People intelligence from New Tech companies 2013 NEW TECH BENCHMARK REPORT

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1 People intelligence from New Tech companies 2013 NEW TECH BENCHMARK REPORT

2 ANATOMY OF A NEW TECH COMPANY Average number of people 250 Survey response rate 80% 90% of companies are in the employee range, with a median of around 250. More than 80% of employees at New Tech companies submitted responses to Culture Amp engagement surveys. They are growing like crazy, have visions that are mind boggling in their reach and are some of the hottest places in the world to work right now: welcome to the New Tech. What makes a company New Tech is not the industry it is in - it is the approach it takes to its business. New Tech companies might be in retail, publishing, entertainment, education, internet services or software development, but at heart they are internet-based and, by extension, technology companies. Traditionally reports from culture surveys tend to be dominated by bigger, more established companies so we wanted to give you an insight into the sorts of companies that we are proud to call our customers. Software is eating the world Marc Andreessen, entrepreneur, investor and software engineer Average annual revenue $70M Revenues range from $1 million - $700 million for those companies with publicly available data. In business 6YRS In an average of 6 years the New Tech companies have achieved what most companies would do in over a decade. All data is less than 12 months old and anonymous aggregate data only. Data is based on a subset of our clients who fit the New Tech description. 2

3 EVERYONE ELSE VS FAST TECH Proud to work at XYZ.com Would recommend XYZ.com as a great place to work Motivated to go beyond what they would do elsewhere Not thinking about looking for another job elsewhere 56% 58% 67% 86% 89% 78% 87% 73% Are New Tech companies better places to work than everywhere else? In short Yes. These 5 questions to the left are standard engagement questions that link strongly in research with other important metrics such as retention, profit and year on year growth. People in New Tech companies are more likely to recommend the company as a great place to work, are more likely to be proud of the company and, most tellingly, are more motivated to provide discretionary effort beyond what is generally expected of them. You can t motivate people, you can only create a context in which people are motivated. Brad Feld, investor and entrepreneur Can see themselves at XYZ.com in 3 years time 50% 65% QUICKTIP Sometimes companies focus on just one measure such as an employee Net Promoter Score (enps) or employee satisfaction. The Murmur Engagement Index includes an enps question but also adds other elements such as pride, motivation and commitment. Engagement is a slightly broader concept than satisfaction, although the two are complementary. As well as providing a broader picture of engagement, using more than one question also increases statistical reliability. 3

4 BEING AWESOME MIGHT NOT BE GOOD ENOUGH 50% OF NEW-TECH STARTUP EMPLOYEES WILL BE GONE BEFORE 3 YEARS ARE UP Employees of New Tech companies are substantially more likely to recommend and be motivated by their companies as great places to work, but they are not necessarily inclined to stay for a long time. This probably reflects the substantial competition amongst startups for talent which can encourage employees to move around. When you consider that many of these New Tech companies are growing very fast, high staff turnover means they are having to re-teach their culture constantly. Anytime you find someone more successful than you are, especially when you re both engaged in the same business you know they re doing something that you aren t. Malcolm X, human rights activist 4

5 WHAT DRIVES ENGAGEMENT? OPPORTUNITIES FAIRNESS ORGANIZATION LEADERS PEOPLE TEAM CAREER REWARDS COMMUNICATION LEADERS VISION INNOVATION ROLE SUCCESS MISSION JOB IMPACT So what drives engagement? Pay? Work/life blend? Actually No. Pay It is very rare for pay to show up as a driver of engagement. In our 2012 analyses across all companies it was ranked in the bottom half of all potential drivers. Our results for New Tech companies showed a similar pattern pay and/or benefits was ranked as a top 10 driver in less than 5% of companies, even though on average only about 50% of employees thought their pay and benefits were fair relative to other companies. For companies in which pay was a driver of engagement, only 35% of employees thought their pay and benefits were fair relative to other companies. Work & Life Blend With so much focus on work and life blend, it might come as a surprise that work and life blend was not ranked as a top 10 driver of engagement. That doesn t mean that employees don t think it s important. More than 80% of people on average indicated that they were able to arrange time out when they needed to, and more than 75% felt they were supported if they needed to make use of flexible work arrangements. It may be that work and life blend does not rate as a driver of engagement for New Tech employees because New Tech companies are doing so well in this area that there is not much room for improvement. Driver analysis is a family of statistical techniques used to determine how strongly variables are related to each other. In Murmur, every individual s responses (to every question) are statistically compared with how they respond to the engagement questions to determine which questions are the most strongly related to overall engagement. Importantly, the things a company does very well, or not very well, are not necessarily the things that determine how engaged someone is. We should not just focus on the high or low scoring questions unless they are also strong drivers. 5

6 KEY DRIVERS OF ENGAGEMENT There are good career opportunities for me here I have confidence in the leaders at XYZ.com It s a great place to contribute to my field Opportunities Confidence Contribution 64% 74% 72% Opportunities, confidence in leadership and ability to contribute were the greatest predictors of engagement across New Tech companies in Given that engagement scores were fairly high for most New Tech companies, the differences between them often came down to retention. What keeps someone at a New Tech company longer? Not surprisingly, but importantly, the answer concerns career opportunities and confidence in leaders. Honorary mentions Leadership Along with leaders who inspire employee confidence, other aspects of leadership often feature among the top drivers of engagement. These include leaders demonstrating that people are important to the success of an organization, and leaders communicating a vision that motivates their people. Innovation Our standard survey asks about innovation being encouraged culturally as well as innovative ideas being acted upon. These items are seen more often in the top 10 drivers for New Tech companies than companies in general, suggesting that it is more important for New Tech companies to ensure that they encourage innovation and act on innovative ideas when they are voiced. 6

7 WHAT DIFFERENCE DO THEY MAKE? There are good career opportunities for me here More committed TO STAY More likely to RECOMMEND More willing to GO BEYOND I have confidence in the leaders here More committed TO STAY More likely to RECOMMEND More willing to GO BEYOND 16% 9% 13% 13% 13% 6% XYZ.com is a great place to contribute to my field More committed TO STAY More likely to RECOMMEND More willing to GO BEYOND 12% 18% 10% Recommend Would employees recommend XYZ.com as a great place to work? Motivation Does XYZ.com motivate them to go beyond? Commitment Are they focused on staying at XYZ.com at the moment? Companies providing better career opportunities scored highly on all engagement measures, but particularly on employees current commitment to the company. Believing you have good career opportunities appears to be particularly important for sticking around. However, although confidence in the leaders also impacts all three measures positively, the strongest positive relationships were between having confidence in leadership and being both more committed to stay at a company and more likely to recommend it to others. Leaders inspire advocacy and action. When it comes to employees feeling that they work somewhere where they can make a significant contribution to their field, the strongest positive correlation is to those employees recommending their company to others. Overall, the drivers have a strong, positive impact on all of these engagement measures. The fact that the degree of impact varies depending on the question reinforces the rationale for using more than one engagement question. We calculated the difference these top drivers had for New Tech companies by dividing all of the companies into highest and lowest scoring groups for each of these questions. To keep it simple we just took the highest scoring 50% of companies and compared them to the lowest scoring 50%. We compared their scores on our three most commonly asked engagement questions. 7

8 NEXT STEPS Trends we are seeing In terms of measurement, we re seeing companies planning to continue tracking things such as engagement and employee net promoter score measures but also things such as manager effectiveness, candidate engagement and wellbeing. Further into the realm of people intelligence we re also seeing a move towards tracking perceptions of processes, collaboration and innovation culture and short tracking surveys around change programs or new systems. There is also a growing trend of allowing all employees to see the data and take some responsibility for their own engagement levels. In terms of actions, we re seeing companies moving into 2014 with plans for innovative approaches in some traditional areas such as learning and development and leadership. For example, we re seeing engagement working groups made up of employees from all levels within a company, sponsored and personally connected with CEOs and other senior leaders. The trend again is to involve employees at all levels in responses to results and measurement. About the author Jason McPherson is Chief Scientist at Culture Amp and a key member of the Murmur research and development team. He has a PhD in Psychology and has published scientific papers on survey and assessment methods in the American Psychological Association s journals. Jason has worked with clients all over the world designing measurement approaches, helping them analyze and understand their people intelligence data, and linking this to other business data. Prior to Culture Amp and Murmur, Jason worked at Kenexa and Towers Watson. Murmur is the first people intelligence platform that lets people operations teams understand the impact they are having on their people. Want to try it for yourself? 8