CONTENTSINTRODUCTION                                                                                   >3KEY FINDINGS     ...
INTRODUCTIONEmployee Engagement is widely agreed by business leaders and HR practitioners as one of themajor drivers of bu...
KEY FINDINGS •   Get back to basics with culture and a purpose     Organisations with a highly engaged workforce have the ...
•     What gets measured gets managed             More than half of respondents currently not measuring the levels of enga...
THE 20 CORE ORGANISATIONAL CAPABILITIES                                    Managing Capacity and     Purpose, Intent, Caus...
The current engagement scores of the respondents in this survey were evenly spread across three major brackets.22% had a s...
There are a couple of different ways to look at what sets highly engaged companies apart. One is to look at whatcapabiliti...
We might conclude that rather than start investing resource into measuring Engagement for measurements sake,they might be ...
Managing Capacity and Workload is the second                 Percentage of organisations achievingbiggest difference with ...
Many organisations cited specific initiatives outside of the 12 activities listed in the survey which included;         • ...
Even when comparing what highly engaged organisations spend with companies who don’t measure engagementwe can see a simila...
Again, this might be another reason why employee engagement might not be the top priority for the leadershipteam – especia...
CONCLUSIONEmployee Engagement is becoming more of a priority for businesses. A full recovery in theeconomy will create mor...
Organisations need to get better at measuring and articulating the return on investment of all their employeeengagement sp...
APPENDIXThe 20 Core Capabilities Descriptions                                            Why we do what we do – the busine...
About Us       Shirlaws is an award winning                                      RedBalloon is Australias largest       in...
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Employee Engagement Capabilities Report 2011


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Employee Engagement Capabilities Report 2011

  1. 1.  
  2. 2. CONTENTSINTRODUCTION >3KEY FINDINGS >4ENGAGEMENT CAPABILITY EXPLAINED >5REPORT FINDINGS IN DETAIL >6 • Employee Engagement – Measured Up >6 • What do highly capable and highly engaged organisations have in common? >7 • The more capable the better >8 • Where are the skills gaps in capability? >9 • The most popular activities for driving engagement > 10 • Employee Engagement Spend > 11 • What do organisations with 80%+ engagement scores do differently? > 11 • Invest in developing people > 12 • Measuring the ROI on employee engagement spend > 12 • What do companies that don’t measure engagement do? > 13CONCLUSION > 14APPENDIX > 16 • The 20 Core Capabilities Descriptions > 16 • About Us > 17 • Research Methodology > 17 • Contact Us > 18 Employee Engagement Capability Report 2011 2
  3. 3. INTRODUCTIONEmployee Engagement is widely agreed by business leaders and HR practitioners as one of themajor drivers of business performance and with the turbulent economic climate has ensured itis one of the hottest topics for debate and action.Rightly so, because as research by Gallup demonstrated that organisations with high levels of engagementroutinely outperform their competitors; they are 27% more profitable, they have 38% above average productivityand have 50% higher customer loyalty.The findings from our research uncovers the indicators that give organisations a clear framework to becomeproactive rather than reactive to employee engagement and proves the hypothesis that the higher the capabilitywithin organisations and with management, the higher the level of engagement companies can achieve.The results clearly show that capability in the highly engaged organisations is significantly higher than thecapability in the average group. This correlation means that Engagement Capability can be used as a predictivetool to give organisations clarity in to the areas they invest time, effort and money to have the greatest positiveimpact on their engagement score.Why conduct this research? The employee engagementRedBalloon and Shirlaws have partnered on the landscapeEngagement Capability survey to build on thewealth of knowledge surrounding employee 2010 saw the largest decline in employee engagement inengagement in an attempt to develop an 15 years, according to Hewitt, for the first time theunderstanding of how ready and capable number of organisations experiencing a decrease inorganisations are to improving their employee levels of engagement out-weighed the number ofengagement reality. organisations achieving an increase. This shift is unprecedented.Our intent was to develop a predictive tool thatwould allow an organisation to have some clarity in The turbulent global economic situation has brought theregards to what investments in employee relationship between employer and employee to theengagement would give them the biggest uplift in fore and engagement is now one of the hottest topicsthe engagement score (even if they currently don’t for CEOs and business owners.measure it). We wanted to create a tool that wouldappeal to both HR Managers and CEOs alike According to Scarlett Surveys International 70% of CEOsbecause it would be underpinned by a measurable are not satisfied with employee engagement surveyssystem for improvement that can deliver cultural whereas 80% of HR Managers are.and commercial results. This obvious disparity needs to change.ContributorsParticipation in the survey was made available to any organisation in Australia; we specifically targeted senior HRprofessionals, General Managers, CEOs/Owners. The majority of respondents were self-identified as HR Manageror equivalent with 21% the CEO, HR Director or business owner (12%).Over 320 organisations completed the online survey with varying employee group size. Almost 70% of responsescame from organisations with employee populations of 51 to over 1000. The industry sectors where also broadlyrepresented with: Professional Services, Technology, Banks, Manufacturing, Recruitments, Health andPharmaceuticals, FMCG. 3 © Shirlaws and RedBalloon 2011
  4. 4. KEY FINDINGS • Get back to basics with culture and a purpose Organisations with a highly engaged workforce have the highest capability scores around Culture and Purpose. Employees are seeking more meaning in their work and a greater sense of purpose. This is the number one area where the greatest capability skills gap exists for organisations with an average engagement score. • Capture their hearts and minds Highly engaged companies strike a balance between commercial and cultural aspects of business as demonstrated by the top 5 capabilities that those companies are most committed to – Culture, KPI’s, Commercial Vision, Purpose, Reward & Recognition. They include Purpose and Culture on the one side and Commercial Vision and KPIs on the other hand with a Reward and Recognition Program to support both. When both the culture and the commercial aspects are aligned it’s a lot more compelling for an employee to stay with the organisation for longer and to deliver high levels of discretionary effort. • The more capable the better Organisations with an engagement score of more than 80% are 30% more capable than those with average levels of engagement. So the higher the capability the greater cut through, meaning and effectiveness the engagement activity has. • Align Reward and Recognition to the organisation’s purpose Organisations with Reward and Recognition programs that acknowledge their people around Purpose and other cultural behaviours are 3 times more effective in increasing employee engagement. • The capability multiplier If an organisation can increase its capability from below 50% to above 70%, the chances of achieving of an 80%+ Engagement score increases by a factor of 11. • Developing people Highly engaged organisations are twice as likely to use a coaching program in their employee engagement spend than companies with low engagement levels. When combined with other Training and Development activity it results in delivering 22% higher capability and a significant positive shift in employee engagement. • The most effective engagement activities are… In order they are Training & Development, Non-cash Rewards & Incentives, Internal Communications and Flexible Working arrangements. • Everyone wants a buddy Don’t forget the social personal touch. Buddy Programs to support induction processes along with social clubs are twice as likely to be in organisations with an Engagement score of 80%+ as they are in the group scoring 40-60%. • It’s not just about how much you spend Whilst some spend $3,000 and more per head, most highly engaged companies spend less than $1000 per head on engaging their staff. Employee Engagement Capability Report 2011 4
  5. 5. • What gets measured gets managed More than half of respondents currently not measuring the levels of engagement are planning to do so in the next 12 months.Capability in the highly engaged organisations is much higher than the capability in the average group.This correlation means that Engagement Capability can be used as a predictive tool.Any business, by assessing capability thoroughly, asking every leader and manager and developing the fullestpicture of capability possible would be able to use the results of the survey to identify the ripest areas forimprovement and quickest route to enhancing its Engagement reality.Employee engagement is a critical business driver and with challenging economic conditions, a hot recruitmentmarket and skills shortages the more engaged employees are the more productive and less likely to leave.Now any business can benefit from understanding their engagement capability to identify the ripest areas forimprovement and quickest route to enhancing its engagement reality in a proactive manner, no matter whetherthey currently measure engagement or not.ENGAGEMENT CAPABILITY EXPLAINEDIf Employee Engagement can be defined by The Leadership Council as “the extent to whichemployees commit—both rationally and emotionally—to something or someone in theirorganisation, how hard they work, and how long they stay as a result of that commitment”,then Engagement Capability can be defined as “an organisations ability and readiness to deliverin the specific areas that contribute to successful employee engagement.”Research conducted by The Hays Group suggests that the 70% of employee engagement is determined by theemployee’s direct Manager. So it seemed that to create a predictive tool we needed to look at the capability of theOrganisation and the Manager to engage employees successfully.During our preliminary research we studied a vast array of surveys and reports on Employee Engagement andorganisational improvement to identify the most common used tools in the market place.From this research, a Framework was created which included Twenty Core Organisational Capabilities that theorganisations could measure the level of depth, understanding and mastery within their organisation.To do so, respondents were asked to rate each capability on a scale from 0-5. LOW CAPABILITY • “This capability is non-existent in our firm” (0) • “We have an idea of what this is about” (1) • “We have a documented plan in place” (2) • “We have implemented the plan” (3) • “Managers are mentoring others in regards to this capability” (4) HIGH CAPABILITY • “This capability is fully integrated and leveraged in the organisation” (5) 5 © Shirlaws and RedBalloon 2011
  6. 6. THE 20 CORE ORGANISATIONAL CAPABILITIES Managing Capacity and Purpose, Intent, Cause Coaching On Boarding Workload Functional Structure/ Performance Culture Managing Expectations Resource Allocation Management Commercial Vision KPI Work Life Balance Developing People Rewards and Compensation and Innovation Decision Making Recognition Program Benefits Brand Energy Communication Recruitment Effective Meetings SEE APPENDIX FOR FULL DESCRIPTIONSTherefore, organisations with a low score rate themselves as least capable and those with a high score ratethemselves as most capable. If an organisation scores themselves a 5 out of 5 on all 20 capabilities, they havereached the maximum of 100 points which means they have absolute mastery of each of the 20 capabilities.Mastery of a certain skill or capability requires high levels of commitment and according to the CorporateLeadership Council employees try harder when they believe the senior executive team has committed to them.We believe that engagement capability is at the source of what drives engagement.Understanding the specific capabilities and the level of depth that drive the highest levels of engagement will allowall organisations regardless of score or indeed those that do not yet measure engagement the opportunity toimprove their reality, proactively.REPORT FINDINGS IN DETAILEmployee Engagement – Measured UpOf the 327 organisations in the study only 48% measure Engagement andof this group nine out of ten have a formal process in place. When using a It’s one thing to measureformal process 50% of organisations engage external consultants, withHewitt, Gallup and Towers Watson being the most commonly used. Of engagement, but it’s crucialthose organisations that measure Engagement 65% do so at least annually. that the weak points are acted on to showMany of our respondents cited informal measures of engagement as employees they are heard.important in driving their overall understanding and awareness on theissue. These included team meetings, monthly checklists, reviews, out-of-office functions, retention statistics and ‘catch-ups’ or huddles.Out of the organisations who currently don’t measure 61% say they will measure it in the next 12 months.The bigger the company, the more likely to measure engagement.Employee Engagement is currently measured by 57% of all organisations with 1000+ employees, 42% of allorganisations with 51-250 staff and 35% of organisations with 250-1000 staff. Companies with less than 50 staffare less likely to measure employee engagement with only 10% with less than 10 staff currently measuring it.This is reflected in the reasons given as to why they don’t measure. 22% say they feel that they are too small tomeasure it. Only 5% of organisations don’t know why it would be useful to measure it. 21% say they don’t knowhow to measure it or they are not aware of the right tools to do it. 10% say either they don’t have enough time ormoney or resources to do it. Whilst for others it seems to be a lack of priority or support by management thatstops employee engagement being measured. Employee Engagement Capability Report 2011 6
  7. 7. The current engagement scores of the respondents in this survey were evenly spread across three major brackets.22% had a score of 80%+, 30% of organisations scored 60-80 another 22% scored 40-60%.The number of respondents with a score of less than 40 was less than 2% and as the sample size is too small to beconclusive we will only compare results from the other three categories for the purposes of this report.The smaller the company, the more engaged COMPANY SIZE ENGAGEMENT SCOREemployees. No. of Employees 80%+ 60-80% 40-60%When we compare the engagement scores achieved by 1000+ 21% 33% 44%different sized organisations it seems that companieswith up to 50 staff are engaged at higher levels than 250-1000 14% 55% 27%with their larger counterparts. 51-250 33% 43% 23% 11-50 64% 21% 14%1/4 of respondents who measured engagementdidn’t know their score. 1-10 50% 50% 0%It’s fascinating though that nearly a quarter of organisations who invest in having an employee engagement surveydone, don’t know their result. The respondents who didn’t know their engagement score were predominantly HRManagers, General Managers and Practice Mangers, Owners, and even people with engagement in their job title.Is this another reason why only 70% of CEOs are satisfied with engagement surveys?What do highly capable and highly engaged organisations have incommon?Below are all 20 capabilities and the average capability score achieved by respondents (out of five) split by theirorganisations engagement levels. This overview matrix allows you to look at the specific capabilities you areinterested in. We will go into more detail on each further on. DON’T CAPABILITIES 80%+ 60-80% 40-60% MEASURE Culture 4.24 3.54 3.14 3.15 KPI 4.03 3.71 3.32 2.91 Commercial vision 3.97 3.51 3.07 2.87 Purpose 3.93 2.90 2.36 2.73 Reward Recognition 3.93 3.20 3.07 2.71 Communication 3.90 3.27 2.61 2.74 Decision Making 3.90 2.93 2.64 2.81 Performance Management 3.86 3.63 3.50 3.07 Develop People 3.86 3.32 3.07 2.97 Recruitment 3.76 3.54 3.39 3.08 Brand Energy 3.48 3.51 2.61 2.84 Compensation & Benefits 3.45 3.24 3.36 2.66 Effective Meetings 3.45 2.66 2.50 2.83 Onboarding 3.41 2.66 2.54 2.22 Expectation Management 3.31 2.39 2.21 2.26 Coaching 3.28 2.83 2.54 2.17 Balance 3.24 2.93 2.50 2.73 Innovation 3.14 2.95 2.32 2.60 Capacity 3.14 2.49 2.32 2.70 Functional Structure 3.10 3.17 2.61 2.83 Total Capability Score 72.38 62.37 55.68 54.87 7 © Shirlaws and RedBalloon 2011
  8. 8. There are a couple of different ways to look at what sets highly engaged companies apart. One is to look at whatcapabilities they have invested most in and have built the most depth around, the second is to look at where thereare the biggest skill gaps that differentiate them. But first let’s look at the depth of capability they have built.There are 7 Capabilities that stand out as they all scored an average close to or above 4 out of 5. This means thatfor each one of these capabilities highly engaged companies have actively engaged managers who haveimplemented, live and breathe these capabilities and mentor others to skill them up.A lot of the big picture capabilities rank very highly for 80%+ companies. Culture for instance is the capability theyhave focussed on the most with Commercial Vision and Purpose ranking 3 and 4. Culture in those companies isnot just a few words on a piece of paper, the values are not just pictures in the foyer and can not only beexpressed they are actively lived and managed in the organisation.The Corporate Leadership Council suggests that emotional commitment is four times as effective in drivingdiscretionary effort and it is therefore not surprising that Culture features so highly.Highly engaged companies also have clear Key Performance Indicators in place. The fact that they attract anaverage score of 4 would mean that the KPIs are implemented and actively managed, which would indicate a highlevel of accountability in the organisation.Reward and Recognition also scores close to a 4 on average. We know that a highly evolved and effective Rewardand Recognition program acknowledges values driven behaviour, not just outcomes and performance. To achievea score of 4 for Reward and Recognition we would also expect to see the autonomy for acknowledgment devolvedto at least a Team Leader level and peer nomination featuring heavily in the mix. The program activity would beregularly communicated and there would be evidence of informal acknowledgement at all levels in theorganisation.The more capable the betterIn 2009 AON Hewitt found the average engagement score in Australian organisations was 55% with the averageamongst the AON Hewitt Best Employer group being 80%. Our research clearly shows that there is a directrelationship between the Capabilities defined by our survey and Engagement, and the higher the Capability thehigher Employee Engagement score. AVERAGE ENGAGEMENT SCORE AVERAGE CAPABILITY SCORE 80%+ 72% 61-80% 64% 41-60% 56% <40% 55% Don’t measure 55%Organisations with 80%+ Engagement scores have a 15% higher capability than companies with engagementscores of 60-80% and a 30% better capability than organisations with engagement scores of between 40-60%.Having a 30% higher capability essentially indicates that highly engaged organisations have driven each capabilityone or two layers deeper to a point where the capability is fully implemented and where the manager is nowmentoring and influencing others in the business in regards to the capability when other companies haven’tstarted the implementation yet.For those that do not measure engagement it is useful to know where they stand in comparison against the 80%+organisations. What we are able to determine is that their Engagement score will with a very high likelihood be inthe 40-60% range as they have similar levels of capability. Employee Engagement Capability Report 2011 8
  9. 9. We might conclude that rather than start investing resource into measuring Engagement for measurements sake,they might be better placed to invest in capability enhancing activities and know that if capability is high,engagement is very likely be higher too.When looking at the respondents who have a capability score of below 50% we see that half the organisations withan Engagement score of less than 60% fall into this category whereas, only 3% of organisations with anEngagement score of 80%+ have a score as low as that.If your capability is above 70% you are almost three times more likely, and if your capability score is above 80%you are four times more likely to have an Engagement score of 80%+ compared to companies with lowEngagement scores. ENGAGEMENT CAPABILITY CAPABILITY CAPABILITY SCORE BELOW 50% ABOVE 70% ABOVE 80% 80%+ 3% 59% 28% 60-80% 25% 35% 18% 40-60% 50% 21% 7%Again, if we start with capability and see what the relationship is from organisations with high capability to seewhat their engagement scores are like we can see that 80% of all companies with a capability of 60%+ also achieveengagement scores of 60%+; whereas 90% of companies with skills below 60% only score an equivalentengagement score.Where are the skills gaps in capability?The following chart highlights the skill gap that exists CAPABILITY DIFFERENCEbetween highly engaged (80%+) and the averageorganisations (40-60%) we surveyed. We can see that highly Purpose 67%engaged organisations have a 67% higher capability inregards to Purpose. Communication 49% Expectation Management 49%This means specifically for Purpose that highly engagedorganisations have implemented their purpose across Decision Making 47%everything they do. Their managers and leaders live and Effective Meetings 38%breathe their purpose and are able to mentor other peoplein the organisation in regards to what it means to be onpurpose; they score an average 3.9, with the vast majority scoring 4+. More than three quarters of all highlyengaged companies have driven Culture and Purpose to a capability level of 4 or 5.Organisations with low engagement only score an average of 2.3. This means that most businesses in this categoryhave not implemented and are not living their purpose or have only started to implement in pockets and for someit might purely be an idea in someone’s head.Communication and Expectation Management are two skills that highly engaged organisations are close to 50%better at than average organisations. This would have held them in good stead especially during the recent GlobalFinancial Crisis as many organisations simply stopped communicating during those tough times.The learning is that highly engaged organisations have built the most depth re big picture topics likepurpose, culture and vision and have communicated more than the average performers.Again it seems that during the downturn too many were focussed on the detail and where they could save moneyrather than investing in the big picture and communicating with employees where they are going.What is worthy to note is that the capability with the smallest gap is Compensation and Benefits. This seems to beone of the standards that everyone who measures engagement is aware of and is able to manage appropriately. 9 © Shirlaws and RedBalloon 2011
  10. 10. Managing Capacity and Workload is the second Percentage of organisations achievingbiggest difference with three times as many capability scores of 4 or 5:highly engaged companies driving this capabilityto 4 or 5, even though only 44% of highly CAPABILITIES 80%+ 60-80% DIFFERENCEengaged companies actually fall into thiscategory themselves. Purpose, Intent & Cause 76% 18% 322% Managing Capacity & 44% 14% 214%Reward and Recognition features high on the list Workloadof differentiated capabilities between the highly Reward and Recognition 72% 29% 148%engaged and average organisations too. Whilst a Effective Meetings 59% 25% 136%program of some description is matter of fact Culture 83% 36% 131%for most organisations the depth and Communication 66% 29% 128%sophistication of the program and its success or Functional Structure 45% 21% 114%otherwise is, from the data, a deciding factor for Decision Making 72% 36% 100%engagement.The most popular activities for driving engagementWe are able to conclude from the results that the most common Engagement activities for any organisation are asfollows: 1. Training & Development Program 2. Non-cash Rewards & Incentives 3. Flexible Working arrangements and associated resources 4. Recognition Programs 5. Internal CommunicationsBut again it seems that some of the most popular items to spend on are not necessarily the ones that make thebiggest difference from an engagement score point of view. Training programs for instance are used by 89% ofcompanies with 80%+ engagement scores and by 91% of companies with engagement scores of 40-60%. DON’T ENGAGEMENT ACTIVITES USED 80%+ 60-80% 40-60% MEASURE Training & Development Program 89% 83% 91% 78% Non-cash Rewards & Incentives 86% 79% 62% 59% Flexible Working arrangements and associated resources 83% 74% 71% 56% Recognition Programs 80% 72% 79% 56% Internal Communication 80% 79% 68% 52% Company lunches, Nights out etc… 71% 66% 47% 58% Health and Welfare Program 63% 49% 55% 31% Coaching Programs 60% 30% 26% 37% Social Club 57% 45% 32% 25% Buddy Program 40% 17% 24% 17% Time off for Volunteering 37% 34% 32% 27% Leadership Roadshows or information sessions 34% 43% 41% 20% Employee Engagement Capability Report 2011 10
  11. 11. Many organisations cited specific initiatives outside of the 12 activities listed in the survey which included; • Music & Art programs • Discounts on own products or services • Subsidised food service and pharmacy • Company sports activities • Mentoring programs • Family daysEmployee Engagement SpendWhen we compare the reported spend on Engagement activity there is little evidence to support a straight spendX, get Y result or indeed, that spending more on activities will necessarily ‘buy’ you a higher engagement score.There is no silver bullet.In fact, it’s clear that even if an organisation invests heavily in engagement initiatives (>$3,000) there is noguarantee of a high score. That said, perhaps surprisingly only 26% of highly engaged organisations spend morethan $3000 yet more than 50% of the highly engaged organisations responding to the survey spend less than$1000 per employee per year.In short, it does not cost a lot to engage. There are many more complex relationships at play. When you have theright mix of activities, the money that you do spend goes a lot further and you will get a better return oninvestment.The mix of activities refers not just to the engagement menu, we are not just talking a check list but the way inwhich those activities are delivered, the skill and competency that the leaders and managers have to articulate,implement and leverage.For example, if you link your Reward and Recognition program into the purpose, and culture of your organisationthen you strengthen and perpetuate your drive for further depth and integration and therefore better results.The commonalities between all Annual Employee Engagement Spend per employee:organisations engagement menu,regardless of score says that there are SPEND DON’T 40-60% 60-80% 80%certain minimum standards that MEASUREemployees expect and if they are not met <$500 22.2% 24.2% 19.5% 25.8%you can invest unlimited sums and it will $500-1000 27.8% 24.2% 29.3% 25.8%not increase the engagement score. $1000-2000 13.9% 18.2% 17.1% 9.7%Employee Expectations have to be met $2000-3000 16.7% 6.1% 19.5% 12.9%before you can start positively impact >$3000 19.4% 27.3% 14.6% 25.8%engagement above 40%.What do organisations with 80%+ engagement scores do differently?So how can we learn for the best? Organisations with % MORE LIKELYhigh Engagement scores are more likely to include ENGAGEMENT ACTIVITY TO USEprovision for a number of key activities than the 40- Coaching Programs +127%60% group. Coaching Programs for instance are usedby more than twice as many. Social Club +77%Overall it would appear that once the core drivers of Buddy Program +70%Engagement are in place organisations get the most Company Lunches & nights out +52%additional value by focusing additional resource on the‘softer’ activities such as coaching programs, company Non-cash Rewards & Incentives +39%lunches, nights out and social clubs. 11 © Shirlaws and RedBalloon 2011
  12. 12. Even when comparing what highly engaged organisations spend with companies who don’t measure engagementwe can see a similar trend. Buddy Programs, Social Clubs and Health and Welfare programs are used by more thantwice as many times by highly engaged organisations.Invest in developing peopleInterestingly companies that include a coaching program in their mixhave 18% higher engagement scores than those that do not. Couple acoaching program to company lunches and nights out and the average Highly engaged organisationscapability increases by 31%. are twice as likely to use a coaching programThe survey results reveal that once an organisation has defined itsEngagement activities, it can, by increasing capability and channellingbudget and effort into particular areas where the best score highly,achieve significant increases in levels of engagement in the medium term.For example, Training & Development is consistently used by close to 90% of respondents yet there does not seemto be a big impact on what the engagement level is, they are spread evenly across the different engagement scoregroups.There is an impact on the engagement capability when we add a Coaching Program to the Training & Developmentprogram. Companies who invest in both of these initiatives achieve a capability score of 70%+ which is a 22%higher capability than companies who only have Training & Development in their mix.When analysing the impact on the engagement scores we can see that 80% of response shifts a whole category upin terms of engagement scores when coaching is added to a training program. In other words when training only isin the mix 80% of respondents have an engagement score of 40-80%. When we add a coaching program 80% ofrespondents score 60-100% engagement scores. ENGAGEMENT ACTIVITY 80%+ 60-80% 40-60% Training only 18% 43% 37% Training plus Coaching 48% 31% 21%Apart from the positive impact on the Engagement Scores this combination also lifts capability by 22%, and allcompanies who had both training & development and coaching programs in their spend mix had an averageoverall capability score of 70%. This is not unsurprising as Training typically focuses on educating which relates tolayers of depth 1 and 2, whereas coaching and then mentoring drives further depth by going up to 5 if required.Measuring the ROI on employee engagement spendOnly 65% of our respondents measure the ROI that they getfrom their investment in Engagement. METHOD % Survey Results 34%34% of respondents use surveys to measure their ROIcapturing a likely increase in the engagement score. What is Attrition 22%interesting to note is that in terms of our understanding of a Retention 19%highly engaged employee as being someone that applies highlevels of discretionary effort and has a high intent to stay with Productivity 18%their existing employer not one of the respondents uses their Turnover 15%employees’ ‘intention to stay measure’ as means todemonstrate a return on their engagement spend. Employee Engagement Scores 14% Profitability 14%The second observation is that only 1 in 10 organisation whoinvest in employee engagement have a commercial measuresuch as profitability, increase of turnover, or productivity inplace to track the success of their spend. Employee Engagement Capability Report 2011 12
  13. 13. Again, this might be another reason why employee engagement might not be the top priority for the leadershipteam – especially if they are commercially minded and dollar driven.What do companies that don’t measure engagement do?What about companies who do not measure? We know that capability wise, overall they score similarly toorganisations with a 40-60% engagement score but do they have the same gaps or are they different?Purpose is still one of the top 5 Capabilities where highly engaged companies shine. However the gap is not as bigas with companies with average engagement scores (40-60%). Expectations Management also makes the top 5 andthe skill gap is nearly identical to companies with average engagement scores. But there are two areas wherehighly engaged companies are more than 50% more capable: Onboarding and Coaching.Onboarding is a key capability, as it constitutes the first experience of someone entering the business. Newemployees have expectations of the organisation based on the Brand Promise or the conversations had in theinterview process. They might be expecting a certain structure and process from the business. They might haveheard what the vision and the values are in the interview process – but if they start on day one and their desk andtheir computer is not ready or nobody is there to welcome them, those expectations are soon disappointed.Onboarding is the perfect opportunity to get the new CAPABILITY DIFFERENCEemployee clear in regards to who is who, who does what,how things work around here, what is expected of the new Onboarding 54%employee and how that will contribute to the big picture ofthe organisation. Is onboarding a tick box process or is it a Coaching 51%tangible experience delivered by all employees? Expectation Management 46%Coaching is a key skill in any organisation that wants to drive Reward & Recognition 45%further depth into the capability of the organisation. As the Purpose 44%research showed in the earlier section training anddevelopment when combined with a coaching program liftscapability by and additional 22%. Highly engaged companies have implemented coaching in their organisation andare getting better at passing this skill on to others. If managers are able to coach their employees rather then tellthem each next step, then employees will be able to work more independently, and feel like they have moreresponsibility and ownership which would drive up the level of engagement. Companies who don’t measure on theother hand have not started with the implementation process yet. This could mean that employees often wait forthe next instruction and are not necessarily proactive in their approach.Reward and Recognition is not just one of the top 5 strongest capabilities that highly engaged organisations have itis also one of the biggest differentiators for them compared to companieswho don’t measure engagement.Reward and Recognition programs are used by 80% of highly engaged Reward & Recognition helpscompanies and only by 56% of companies who don’t measure. As we have drive depth into otherseen earlier they are one of the most common items companies spend money capabilities by putting theon in the name of engagement. The results in terms of impact on the spotlight on behaviours andengagement score are not conclusive at first glance. But when we mix in achievements thatspecific capabilities that have been driven very deep into the organisation thepicture starts to change. Reward and Recognition programs of companies contribute to KPIs arewith capability scores of 4 or 5 in Reward and Recognition, Purpose and aligned to the vision.Culture for instance are three times more successful in achieving anengagement score of 80%+.In other words, Reward and Recognition programs that reward traditionally soft topics, like being on purpose andacting in accordance with the company’s culture and values, have a much higher impact on engagement scoresthan when we mix it with high capability scores for commercial vision and KPIs. 13 © Shirlaws and RedBalloon 2011
  14. 14. CONCLUSIONEmployee Engagement is becoming more of a priority for businesses. A full recovery in theeconomy will create more jobs and opportunities for capable employees. The more engagedemployees are the less likely they are to switch. If they don’t switch they are able to retaincapability, they have spent years building in the business, which is a competitive advantage thatwill allow those businesses with highly engaged employees to pick up significant market sharein the years to come.For SME’s there is the additional challenge of Succession. A large number of business owners want to exit theirbusinesses in the next five years and they need engaged employees and successors capable to continue to engagethem to be able to do that successfully. For larger organisations where a merger, floatation or sale may be on thehorizon a highly engaged workforce will be a significant contributor to overall value.More than half of the organisations currently not measuring will do so in the next 12 months. The fact thatcompanies who don’t measure have the same capability as companies with average to low engagement scoresneeds to be a wake-up call for any business currently not measuring.All organisations, regardless of Engagement score, share some similarities in thenature of the activities they undertake to drive it. If we conclude that thesecommonalties have become the expectation of most employees and therefore will The deeper the skillshave limited application to shift upwards to the ‘best employer’ territory of 80% the higher theand above, we are then able to start looking at what it is that the ‘best’ do different. commitment and theWhat we find is that organisations achieving an 80%+ Engagement score are higher the commitmentinvesting in the softer activities that create opportunities for the development of of the leadership group,social connection and informal learning. the more engaged andEmployee Engagement is a complex topic – no one measure is more effective than committed employeesanother in isolation. It is always a combination of different initiatives that lead to a are.result. But what is clear is that the same mix can be a lot more effective whensupported by the right level of commitment and depth of capability.Reward and Recognition programs for instance achieve a lot better results if the organisation is highly capable andcommitted to purpose and culture. The deeper the skills the higher the commitment and the higher thecommitment of the leadership group, the more engaged and committed employees are.Highly engaged companies strike a great balance between commercial and cultural aspects of business asdemonstrated by the top 5 capabilities that those companies are most committed to. They include Purpose andCulture on the one side and Commercial Vision and KPIs on the other hand with a Reward and RecognitionProgram to support both. This finding seems to confirm what the Corporate Leadership Council reports in regardsto actively engaged employees being emotionally and rationally committed to an organisation. When both theculture and the commercial aspects are aligned, it’s a lot more compelling for an employee to stay with theorganisation for longer and to deliver high levels of discretionary effort.Once the Capability has been assessed a strategy and implementation plan needs to be designed that outlines,which areas the organisation needs to get more committed to and build more depth in, and how it is going todeliver this. Highly engaged companies use a combination of training & development and coaching programs todrive depth as this mix is more effective than using a training & development on its own.Like any strategic change it will take some time for those changes or the increased capability to take effect, be feltin the organisation and show the commercial result. If a survey is completed simply to say “we’ve done it” butmanagement doesn’t care about the result and no implementation plan follows, then results won’t change andemployee engagement as a topic will lose its relevance and priority. Employee Engagement Capability Report 2011 14
  15. 15. Organisations need to get better at measuring and articulating the return on investment of all their employeeengagement spend in a commercial way to make it a higher priority for management. If organisations canarticulate what the expected return is going to be for the planned change, budgets are much more easily allocatedfor this traditionally “soft” topic.Engagement capability, as measuring device, provides an easily accessible tool to all organisations wanting tounderstand where they are at and what they can do to improve their engagement score. The data derived fromthe survey in its first year allows us to broadly predict what should happen to engagement in any organisation ifresources are focused in a particular way.Perhaps most importantly Engagement Capability bridges a gap between HR and leadership to bettercommercialise the engagement opportunity. We have created some white space for organisations to better focuson and plan the connect with employees to drive performance and profitability.There is no silver bullet; but we believe that this work has made some significant headway into understanding therelationship between engagement capabilities, contributors and outcomes and provides a useful tool forimprovement planning. 15 © Shirlaws and RedBalloon 2011
  16. 16. APPENDIXThe 20 Core Capabilities Descriptions Why we do what we do – the business has a clear purpose beyond makingPurpose, Intent, Cause money that all employees can engage with. What is important to the people in the business and what guides theirCulture behaviour - capability to express the culture, manage it and bring it alive Describes the 3-5 year vision of the organisation. Understanding the keyCommercial Vision drivers that build equity value of the businessInnovation Ability of the organisation to innovate The perception and reputation of the organisation and the people in itBrand Energy that attracts clients and staff alike Planning and managing workload and growth of the capacity of the team,Managing Capacity and Workload the division, the organisation in accordance with the risk profile Organisational structure that is functional, provides clear roles and responsibilities and leverages the current resources for maximumFunctional Structure/ Resource Allocation profitability. The business has the right resources and right systems and processes. Defining and managing meaningful KPIs that help drive the vision andKPI strategy of the organisation - clear accountability A program that reinforces chosen values and behaviours as well asRewards and Recognition Program commercial KPIs Ability to communicate effectively with anyone in the business, effectiveCommunication meetings and communication structures Ability to deliver learning’s through coaching to bring out the best inCoaching people Setting, managing and resetting expectations proactively to maintain highManaging Expectations standards Understanding what work life balance means in the organisation and howWork Life Balance it can be achievedCompensation and Benefits Fair, transparent remuneration packages Based on values, attitudes and behaviour first and skills and experienceRecruitment second to create an aligned culture Providing clarity and connection for new employees and raise awarenessOn Boarding re the importance of their role in relation to the vision Proactive performance management and ability to have hardPerformance Management conversations Growth Opportunities for staff, Personalised Development plans andDeveloping People managers giving opportunities to staff Effective and timely decision making in alignment with the agreedDecision Making direction of the business Ability to run effective, time efficient and relevant meetings where Effective Meetings everyone has their agenda addressed and clear actions are driven Employee Engagement Capability Report 2011 16
  17. 17. About Us Shirlaws is an award winning RedBalloon is Australias largest international firm of business experiential gifting retailer and a advisers who create 2010 Hewitt Best Employer with an transformational change in engagement score of 90%+ for the organisations large and small by last three years. RedBalloon’s building depth in management and corporate team supports engagement capability to increase organisations large and small to the value of the organisation for all develop reward and recognition stakeholders. strategies and non-cash incentive programs that drive engagement. Phone (02) 9241 7851 Phone 1300 850 940Research MethodologyThe research was conducted in November and December of 2010. 327 voluntary respondents completed theonline survey, incentivised with a $250 RedBalloon Gift Voucher draw. The opportunity to participate waspromoted to ‘opted in’ business lists held by RedBalloon and Shirlaws by email and pushed through distributionpartners and online social networks.The overwhelming majority of respondents were self-identified as HR Manager or equivalent. 21.4% of the groupwere the CEO or HR Director and 11.9% the business owner. In terms of being a representative sample of theAustralian business landscape 69.2% of the results are from organisations with a workforce of 51+ employees.Given that survey was self-reported and unchecked it is important to point out that 63% of respondents have beenwith their organisation for at least two years and given their roles it is fair to assume that their level of awarenessand understanding around organisational practices and capabilities is sufficient to expect accurate data forinterpretation. For more information To request a copy of the report, media enquiries or for more information please contact James Wright (RedBalloon) on (02) 8755 0020, or Oliver Christen (Shirlaws) on (02) 9241 7851, 17 © Shirlaws and RedBalloon 2011