August 23, 2010

Employee Engagement and the New Deal

Employee Engagement and the New Deal

Whether or not this is indeed a watershed moment as the 2010 Global Workforce Study (GWS) by Towers Watson posits, clearly Employee Engagement is of paramount importance to the success of your business.

Top companies recognize that employee engagement is a key force behind success. Employee engagement impacts every aspect of how satisfied the customers are, how smoothly suppliers are involved into the production of the company’s good or service, how efficiently tactical plans are carried out, how consciously quality and improvement are integrated into the company’s practices, and bottom-line: how profitably a company performs. Think of employee engagement as the equivalent of customer loyalty.

The Great Recession has introduced or exacerbated various workplace ills that erode the employee engagement. According to Gallup, the ration of engaged employees to actively disengaged employees is 2 to 1; with a cost of $300 billion in lost productivity. A Watson Wyatt survey in May showed that engagement levels for top performers fell close to 25 percent year over year. Employees overall experienced a 9 percent drop in engagement year over year.

The GWS results show some disturbing results. Only 47% of employees see senior leadership as trustworthy, only 41% believe that senior management encourages talent development, and only 38% believe that management cares about their well-being. Another key finding is that security and stability are of higher importance than compensation, career growth, or other factors. Despite this air of discontent and very low confidence in senior leaders, only 9% of employees report actively looking for another job. The cost of recruiting and training new staff is enormous; however the cost of retaining unengaged employees is also high especially during a recession.

What is engagement?
It is the motivation, commitment and loyalty of the people working at a common mission. The staff’s level of satisfaction, pride and personal responsibility is directly related to how engaged they are in accomplishing the organizational goals.

Are your employees engaged?
The first step to engaging your employees is to recognize the various factors that negatively affect them. Contributing factors include customer losses, revenue strains, squeezed profitability, layoffs, employee turnover, understaffing and overworking – pretty common issues confronting business in the current climate. But also, look at inefficient systems and processes, bureaucracy or lack of compelling internal communication, policy or practice inflexibility. Are compensation, benefits, rewards and employment environment conducive to motivating the talent in place? Does the senior leadership effectively communicate a confident vision for the company and the employees? Are they seen as valuing current staff and nurturing career development opportunities? Do they portray integrity, dedication, and teamwork?

Solicit Input and Track Results:
Don’t just assume what factors motivate or disengage: ask your employees. How they feel about the organization? Create opportunities for dialogue and feedback. A suggestion box, focus groups, periodic employee surveys are be useful tools for measuring engagement.  Engagement drivers and levels should be tracked over time.

Show Leadership & Communicate:
Senior management needs to lead. The corporate vision and strategy must be instilled throughout the company. Hold company meetings, whether in a town hall type approach; engage in focus groups or a coffee klatches. Create opportunities for management to provide vision, assuage concerns, invite engagement, and address the employee-employer relationship. Communicate via newsletters or memos to let employees know about business goals, company performance and plans, and industry activity, opportunities.

Employee Performance Feedback:
Gallup surveyed over 1,000 US employees and reports that the best way to drive employee engagement is for managers to address employee performance. Focusing on the positive performance provides the highest boost to engagement, however providing evaluation of negative performance is better than no discussion of performance at all. The Gallup survey showed that of those employees who felt that their review focused on strengths, 61% were engaged, of those who felt the focus was on weaknesses, 45% were engaged, and those who felt ignored showed only 2% as engaged.

Performance evaluations should: clearly articulate job requirements and metrics; analyze performance and determine the type of management guidance and development needed for improvement; and provide direction to the employee.

Rewards and Recognition Programs:
Financial remuneration is of course the reason most people go to work, but it is by no means the only motivator. Work provides us with an opportunity to meet our psychological, emotional, social, creative and personal achievement needs. And most of us want to be recognized for our work, our ideas and contributions, our loyalty and motivation. Rewarding employees by letting them know that their work is valued is important at all levels of the company – saying “thank you” to people is a very powerful tool. Encourage a culture of going the extra mile in customer service or quality/process improvement, by recognizing it when it happens. Provide tangible rewards such as flexible hours and locations for valued employees. Studies show that flexible workplaces attract, retain and develop talented employees.

Career Development & Mentoring:
Everyone wants to feel that their efforts are recognized and their contribution is valuable. Training opportunities can both hone current staff’s skills as well as communicate that the company believes in them and cares about their career well-being. Focus should be on providing training and development in areas where both employees and employers can benefit. Mentoring is also a win-win solution for strengthening focus and building trust and communication. Participate in a career track for existing employees. This will allow for succession planning and help employees visualize their futures in the organization.

What about the costs of engagement efforts?
The costs and benefits will be unique to each company. Surveys conclude that the organizations with high employee engagement see clear positive effects on their business performance. Various studies also show that companies with greater employee engagement see increases in operating income and earnings per share, greater sales growth, increased customer loyalty and satisfaction, large increases in employee discretionary effort, an ability to draw from a bigger pool of talent, greater alignment with organizational strategy, an improved bottom line, and greater sustainability in the face of business challenge. Contrast these benefits with the costs of disengagement: low morale, dysfunctional teamwork, high absenteeism, lack of commitment, high turnover, increased recruitment and training efforts, etc.

Further reading:

Towers Watson Global Workforce Study 2010
http://www.towerswatson.com/global-workforce-study

Jobless Recovery in the U.S. Leaving Trail of Recession-Weary Employees in Its Wake, According to New Study
http://www.towerswatson.com/press/1365

What engages employees the most or, The Ten C’s of employee engagement
http://www.iveybusinessjournal.com/view_article.asp?intArticle_ID=616

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