"It's the manager, stupid."
In a1998 article with this title, The Economist wrote, “It is an article of faith among management gurus that good management is largely the preserve of ‘great’ or ‘excellent’ companies that are marked out by their unique corporate cultures … Now doubt has been cast on the idea of great companies by an enormous statistical survey …”
The study was one of the first iterations of Gallup’s ongoing meta-analysis of workplace culture and business performance, which revealed significant variance in how employees experience work across teams within large companies, some of which were considered “great.” This variability in worker experiences was linked to those same teams’ performance and retention rates.
Over more than a quarter century since, that Gallup study has been updated and replicated 11 times, with some iterations published in top academic journals.
The original 1998 study included 2,528 business units and teams from 24 companies. It has since grown to 183,806 business units from 736 research studies. Overall, Gallup has surveyed 64 million employees on topics related to employee engagement and wellbeing, and conducts the only global representative sampling of employees, updated annually in its State of the Global Workplace report.
What Has Gallup Measured for the Past 25 Years?
Employee engagement is the involvement and enthusiasm employees have for their work and workplace. Gallup measures engagement through a composite of 12 workplace experiences, including role clarity, resource availability, recognition for good work, development on the job, opinions counting, connection to a mission or purpose, coworker relationships, and work progress. These 12 experiences, known as Gallup’s Q12, are linked to performance outcomes and are crucial at every stage of the employee life cycle, from pre-hire interactions and reputation to onboarding, performance management, career progress, and, finally, the exit experience. Gallup’s Q12 is a high-bar metric, and when organizations show improvement on it, they see tangible value and positive outcomes.
What Still Holds True Today?
The variability in employee engagement within teams at a given company is nearly as great as the variability in employee engagement for teams across all companies. The differentiating factor in this variability is the quality of management, which explains 70% of the variance in team engagement. Team employee engagement consistently relates to performance outcomes such as customer ratings of service, productivity, employee retention, safety and profitability across industries and geographies.
In Gallup’s most recent study, top-quartile business units achieved 23% higher profit than bottom-quartile units. This is largely driven by those same units experiencing less absenteeism, lower turnover, less shrinkage or theft, fewer safety incidents, fewer defects or errors, and higher customer loyalty and productivity. The more highly engaged business units also had higher employee wellbeing and greater involvement in organizational initiatives, often referred to as organizational citizenship.
In addition to Gallup’s findings, numerous academic studies and papers using different data sources and from different investigators have further supported the original Gallup findings.1
Why Is Meta-Analysis Important?
Meta-analysis is a statistical method used to combine results from multiple studies to draw stronger conclusions than any single study can provide. A unique feature of meta-analysis is the ability to test whether the relationship between, in this case, employee engagement and performance is consistent across companies, industries, geographies and time.
Most leaders want to know the likely return on investment for applying any management initiative. For them, meta-analysis can project the financial net gain in an investment.
Several recent published studies have reported relationships between crowd-sourced employee opinion data and organizational financial performance. Crowd-sourced data tend to be less representative of an organization’s employee opinions. Gallup’s meta-analysis uses census data for each organization, averaging response rates of over 80%. This provides more precise estimates of organizational culture across business units and teams inside organizations, which can then be compared with those same teams’ performance and retention rates. This type of reporting and analytics is significantly compromised with incomplete crowd-sourced data.
Why Does Gallup Continue to Update This Study?
As Gallup adds new studies to its meta-analysis, analysts can increase the breadth of outcomes studied, increase the size of composition for various industries and geographies, and examine the effect of the employee experience during changing times.
Why Is This Study Uniquely Important for Leaders?
Stock performance and earnings, the outcomes leaders care most about, are highly influenced by how teams produce within their organizations. These financial results are downstream from other business outcomes such as customer loyalty, retaining top talent, productivity, quality of work, and reducing accidents and other avoidable costs.
Past published meta-analyses have shown strong evidence of a causal relationship between each of Gallup’s 12 engagement elements and performance across business units.2 This relationship between team engagement and performance or retention of employees is even stronger during challenging times such as past recessions and the more recent COVID-19 pandemic. Organizations with strong, highly engaging cultures are more resilient in tough times.
Gallup’s research shows that its metric is highly changeable across time when leaders implement the right strategies, communication, manager development and accountability. The best organizations Gallup has studied reach 70% or more engaged employees -- more than three times the global average.
Organizational leaders face increasing demands, and their jobs have never been more challenging. Too often, well-intentioned leadership priorities encounter resistance within the organization or fail to be executed. This is often because manager-led teams are not aligned with each other or the organization’s higher aspirations, which is why leaders must build organizational culture through great managing at all levels.
Gallup’s decades-long study of workplace culture and business performance provides science-based evidence that leaders can build great companies with great cultures that achieve their financial and societal objectives -- if they create systems that continually improve the quality of managing. Great managers, who are closest to their employees, are the key to inspiring extraordinary performance.
Improve your strategic decision making with the well-established science of engagement:
- Follow global engagement data and track trends that affect employee performance.
- Partner with Gallup to build a performance-oriented employee experience.
- Get more worldwide data on employee mental health and wellbeing by downloading Gallup’s State of the Global Workplace: 2024 Report.
1 Whitman, D. S., Van Rooy, D. L., & Viswesvaran, C. (2010). Satisfaction, citizenship behaviors, and performance in work units: A meta-analysis of collective construct relations. Personnel Psychology, 63(1), 41-81.
Edmans, A. (2012, November 1). The link between job satisfaction and firm value, with implications for corporate social responsibility. Academy of Management Perspectives, 26(4), 1-19.
Harrison, D. A., Newman, D. A., & Roth, P. L. (2006). How important are job attitudes? Meta-analytic comparisons of integrative behavioral outcomes and time sequences. Academy of Management Journal, 49(2), 305-325.
2 Harter, J. K., Schmidt, F. L., Asplund, J. W., Killham, E. A., & Agrawal, S. (2010). Causal impact of employee work perceptions on the bottom line of organizations. Perspectives on Psychological Science, 5(4), 378-389.
