National Gallup Study Finds Unmanaged Major Organizational Change has Long- Term Negative Impact on Morale, Productivity, Customer Service and Bottom-Line Profits
PRNewswire, 15 October, 1999


Carlson Marketing Group (CMG), a world leader in Relationship Marketing, recently commissioned The Gallup Organization (Gallup) to conduct nationwide independent surveys of U.S. workers and senior management in companies with at least 500 employees. The objective of the surveys was to determine the incidence of major workplace change (i.e. mergers and acquisitions, downsizing, competition for scarce employee audiences, increased competition in the marketplace and declining sales and profits), and then assess the type and extent of actions taken by an organization to help workers adjust to or understand these changes.

Karen Hessian, senior director of Employee Marketing for Carlson Marketing Group, explained the significance of the study.

"In this era of sustained economic growth, it's intriguing that downsizing, mergers and acquisitions continue to top the list of major organizational change in the U.S. -- and there seems to be no end in sight for this growing trend.

"At CMG, we were curious to find out what actions corporations take to help their workforces understand and adjust to these chaotic changes.

"This study provided us with the essential data needed to support what we believed to be true -- that it's important for organizations contemplating a major organizational climate change to create an effective change management strategy which incorporates what we've termed 'Best Practices.' By implementing these practices, organizations will maintain a workforce of genuinely satisfied employees who contribute to positive business outcomes and reduce the substantial costs associated with excessive employee turnover."

Key Findings Related to Major Organizational Change

Overwhelmingly, about seven in ten (69%) workers surveyed said their organization has undergone a reorganization in the past five years. Forty-four percent say their company has merged with or was acquired by another company, while two in five (39%) state their company has had layoffs or downsizing, and 24% say the company has faced declining sales or profits.

The senior management surveyed say the change climate challenges most often faced by their companies include increased marketplace competition (73%), difficulty in attracting employees (67%), re-engineering or reorganization (67%), difficulty in retaining employees (56%) and mergers and acquisitions (52%).

Of the major organizational changes and climate challenges faced by companies, management said that downsizing had the most negative effect on employee morale. Four out of five (81%) senior management respondents whose company had downsized in the past five years say the process had resulted in lower workplace morale. Two out of three (68%) say declines in morale resulted from difficulty in retaining employees, while an equivalent proportion (67%) cited declining sales/profits.

Best Practices Implementation

CMG identified a series of five "Best Practices" thought to mitigate the negative impacts major organizational change can have on employees and business outcomes.

* Creating awareness of the change and how it will affect individuals
* Encouraging two-way conversation between manager and employee
* Developing competencies to help managers and employees through the new change environment
* Providing measurement and feedback to managers and employees regarding their work assignments
* Demonstrating reinforcement and recognition for accomplishments

As part of the studies, Gallup queried workers and management to determine the impact the implementation and usage of these "Best Practices" had during times of change.

Assessment of "Best Practices" Used by Companies

About four out of five (83%) senior management respondents say the company encouraged increased two-way communication between employees and supervisors as an action taken in response to change climate challenges. As many (82%) say the company responded by helping employees obtain and improve the skills they need to do their jobs. Three out of four (75%) state the company recognized good job performance, while an equal proportion (75%) say the company had programs to increase awareness of its actions in response to the challenges. Approximately two-thirds (64%) say the company undertook formal performance measurement.

Workers said the most common action taken by companies to help employees understand or adjust to major changes was to measure job performance. Four out of five (78%) say their company measured their job performance as a way to help them understand or adjust to major changes. Seven in ten (70%) state the company made them aware of how the changes would affect their job responsibilities. Three in five (62%) state the company recognized their performance during the change. Half (52%) say management helped them gain new needed skills or competencies, while 41% say their manager or supervisor had a one-on-one conversation with them about the changes and its effects on their job responsibilities.

Use of "Best Practices" Found to Mitigate Negative Factors

Three out of four (73%) senior management respondents said the use of "Best Practices" in response to change climate challenges had a positive effect on workplace morale, while 59% said the actions increased productivity, and half (50%) said the implementation of these "Best Practices" increased profitability. Almost three out of four (72%) think these actions increased the company's ability to provide quality customer service.

A statistical relationship was found between companies that took actions to help employees understand or adjust to major changes and higher job satisfaction. Recognition for performance during change has the largest effect. Incidentally, seven out of ten (70%) of the companies measuring employee satisfaction hold individual supervisors accountable for the level of satisfaction in their work units.

Hessian said that corporations in the midst of major change are typically more concerned with how their customers will perceive the changing company than they are with their own employees' feelings and perceptions.

"Pick up any company's annual report and you'll no doubt find the phrase, 'employees are our greatest asset,' yet there continues to be a significant shortfall in the quality and quantity of communications and interactions provided to employees compared with those directed toward end consumers. That's interesting given those employees are the essential vehicle through which products are sold, delivered and serviced.

"Today's economic realities have shifted the balance of power to the employee," Hessian continued. "Successful employers must offer a new employment contract that leads employer and employees alike to a new sense of mutual commitment."

Hessian identified the effects of well-conceived Employee Marketing initiatives as a priority in establishing an organization's satisfied and productive workforce.

"Traditionally, organizations have focused their marketing strategies on their consumer and channel audiences. Now, with this shift in power from employers to employees, they're recognizing the need and benefits of applying marketing strategies to their employee audiences as well.