Why does Employee Engagement matter to CEOs?

FOCUS FOCUS Commercial Director, EMEA Region, Hay Group Insight Why Does Employee Ben Hubbard Engagement Matter to CEOs? No one would seriously argue against engaging employees in the daily care to mention, whether they be profit, goals) has come a long way in the past three innovation, safety or anything else. It decades. Years of global research with many running and the long term goals of the organisation – but how many also means comparatively better share millions of employees of all levels and leaders work consciously towards it? Measuring how engaged your staff performance. demographic groups has given Hay Group really is with your organisation could make for frightening reading. But, a pretty definitive understanding of what To the question of whether employee these days more than ever, employee engagement must be part of any really drives people to come to work and to engagement matters to the CEO the company’s key performance indicators and should be tied into decisions work effectively. answer is undoubtedly ‘yes’. Highly that effect return on investment. engaged workers make for better business outputs, more loyal customers, Better still, it’s very possible now fewer ‘problems’ and better financial to tie these measures to your key We’ve all heard the one about the CEO After all, who needs competitors if you’ve performance. What’s not to like? performance indicators so that you are who was asked how many people worked got actively disengaged employees on your able to understand not only the resulting in his organisation. “Oh, about half of payroll? Engagement and return on investment impact on the wider business but more them,” he replied. The science of measuring and following up importantly to appreciate the return on All of our research shows that employees on employee engagement (the measure of investment of addressing prioritised areas. Joking aside, how true is this within your want to work and want to work hard, enthusiasm and alignment to organisational (See below.) organisation? If you don’t know chances it’s what human beings naturally want to are it’s not being measured or at least not do. That’s the good news. Given that the being measured in a way that gives you vast majority of us want to work, what the same top line data such as profit, debt then is the driving force behind those that days outstanding and units shipped. It’s want to work in the same direction as the interesting that many organisations just employer and those that don’t? That’s the AnyCo Developments is a technology business focusing on innovation. Its don’t know, even when perhaps half of question a good engagement study seeks innovation score is 57 per cent and a 3 per cent shift in a positive direction would their salary bills, their biggest costs, are cost an additional €162,000 to implement over the next six months. to answer. And the answers matter. A going on people either not contributing well aligned workforce results in better – what we call non-engaged – or, worse bottom-line performance. It delivers But the resulting sales increase would likely be in the region of €3.2 million over the still, those who are actually pushing in the higher scores on pretty much any business following 12 months - a straightforward investment decision. wrong direction. In other words, actively critical key performance indicators you disengaged.12 Hay Group 13

Why Does Employee Engagement Matter to CEOs? FOCUS FOCUS Today approximately 85 to 90 per cent of European headed multinationals survey all their employees. Of these about 50 per cent specifically address the matter of ‘engagement’ albeit to varying degrees. Like any other business metric such Surprisingly few, however, then go on to Therefore, it’s largely left to the thought case and most major experts in the market as profitability, sales per square metre, action the data they collect in a way that leaders in HR or on the board to initiate now take a similar approach, at least with reliability, units produced and so on, is linked to specific business outcomes. In and pursue. regards to the mechanics of running a companies need to be measuring the item most cases organisations try to improve survey. that most links to the business performance individual scores but they neither prioritise Secondly, those functions within the outcome in question and then deal areas that need to be addressed nor do they organisation that typically own the ‘people Employee research has also been regarded with the findings in a way that makes a focus their efforts in an efficient manner so research’ piece are not usually tasked as a tactical necessity, with a philosophy difference. that the greatest gains are made from ever with thinking in terms of large ‘Return of ‘let’s do the minimum required at the decreasing resources. on Investment’ decisions. For example, lowest cost’, instead of being a strategic For organisations who already do this, it an organisation might invest £1.5M in a exercise aimed at understanding and really is a bit of a ‘no brainer’ – it’s one of The analogy with other aspects of a programme designed to identify and follow driving those elements that most allow the few remaining largely untapped areas of business could not be starker. Which up on global engagement levels in order to people within the organisation to deliver. significant organisational improvement left organisation would measure its profit increase sales by £350M. But perhaps one of the main reasons for available to CEOs today. The advantages levels, identify the major drivers behind ignoring this data is simply that it’s quite this offers are immense – CEOs are already it and then do little or nothing with that Also, those organisations that have scary. What if I measure engagement and pressing the buttons called ‘cost efficiency’, knowledge? It might sound odd but mastered the art, and that are actively find that the score is low? Is simply not ‘innovation’, ‘sales’ and ‘production’ when it comes to employee engagement pursuing the engagement agenda, are knowing the best option? Scary or not, amongst others but to what extent are it’s still largely true of many European reluctant to expose or alert competition to with competitors picking up the baton and they pressing the one labelled ‘employee organisations in comparison to their US their approach or results. with legislative reporting guidelines on the engagement’? equivalents – we in Europe have some Another reason is that until recently there horizon - this head in the sand approach is catching up to do. has been little industry standardisation. increasingly dangerous. Surveying employees – but for what? This has meant that partnering with an Today approximately 85 to 90 per cent of Our experience indicates that there are external provider locks organisations into a Bringing tangible benefits European headed multinationals survey several reasons for this hold-up. The first is unique process that, for historical trending More than ever, the benefits of real all their employees. Of these about 50 that employee engagement is not a science purposes, means that they can’t easily shop engagement are being recognised. Even per cent specifically address the matter of that is either well understood by or taught around in future years. It’s something of minor improvements in employee ‘engagement’ albeit to varying degrees. in European HR Educational programmes. a one-way street. But that’s no longer the engagement see measurable, often 14 Hay Group 15

Why Does Employee Engagement Matter to CEOs? FOCUS FOCUS Employee Engagement – a quick guide for CEOs: for are a global presence but a customised research since every organisation’s needs  Ensure the exercise is a strategic initiative with the sole objective of providing and issues are different. Standardised methodology so that you can change from one the board guidance around the matter of how and where to invest in people to supplier to the next is also important, as are advanced analytics, which are capable of maximise business performance. In other words, keep the end goal firmly in sight delivering straight answers and which are backed by rigorous research and relevant at all times. global normative data.  Drive engagement from the top. A lack of senior sponsorship usually results in  In the 70’s we had ‘satisfaction’, in the 80’s we had ‘commitment’, in the 90’s we had poor buy in from employees and a poor purchase decision based on local tactical ‘engagement’. All these increasingly mattered, the evolution had been one of working needs, for example the lowest cost provider. toward the factors that most related to business outcomes. The noughties (00’s) brings  Pick an expert to help. It’s a specialised science - few suppliers can handle us closest yet to that holy grail – ‘employee effectiveness’. The measure of engagement the strategic, analytical and logistical needs of a multinational organisation combined with enablement. If you’re not hearing that from your providers you might undergoing a full blown engagement research project. The key items to look well not be getting the best out of your employee research. significant, improvements in business Simply to say that engagement stems very enthusiastic but be pushing in the us to appreciate something that many of outcomes. In turbulent times a highly from profitability (a common myth) and wrong direction. To be engaged with the you will already take for granted (but it engaged workforce dramatically improves therefore to ignore it as a required ‘measure organisation means to actively pursue may surprise you how often it’s actually the chance of weathering the storm - it’s & action’ activity is to see only half of the goals and objectives of that business. overlooked) and that’s ‘enablement’. It’s a real differentiator between winners and the picture and to ignore this two way It almost goes without saying that to one thing to have engaged employees all losers at such times. connection. measure and know this metric provides pushing in the right direction but if they management with an invaluable tool in are not properly enabled to do their work The share performance curve of It’s also likely legislation and/or guidelines determining how aligned the workforce is then, well... you work it out. Measure organisations with highly engaged from the likes of the Accounting Standards with the direction in which they are meant engagement AND enablement, analyse employees is generally smoother and Board will at some point soon force the to be going. their interdependence and links to business generally moves in an upward direction, matter of reporting measures of intellectual outcomes and you really start to get an idea compared to that of organisations with capital – something that has historically The article could end here but there is one of what drives your ‘greatest asset’ to deliver poor engagement levels. In other words been intangible but increasingly is now well other key fact to consider. Engagement fully. At the extreme, engagement without market forces have less of an effect on understood and defined. In the UK this is important and is, relatively speaking, a enablement is somewhat like having a car high engagement environments. Investors was very nearly the case with the postponed business advantage but it’s only part of the without wheels - it’s not usually that bad are increasingly seeing the link between UK OFR legislative revisions earlier in ‘whole’ when it comes to understanding but the quality of enablement inside your engagement and business outcomes. 2006, which included measures of Human how people link to business outcomes. organisation can make all the difference in Engagement is a great predictor of future Capital. Behind the scenes there was Perhaps it’s useful to step back for a an otherwise level playing field. But that’s a financial performance. much talk of ‘employee engagement’ being moment and see how the picture has topic for another time. one of the reported measures. evolved; in the 70’s we had ‘satisfaction’, Engagement effects business outcomes in the 80’s we had ‘commitment’ and We live in interesting times. The – and business outcomes affect So, engagement is the measure of the ‘state in the 90’s we had ‘engagement’ - each opportunities currently available for any engagement. The two are closely correlated of being’ with regard to employees and an evolutionary step beyond the former, organisation to improve its bottom line by and symbiotic. In good times engagement more importantly how that relates to the each taking us closer toward a true actively engaging a workforce have never is bolstered by high profits, in difficult aims and ambitions of the organisation. understanding of how people affect been so good – and the time to act is now. times, engagement drives up profits. In other words, you could potentially be business. Most recently, research has lead 16 Hay Group 17

Why does Employee Engagement matter to CEOs?

by Hay Group India on Jul 09, 2012

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Why does Employee Engagement matter to CEOs? Presentation Transcript