CORPORATE HEALTH GROUP

1. FINDING THE PATH and taking you there CORPORATE HEALTH GROUP

2. Employee Engagement: Does It Really Add Value? Catherine Baumgardner, Corporate Health Group Brandon Melton, Lifespan ASHHRA Annual Conference October 16, 2006 2

3. The Context for Employee Engagement • A key part of the organization’s overall customer experience strategy • Not stand alone • Leadership must understand the connection

4. How do you define employee engagement? 3

5. Definitions • Employees feel a strong emotional bond to the organization that employs them • People demonstrate a willingness to recommend the organization • People are willing to commit time to help the organization to succeed Source: Wikipedia 4

6. Why Should We Care? • Strong relationship between employee satisfaction, customer loyalty and store profitability. Source: Harvard Business Review (1998) • Sales force engagement linked to physician loyalty. Source: PeopleMetrics (2002) • “Fully engaged” employees had higher portfolio holdings. Source: PeopleMetrics (2004) • Employees who were “fully engaged” produced significantly fewer “defects” than those who were “disengaged.” Source: PeopleMetrics (2005) 5

7. Relevance to Today’s Workplace • Increased employee, patient satisfaction • Engaged employees mean a better bottom line • Enhanced employee retention • Identifies key drivers of employee engagement 6

8. Is it enough to have satisfied employees?

9. Traits of a Satisfied Employee • Pleasant • Satiated • Content • Gratified • Low absenteeism • Low turnover • Low substance abuse Source: Leadership Excellence, August 2006

10. Traits of an Engaged Employee • View their work as a part of enhancing the overall organization • Are willing to do what it takes to exceed customer expectations • Believe in their organization • Want to make it work better • Trust their managers

11. Behaviors of an Engaged Employee • Build relationships • Anticipate customer needs • Support co-workers to provide excellent service • Take initiative • Find answers Source: Leadership Excellence, August 2006

12. Today’s Objectives • Share practices most highly correlated with engagement • Discuss where to best expend resources to impact engagement • Show correlation between employee engagement and organizational performance 7

13. Today’s Deliverables • Criteria for calculating engagement index • Categories of effective people practices that drive engagement • Measurement tools 8

14. Case Study--Lifespan • Health System Founded: 1994 • Hospitals (Founded): • Rhode Island Hospital (1863) • Newport Hospital (1873) • The Miriam Hospital (1926) • Bradley Children’s Psychiatric Hospital (1931) • Hasbro Children’s Hospital (1994) 10

15. Lifespan Facts • Employees: 11,400 • Physicians: 2,519 • Residents: 510 • Patient Discharges: 52,680 • Emergency Department Visits: 198,447 • Revenues: $1.26B • Research: $66.8M 11

16. Why Did Lifespan Pursue Engagement? The mission of Human Resources is to assist Lifespan and its Partners to become the Employer and Provider of Choice in the communities we serve.Our vision is to be at the forefront of human resources practice to achieve the sustained success of Lifespan and its Partners. 12

17. Lifespan Employee Engagement Initiative People Practices Worklife Values Leadership/Management Supervision Career Development Employee Engagement Advocacy Retention Job Satisfaction Organizational Performance Patient Satisfaction Financial Performance Employee Retention 13

18. Participation • All but one Lifespan location conducted the Employee Engagement Survey in August and September 2005 • All five Lifespan locations used the same core questions – allowing comparison across the health system • More than two thirds (69%) of Lifespan employees participated in the Employee Engagement survey • All but one location has an Engagement Index of 70% or higher – fully engaged and engaged employees • All Lifespan locations have the same top overall driver of engagement – “Lifespan cares about its employees” 14

19. Measuring Employee Engagement • Response Scale (Likert ) • An engagement index includes respondents answering 4 or 5 on all three outcome questions 15

20. Engagement Index • Advocacy: I would recommend Lifespan as a great place to work • Retention: I intend to be working at Lifespan two years from now barring retirement • Satisfaction: Overall, I am satisfied with Lifespan as a place to work 16

21. Engagement Segment Definitions • Fully Engaged “5’s” on advocacy, retention and job satisfaction • Engaged “4 or 5” on advocacy, retention and job satisfaction (but at least one “4”) • On the Fence “3, 4 or 5” on advocacy, retention and job satisfaction (but at least one “3”) • Disengaged At least one “2” on advocacy, retention or job satisfaction 17

22. Engagement Index Results 18

23. The Not So Good News… Almost 1/3 (31%) of Lifespan employees are “On the Fence” or “Disengaged” 19

24. The Unengaged: Who Are They? • Employed 1-2 years • Under 40 years of age • Work nights and evenings • Mostly knowledge workers, not production workers 20

25. Categories of Effective People Practices • Work Life Balance • Values • Leadership/Management • Immediate Supervisor • Career Development 21

26. Top Engagement Drivers • Bradley Hospital • Bradley Hospital cares about its employees • My immediate supervisor demonstrates a positive leadership style • I feel my career is developing at Bradley Hospital • Lifespan Corporate Services • Lifespan Corporate Services cares about its employees • Lifespan Corporate Services treats employees with respect • I have confidence that senior management is leading Lifespan Corporate Services in the right direction • Newport Hospital • Newport Hospital cares about its employees • Newport Hospital is a socially and ethically responsible organization • I am able to maintain an appropriate balance between my personal and work life 22

27. Top Engagement Drivers • Rhode Island Hospital • The Rhode Island Hospital cares about its employees • There are excellent job opportunities available for me at Rhode Island Hospital • Rhode Island Hospital provides quality patient care • The Miriam Hospital • The Miriam Hospital cares about its employees • My contributions are appropriately rewarded and recognized • The Miriam Hospital provides quality patient care 23

28. Overall Engagement Model Section* Survey Item** % Favorable EMPLOYEE ENGAGEMENT (71%) Satisfaction Retention Advocacy 1. Work Life 2. Values 3. Immediate Supervisor 2.My immediate supervisor demonstrates a positive leadership style 78% 4. Career Development 3. I feel my career is developing at Bradley Hospital 65% 5. Leadership/ Management 9. Bradley Hospital takes employee interests into account when making important decisions 58% * Sections are listed in the order of their impact on Employee Engagement ** Survey items are listed in order of individual impact on Employee Engagement Items that score below 65% are highlighted in Red and Bold text. 24

29. Follow-up/Action Planning • Communicate survey findings to executive management and governing boards • Distribute site and department level reports to middle managers • Communicate survey findings and next steps to employees • Clarify major issues and concerns with employees • E-Focus Groups • Department Meetings • Develop action plans to address issues with key milestones, accountabilities and timelines • Overall site plans • Department specific plans 25

30. Follow-up/Action Planning • Implement needed improvements – site and department specific • Communicate specific follow-up actions taken to employees • Measure progress through employee ‘pulse’ surveys • Conduct Correlation Study 26

31. Gap to Perfection • Newport Hospital Survey was conducted in Nov, 2004. • Weighted Average Based on number of Full-Time and Part-Time employees at each Lifespan Site. Straight Average: 44% 27

32. Correlation Study • Relationship Between the Level of Employee Engagement and Organizational Performance • Organizational Performance Measures • Patient Satisfaction • Labor Costs • Overtime Usage • Contract Labor Usage • Employee Retention/Turnover • Engagement Levels • Lowest Engagement (<50%) • Middle Engagement (50%-70%) • Highest Engagement (>70%) 28

33. % Overall Rating of Care by Engagement Index 100% 80% 73% 66% 65% 60% % Highest Care Rating 40% 20% 0% Lowest Middle Highest Engagement Index Note: All percentages on this chart indicate a top box score. That is, a 5 (very good) on a 5-point scale. 29

34. Percentile Rank Overall Rating of Care by Engagement Index 100% 95%ile 80% 65%ile 60% 50%ile Percentile Rank 40% 20% 0% Lowest Middle Highest Engagement Index Note: All percentages on this chart indicate a top box score. That is, a 5 (very good) on a 5-point scale. 30

35. % Likelihood to Recommend Hospital by Engagement Index % Highest Recommendation Rating Engagement Index Note: All percentages on this chart indicate a top box score. That is, a 5 (very good) on a 5-point scale. 31

36. Percentile Rank Likelihood to Recommend Hospital by Engagement Index 100% 90%ile 80% 60% 50%ile 50%ile Percentile Rank 40% 20% 0% Lowest Middle Highest Engagement Index Note: All percentages on this chart indicate a top box score. That is, a 5 (very good) on a 5-point scale. 32

37. % Overtime by Engagement Index RIH Total Overtime Budget: $22,178,510 Potential Savings*: $5,544,628 This 9 percentage point difference costs an additional $4,158,471 This 3 percentage point difference costs an additional $1,386,157 % Overtime Engagement Index Note:Potential Savings assumes all employees move to the Highest Engagement Level. 33

38. % Contract Labor by Engagement Index RIH Total Contract Labor Budget: $11,343,926 Potential Savings*: $4,003,738 This 11 percentage point difference costs an additional $2,446,729 This 7 percentage point difference costs an additional $1,557,009 % Contract Labor Engagement Index Note:Potential Savings assumes all employees move to the Highest Engagement Level. 34

39. % Voluntary Turnover by Engagement Index 15% Total Voluntary Turnover during time period: 694 Potential Savings*: $1,645,120 (based on 40 employees) 10.1% 10% 9.0% 74% increase in turnover % Voluntary Turnover 55% increase in turnover 5.8% 5% 0% Lowest Middle Highest Engagement Index Note: Potential Savings assumes employees that would have stayed if Hospitals were in the Highest Engagement Level. Each Nurse has a replacement cost of $42,400 35

40. Next Steps and Tools • Agree upon an organizational motivation and commitment to employee engagement • Determine what you would like to achieve • Define the goals of your effort and how to measure • Develop engagement questions based around the criteria for measurement • Conduct Correlation Study: Employee Engagement and Organizational Performance Measure • Build accountability into the performance appraisal process, starting with leadership • Develop an action plan to address issues 36

41. Employer of Choice Objective • Engagement: Increase percentage of respondents in “disengaged” and “on the fence” categories to the “engaged” and “fully engaged” categories in the Employee Engagement Survey. Minimum: 2.5% Midpoint: 5% Maximum 7.5% • Diversity: Decrease the gap of racial/ethnic diversity between RI population and Lifespan employees in Technical, Professional, and Managerial Job Categories. Minimum: 15% Midpoint: 25% Maximum 35% • Retention: Increase retention rates in first 12 months of employment of full and part time employees (voluntary separations only). Minimum: 5% Midpoint: 10% Maximum 15% 37

42. Management Scorecard • Purpose • Measure Progress • Recognition and Reward • Accountability • Best Practices • Retention, Diversity, Engagement • System, Site, Division, Department • Distributed Quarterly 38

43. Resources Brandon Melton Jonathan Honibal Sr. Vice President, Lifespan Research Director bmelton@lifespan.org PeopleMetrics, Inc. 401.444.3774 jhonibal@people-metrics.com 215.979.8032 Catherine Baumgardner Associate Consultant Corporate Health Group cbaumgardner@corporatehealthgroup.com 717.285.2240 www.corporatehealthgroup.com Sean McDade, Ph.D President & CEO PeopleMetrics, Inc smcdade@people-metrics.com (215) 979 – 8040 www.people-metrics.com 39

44. FINDING THE PATH and taking you there CORPORATE HEALTH GROUP 1-888-334-2500 www.corporatehealthgroup.com