Picture this: two companies, exactly the same in every way except one. The first company's employees work as hired hands, just doing what they're told, while the second company's employees are trusted partners--everyone understands and participates in the economics of the business. Which company has better relationships with its customers? Which company has lower turnover and better employee engagement? Which company grows faster and more profitably?
One more question: What if this isn't just a thought exercise? We wondered too.
In early 2020, we set out to track companies this way, measuring their economic engagement and its effect on profitable growth. Working with Harvard Business School professor Dennis Campbell and research associate Iuliana Mogosanu, we identified five key aspects of an economically engaged business.
- Customer engagement is the starting point, since customers define value and, thus, the economics of any business.
- Economic understanding aligns all employees in a common understanding of what defines success for the company.
- Economic transparency enables all employees to see how the company is doing and learn from successes and failures.
- Economic compensation gives all employees a shared stake in the results, making them economic partners in the company.
- Employee participation leads to lower turnover and better relationships between owners/managers and employees.
Hundreds of companies boast high economic engagement in a wide variety of industries, geographies, and sizes, and, in each case, tangible economic improvement has been the norm. A few we've worked with can be found below.
- Feuerborn Engineering: Revenue up 300 percent and profits up 400 percent cumulative in seven years across the entire company, with no layoffs ever.
- Southwest Airlines: "Plane Smart Business" economic engagement initiative with Orlando Pilots generated $2 million in fuel and productivity savings in six months.
- Boardman Fabrication: After applying economic engagement principles, sales grew by 55 percent in the first year, and profits were more than the past three years combined across the entire company.
- Adams Beasley Associates: In the first year of economic engagement implementation, sales doubled and profits grew even faster, with no layoffs ever.
We believe this is no accident. Each of the five drivers of economic engagement is linked to specific behaviors that drive results. But we wanted to move beyond anecdotes and into research.
We began with three of the 27 branches of Carlson Wagonlit Travel (Rochester, New York, St. Louis, Missouri, and Houston, Texas) in a 12-month economic engagement pilot. The results were compelling. The three test branches exceeded their profit budgets by 10 percent, 17 percent, and 20 percent respectively, generating $1.7 million total profit above budget. None of the 24 control branches achieved their budgets. The initial pilot was subsequent rolled out to all other branches. (See their success story in this CWT rollout video.)
We also worked with Filene Research Institute, an association of credit unions, where we tested the hypothesis that economic engagement drives business results. When ranked by economic engagement, the top quartile of credit unions showed six times faster growth, 50 percent higher profitability, and 20 percent lower risk compared to the average ranking. This Filene research report provides more details on these results.
We used the same economic engagement tool to survey additional CEO groups. A brief synopsis of the results follows:
- Scaling Up (a platform of fast-growing companies in a wide array of industries): The top quartile companies in the economic engagement ranking had an average profit growth of 106 percent during 2017-2019, versus the group average of 37 percent. The CEOs expressed a unanimous sentiment that the survey accurately captured their individual company situation.
- AFC Clinics (a group of emergency clinics throughout the U.S): The clinics with the highest economic engagement; the average profit growth rate was an impressive 88%.
- California Restaurant Association: The 30 board members completed the survey. Top quartile average profit growth for 2017-2019 was 20 percent, versus the group average of 10 percent.
- National Center for Employee Ownership: We surveyed roughly 5 percent of NCEOs members. The top quartile average profit growth was 13 percent, versus the group average of 9 percent during 2017-2019.
- Swiss B-Corp companies, in association with St. Gallen Business school in Switzerland, showed that the top quartile had double the average profit growth.
Each participating company received a report on its economic engagement ranking and performance of each of the five drivers of the economic engagement.
Most exciting? Our research continues. If you'd like to be a part of it, you can be--just follow this link and complete the survey, which takes about 10 minutes. We will compile results at the end of this month. All participants will get a confidential report on where they stand versus the top quartile and the average of all Inc. reader participants. There is no charge for participation or for the custom report.
If you have questions, just contact our research associate, Iuliana Mogosanu, at email@example.com. We'd welcome your help in advancing the research on economic engagement, and consequently improving business results and the lives of the employees who drive those results.