Vision of ‘Controlled Flexibility’ for Employee Engagement Delivers Consistency, Continuity and Choice for Royal Philips Electronics Business Units

The 90s were a tumultuous decade for Royal Philips Electronics but after going through a major transition, the company today has emerged healthier, stronger and positioned for growth, especially in the field of healthcare after it has strengthened its medical business unit through acquisitions in recent years. Reclaiming their leadership position as one of the most admired companies in their industry commenced with an extensive internal focus and the revelation of a founding truth: for a successful company to continue to succeed, their people must share a sense of purpose and motivation. Nurturing a common language of engagement across the organisation has become a major part of the company’s global strategy in creating the right culture to spur growth and meet goals of being the leading solutions provider in the areas of healthcare, lifestyle and enabling technology.

Royal Philips Electronics of the Netherlands (NYSE: PHG, AEX: PHI) is one of the world's biggest electronics companies and Europe's largest, with sales of $37.66 billion (EUR 30.3 billion in 2004). With activities in the three interlocking domains of healthcare, lifestyle and technology and 161,500 employees in more than 60 countries, it has market leadership positions in medical diagnostic imaging and patient monitoring, colour television sets, electric shavers, lighting and silicon system solutions.

Philips is a highly matrixed organisation comprised of five key product divisions: Consumer Electronics, Domestic Appliances & Personal Care, Lighting Company, Medical Systems, Semiconductors as well as several specialty businesses. Within those divisions are 60 business units, formerly focussed on their respective agendas, strategies and initiatives. When a new chief executive joined in 2001, a clear corporate goal was to create an environment and company value of "One Philips" - a mindset and a way of working focused at maximising value creation for Philips and its customers by leveraging competencies and resources across the company. However, with so many businesses spanning across as many countries, how could the company create a globally consistent leadership culture while still embracing each individual business’ needs?

Recognising the need to create an environment where positive leadership and managerial behaviours are the norm rather than the exception, Roger Long, Director of People and Organisational Development Projects for Philips, championed employee engagement and a vision of controlled flexibility. This vision included corporate control of the employee engagement process while delivering enough flexibility to stimulate leadership team ownership of the process and the results. Two key principles emerged as the company became more fluent in the language of engagement: Measure what drives business results through people and ensure that the process supports the business.

In the past, the survey process at Philips was conducted on a global, corporate level with each business unit participating in the process at the same time. Because they were using a "one size fits all" approach, some of the businesses found the process disruptive and in a few areas participation was less than 50%, negating the credibility of local results. Also, since the content in the questionnaire was defined at corporate, the company was measuring too broad a range of issues, many which were unrelated to employee commitment or the employment experience and unrecognisable to individual businesses. Without meaningful measurement at the business unit level focused on the drivers of employee engagement, a resulting direct impact on employee performance as well as business results would prove impossible.

Long’s team knew they needed to identify a global survey partner who could deliver their vision of controlled flexibility and tailor a solution that would provide corporate consistency while allowing the business units to be in command over what they were measuring, thereby producing meaningful results.

After an extensive RFP process, Royal Philips Electronics selected Kenexa to help put their finger on the behaviours and issues important to employees and create a more productive workforce. Kenexa’s employee engagement model was developed and tested through a stringent process of survey item design, beginning with rigorous studies of organisational effectiveness and comprehensive reviews of the academic literature related to employee commitment, psychological ownership, organisational pride, loyalty and satisfaction. Through the Kenexa solution, Philips would achieve consistency in process while delivering flexibility to the business units.

"The three items that set Kenexa apart from the other vendors we looked at were their passion for employee engagement, IT tools and flexibility within a set solution," said Long. "Through the solution, we are able to offer our internal business units the ability to commission and run an employee engagement survey to suit their specific business needs while maintaining a level of corporate consistency. Additionally we are able to evolve the process as we gain greater insights into the real drivers of employee engagement across Philips."

The Kenexa questionnaire designed for Philips’ has a set of 33 mandatory items. Identifying common engagement drivers across the businesses was one way of helping to create uniformity across the company. To meet each groups’ individual needs, business units are then able to customise their survey questionnaire by adding an additional 10 to 17 items from a corporate defined database of 80 supplementary items. Business units also have the option of including seven customised questions in the event that they need to measure a specific people issue unique to their business. The businesses are advised not to exceed 50 questionnaire items in order to keep the focus on immediate drivers of engagement.

Long estimates two-thirds of the business units took advantage of the flexibility in customising their questionnaire. Another option for flexibility is how the survey is branded to employees. What you call it is not something that is important on a corporate level, says Long, and some units dubbed it a motivation survey to maintain consistency with past survey monikers while others firmly position the process as an employee engagement survey. The subtle differences offer enough flexibility to inspire ownership of the process, the results and actions moving forward.

"We are looking at our communications as opportunities to create employee dialogue and improve engagement," said Long. "While corporate has provided some standardised communication and education materials, the solution gives each unit the flexibility around how they positioned the process and how it contributes to their business agenda."

Flexibility is further enabled by allowing businesses units to run an engagement survey at a time that meets their individual needs and fits their business schedule.

"We found that running a survey every two years at a global level was not always satisfying the needs of all our businesses," said Long. "Enabling the businesses to run the survey at a time when it best fits their needs has significantly increased the top management buy-in and ownership to the data collection as well as strategically and tactically using the data in their business going forward."

Survey participation has exceeded corporate expectations and in 2004, Philips conducted 12 surveys targeting over 118,000 employees with an average response rate of 80%. One survey alone was translated in 21 languages and distributed to over 41,000 employees. Adding further suppleness to the process included offering the survey via paper and/or the Web -providing yet another level of flexibility for each business unit.

Along with gaining continuity and consistency, Philips has been able to reduce costs in the process through the use of web applications and standardisation.

Reliability of the web questionnaire is another benefit realised through the Kenexa solution adding further credibility to the process. The vast majority of employees experienced a fast loading, easy to understand and complete questionnaire. The one percent of participants who encountered problems received timely and professional support from Kenexa’s 24/5 helpdesk.

"In addition to providing a solution that the businesses have rated highly in terms of value-for-money, Kenexa is helping us to have a better understanding of leadership and manager behaviour and what we need to do to encourage the best performance from employees and have them more energised about their and Philips’ future" notes Long.

While gathering data from employees is a key function of the survey, the bigger value is in the communication it encourages and Long credits the solution with enabling better, more productive dialogue across the company. As part of the process, each business unit is challenged to define a twelve-month employee communication plan of which the engagement survey process is a part.

"It is extremely important to give our employees feedback on a regular basis about what is happening with the data that is collected," he says. "You are not only collecting data but you are also communicating to your employees what matters most for the business. Continuous communication is key to ensuring that people will want to participate, and the more responses harvested, the more credible the process."

For other organisations considering controlled flexibility in their employee engagement process, Long recommends finding a partner that is enthusiastic and flexible in their approach as well as in their solution. Part of Philips success is also attributed to having dedicated internal control to manage the process across the different businesses.

"By having someone at corporate work with the businesses on a daily basis, we are able to help them understand what is happening in the other businesses and shape one solution that fits within our ‘One Philips’ model," said Long. "Having a flexible framework requires constant management but feedback has been positive and I am noticing a positive change in the language of our leadership towards engagement."

"Looking back on our first year with this new approach, the level of visible management ownership for the employee engagement process has been tremendous," said Long. "The solution has helped illustrate that a ‘One Philips’ approach is possible and that it does not need to be rigid. Because Kenexa took the time to understand our needs, they have provided great tools and shaped them into a system which is enabling us to run the surveys, collect the data and focus on what really matters: creating dialogues which lead to a deeper understanding of the drivers of success and ultimately, improved business results."