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Employee Engagement Li Presentation April 7 2011
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Employee Engagement Li Presentation April 7 2011


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Relating employee engagement to Return on Investment and Value on Investment

Relating employee engagement to Return on Investment and Value on Investment

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  • 1. Employee EngagementHow Can you raise the valuecontributions of your people? Engaged2Perform 519-656-1066
  • 2. Defining the TerminologyEmployee Engagement:It is the extent to which employees commit tosomething or someone in their organization -the amount of discretionary effort theyprovide and how long they stay with anorganization as a result of that commitment.(CLC, 2004) Engaged2Perform 519-656-1066
  • 3. Defining the TerminologyEmployee engagement is the level of commitment andinvolvement an employee has towards theirorganization and its values (Vazirani, 2007).Engagement is the willingness and ability to contributeto company success, the extent to which employees putdiscretionary effort into their work, in the form of extratime, brainpower and energy (Towers Perrin, 2007).Often used as a synonym for motivation or motivationand retention; engagement is really more fundamental. Engaged2Perform 519-656-1066
  • 4. Defining the TerminologyEngagement is an employees decision to apply hisdiscretionary effort to the goals of the enterprise, toaccept those goals as his own and wholeheartedlycommit him/herself to achieving them. (Fineman &Carter 2007) Engaged2Perform 519-656-1066
  • 5. Defining the TerminologyReturn on Investment (ROI):For recognition programs, the ROI is the methodused to measure the benefitgained as a function of the cost of the program. Engaged2Perform 519-656-1066
  • 6. Defining the TerminologyValue on Investment (VOI):VOI is another approach to ROI that emphasizes both thefinancial and non- financial impact of recognition. VOIincludes all tangible and intangible benefits and overallvalue (financial and non-financial) produced by a businessinitiative -financial and non-financial. Too often, the use ofROI focuses exclusively on only the financials and doesnot include the "softer" measures of value, such asteamwork and cultural values. Engaged2Perform 519-656-1066
  • 7. The ChallengeDisengaged workers cost organizations money inmany ways especially in productivity . Engaged anddisengaged workers of equal skills, knowledge andabilities do not contribute equally. Gallup estimatesthe cost of employee disengagement in the u.s.annually to be $375 billion in direct costs with totalcosts exceeding $1 trillion or 10% of Gross DomesticProduct annually. (Gallup, 2004a, 1) Engaged2Perform 519-656-1066
  • 8. The ChallengeUnfortunately, few measures exist that quantify theimpact of engagement infinancially tangible terms. And those that do existare hard to be implemented in organizations that failto see the merit in measuring human capital to thisdegree. Engaged2Perform 519-656-1066
  • 9. The ChallengeWhy do we not see more attention to this?The practice of tracking ROI on a piece ofequipment is more ingrained.Employee recognition and engagement is oftenmisunderstood meaningdifferent things to different people.Accounting is not set up to track this expense. Engaged2Perform 519-656-1066
  • 10. The ChallengeWhy do we not see more attention to this?Only some HR disciplines are able to bring themeasurement of HR capitalto the surface.It has traditionally been in a world of softmeasurement.Hard to justify to owners and investors. Engaged2Perform 519-656-1066
  • 11. The ChallengeSome best measures do exist, along with Return onInvestment (ROI) methodologies that impactintangibles (such as turnover) can be measured andtherefore contribute to a quantifiable understandingof the benefits of employee engagement. Engaged2Perform 519-656-1066
  • 12. The ChallengeThese measures are important because initiativesdesigned to drive engagement are often time andresource intensive and while we may firmly believethat they are worth the investment, we must alsostrive to demonstrate that potential in terms thatsenior executives and investors can quantify to thebottom line success of the company. Engaged2Perform 519-656-1066
  • 13. Two Formulas for Measuring Human CapitalHuman capital ROT = Revenue - (Operatingexpense - labour cost) + labour cost andHuman capital Value Added = Human capital ROJ +number of employees Engaged2Perform 519-656-1066
  • 14. Two Formulas for Measuring Human CapitalWhen we consider that financial data is a laggingindicator, it provides even more importance on theleading indicators - such as employee engagement -to see early warning signs and take action. Engaged2Perform 519-656-1066
  • 15. Two Formulas for Measuring Human CapitalIn the era of cultivating the engaged workplace inthe knowledge-based economy, the paradigm shiftis for HR professionals to become key stakeholdersin the process of measuring employee engagementto ensure that VOI and ROI are built in to theprocess and to ensure all Employee Engagementand recognition investments are clearly aligned withcompany goals. Engaged2Perform 519-656-1066
  • 16. A Starting Point1. Understand the relationship between people and business performance2. Find a simple and consistent way to measure value and report it3. Spend time analysing results rather than arguing about the data4. Act on the outcomes to improve bottom-line performance Engaged2Perform 519-656-1066
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  • 20. Engaged2Perform 519-656-1066
  • 21. Call for Free Consultation! 519-656-1066 Engaged2Perform 519-656-1066