Guest Post: The Business Case For Employee Engagement
By now, most organisations (ones that want to stay in business, anyhow) understand the importance of engagement to their company’s bottom line — and there are some pretty powerful stats to support it. For example, the Human Capital Institute offers an interesting engagement formula to underscore the link between engagement and performance:
- Highly engaged employees return 120 percent of salary in value
- Engaged employees return 100 percent of salary in value
- Somewhat engaged employees returns 80 percent of salary
- Actively disengaged employees return 60 percent of salary in value
Furthermore, according to Gallup, “actively disengaged employees” cost the organisation $3,400 for every $10,000 in salary.1
If you’ve got an employee engagement issue, it could be just the start of a bigger problem – high turnover rates. In fact, low employee engagement is like an early warning system for the departure of top performers. Research estimates that top performers are two to four times the value of the average employee. 2 This equals a huge cost to replace those who walk out the door because of an engagement problem. If you watch closely, you’ll also see a few other things leave the premises at the same time — company morale, corporate memory and momentum.
What drives engagement?
Suffice it to say it’s not always about the money. Towers Watson study of the global workforce, Closing the Engagement Gap, identifies top ten global engagement drivers:
- Senior management sincerely interested in employee well-being
- Improved my skills and capabilities over the last year
- Organisation’s reputation for social responsibility
- Input into decision making in my department
- Organisation quickly resolves customer concerns
- Set high personal standards
- Have excellent career advancement opportunities
- Enjoy challenging work assignments that broaden skills
- Good relationship with supervisor
- Organisation encourages innovative thinking
The study also states that only one out of five works today is giving full discretionary effort on the job and that four out of ten are disenchanted or disengaged.
Keeping the scary stats at bay
Chances are that you organisation has its share of disengaged employees (don’t worry, most companies do). Once you accept it, you can move on. And by “move on” I mean it’s time to look at implementing talent management best practices — the practices and processes you can leverage to keep your employees motivated, inspired and contributing to the success of your organisation.
Employee performance management is in many ways at the heart of talent management and has an impact on many of the elements that drive engagement. Among other things, effective managers use performance management to give their employees a framework from which to do their work, setting clear expectations and ensuring that they have the skills, knowledge and training to accomplish their goals.
In the Creelman Research white paper, 5 Performance Management Tactics to Boost Employee Engagement, author David Creelman explores the relationship between five elements usually found in engagement measures and how they link to performance management.
Clarity: People need to know what is expected of them at work. Ensure all employees have clear, SMART goals (specific, measurable, achievable, results-oriented and time-bound) that are aligned with the organisation’s high-level goals.
Support: Employees need to have support—the tools and training to achieve their objectives—to feel engaged. Use performance reviews as well as informal one-on-one sessions to ask employees if they have the support they need.
Fit: Another way managers increase engagement is by ensuring employees can use their strongest skills. Try crafting tasks and related goals to what each employee does best.
Feedback: Research consistently shows that employees want meaningful feedback on an ongoing basis. Ensure employees get the regular coaching and constructive feedback they need to direct their work and improve performance.
Development: If you develop your employees for the future, you’ll have more engaged employees today. Provide learning and mentoring opportunities and a culture where regular ongoing discussion about career paths takes place.
One last bit of advice that can go a long way in supporting an engaged workplace culture. Get to know your employees as individuals through regular, ongoing, two-way dialogue. This form of manager-employee relationship building ensures that expectations, performance levels and development needs are understood and addressed as needed.
Sean Conrad is a Certified Human Capital Strategist and Senior Product Analyst at Halogen Software. He writes regularly about employee performance best-practices for the Halogen Software Exploring talent management blog.
- US dollars
- David Ulrich
First Review Of The Opening Night Of My Comedy festival Show ‘The Grin Reaper’
I know this is a blog about employee engagement and here I am posting about my comedy show but let’s look at it as a case study in the power of positive reinforcement. It’s a great review and I feel great.
Market Juxtaposition?
My book ‘The Brain-Based Boss’ gets in their journal as the NZICA (NZ Institute of Chartered Accountants) add it to their official library. Obviously they’ve heard about my comedy festival show which opens this Saturday night & the tremendous tax benefits of investing in many tickets. Does it count as an achievement if you’re in both a comedy festival and the official library of accountants or is it really bad market segmentation by me?
What Motivates Us At Work
I recommend this blog post from Jessica Gross summarising a TED talk from Dan Ariely. It’s a succinct capture of his key points about internal motivation and how we can tap into that (or at least avoid conflicting with that.) There’s some evidence that cute internet kitten photos can actually enhance your sense of focus on a proximate task and I’m definitely going to try the hand-washing motivation technique with my family!
His key points were:
- Seeing the fruits of our labor may make us more productive
- The less appreciated we feel our work is, the more money we want to do it
- The harder a project is, the prouder we feel of it
- Knowing that our work helps others may increase our unconscious motivation
- The promise of helping others makes us more likely to follow rules
- Positive reinforcement about our abilities may increase performance
- Images that trigger positive emotions may actually help us focus
‘Stay’ Interviews
Every employer does job interviews when seeking new people. Many employers do exit interviews when wondering why people leave. I like this idea of ‘Stay’ Interviews – interviewing people who are already working with you before they leave and on a regular basis. Why not find out as close to the current truth amongst your workforce as you can while there’s still time to do something with the information?
Personally, this is what a regular performance one-on-one chat should be anyway and coming up with a catchy and clever new name for it doesn’t make it different or separate. (Although , I really wish I’d come up with it!)
If it’s true that half your employees are actively seeking employment elsewhere at any given time, how focused on, or interested in, their outcomes for you are they really going to be? The metaphor here is keeping your finger on the pulse of the people in your business. As this article says, “Research by Towers Watson (2012) suggests organizations with high sustainable engagement have operating margins three times those of organizations with a disengaged workforce.”
A news item today laments that New Zealand mothers being visited by the free post natal support service Plunkett are highly prone to lying about what they do with their babies for fear of being judged by the visiting nurses. However counter-productive that attitude is, it is a very human one and quite predictable and understandable. So, would ‘Stay’ interviews be prone to the same problem of employees simply saying what they think bosses want to hear? The article I linked to above is sadly lacking on details about ‘Stay’ interviews and focuses mainly on surveys. There is way too much emphasis on surveys generally.
‘Stay’ interviews and engagement surveys aside, the best way to assess engagement levels is simple observation. Are people doing more than they have to because they choose to? Don’t worry about why they are (yet) but are they? If they are, they’re engaged. They can say what they like in a survey but there’s no hiding actual observed behaviour. Just be aware of surveys – Snow White did one once and discovered that six out of seven dwarves weren’t happy…
Call Me Loyal: How To Build Customer Loyalty By Focusing On Employee Loyalty
What does customer loyalty even mean? It’s more than customer satisfaction. Over two-thirds of customers reporting themselves as ‘satisfied’ will take their business elsewhere for a cheaper price or shinier distractions. The past decade has seen a re-focusing by business leaders on customer loyalty. A common and practical perspective is that a loyal customer is one who, when asked how likely it is that they’d recommend your business to friends or family, would reply with a score of 9 out of 10 or better. Anything less is a neutral customer or a detractor. (A useful follow-up question, regardless of their score, would be, “Why?”)
This shouldn’t be confused with the increasingly ubiquitous ‘loyalty programmes’ with varied effectiveness, ranging from cardboard coffee shop cards where a 10th stamp means a free coffee to national points-earning systems plugged into databases like Neo was plugged into the matrix (with much the same intent.) I’ll often ask audiences to raise their hand if they have a coffee shop loyalty card. Then I’ll ask who has more than one. Then I’ll ask what the word loyalty means…
These programmes occur narrowly at the touch points with customers – the phone, the store, the website – but a lot of what drives customer loyalty comes from non-customer facing processes such as billing or delivery. Programmes involve significant expended energy and expense, yet the research indicates a wiser investment might be to generate employee loyalty which drives a much greater and quicker positive impact on customer loyalty. Businesses need customers who will advocate for them on their behalf. Apple has tons of them for example (or had tons of them. Check again tomorrow, they might be back.)
The Harvard Business School’s research in the 90s established the service profit chain showing the flow-on effect to profits from loyal employees. Subsequent studies have further validated this. These committed souls are far more likely to be engaged, applying discretionary effort – doing more than they have to because they want to. They are far more likely to stay and form productive relationships within the business. They are far more likely to create an impression of perceived value in the mind of the customer and perceived value is the primary driver of customer loyalty. If you want to research further yourself, Frederick F. Reichheld is the guru on this topic, with his ‘loyalty effect’.
So if loyal employees drive customer loyalty (or conversely, disloyal or neutral employees suck out the lifeblood of loyalty like a vampire’s bedbug), what can employers do to generate and maintain employee loyalty? Try frequent and genuine recognition, career growth and / or personal development opportunities. Try giving them some autonomy wherever possible. Try paying them more than the least you have to. Try catering to reasonable work-life balance requests. Get to know them. (People don’t leave jobs, they leave bosses.) Keep them informed and involved in developing processes that affect them.
Remember those questions at the start of this article we were asking customers to assess their loyalty? Ask your employees those same questions. Get it done independently. After all, what are they going to say to your face? Would they recommend your products or services to their friends or family? Why? Why not? What would be the first thing they’d do if the business was theirs? And, after all, your name might be on the paperwork but, really, the business is theirs.
[First published in The NZ Herald 9th March 2013]
Congratulations On Your Engagement
Today’s business section in the Herald runs my latest column on employee engagement.
Q: I want to be a great leader. What’s this thing called “employee engagement” I’ve been hearing about? Is it just consultants coming up with some new term to sell me their services, or what? I’m hoping it’s real. Economic times are tough. I need something to get more out of the team I lead. – Bewildered of Birkenhead
A: Dear Bewildered of Birkenhead,
The phrase “employee engagement” might be new and it certainly is flavour of the month in leadership literature, but the underlying concept is true and timeless human nature.
Employee engagement is not “morale” or “satisfaction” or “happiness”. Plenty of unhappy people are highly productive and plenty of deliriously happy folk are fine with showing up, punching a clock, getting paid and going home regardless of whether anything productive happens. Employee engagement is the extent to which an employee chooses to apply discretionary effort. It’s doing more than you have to because you choose to.
So, there are engaged employees doing more than they have to, present employees who do only what they have to, and disengaged employees who are reading this careers section at work to find a new job with anyone who isn’t you.
The numbers vary a little across time, industry and geography, but they’re remarkably consistent: 26 per cent are engaged, 28 per cent are disengaged and 46 per cent are present.
These are averages. What are the proportions in your workplace?
Employee Engagement: Generational Differences
I’m in the middle of a big roadtrip, mostly MCing the Dairy Awards across regional New Zealand. It’s our nation’s biggest industry with highly engaged people and many of the farms and businesses are inter-generational. It made me wonder how does employee engagement compare across the age gaps? I found this infographic from the U.S.
‘Employment Today’ Magazine Reviews My Latest Book ‘The Brain-Based Boss’
“A great addition to the library of any organisation…”
Employee Loyalty Drives Customer Loyalty
Here’s my lead article from the careers section of the business pages in last Saturday’s NZ Herald all about how the greatest driver of customer loyalty is employee loyalty…
