clc engaging the workforce cultural assessment process caterpillar

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Chapter IIITargeting Drivers of Disengagement

Key Insight

Before any proactive organization-level engagement strategy will succeed, organizations must fi rst identify and remove the drivers of disengagement, many of which are “invisible” to traditional methods of detection, such as employee engagement surveys.

Engaging the Workforce58

Chapter III: Targeting Drivers of Disengagement 59

Companies That Analyze Retention Data to Assess Engagement

Companies Using Discussions Between Managers and Direct Reports to Understand Engagement Barriers

77%

23%

75%

25%

43%57%

31%

69%

The Council’s survey of HR executives identifi ed 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 diffi cult to discern—barriers to employee engagement.

While a strong majority of organizations measure engagement levels…

Practices to Measure Engagement

Cause Versus Effect

…far fewer use practices to build an understanding of barriers to engagement

Practices to Measure Barriers to Engagement

Source: Corporate Leadership Council 2004 HR Executive Survey; Corporate Leadership Council research.

= 86.

Companies That Use Organization-Wide Surveys to Measure Engagement

Companies Using Executive-Led Focus Groups or Discussions to Understand Engagement Barriers

Yes Yes

Yes Yes

No No

No No

61

Targeting Drivers of Disengagement

Practice #3: Cultural Assessment Process

DescriptionCaterpillar 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.

GoalsThe 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.

Key Differentiating FeaturesCaterpillar’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 identifi cation 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.

ResultsThe 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.

• 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.


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 specifi c 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.

Caterpillar adds a people componentto its list of critical success factors…

Caterpillar’s Critical Success Factors

…which is reinforced by targets for employee engagement…

CEO’s Employee Engagement Challenge

From: CEOTo: Business Unit VPsTo support our growth objectives I’m expecting each business unit this year to improve its employee engagement index* scores by fi ve points…

Critical Success Factors

• Growth • Six Sigma• Cost Reduction • Best Products• Order Fulfi llment • People—Quality Work Environment

What They Need to Succeed

…prompting line leaders to identify the need to overcome gaps in information about employee engagement

Identifi ed “Visible” Barriers to Engagement Unidentifi ed “Invisible” Barriers to Engagement

BU Employee

BU Employee

Our overtime policy is never applied consistently.

BU Manager

Head of BU

Employee Survey Results

AnnualAction Plan

• Benefi ts• Compensation• Training• Communication

* Caterpillar has created several indices, covering each of its Critical Success Factors, which are measured on an annual basis.

Source: Caterpillar Inc. ; Corporate Leadership Council research.


Step # 5: Create a Continuous Cycle of Cultural Improvement

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

Step # 3: Identify the Cultural Barriers to Engagement

Step # 2: Identify the “Invisible” and “Visible” Components of

Organizational Culture

Step # 1: Establish the Relationship Between

Culture and Results

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*

Perceptions Actions Results

120-Day Action Plan

________________ ________________ ________________

Implementation

AssessmentAction Plan


Survey__________________

Focus Group Survey Interviews

Power Through Knowledge“We have no authority over business units—our infl uence lies in the rigor of the assessment process that opens managers’ eyes to misalignments between their people and their strategic objectives.”

Head of the Organizational Effectiveness and Engagement Division

Caterpillar Inc.

Three “Visible” Aspects of Culture

CommunicationLearningReinforcements

Three “Invisible” Aspects of Culture

Road MapsRelationshipsReinforcements

* Caterpillar’s Cultural Assessment Process is currently patent pending.

Organizational Effectiveness and Engagement Unit (OE+E)

• 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

• 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 #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 fi nancial 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 fi nds that employees’ perceptions of the workplace directly

impact their actions and the company’s fi nancial results…

Caterpillar’s Culture Impact Value Chain

Are we meeting our strategic objectives?

Perceptions

Employees’ beliefs and attitudes about the “visible” and “invisible” aspects of the work environment…

Actions

…drive what they do,how they do it, when they do it,

and why they do it…

Results

…which shape the company’s cultureand impact

fi nancial 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 identifi es the need to react immediately to symptoms of negative employee perceptions that infl ict costs on the business

Symptoms of a Derailing Culture It’s Perceptions That Matter“If an employee perceives an inequity, then he/she will react to it regardless of whether an actual inequity exists.” OE+E Presentation Material

1. Absenteeism 2. Attrition 3. High level of grievances 4. Inability to attract most qualifi ed

candidates 5. Increase in injuries 6. Inventory shrinkage 7. Low level of employee idea input 8. Low levels of volunteerism 9. Low productivity 10. Resistance to change


Caterpillar’s Defi nition of Culture

“The perceived ‘right way’ we do things at the facility.”


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, fi nally, “reinforcements” by which these cultural aspects perpetuate themselves.

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

SymbolsNonverbal communications that explain what is valued

Rites and RitualsCeremonies or events that highlight what is important

Stories and MythsStories that describe what the company stands for

ValuesWhat the organization cares about most

2. Relationships

Norms and RoutinesDay-to-day ways people behave and interact

PowerInfl uencers of opinion (not necessarily linked to position)

StructureRelationships, communications, and power

Roles and ResponsibilitiesWhat is expected of people and their performance against expectations

3. Reinforcements

AssumptionsThe unwritten rules accepted as facts

Systems and RulesThe methods that control, measure, and reward desired behaviors

Get It All Out


Caterpillar also assesses “visible” aspects of the facility’s culture—characteristics easily identifi able 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.

assesses three “invisible” and three “visible” aspectsemployee disengagement and/or strategic misalignment

“Visible” Aspects of Organizational Culture


1. Communication

CommunicationGenerating understanding with employees

Policies and ProceduresRules and processes supporting desired behaviors

MeasurementDetermining if the organization is on track to reach goals

2. Learning

LearningProviding employees with needed knowledge to act effectively

Decision MakingClarity and acceptance of decision-making structures

LeadershipEffective modeling, guiding, and coaching of desired employee behavior

AccountabilityClarity and acceptance of accountability structures

3. Reinforcements

RewardsRewarding desired behaviors

RecognitionRecognizing desired behaviors

SelectionRecruiting employees who support desired behaviors

on the Table


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 AnalysisThe 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)


Focus Group Sessions Manager Interviews

OE+E Consultant

Manager

Section I(20,000-Foot

Culture Questions)

Section II(“Invisible” Elements of Culture Questions)

Section III(“Visible” SupportSystems Questions)

• What is improving in the facility? • What are some things that are not written down but are accepted as fact?

• Who comes to mind as the infl uencers of opinion in your facility?

• What are some signifi cant events in your facility in the past 12 months?

• How do people know what is expected of them?

• How does your unit reinforce desired behaviors?

• Do you have the materials, equipment, and training you need to do your job?

• How effective is the internal communication and feedback system?

• What is the recognition process?

• Are managers consistent in their expectations for employee performance and behaviors?

• What is disappointing or causing pain in the facility?

OE+E Consultant

Business Unit

Personnel

The open-ended nature of the questions offers the OE+E consultant a better opportunity to identify employee and manager perceptions of the key aspects of the facility’s culture.

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.


Establish Baseline Understanding

• Participants share and compare perceptions of words commonly used in the facility.

• Purpose: To identify perceptions of communication clarity.

Trust Exercise

• Participants identify behaviors that inspire trust, then compare trust factors against current level of employee/supervisor trust.

• Purpose: To identify employees’ level of trust in management.

Say–Do Gap Analysis

• Participants discuss perceptions of the gap between what leaders say is important versus what they actually do

• Purpose: To identify perceptions of management’s ability to “walk the talk.”

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 fi rst exercise identifi es 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

Focus Group Overview

• Between 9 and 12 employees in each focus group

• Each focus group session lasts approximately 90 minutes

• Employees are selected by the management team representing different functions of the organization to meet a 95% statistical confi dence level for data collected

Verifi cation of Qualitative Data1. Walk-Around Verifi cation OE+E consultant verifi es dominant themes raised in the Focus Group sessions and interviews through visual observations.

2. Quantitative Verifi cation OE+E consultant verifi es themes raised in the focus group sessions and interviews through analysis of quantitative data.

• Employee opinion survey data• Productivity data• Safety record data

OE+E Consultant


Well-Understood Words

Words with Mixed Meaning

• Load Factor • Quality• Six Sigma• Core Value

Does Well At

Needs Improvement

• Consistency• Follow Through• Honesty

• Respect

Policies

Say Do Gap

Set disciplinary action policies

Change the policy, it’s applied inconsistently

Not for everyone

Write the policies They implement them as they please

No credibility


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 signifi cant 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.

• Twelve to 40 participants across functions• Desired 1:2 ratio of managers to employees• Participation of positive and negative “infl uencers”

of opinion


CAP Action-Planning Steps

The OE+E consultant presents the main fi ndings of the CAP to the business unit…

…while an Action Planning Team identifi es a prioritized list of action recommendations…

…and the business unit management team decides on a 120-day action plan

3

2

1

An Action Planning Team provides team with a prioritized list of

120-Day Action Plan

Caterpillar’s Seven Action Plan Areas

Typical Follow-Up Actions

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 fl exibility around production scheduling

Organizational Culture Enhance sense of belonging through communications and events

From Assessment

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


A/C/E ScoreCompensation TotalGive everyone a raise or no one a raise 79Leadership TotalSet clear expectations of behavior; develop metrics; communicate results; hold accountable 115

Team/EE Involvement TotalEmpower production teams to make decisions on line movement and cross-training plan 77

Validate and communicate metrics/values in capacity charts 67

Prioritized Action RecommendationsAbout 10–12 Prioritized Recommended Actions

Data InputAbout 150 Action Ideas

• Results from employee opinion survey

• Results from cultural assessment

• OE+E Consultant recommendations

• Action Planning Team recommendations

Action Prioritization Process

Action Filtering Process

• Need-to-do actions, not nice-to-have

• Actions controllable by business unit

• Actions that can be completed within 120 days

The Action Planning Team provides input to business unit managers, who create a formal action plan with a 120-day deadline. Caterpillar fi nds that employees’ direct involvement in the action prioritization process helps the business unit ensure that employees have realistic expectations of overcoming engagement barriers.

the business unit management suggestions for the 120-day action plan

“ACE” Action Prioritization Tool

Each member of the Action Planning Team rates each action idea on a scale from 1–5 to prioritize the action ideas:5 = Absolute action 3 = Consider action1 = Execute later

to Action



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: 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 ImprovementAt 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

120-Day Action Plan Adopted• Organization-wide communication

of (new) action plan and priorities• Clear ownership of actions identifi ed

3

Identifi cation of New Action Areas• OE+E Consultant presents results from the

post–action plan implementation• Business unit management team decides

on a new list of actions, if needed

Implementation of Action Areas• HR, CAT University, and the OE+E provides

implementation support and best practice solutions

• Employees are updated about progress toward implementing actions

24

1

120-Day Action Plan

________________ ________________ ________________

OE+EConsultant

BU Manager HR

After the post-120-day action plan assessment, business units typically

identify remaining actions for a fi nal,

more limited, 90- to 120-day action plan



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*

Source: Caterpillar Inc; Corporate Leadership Council research.

*

* All names in newsletter are pseudonymed.

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 confi dence in management receptivity to their input.


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.

Case in Point: International Manufacturing FacilitySituation: 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 identifi ed 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.

Returns on a Healthy CultureCaterpillar’s Cultural Assessment Process has a long-term

positive impact on business unit’s culture and bottom line…

Business Unit Annual Savings:$8.8 Million

Absenteeism(Indexed)

Beforethe CAP

18–24 MonthsAfter the CAP

Overtime(Indexed)

Beforethe CAP


Beforethe CAP


Attrition(Indexed)

A High ROI Exercise“The overall cost of the assessment and follow-up was far less than the value it generated to the company and employees. It greatly contributed to a feeling of renewal by employees in having a positive infl uence on where their company goes.”

President of International Manufacturing Facility Caterpillar Inc.

…and is gaining companywide popularity with business unit managers

“Investors in People Award” 1

2001

“Manufacturing Excellence Award” 2

2002

“Employer of Choice Award” 3

2003

1 Annual award given by the “Investors in People” group, United Kingdom.2 Annual award given by the “Institution of Mechanical Engineers,” United Kingdom.3 Annual award given by the “Investor In Northern Ireland,” United Kingdom.


1.00

0.56

1.00

0.41

Caterpillar has conducted 75 CAP engagements to date and has expanded applications of the CAP beyond manufacturing operations to encompass acquisitions, suppliers, and international operations.

1.00

0.26


Council Assessment:Cultural Assessment Process

Caveat

The Cultural Assessment Process (CAP) is an effective tool for organizations that fi nd they do not adequately understand engagement barriers. However, because of the time and resources required to successfully see the process through, the Council fi nds 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 MembershipMembers 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 + EngagementPeoria, IL+1-309-675-1000

clc engaging the workforce cultural assessment process caterpillar

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