Looking Through the Periscope: Employee Engagement Comes Into Focus

Jul 6, 2009

Recently at an industry conference, the Executive VP of HR at a national restaurant chain was asked to list her #1 priority right now.

“Guest count, recurring revenue, profit, in that order,” she replied.

It’s not surprising that today’s talent priorities center on gaining market share and maximizing profit margins. After all, it’s the worst climate ever for most of America’s business community. Customers and customer preference are the name of the game.

It’s also not surprising that most business consultancies, HR specialists, and employers are thinking about engagement as the critical component connecting talent strategy to business outcomes in 2009.

Engagement is a huge focus because it is the best way to overcome the shortfalls in talent caused by contraction and layoffs. At the same time, it’s the one aspect of your business that is most threatened by those same economic realities.

Engagement is about thriving in this economy, not merely surviving. But the relationship with employees is now at risk due to new forces — forces ranging from simple “bad news fatigue” to EFCA discussions, social networking challenges, and other external pressures on how employees come to understand your management, purpose, and mission.

To this end, dozens of companies have completed research that documents employee engagement levels and the connection between those levels and corporate performance. The business case has emerged and it is clearly pointing the way to significant ROI.

Return on Engagement
When all is said and done, the ROI (or ROE) speaks for itself. Financial improvement is a cornerstone objective for most companies. Ironically, a variety of research studies have documented this fact. By focusing on employee engagement, which some consider an emotional rather than fact-based, non-financial attribute, companies can reap financial benefits:

  • Organizations that invest in employee engagement significantly outperform their competition on major business measurements. The profitability edge can be as high as 27%, productivity can reach 33%, and organizations can outperform competitors in customer satisfaction ratings by 50%.
  • Employee retention can improve as much as 50% while recruitment and training costs go down.
  • Conversely, disengaged employees cost companies $300-$350 billion annually.

For the senior executive or HR professional trying to assess their current state of employee engagement, as well as their future strategic direction, here are some best practices that have surfaced across multiple employee engagement studies:

  • Ongoing Commitment: Many companies, regardless of size or market challenges, are still taking an impassive approach to employee engagement. Those companies that demonstrate an above-average level of highly engaged employees fixate on making engagement an ongoing strategic priority, not a point-in-time measurement.
  • Top-down Alignment: Generational differences aside, there is a sweeping need for employees to feel as though their work is meaningful. Employees need to understand company goals and ongoing results, so that they can align their efforts appropriately. But even more, they need to know that this alignment fits to their own values and objectives. Fully integrated performance management programs can have a significant impact on employee insights into the organization’s goals by focusing on current and future behaviors.
  • Cultivate Culture: Culture, defined or not, touches and molds every company’s work environment. As John H. Fleming pointed out in Where Employee Engagement Happens, within every organization an employee’s actions can either build a culture to make it stronger or weaken it. Companies should cultivate their culture through communicating the company’s value, mission, and strategic direction at every possible opportunity.

The research on how engagement impacts the organization’s financial health is abundant. At the same time, there’s a gap in information about this key subject. Who owns engagement within the largest U.S. corporations? What about small and newly formed companies? What drivers of engagement are highest priority today? Where are the investments being made, and what are the key performance indicators that will signal “progress”?

The sheer impact of engagement makes a strong business case for more detailed study on how organizations are monitoring and reacting to the all-important employee state-of-mind. A nationwide survey among HR professionals to uncover best practices in employee engagement and communication is now underway. The incentive of a copy of the final report should be an important takeaway to anyone managing talent budgets today.

Now is the time to discover whether or not organizations are bolstering their efforts to drive higher levels of engagement. As workforces are downsized, high productivity can still be achieved when employees believe that their efforts are recognized and that they have support from their employer to grow in their career.

I encourage you to participate in the survey and review the research report it generates. I look forward to discussing the results of this important research with you in my next article.

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