kenexa research institute employee confidence anne e. herman

Copyright Kenexa®, 2010

Understanding Employee Confidence: Employees’ Experiences and Attitudes-Quarter 1 2010 Update

Anne E. Herman, Ph.D.Kenexa Research Institute

This is Anne Herman from the Kenexa Research Institute, where I am a researcher and consultant. One of my primary responsibilities is really to focus on the employee confidence index, and I am really grateful to be able to share our research here today on this important topic. We are very excited to see so many of you interested in this work and continuing to attend these webinar updates that happen on a quarterly basis and touching base with us to get the new information.


Employee Confidence

Effective management

and business processes,

financial success

Competitively well

positioned, demand

for products, attractive

to customers

Job security, bright future

at organization, long-term

skill development

Transportable, up-to-date

skills, equivalent

job opportunities

available elsewhere

Internal External

Organizational

Personal

I apologize to those of you who I know have attended quite a few times. Employee confidence is a concept that was developed by a gentleman named Jeffrey Saltzman along with myself and a gentleman named Bill Zinsmeister. The work has been done exploring this concept for the past couple of years, and employee confidence really involved the focus on two things. First is on how an employee feels in terms of their confidence towards their organization, as well as how they feel about their own personal confidence in their own career. This is really comprised of two components, both an internal and an external component. When we think about the internal component of

how I feel about my organization, it is about how I feel about my leadership, how I feel about the way that the work is set up, the way that the work is being led, the processes, procedures, and financial success in my organization. When I think about my organization externally, I am really thinking about does my organization create products and services that are in demand? Is the industry that we are a part of actually a competitive one and one that is healthy and robust? Are we doing a good job making things that are attractive to customers and desired by customers? Now, when we think about our own selves and our own personal careers, when we think about our personal internal situation, we are looking at how do I feel about my own personal and career opportunities in my organization? Do I have a future here? Is there a career path here for me to follow, etc.? On the flip side, when I consider what is going on externally, first and foremost, I need to consider are there organizations out there that are looking for people like me? Would I have the skills and abilities to go out and get a similar or better paying job? And would there be jobs out there? Will I be able to utilize and leverage my skill set? Those are really kind of the conceptual components of employee confidence. What we do is we actually measure this concept in total or the employee confidence index is measured with 12 items and three items each are part of each of those four squares, if you will, that you see on the screen. We use three items to measure organization internal and organizational external, etc.


Current Country Selection

Countries represents 70 percent of the 2008 Global GDP

Percentage of Global GDP

• United States (23.7%) • Japan (8.1%)

• Germany (6.0%) • China (7.1)

• United Kingdom (4.4%) • France (4.7%)

• Italy (3.8%) • Canada (2.5%)

• Spain (2.6%) • Brazil (2.6%)

• Russia (2.8%) • India (2.0%)

Now, since we started our research back in the second quarter of 2008, we have been focused on the world‘s 12 largest economies. And even though we do have updated GDP numbers and it is slightly a lower bit of a percentage of the total world‘s GDP across these 12 countries (it used to be roughly 73% and now it is roughly 70% as of 2008), these are still the 12 largest economies in the world. We did do some additional data collection in quarter one of 2010, so we do have the Kenexa employee confidence index numbers or figures for other countries. Namely, this time, we collected data in the Netherlands, Finland, Switzerland, Denmark, Sweden, Mexico, Australia, the United Arab Emirates, Kingdom of Saudi Arabia and Qatar, in addition to these 12 countries listed here, but the primary focus for the work that we do is really focused on tracking these 12 countries. We have been tracking these 12 countries since, as I mentioned,

before the second quarter of 2008, and we will continue to do so on a quarterly basis going forward.


Poll Question #1

• What happened to Employee Confidence across the international

sample in the 1st quarter of 2010?

• Improved

• Declined

• Did not change

• Do not know

Poll Response: Roughly almost 32% of us think that the employee confidence figures across our 12-country sample improved; roughly 35% of us believe that things declined; roughly 14% of us think that there wasn‘t a change; and about 20% of us have said that we just don‘t know.


Poll Question #2

• What happened to Employee Confidence in the United States in the

1st quarter of 2010?

• Improved

• Declined

• Did not change

• Do not know

Poll Response: It looks like only 42% of us think that the numbers declined; almost 32% of us think that things improved; we have got about 18% of us think that things did not change; and we have got almost eight percent of us who are not sure.


Poll Question #3

• Which of the countries improved the most in the 1st quarter of 2010?

• Brazil

• Canada

• China

• France

• Germany

• India

• Italy

• Russia

• Spain

• United Kingdom

Poll Response: Overwhelmingly, most of us think it is China. It is not, by the way. It looks like 11% of us or so believe that it might be Canada; we‘ve got 15% looking at India; roughly almost 10% looking at Brazil; and about seven percent thinking it is the UK. We are all wrong, by the way. Only 1.4% of us were correct. Moving on to look at the data…


Employee Confidence Percentage Scores

∆

1Q10

-4Q09

∆

4Q09-

3Q09

∆

3Q09-

2Q09

∆

2Q09-

1Q09

1Q10 4Q09 3Q09 2Q09 1Q09 4Q08 3Q08 2Q08

Global ECI -3.9 1.6 -.95 5.03 95.6 99.5 97.91 98.86 93.83 100.35 101.93 100.0

U.S. -4.7 -0.6 -1.2 5.3 92.4 97.1 97.7 98.9 93.6 101.4 103.4 100.0

UK -8.8 2.6 -1.8 4.6 91.0 99.8 97.2 99.0 94.4 102.6 103.0 100.0

Germany -2.1 -0.6 -2.3 7.6 94.0 96.1 96.7 99.0 91.4 101.3 100.7 100.0

France -2.7 -2.2 -4.3 8.4 92.2 94.9 97.1 101.4 93.0 101.5 99.6 100.0

Canada -3.5 2.7 -0.6 1.6 97.5 101.0 98.3 98.9 97.3 99.9 105.4 100.0

China -5.8 2.8 0.5 12.5 99.8 105.6 102.8 102.3 89.8 100.7 99.9 100.0

India -5.7 1.1 0.6 8.1 95.6 101.3 100.2 99.6 91.5 99.3 100.1 100.0

Russia -4.7 -1.1 -1.3 12 93.8 98.5 99.6 100.9 88.9 98.3 101.6 100.0

Brazil -10.0 2.2 -1.9 6.8 97.5 107.5 105.3 107.2 100.4 106.4 105.7 100.0

Japan -2.2 -1.6 1.8 -0.7 91.8 94.0 95.6 93.8 94.5 93.6 99.5 100.0

Spain 3.1 -0.9 -2.7 3.9 95.5 92.4 93.3 96.0 92.1 100.5 100.1 100.0

Italy -2.3 3.4 -0.3 5 98.6 100.9 97.5 97.8 92.8 100.3 101.3 100.0

What you can see here, this is actually an employee confidence index tracking over time. You have got each quarter listed since we started collecting the data. The last set of four quarters is where we do the change scores. And we look at this not only at the global or the 12-country solution, but we also look at it across each of those individual countries. As you can see here, pretty much everybody went down. Of the 12 countries we tracked, the global ECI of 11 countries went down, somewhat surprisingly in some cases, so the answer to that last question was Spain. Spain was the only country in fact that had any kind of improvement between quarter four and quarter one of 2010. We are trying to figure out exactly why that is. Most of the economic reports and job reports

that came out of Spain in the last three to four months really haven‘t helped me make sense of this number yet, so I am still looking into and trying to find out why that is the case as we are seeing this time around. Some of the bigger surprises though that I just want to highlight off the page were we saw a 10% point drop in the employee confidence index in Brazil and that one in and of itself was quite surprising to me. I am actually having dinner with a friend who is flying here from Sao Paulo today and what he doesn‘t know is that he is going to probably spend half his dinner tonight trying to help me figure this out, and I should note too that these numbers are incredibly fresh. We have just finished collecting the data less than two weeks ago, and so we spent last week kind of putting together the data and putting together these numbers, so it is brand new data collected at the very tail end of quarter one in March. It is definitely fresh data and we are still trying to tie it into what we can learn and what has been in the news. With respect to the UK, you will see that the UK had the second largest drop. I did read some information that has come up in the UK, and really, I think we have seen Britain kind of go up and down if you look across the UK line; for example, in Q4 they actually had a nice peak but they were down in the third quarter and then up in the second quarter of 2009. They have kind of gone a step forward and a step back and step forward and a step back. If you really go back and objectively examine how the UK was hit by this recession, they were definitely hit worse than any other economy in the EU, and I would also say, and I think some people will agree with me, that they have definitely been hit harder than the US as well with respect to how the financial markets really have affected their economy. I think that even The Economist put out an article a couple of weeks ago that talked about how the growth in the UK is going to continue to remain somewhat sluggish and that we are probably going to see some definite changes being made in their next elections, which are coming up the first week of May, or I think it is May 6th if my memory serves me correctly. I think that the UK is going to be an interesting economy to watch. We do our next data collection in June, so that will be after the next set of elections. I am kind of anxious to see how things change based on some of the election changes that I think are foreseen in the British government. One of the other countries, obviously most of thought China would have the largest increase, but they did have almost a six percentage point decrease in their employee confidence index scores. There was a stimulus package that came from Chinese government last year and most of the money associated with that has actually started to run out, so there was sort of a tapering on the boost of the Chinese economy that had been happening. A lot of the news reports coming out of China have been pretty favorable with respect to the growth there, but I think that there have been some things. Obviously, most of us are quite familiar with what happened to Google earlier this year in China and sort of the almost backlash, if you will, that has been in not only the media, but also within some of the considerations of foreign-based organizations moving into China, not maybe playing a role in how people are perceiving or Chinese workers are perceiving their particular confidence in their opportunities there, in the Chinese economy at present. We didn‘t obviously pick the US in that last one, but there were definitely part of us, 32% of us, for example, who thought that the US employee confidence would have gone up in quarter one of this year, and I think that though there are some bits of hope that have come through our news, such as maybe the jobs creation or jobs loss index, if you want to think of it that way. A lot of what we have been able to determine when we really look at those numbers is that in fact that there were jobs created in quarter one of 2010, a lot of those jobs are related to the US census typically will be non-permanent jobs. They will be part-time jobs that happen for a fixed amount of time, and though they are definitely helping out with giving people some rest, if you will, from a short-term perspective, they

are not long-term creation of jobs that are going to be helping people across the economic spectrum in the US, so I think that is something to note.


Global Employee Confidence Subscores

50

55

60

65

70

75

Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110

ECI Overall Organizational Internal Organizational External

Personal Internal Personal External

Let us take a look at the percent favorable scores that come across the four components of employee confidence along with the employee confidence numbers overall. Again, remember this is reflective of the 12-country sample. These are the percept favorable scores that are associated with the 12 items of the employee confidence index, so those 12 items make up the ECI overall, whereas each of the four components are represented by those three item measurement scores, as I told you before. We are definitely seeing some movement happen that is a little bit different than what we have seen in the past. It has been a while now, for example, since the workers‘ personal external confidence was higher than their personal internal confidence, so what you can see is between quarter four and quarter one of this year, we do see that personal external confidence is higher than the personal internal confidence. And this is something where I have seen this happen in a couple of organizations who have used some of these items in the recent past as well, and so I think this is something really interesting to note, that people are starting to feel more favorable towards the opportunities to get jobs externally than they are internally. I think that has got some implications for those of us who are on the line as HR practitioners, and we will talk about that toward the end of today‘s webinar. If you look at some of the other factors of employee confidence, you can see there has been a decline in the other three factors as well as the ECI overall, but the largest hit or the largest decline, the greatest decline here was with respect to organizational internal confidence and it was a pretty massive decline. Especially with our global sample, we seem to see less dramatic shifts in our global samples than we do, for example, with our US sample. But this is a pretty steep drop between what we saw in Q4, which was roughly 68% to 69%, and what we are seeing now, which is 59%. There was almost a 10% swing between Q4 and Q1. That is something we will come back to and talk a little bit more again about because I think there is definitely some implications here for HR professionals, and I think many of us fall into that role on the line. In addition, the other thing I wanted to bring your attention to is with respect to that organizational external confidence, we did see a little bit of a deeper decline here, not so much as the internal organizational confidence, but I do kind of wonder what is happening in terms of the way employees are feeling about their

organizations, not only how they are operating internally, but also the competitiveness and opportunities on the horizon, if you will, with respect their marketplace in their industry.


U.S. Employee Confidence Subscores

50

55

60

65

70

75

80

Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110

ECI Overall Organizational Internal Organizational External

Personal Internal Personal External

When we look at the US numbers, as I said before, US scores are always a little bit more dramatic. They were a little bit more favorable to start, but really we see the same pattern of results we saw when we looked at the 12-country sample. That organizational internal component is really where we are seeing the most massive drop, and in this case, it is about an 11% swing. It went from roughly 73% in Q4 to 62% in Q1 of 2010. We also are seeing drops obviously in the organizational external, not as dramatic as we saw in the US, but just slightly differently, so really it is a non-meaningful difference but the one that clearly stands out here as well is that drop in organizational internal confidence. Again, remember that organizational internal confidence is that feeling that you have got the right leaders in the right place, your organization is well led, the work has been effectively managed, you have got good policies and procedures set up to really run the shop and there is definitely a drop in how we feel in terms of being favorable toward that. As I said, at the end of today I am going to try and focus a little bit and provide a little bit of conjecture as to what has gone on, what has happened with respect to how people feel not only in the US, but also in our 12-country sample, about their own internal organization situation. If you do have questions or thoughts or comments or input on that, we would really be keen to hear that from you. We have started to do some testing with respect to looking at trust with senior leadership, also looking at trends. Not only do we collect data quarterly, but I think many of you are familiar with the work we do in the work trend study. We do collect data annually across many countries as well, and we are looking back across some of the items that definitely we know drive confidence and we will talk about the drivers of employee confidence at the end of today‘s webinar as well. We are starting to look at some of these things and see if we can find a pattern where some of these jobs have occurred, but again, if you do have input that you would like to share throughout today‘s webinar, definitely we would be interested to hear your thoughts on why things are happening the way they are happening.


Global Employee Confidence by Job Type

50

55

60

65

70

75

Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110

Senior/Middle Managers Supervisors Professional/Technical

Service/Production Sales Clerical


U.S. Employee Confidence by Job Type

50

55

60

65

70

75

80

Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110

Senior/Middle Managers Supervisors Professional/Technical

Service/Production Sales Clerical

This next slide presents a look at things across the different job types and we didn‘t do all the job types clearly. We did do some focus on a few of the key job families. We do see declines again across all of these jobs, but what is interesting to note here is in the global sample or the international sample, we are seeing those in the supervisory roles are having a steeper decline than those in the other types of jobs that are represented here. I thought that was somewhat interesting and especially when we are going to flip now to the US version of this. As you can see here, one of the biggest declines is in the senior middle management position, which I thought was pretty interesting. That typically doesn‘t happen and the pattern both in the international sample as well as in the US sample, they definitely hold true to how we see typical survey responses behave. For those of us who spend a lot of time with organizational surveys, we typically see that senior managers and middle managers are more favorable than the rest of the population and then you have some nuances about the organization sometimes that pop out, but you typically see that those in professional and technical roles, maybe

supervisory role, sales roles, are more favorable. We do see the pattern of typical survey results holding here, but what I thought was interesting to note again was that in the US, especially the senior/middle managers experienced quite a drop between Q4 in 2009 and Q4 in 2010. We also saw a pretty steep decline with those who are in the service and production roles, but I do think that many of those folks are probably hit harder by the recession than the folks in the senior/middle management role, so I just find that really interesting to note and we will definitely dig into that as we can kind of move forward. As I said before, with the US we often see more drastic changes relative to the international scores, but given that we started a little bit more favorable in the US overall, I still find it really interesting to note that those in the senior/middle management positions have definitely seen a great decline as well as those in service and production roles.


U.S. Employee Confidence by Industry

50

55

60

65

70

75

80

85

Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110

Manufacturing Electronics Healthcare Services Retail Finance

Lastly, we want to take a look at this by industry and we focused a little bit more on the US here. We ran the numbers for the international sample, but didn‘t provide them here today somewhat in the interest of time. But what we did see is that the largest drop is clearly for the financial services industry and in retail what we are seeing here is maybe something like the post-holiday blues. Obviously their Q4 every year is sort of their busiest and craziest time and then they do experience quite a decline between the numbers in the sales that happened in the Q4 as well as the Q1 kind of paying over, if you will. With respect to healthcare, I imagine there is something about the ambiguity that is relating to the new legislation that is under way on the healthcare bill that is probably affecting how some of those folks are feeling towards their confidence. Typically, healthcare has been fairly stable over time. Employees in electronics and manufacturing roles are fairly stagnant, which is interesting because if you think back one of the largest declines in the US at the job level were those in service and production roles, so I find that somewhat interesting that in the manufacturing industry we have got a fairly stagnant, not a large drop anyway, but when we look at it by the job type, folks in service and production roles definitely are feeling a little less confident than some of the others in the organizations.

Examining Employee

Confidence: What Does it

Help to Understand?

When we think about employee confidence, we have now spent time sort of understanding how it is behaving, what changes have occurred, and we have had some pretty strong changes, definitely some drops in areas we might have been surprised by, definitely some drops in countries we were surprised by, and we had some time, like I said, to go back and try to identify the ―why‘s‖ and ―how‘s,‖ but definitely some interesting drops to note, and as I mentioned, there are some specific job types in a few industries that we did see some drops that are somewhat interesting and something we want to definitely track as we go forward.


Employee Confidence Aligns With Rank

Order ∆GDP–June ‗08

CountryConfidence

Rank Order

∆ 07-08

GDP

∆GDP Rank

Order

India 1 7.35 1

China 2 9.01 2

Russia 3 5.60 3

Brazil 4 5.08 4

Canada 5 .41 9

United States 6 .44 8

Germany 7 1.25 5

Spain 8 .87 6

Italy 9 -1.04 12

United Kingdom 10 .74 7

France 11 .32 10

Japan 12 -.71 11

Four rapidly

expanding economies

Three of four slowest growth

or shrinking economies

rho =.83*

We have done this analysis before. We have presented this analysis before, and we are still waiting to get an updated global or gross domestic product values, and hopefully, we are hoping that by the end of Q2, if the pattern holds true, we will see something new for 2009. There is an incredible lag with respect to getting economic data at the GDP level, and so we are sort of at the mercy of the organizations to do that kind of research. As soon as we can we are going to be updating this, but for those of you who are new to

this webinar, clearly what we have seen is that employee confidence really aligns well with the change in gross domestic product. When we look at it across the 12 economies to note, when we looked at the change in GDPs between 2007 and 2008, and we compared it to the employee confidence numbers that we collected in the second quarter of 2008, we saw a really good mapping across the rank order of the GDP change. What that means is that employee confidence did a really nice job helping us to predict, if you will, where countries would fall on the GDP change. And when we did the correlation, we used a Spearman‘s rho for rank order correlation and it was quite high. It was at 0.83 and with a sample of 12 that is saying something and the fact that the correlation is quite high with such a small power, such a small sample. We did see some kind of mixture of results across the four economies that fall within the middle, but we do see a pretty strong pattern of the rapidly expanding economies at that time, which were the BRIC countries, as well as those who kind of fell at the slowest growth or the shrinking economies at the bottom.


Engagement Scores Are Not As Well

Aligned with ∆GDP–June ‗08

Four rapidly

expanding economies

CountryEngagement

Rank Order

∆07-08

GDP

∆GDP Rank

Order

India 1 7.35 2

China 2 9.01 1

Canada 3 .41 9

United States 4 .44 8

Brazil 5 5.08 4

Russia 6 5.60 3

Spain 7 .86 6

Germany 8 1.25 5

United Kingdom 9 .74 7

France 10 .32 10

Italy 11 -1.04 12

Japan 12 -.71 11

rho =.72*

We did do the same comparison or same examination with a very commonly used survey metric known as employee engagement. What you don‘t see is a similar pattern of results happening. What that means is that engagement wasn‘t as strong or wasn‘t as valuable in helping us to predict how the GDP change would happen and that is something that has been really interesting for us who have been working on employee confidence to see happen over time. In addition to looking at it at the overall kind of geography or the country level, or economic factor,


Employee Confidence and DEPS

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

Top 25% Bottom 25%

Diluted Earnings Per Share

r = .393; n = 147; Top/Bottom 25% Based on Organization EC Mean

we have done some examinations of employee confidence in organizational performance. What this was was a study where we looked at almost 150 companies. You can see here it is 147 organizations that were in our study and we went out and we collected not only employee confidence data, but also the diluted earnings per share data. These were all publicly traded firms that had to report information such as diluted earnings per share, total shareholder return, etc. And what we found we did this is that there was a correlation between employee confidence in these organizations and the diluted earnings per share and that correlation value was 0.393, but in another words if you think about this, if categorize those organizations into those who are higher in the top 25% on employee confidence versus bottom 25% on employee confidence and you have that 50% in the middle that are around the mean or around the average, those in the top 25% of employee confidence when we looked at their average diluted earnings per share, we found that that was roughly 2.33, so 2.33 was the average diluted earnings per share for those organizations who are in the top 25% on employee confidence, and what is interesting is when we compare that to those in the bottom 25% on employee confidence, their average diluted earnings per share across those organizations was -5.74. You do have quite a spread there between those in the top bucket and those in the bottom bucket.


Employee Confidence and 3-Year TSR

-40

-35

-30

-25

-20

-15

-10

-5

0

Top 25% Bottom 25%

3-Year Total Shareholder Return

r = .268; n = 138; Top/Bottom 25% Based on Organization EC Mean

A similar pattern of results emerges when we look at the total shareholder return, and we used a three-year total shareholder return metric and for those of you who do anything or have been watching TSR values over the past couple of years, you will know that they are incredibly strange to play with at present. Specifically, what you see is a lot of negativity with respect to the total shareholder values and what you see here is that those organizations in the top 25%--and again, the samples were roughly 140 companies or 138 companies—they are doing less bad, which I think is better than worse, but you are seeing that those top 25% of organizations, their average three-year TSR was negative roughly 16.80, so $16.80 were those in the bottom 25%, their value was -37.66. This top 25% of organizations on employee confidence are doing less bad than those that are in the bottom 25% of organizations. Still not great, but I think many of us would take less bad returns on our money than we have seen.


U.S. Employee Confidence and

Consumer Behavior

Note: values represent percent favorable

0

10

20

30

40

50

60

70

Q408 Q109 Q209 Q309 Q409 Q110

Low ECI High ECI

Currently worried about personal financial well

being to a great extent

Are delaying current purchases to a great extent

0

10

20

30

40

50

60

70

Q408 Q109 Q209 Q309 Q409 Q110

Low ECI High ECI

This is somewhat surprising and when we saw these values come back out. This is actually a set of questions that we asked the respondent to also reply to the employee confidence items to tell us how they are feeling about their own personal financial situation, and what you will see here is if you look across the dark bars on the left represent those people who we classify as low on employee confidence. Those are in the bottom 25% of respondents. And those that are in the top 25% are represented by that lighter blue bar, the bar on the right, and as you can see, there has always been a little bit of gap, quite a big gap between those who are in the low and high employee confidence situations. We have seen that those who are in the high employee confidence situations were less likely to be worrying about their own personal financial wellbeing. What you can see here in quarter one of 2010 is that the gap between those in high and those on low employee confidence situations has definitely changed, and unfortunately, we are not really sure what this means. When we look at whether or not people are delaying or planning to delay their purchases, we are also seeing again that gap reduced, but even more so than what we saw with respect to just worrying about their own personal financial situation. We asked another set of items that asked about whether or not these people are really thinking about the future of their financial wellbeing and again, same thing. The bar on the left is representing those who are in the low employee confidence bucket and those who are in the high employee confidence bucket, we are seeing on the right hand side or in the lighter blue bar, and so if you look at this again, what we are seeing here is a different pattern or a slightly different pattern where those in the high employee confidence feel that they are still a little more hopeful than what we have seen before, but those who are in the low employee confidence bucket may be a little bit more favorable than they have been in the past, so that gap has kind of stayed the same, but we are seeing those who are in the low employee confidence bucket feel a little bit more favorable and that final thing is talking about the delay or playing in delay of purchases in the next six months.



Consumer Behavior

Note: values represent percent favorable

0

10

20

30

40

50

60

Q408 Q109 Q209 Q309 Q409 Q110

Low ECI High ECI

Feel personal financial well-being will improve

over the next size months

Are delaying next six months of purchases to

a great extent

0

10

20

30

40

50

60

Q408 Q109 Q209 Q309 Q409 Q110

Low ECI High ECI

Again, just like we saw in the slide prior of about delaying current purchases, we are seeing again that gap narrow. We really haven‘t seen that gap narrow since Q1 of 2009. And one of the things that might be affecting this clearly is the notion that the first quarter of the year is typically when people are trying to reflect on their spending patterns,

maybe of the last year especially relative to the quarter four, which is near the holiday season when people tend to spend a little bit more money. It may be a factor where people are just saying, ―Hey I need to budget. We have New Year‘s resolutions under way where we need to monitor how we spend our money a bit more,‖ but it is still interesting to note that some of the gaps that we have previously seen and been able to see with respect to comparing those in the low and high employee confidence situations tend to go by the wayside a little bit more in this particular data collection.



Consumer Confidence

20

30

40

50

60

Consumer Confidence Employee Confidence

90

92

94

96

98

100

102

104

Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110

Related to the consumer behavior expectations are what we are asking people to respond to is a focus on consumer confidence. We have been tracking the confidence index now for the past couple of years, and the consumer confidence index is actually collected on a monthly basis, and we do our data collection on a quarterly basis. What you are seeing on the right hand side, the employee confidence numbers are again the index numbers, not just the percent favorable, but the pattern is still continuing to hold. We have seen a decline. The US consumer confidence numbers I do think just came out, but we have seen the pattern of data still tend to track, so we are still holding here.


Employee Confidence by Industry and

Bankruptcy Filings (D&B)

Industry

2007

Jan-Apr

Filings

2008

Jan-Apr

Filings

% Change

BF

Rank

%

ChangeBF

Dec 08

ECI

Dec 08

ECI Rank

Agriculture, Forestry & Fishing 395 410 104 1 102.9 1

Services 2,646 3,162 120 5 101.1 2

Retail Trade 1,587 1,851 117 4 100.2 3

Transportation, Communication & Utilities 503 753 150 7 100.1 4

Wholesale 306 346 113 2 99.3 5

Finance, Insurance & Real Estate 441 705 160 8 97.9 6

Construction 1,497 1,857 124 6 97.2 7

Manufacturing 400 463 116 3 96.4 8

Mining 10 54 540 9 92.8 9

rho =.52

If you look at this next slide, what you are seeing here is a glance at industry health. Unfortunately, we don‘t have new updated numbers. We got these numbers done at Bradstreet in quarter one of last year, but we haven‘t seen the new numbers come out, so if anyone has got any pull over at Bradstreet and can give us new numbers, that would be great. What we do see again is—for those of you who have seen this, we apologize, but those of you who are new to the webcast—a relationship emerge where understanding the confidence of employees in a particular industry did help us understand how their industry in and of itself was performing, and we used the metric of industry health that we could get our hands on and it was actually on bankruptcy filings at the company level within the industry sectors, and what we saw again is by understanding the employee confidence of the employees, we were able to fairly accurately predict how those industries would actually be doing with respect to a lower number of bankruptcy filings was associated with higher employee confidence from the employees within the actual industry sector.


U.S. Employee Confidence and Unemployment

Q208-Q309 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

5.6 5.8 6.2 6.2 6.6 6.8 7.2 7.6 8.1 8.5 8.9 9.4 9.5 9.4 9.7 9.8 10.2 10 10 9.7 9.7 9.7

ECI100.

0

101.

5 98.7 93.6 98.9 97.7 97.1 92.4

0123456789

10

Unemployment Employee Confidence

90

92

94

96

98

100

102

104

Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110

One last kind of metric you want to look at is that of unemployment. We have got unemployment here and we have got unemployment change, and again, what we will see here in the first quarter of 2010 is unemployment has gone down just slightly. It has sort of stayed the same in a couple of the months and then went down just slightly and again, we talked a little bit earlier about how the jobs increase did occur but again, when we really examine that a little bit more closely, we do see that being mostly part-time jobs and not really a large creation of full-time work.


U.S. Employee Confidence and Average

Rate of Change in Percent Unemployment

Q208-Q110 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110

Avg Change in

Unemployment4 2.3 3 4 2.3 1.4 .68 0

ECI 100.0 101.5 98.7 93.6 98.9 97.7 97.1 92.4

0

1

2

3

4

5

Q2

08

Q3

08

Q4

08

Q1

09

Q2

09

Q3

09

Q4

09

Q1

10

Unemployment Employee Confidence

90

92

94

96

98

100

102

104

Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110

When we look at the unemployment change or the rate of unemployment change and the US employee confidence, again we still that pattern holding true and a little bit of changes you see here overall throughout the quarter. The average change in unemployment averaged out to be zero, but we did see a small decline and they do think that the decline again might be due to the fact that it is really not full-time job creation that we are seeing, but we are seeing a little bit of a flattening out of our unemployment rate.


What Do We Do Now?

Certainly, I think that takes us to where many of us really want to know and what does this stuff mean for us? For those of us who are in HR leadership and HR practitioner roles, what do these things mean for us?


Influencing Employee Confidence

(International Drivers as of Q1 2010)

1. Excited about one's work

2. Recognized for outstanding customer service

3. Decisions demonstrate quality and improvement are priorities

4. Organizations supports work/life balance

5. Motivating vision of future communicated by leadership

6. Company provides opportunity for growth/development

7. I can achieve my career goals at this company

8. Co-workers give their very best

9. Company values my contribution

10. All employees have equal opportunities for advancement

What we did, which we have done in the last couple of quarters, is we actually calculated what are things that are most affecting employee confidence, and we did this at the overall international level as well as the US level. When we look at these numbers here, and I can tell you this because I spent a lot of time looking at this, when we look at the drivers in 2010 or quarter one of 2010 relative to Q4 of 2009, many of these are the same. The order has changed somewhat. One thing in particular that I wanted to bring up, this number two driver here, ―recognized for outstanding customer service,‖ was something that was brand new that came forth with respect to being a driver of employee confidence, and I found that to be really interesting, and I am not sure quite sure why or how that came about. A couple of other things that I do want to plan out when we look at these international drivers are the 12-country sample drivers is you will see sort of a focus here on the company and organization. There is the one item about, ―I can achieve my career goals with this company,‖ but in a minute when I show you the US drivers, I just wanted to point sort of the difference, with the international drivers focused really heavily on sort of what the organization is doing.


Employee Confidence-International Drivers

0 10 20 30 40 50 60 70

All employees have equal opportunities for advancement

Company values my contribution

Co-workers give their very best

Can achieve my career goals at this company

Company provides opportunity for growth/development

Motivating vision of future communicated by leasership

Organizations supports work/life balance

Decisions demonstrate quality and improvement are priorities

Recognized for outstanding customer service

Excited about one's work

Percent favorable values presented

If you look at just across the 12-country sample, how the recent favorables are for each of these drivers, you can see here that the percent favorables don‘t really have a lot of variability, so it is not like things are incredibly high or incredibly low, but we are seeing one of the maybe strongest areas is that employees in the 12-country sample do think that employees do have opportunities for improvement and there is some equalization or definitely some benefit to diversity that we are seeing there. But a few of the things that are definitely lower that might draw attention to them is that the employees are feeling that there is a motivating vision that has been shared with them for the future. Furthermore, you might see that item I pointed that‘s truly about me is I can achieve my career goals with this company. Remember that we saw for the first time in a long time that personal internal confidence is lower than personal external confidence and this item about achieving career goals with the company would definitely be related to that personal internal confidence. It is something to note.


Influencing Employee Confidence

(U.S. Drivers as of Q1 2010)

1. Company provides job security

2. Excited about one's work

3. Organizations supports work/life balance

4. I can achieve my career goals at this company

5. Recognized for outstanding customer service

6. Decisions demonstrate quality and improvement are priorities

7. Motivating vision of future communicated by leadership

8. Company provides opportunity for growth/development

9. I feel that I am part of a team

10. Safety is a priority

11. Company recognizes productive people

When we look at those drivers at the US level, remember I kind of pointed out to you that there were some organizational level factors and they still come forward here, but definitely, what you can see here is a little bit more focus on the ―me‖ than we see in the international sample. Furthermore, we have seen some differences in how people thought about things over the past couple of years. For a long time, especially in 2007 and 2008, and this is just with respect to employee survey results or the drivers of some of the outcomes people cared about like retention or engagement, etc., had to do with ―me.‖ We did see a shift to more of a focus on the organization and you still see that here in terms of there are some things about the organization and the future of the organization, but what you do see here is definitely a focus on ―me.‖ First and foremost, I have a job security. Also, that I am excited about my work, that I can achieve my career goals, which was on the international list as well. You see that recognition for outstanding customer service pop up here. You feel you are part of a team, that you have got some opportunities for growth and development, etc. There is really kind of more of a focus on ―me‖ on this US drivers list than there is necessarily in the international list, but we do see some things overlap. That motivating vision of the future pops up here and that demonstration of quality and improvement are priorities is also on this one as well as the international one.


Employee Confidence-U.S. Drivers

0 10 20 30 40 50 60 70 80

Company recognizes productive people

Safety is a priority

I feel that I am part of a team

Company provides opportunity for …

Motivating vision of future communicated by …

Decisions demonstrate quality and improvement …

Recognized for outstanding customer service

Can achieve my career goals at this company

Organizations supports work/life balance

Excited about one's work

Company provides job security

Percent favorable values presented

Again, taking a look at how people feel about these things in the US. When we look at the percent favorables, we are a little bit more favorable on a couple of things here, but overall, similar patterns of things come up; for example, that motivating vision or the future being communicated by leadership. It is definitely not as favorable as we would like it to be which might help us clue in or talk to our senior leaders about sharing information and providing a vision for where the companies are going. Remember when we looked at the numbers, the biggest drop and the biggest decline in what we are seeing is that organizational internal confidence and right after the things started to really go south, we did see people fairly favorable towards the internal organizational confidence and maybe what are seeing here is that the leadership of organizations has really backed off on providing updates and providing a vision for where things are going, etc., and maybe that is the wrong strategy for us to be using. The continued communication about the plans for the future, the continued acknowledgement of the struggles that organizations are going through, as well as a continued focus communicating, ―Yes, this is going to happen and here is what we are going to do about it,‖ especially in industries, for example, in the US like the healthcare industry. There is a lot of ambiguity I imagine for people who are working in those roles, and it is going to be really important to the best of their abilities that leaders in organizations continue to have their doors open, continue to make sure that by providing information but they are acknowledging maybe ambiguous situations, but they are working to try and address those situations that they can and share that information with employees. Communication and sharing the vision of the future and sharing sort of what the road map looks like to the extent that people can do that is really a key component of I think building not only organization internal confidence, but just building a stronger workforce. There are some other things again that remember I talked about, some of these individual-focused items that are on here as well that we want to point out. Feeling part of a team is fairly favorable. That might be your strength for people to leverage, but being able to achieve your career goals at the organization is something that definitely leads again. I talked about this in the last slide to focus on that personal internal confidence, so helping employees feel or understand how exactly they achieve their career goals. What are their career goals? It might be the first question managers need

to be asking, but helping them understand or translate opportunities in the organization to how does this affect me personally is something that most managers I don‘t think do a good enough job about and it is something we could definitely provide value for us to remind them to do so. That job security question comes up as the number one driver of confidence in the US and only about 60% of us feel favorable to that. There is only about two out of three of us who feel that the organization we are currently working for is able to provide job security for us, and again, part of that might be just the realities of the situation for many of us, that we are working in an organization and we no longer feel really tied to the idea that our organization will provide us with long-term job security. But it might also be related back to that focus of communication, and focus of addressing the ambiguities that can be addressed, communicating what is on the horizon, communicating a road map and helping to build confidence and motivation and hope for the future in our organizational workforces.


Poll Question #4

• So, where will global EC go in Q2 2010?

• Improve

• Decline

• Will not change

• Do not know

Poll Response: I think we are feeling fairly optimistic, which is good. I am not sure if that means we are feeling empowered, but as HR professionals and as leaders in an organization, we have a little bit of a say on this, but if you want to share why you are feeling optimistic that is great. But it does look like we are feeling more optimistic than I thought maybe we would here. About 37% of us feel that EC will improve. About 39% of us feel that it won‘t change, which I guess is better than going down. There is only about roughly 14% of us who feel that it will go down, and there is about 10% of us who really don‘t know. I will save these numbers and we will make sure to go back and reflect on this when we get our new numbers at the end of June.


Summary

• What is the Employee Confidence Index research helping us

understand?

• How should we use this information in our organizations?

• What questions do you have?

When we consider how things have gone, I think that one of the big things I am hoping you see here is that the employee confidence index research is helping us to understand somewhat how the macroeconomic environment and the worries and the hopes, the fears, etc. that come from a lot of what is in the news, a lot of what people are actually experiencing, how our feelings about our organization affects those things as well as how those things affect our feelings about our organizations and our own personal careers and security and things like that. Furthermore, I hope that what we are able to see here is by understanding especially the components of employee confidence and how that plays in an organization, we may be able to address some things such as senior leader communication or discussions about personal internal career opportunities and career growth and career pathing that maybe we haven‘t paid attention to for a while because we have been so focused on literally stopping some of the crises that were happening or addressing things such as reduction of force, etc. I think that what these numbers are telling us is that we cannot forget to kind of focus on the basics and focus on again a notion of two-way open and honest communication of organizational leaders making sure that they are sharing what is on their minds and to the extent that they can sharing what the future holds, what the plans for the future are. In addition again, I would also highlight that that focus on the personal internal confidence is something that I think has really waned over the past couple of years and it is not to say that everyone is going to be able to build a GE or a Coca-Cola model of employee development and employee management training, etc., but I do think that organizations can do better and managers can be coached to at least have some conversations with employees about their personal careers and how they feel about their own opportunities within an organization.


Thank You!

If you have any questions about the research discussed today or

generational differences in general, please contact:

Anne E. Herman, Ph.D.

[email protected]

402.419.5449

Audience Question: What other things do you feel are influencing the big drop in the organizational internal confidence? Response: As I mentioned, the data itself is relatively new, so we have really just begun to start to play with this. We did do some quick examinations of things such as senior leadership trust and we didn‘t see huge drops there, but we are continuing to examine and running some drivers and trying to figure out if we can find any patterns of things that have in fact dropped. As I mentioned a few times on the webinar today, one of the big areas where I am curious to see if this is really what is causing that is sort of a lack of focus on communication. I know that when Jeff was presenting some data last year about this time, maybe even a little bit earlier in the year, one of the big groups he was always interested in finding out about employee confidence seemed to be the corporate communications folks. I think that was because a lot of senior leaders and CEOs will really recognize, ―I need to get out there and I need to talk with my employees and need to tell them what is going on.‖ I just wonder if over the past 12 months or so we have become a little bit less focused on making sure that we are communicating to our employees and we are continuing to fill in the details or gaps on what we can. That is just again my conjecture. I haven‘t been able to go out and prove that, but there did seem to be about a year ago a big focus on really spending time communicating with employees, trying to sway any fears that could be swayed. Make sure you are communicating. I just wonder if we have gone back to the sort of way it had been done in the last couple of years prior to that where the CEOs aren‘t necessarily as visible, senior leaders aren‘t taking the time to do town hall meetings and things like that. Audience Question: How do you calculate or how do you come up with the drivers for employee confidence? Response: This is a good question and I apologize that I didn‘t address that when I presented the data to you. What we utilize here, both with respect to calculating the international drivers as well as the US drivers, is the technique called the relative weights analysis. It is sometimes called RWA. I won‘t go into huge detail about that, but if you do want the detail I can give you the citations for how that technique is recommended to be used, but the relative weight analysis does allow for some statistical

stuff to happen in terms of controlling for variance influence that other techniques such as maybe using correlations or even regressions stepwise or what have you doesn‘t allow for, so we use the RWA or relative weights analysis. Audience Question: Do you believe that the less jobs lost in the last month has had a negative effect on employee confidence? Response: I am not really sure. I guess one of the things that I did notice there was a lot of press that came out when they released the jobs loss or the jobs creation for the quarter that they talked about how we lost so few or less jobs. But really when you read the details of it, it was mostly due to that census job creation which is great, and I definitely think that it allows for some rest and reprieve for the folks in the short term. I am not sure if it provides business or really long-term benefits and so I am just wondering if it is not having a stronger than intended effect because a lot of people aren‘t saying, ―Hey, I still have a job. My confidence really hasn‘t change,‖ but the fact that there are some new census jobs out there, that there were less jobs lost in Q1 because if you do go out and you look, there were still jobs lost in Q1 but the creation of the census jobs did kind of sway the number just a little bit.

kenexa research institute employee confidence anne e. herman

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