Companies have spent billions of dollars on employee engagement initiatives over the past decade, all in the hopes of raising employee performance and profitability. The nominal rise in engagement can be easily attributed to positive economic factors, not specific activities intended to increase employee engagement.

The question is "Why?" The answer is almost absurdly simple. 

Avoid These Mistakes

Companies have relied on unproven methods that they believed would lead to greater employee satisfaction and happiness to drive an increase in engagement. Relying on intuition or simply doing what other companies are doing can be an expensive mistake--and result in no ROI.

I recently spoke with workplace psychologist and leadership consultant Dr. Jason Jones, author of 28 Days to a Motivated Team. Jones said, "Company leaders know that employee engagement has a significant impact on culture and profitability. The problem is that there are too many people guessing about what will really move the engagement needle in their company." To back this up, the 2020 State of Talent Optimization report by Predictive Index surveyed 600 executives and showed that only 22% of companies know what's driving disengagement. This leaves the majority of executives unsure.

So what really increases employee engagement, and how can companies stop wasting money on ineffective engagement strategies?

1. Too Much Focus on Incentives and Rewards

The most popular employee engagement tool is the use of incentives. Bonuses and rewards, such as lunches and small gifts, are a double-edged sword. Although research supports their effectiveness in the short term, a large amount of data reveals long-term problems. Companies that implement incentives and rewards haphazardly often create an expectation in employees' minds. This expectation can quickly turn into entitlement.

Entitlement isn't the only problem that rewards can create. According to scientific studies, extrinsic rewards can inhibit intrinsic motivation--the kind of motivation that's self-directed and sustainable.

Jones suggests that companies implement incentives and rewards in a very thoughtful way, taking into account the company's unique situation and culture. He shared that the worst thing a company can do is to give rewards and freebies without any connection to an employee's work on a consistent basis over a period of time.

In my experience in helping leaders create cultures that offer a competitive advantage, the best thing you can do is combine rewards and intrinsic recognition. This enables leaders to help employees connect their work with the impact it has on others, as well as the company's mission.

2. Generic Engagement Activities

A typical engagement strategy for many companies involves creating a calendar of activities geared to make people happier. These activities are usually centrally planned by the human resources department or a committee, then implemented generically. Think: company picnics or "Free Lunch Friday." 

Events like this can be expensive, yet they don't appeal to the needs and wants of every employee. They fail to account for the uniqueness of people. And some engagement activities remove the most important variable of employee engagement: the leader.

Organizations can save time and money in their engagement efforts by investing more money in leadership development. The most powerful factor that drives engagement is an employee's interaction with his or her manager.

One of my clients who wanted to improve employee engagement has seen an impact by investing in his people. The best investment a company can make is to spend money and time developing its leaders. Skills related to relationship building and coaching are the most important competencies for driving higher levels of engagement and performance. People, after all, don't usually leave jobs--they leave managers.

3. Competitive Cultures

Competition is the lifeblood of business. However, companies that use internal competition to motivate employees create a mindset of self-interest and scarcity, resulting in egocentric behaviors. This approach hinders collaboration, communication and teamwork, ultimately lowering organizational performance. 

While external competition--competing against other companies--is a positive motivator, research shows that internal competition--competing against your teammates or colleagues--hinders organizational performance. To get the highest level of engagement, collaboration and performance, you have to abolish internal competition and reward the team as a whole for its achievements.

Deliotte's 2017 Human Capital Trends Report found that 94% of companies believe that agility and collaboration are critical elements of their company's success. Competitiveness and collaboration don't mix well and lead to confusion, frustration and disengagement on the part of employees. Jones implores leaders to "help employees focus their competitive energy externally while focusing their collaborative energy internally. Not only does this lead to better communication, cooperation, innovation, and efficiency, it's a lot more fun."

Employee engagement is crucial today, and you can't do the bare minimum and expect lifelong loyalty. Avoid these three mistakes, and you're more likely to keep people interested over the long haul.