Yes, it's true - the research and the numbers on employee engagement aren't something to brag about. Google "The GallupOrganization" or "Towers Perrin" and "employee engagement," and see what comes up. Towers Perrin found 21% of employees being truly engaged (they'd go the extra mile for their employer), and 38% disengaged. Gallup found that in average organizations the ratio of engaged to disengaged employees is 1.5:1. In world-class organizations the same ratio is 8:1.

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The numbers on engagement translate into business results. In fact Gallup calls employee engagement a leading indicator of financial performance. They estimate the cost of lost productivity from disengaged employees in the U.S. workforce to be more than $300 billion. Their research and analysis has shown that engaged organizations have 2.6 times the earnings per share growth rate vs. organizations in the same industry that have lower engagement. So when we say U.S. companies may only be operating at 1/3 of their true capacity due to disengagement, it's not a stretch in the context of these numbers.

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All of this begs the question of motivation. Many factors thought to motivate employees aren't motivators at all. Research since the 1960s shows pay and benefits for example don't motivate people to better performance. If they are at market level, they can attract people to a company and keep them from leaving; but pay and benefits have no impact on improving performance. Or so I thought until I read some recent research done by the Federal Reserve Bank of Boston. Their research found that for completely mechanical, non-thinking tasks, performance will increase with increases in money incentives. BUT as soon as any cognitive skills are needed for a task, larger money incentives result in decreases in performance.You read that right - performance goes down when money incentives go up.

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Maybe this explains the discrepancy in the opinions of managers who see themselves as not needing money to be motivated (I'm a professional), yet think they need to use money to motivate their employees. The truth of the matter is that both the carrot and the stick are external motivators. They may work for a short time in a specific situation, but they'll never create a motivated and engaged workforce. For motivation to last, it must come from within. In other words the only person you can motivate is yourself.

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Once you accept the premise of motivation coming from within, then you no longer get caught in the losing game of trying to motivate others. Instead you can work to develop an environment in your organization in which people can be motivated and engaged.

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Here are three ingredients I've found to be critical to an environment of engagement. By the way, I'm assuming you have people with sufficient talent. But talent alone won't cut it; you've seen enough disappointing sports teams that are loaded with talent. These three ingredients will go a long way to help talented people use all the talent they've got.

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Self-direction -Especially in a fast-paced business environment where it's critical that people act and react quickly, make sure people understand the contribution that's needed from them, and give them the autonomy to do it. An entrepreneur who built and sold four businesses (she's currently on her fifth) told us the key to her success was, "I hire the right people. And I spend a lot of time making sure they know 'what done looks like.' Then I turn them loose to do their jobs." Initiative and creativity emerge that may otherwise never seen the light of day.

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Mastery -Most people have an urge to get better at things they do. Allow and expect them to do that. Whether it be through appropriate challenges, through training and development opportunities, through frequent feedback and discussion, through providing the right tools to do their work, give people an opportunity to excel. A question in one of the Gallup surveys showing the links between employee opinions and business results was, "Do I have the opportunity to do my best every day at work?"

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Meaningfulness -People need to know that there is purpose or significance in what they do beyond making a profit. That doesn't mean profit isn't important or that employees are averse to the company's making a profit. It does mean that people are motivated to perform better when there's significance beyond the profit. Several years ago at the conclusion of a speech I did at a conference at Bellagio, I thanked the staffpeople who were rearranging tables and chairs, refilling water pitchers, and replacing pads and pens for making it so easy for me to conduct the workshop. One of them replied, "That's why we're a five-star hotel." There was something about her job and her employer that she could be proud of, and she was.

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When those three ingredients exist in your business and are supported by every leader, manager, team member, you'll have gone a long way to developing and sustaining an engaged workforce and an improved bottom line.

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