories of each are as follows:
Promises to Employees
Providing Clear Direction
- Our managers communicate the brand promise on a regular basis.
- Our managers keep their promises to our team and to our customers.
Giving People the License to Succeed
- In the past year, I have had opportunities to grow and learn at work.
- I receive the support and training necessary to deliver great customer service.
Creating a Sense of Community
- I receive recognition that is meaningful to me.
- I feel like I belong and am an important part of the team.
Promises from Employees
- I understand the importance of my job to our success.
- My teammates do their jobs to our high standards every day.
- This is a fun place to work.
Key Predictive Attributes
- I am proud to work here.
- I am very committed to the success of this company.
In the example, the items have been abstracted from the company’s Employee Experience Survey based on each item’s long-term relationship with employee intent to quit because this is not a good enough place to work and with an employee’s likelihood to recommend the company to others. Employee intent to quit is a leading indicator of actual turnover and, therefore, reducing intent to quit will logically reduce a company’s turnover rate. Employee likelihood to recommend the company is a leading indicator of employee engagement and subsequent brand delivery.
Building the EEI
The individual scores of the items that are consistently related to intent to quit and employee recommendations are aggregated, averaged, and transformed into normal scores, resulting in a standardized EEI number for a particular time period (e.g., 2010). In addition, a reference base is prepared by calculating a composite EEI number for a period of three years (e.g., 2007-2009). This three-year base EEI number is transformed to equal 100. The achieved EEI number can then be easily compared to the base EEI number to determine the direction and degree of change that has occurred in the quality of promise keeping to employees and its implications for employee turnover. The base number of 100 can then be used to make a quick and easy comparison to EEI numbers taken from subsequent years. For example, a current EEI number of 110 indicates a 10% increase in the overall employee experience compared to the base period. Similarly, an index of 90 represents a 10% decrease in the employee experience. This simple approach greatly reduces complexity and confusion frequently associated with employee data.
Why the EEI?
Data has meaning only when it is turned into useful information. In the context of the EEI, useful information means having unambiguous answers to three questions: 1) How well are we doing? 2) Are we getting better? and 3) How can we improve? The EEI is a clear-cut answer to the first two questions that capitalizes on the end-user’s familiarity with the indexes of everyday life such as the Consumer Price Index.
How can the EEI be used?
The EEI is a composite indicator of the quality of the employee experience. The index serves as a convenient “snapshot” of the state of the employee experience and its direction. It can also be used to make a quick apples-to-apples comparison between different parts of a company and whether the company is making tangible progress toward a big picture goal such as being a preferred employer.
How are the EEI and CPI similar?
The Consumer Price Index (CPI) is a composite measure representing all goods and services purchased in the U.S. It allows for comparisons over time to be made in the prices paid by consumers for a “market basket” of consumer goods and services. The base number for the CPI is established over a three-year period using a select sample of the U.S. population. This base number, or reference number, is then compared to the current year’s CPI number which can then be used as an overall economic indicator and as a means of understanding the purchasing power of the dollar.
Similarly, the EEI measures the change over time in the quality of the employee experience in terms of the promises in our vision. Much like the CPI, the EEI is a composite measure representing essential aspects of the employee experience. The base number for the EEI is established using a three-year period of responses to an Employee Experience Survey. The current year’s EEI number can then be compared to the EEI base number to establish the magnitude of improvement or decline in promise keeping to and from employees.
“What gets measured gets treasured” is a saying that is likely more true today than ever. The proliferation of software packages that allow rapid analysis of data and “measurement” firms that don’t know as much about the proper ins-and-outs of psychometrics as they should are two ready explanations for this phenomenon. However, what is also true is that what is measured may have nothing to do with what should be treasured. What should be measured are the things that reflect a company’s success with its stakeholders and their ensuing consequences for staying in business. Obviously, customer and employee loyalty are two things that enable a company to sustain its sales, profit and growth. These crucial measures should be unambiguously referenced to the experiences that make them happen; e.g., customers shop more often and refer; employees stay, get good at their jobs and refer. Index numbers serve this purpose without the problems inherent in the use of averages and the like.