In every business, profit is important and it is the result of marketing, innovation and productivity (Peter Drucker, 1954). It is also the test of validity of business decisions and the only source of risk premium. Drucker added that the problem of business is not profit maximization but making enough profit to cover the risks of economic activity and to avoid loss. But it appears that certain organizations have other ideas about maintaining their margin; “in the face of competition”, observes James Clifton of The Gallup Organization, “they are on the path of continuous margin erosion”.

The Economist in their December 2001 publication tracked the profits made by all nonfinancial companies in the United States for a fifty-year period from 1950-2000. The high point of the graph was what Clifton called a “relentless fifty-year force gradually squashing profits out of American companies”. Reason? Organizations could make profits easily in the absence of competition but are unable to maintain margins from normal operation when faced with extreme competition. The reason for this is a customer relationship based wholly on price. When all you have that differentiates you is your price, your product becomes commoditized says Clifton.

The solution to the problem of margin erosion is rooted in the fact that organizations are not built of bricks and mortar; they are built of people. People in this context, refers to the customers and the employees. There is therefore the need to have a relationship with customers that supersedes price-that is, harnessing the power of human nature or go broke and suffer similar fate as dinosaurs. Clifton summarizes the solution in “running an organization that can maintain and expand its customer base without slashing prices or reducing its fiscal integrity.”

We could see the solution from another viewpoint; as a function of how employees connect with the organization and then the customers. This is one secret great organizations have used to their advantage; achieving growth and profits by maximizing innate abilities of their employees to connect with customers on an emotional level. Consequently, customers return because of how they feel. In “Follow This Path” by Curt Coffman and Gabriel Gonzalez-Molina, 2002, they stated that the response from return customers “has been so phenomenal that these organizations refers to them as being emotionally engaged customers.” But that is not all; great organizations also create environments that would bring out the best in employees such that they become very effective at responding to the needs of customers. Consequently, profits and growth flourish. Curt and Gabriel refers to them as emotionally engaged employees. Here is their final submission: “when engaged employees put their talents to use, they provide an instant competitive edge and build a new value-emotionally driven connection between employees and customers.”

But emotionally engaged employees are in short supply; in a massive study by The Gallup Organization involving over 10 million customers, 3 million employees and 200,000 managers, employees were classified into three categories: the engaged, the not-engaged and the actively disengaged in the U.S economy. According to the study, “only 30% of the workforce is engaged, 54% are not engaged, while approximately 16% is actively disengaged.” Now take a cursory look at the percentage of engaged employees in other climes: Canada-24%, Germany-16%, Britain-9% and France-9%.

Now, is there a chance that more recent studies would show significantly improved engagement data? In a 2014 Gallup global survey published in New York Times on 28/08/15 by Barry Schwartzaug, it found that almost 90 percent of workers were either “not engaged” with or “actively disengaged” from their jobs. Imagine that nine out of 10 workers spend half their waking lives doing things they don’t really want to do in places they don’t particularly want to be. It clearly shows that this sad trend has been sustained over time. Sadly, employee disengagement costs money; Gallup estimated that the cost to the U.S economy of actively disengaged employees is in the range of $254-$363 billion annually. The fact that global economies thrive with a paltry fraction of engaged workers doesn’t mean the ugly trend should be allowed to continue. Imagine how much it could grow by doubling the number of this category of workers!
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