Blog Articles
EMPLOYEE ENGAGEMENT
March 2010
The bottom line eats loyalty every time
How an organisation dealt with its employees during the financial meltdown might influence its current levels of employee engagement.
Downsizing staff to protect shareholder value might have seemed the right thing to do in the midst of a real (or perceived potential) sharp downturn in profits but, with the wisdom of hindsight, might prove to be far more costly than a pay freeze or reduced work week would have been.
The Strategic Human Capital Newsletter brings you well researched meaty information about the strategic role of people in the success of organisations.
The recession is hopefully over its worst but the after effects will be with us for a long time. How an organisation dealt with its employees during the financial meltdown might influence its current levels of employee engagement. Downsizing staff to protect shareholder value might have seemed the right thing to do in the midst of a real (or perceived potential) sharp downturn in profits but, with the wisdom of hindsight, might prove to be far more costly than a pay freeze or reduced work week would have been.
SO WHAT DOES EMPLOYEE ENGAGEMENT MEAN?
The world of the workplace has shifted over the past 50-years from give-me-your-loyalty-and-I-give-you-lifetime-employment to you-are-a-discardable-costly-resource-that-I-would-retrench-at-the-drop-of-the-share-price. In the process employees have woken up to the fact that the place where they spend over 70% of their living hours should give them more – a salary cheque is simply not enough to make them dig into discretionary effort.
Employee Engagement is a term that has developed to refer to the levels of employee commitment (and probably loyalty) and productivity, relating to what is referred to as discretionary effort. The “I arrive at work and can tick all the boxes of my job description” mindset often translates into employees only using a very small amount of their actual available effort to just ‘get by’. A ‘giving more than one needs’ mindset and approach is determined by amongst other factors, the employees’ emotional commitment to the organisation and what it stands for (values, purpose, strategy etc.). From the engaged employee one has to distinguish the unengaged employee who will follow a ‘give me instructions’ and ‘wait and see’ approach, and the ‘actively disengaged’ employee who displays cancerous traits and often actively undermines the organisation.
One very interesting finding of the Towers Perrin research was that the factors that keep an individual engaged are very different from the ones that attract individuals to an organisation, or keep someone at an organisation.
DOES EMPLOYEE ENGAGEMENT IMPACT THE BOTTOM LINE?
Numerous studies have shown that engaged employees make an organisation more profitable, are more customer focussed, and deliver a higher quality of performance. The Sirota study (spanning 4 years, 920 000 employees, 28 multinationals) found that companies with high morale outperformed comparative companies by more than 2.5 to 1 and stock prices by almost 5 to 1.
The Watson Wyatt researchers found a very real relationship between current financial performance and past measures of employee engagement. A significant improvement (one standard deviation) in the past levels of engagement is associated with a 1.5 percent increase in current market premium. Employee engagement data is thus now widely seen as a leading indicator of financial performance. Your employee engagement survey numbers could thus act as a strategic management tool, providing an early warning indicator.
The GPTWI survey found that employee turnover in the Top 100 Companies is far lower than the average. Industries sectors ranged from 8 – 19 percent in Top 100 Companies vs. a 12 – 48 percent across the industry average.
Finally Gallup has found that high employee engagement levels have a direct (doubling up) influence on customer engagement levels. (Gallup: Human Sigma).
HOW DO I MEASURE IT?
There are numerous international surveys available that allow an organisation to benchmark itself against international competition; however these are often prohibitively complex and expensive. At SHCC we advise that clients customise an employee engagement survey for the organisation (based on international best practice research), then establish a credible internal benchmark across units in the organisation and regularly track the movements and manage the implications proactively over time. (www.strategichumancapital.co.za/pdfs/Employee_Engagement_SHC.pdf)
WHAT ARE THE MOST IMPORTANT DETERMINANTS OF EMPLOYEE ENGAGEMENT?
All the research studies basically conclude one prerequisite for high employee engagement: is it a great place to work? The conclusion regarding critical factors for a great place to work differs from one study to another, but the following are some of the highest rated factors: whether senior management consistently shows that they truly care about employees (Towers Perrin) and if an employee has regular opportunities to discuss their career with the person that has real power over them (Gallup); whether an employee experiences real progress, i.e. a sense of achievment on a regular basis (HBR). It boils down to a complex network of relationships that an employee has with management, their jobs, the organisation and other employees. (The GPTWI Institute)
DO MANAGERS INSTINCTIVELY UNDERSTAND THIS?
Research shows that there is often a fair gap between management’s impressions and employees’ views. In a recent study by the International Association of Administrative Professionals, California, managers ranked promotions and cash bonuses as the two most effective ways of recognising employee accomplishments (keeping them happy and engaged), whilst workers preferred an in-person thank you or having a job well done reported to senior management. Employers often underestimate the degree to which workers value encouraging/ affirming words delivered face to face.
HOW CAN I IMPACT IT?
The good news is that all organisations can do something about most of the factors rated as having a large influence on employee engagement. In this regard interesting guidance comes from the latest neuroscience research (the SCARF Model of David Brock) into the factors that organically decrease individual accessible intellectual ability and creativity in humans (as a result of threat responses) vs. those that facilitate high performance workplaces and engaged employees (the result of reward responses). The advice of this research is that that leaders should create workplaces that promote in individuals positive experiences/ feelings (reward responses) relating to their status; certainty; autonomy to perform; relatedness to others; and general practices of fairness.
Towers Perrin summarises the following as things that organisations can do something about to improve employee engagement: senior leadership; company’s attention to employee needs; opportunities for career growth and company reputation.
First of all leaders need to understand their employees and regularly track the mood on ground level across the organisation (which process an engagement survey can valuably support), monitor the aspects that raises red flags and align human capital strategies (including a work environment and culture) to ensure a more engaged workforce that ensures that business strategies are achieved.
HOW CAN WE HELP?
At SHC we support clients in customising and implementing strategies and solutions that help optimise employee engagement. We believe that this can only be sustained through a continued and comprehensive process. If you’d like to find out more about how we can help you in this regard, we’d appreciate the opportunity to meet up and discuss your organisation’s needs.
REFERENCES
Harvard Business Review, Jan-Feb 2010/ Towers Perrin Global Workforce Studies 05, 07-08/ Human Capital Institute, Economics of Engagement, June 2009/ The Enthusiastic Employee: How Companies Profit by Giving Workers what they want, Dr D Sirota, 2005/ Watson Wyatt 07/08 Work-Asia Survey Report/ Great Place to Work Institute (GPTWI), Fortune 100 Best Place to Work List 1998-2006/ www.inc.com, 2010/ Gallup Inc., Human Sigma, 2007/ Strategy and business, Autumn 2009, Managing with the Brain in Mind, D Rock/