Probably everyone has heard the phrase “employee engagement”, but for many who have, unless they are in HR, few will know exactly what it is, why it’s important and that every leader needs to make it happen to so they, their team, and organisation more successful.
As a leader, it is your route to success. HR can support you but, in the end, it’s about what you do, no one else. In a wider context, all employers, and senior leaders in particular, need to pay more attention to organisational and team engagement. Each year if possible conduct employee engagement surveys to make sure employees are having a great employee experience. Because if they aren’t they won’t be performing well and may be thinking of leaving.
Engaging your people is how you maximise your potential to achieve real success for any organisation set against any important factors you care to mention, from customer experience to risk management and high performance to innovation.
This isn’t some soft fluffy idea about being nice to people this is a proven evidence-based organisational strategy for success and maximised return on investment.
Having an employee engagement strategy will enhance employee experience, boost employee satisfaction and thus build an engaged workforce. That is one of the best ways to minimise employee turnover, increase the quality of work and boost morale across the entire organization. But also a great way to grow positive core values and company culture which then enhances the organisation’s success long term.
Certainly, anyone in senior leadership roles needs to understand in detail what employee engagement is and how to optimise it within their area of responsibility.
At C suite employee engagement is not just a responsibility of HR, it’s the strategic responsibility of everybody at the senior level to role model it and to support it. In particular, the CFO, as will maximise the return on investment from human capital.
What is employee engagement?
There are numerous technical definitions of employee engagement but to keep it simple and practical you can say that “engaged” employees are people who are genuinely giving their best at work. Thus when you see a figure for employee engagement in an employee engagement survey this is the percentage of employees in the organisation who are doing that. Employee engagement is the process by which organisations seek to get more of their employees engaged and thus giving their best.
It is worth mentioning “discretionary effort” here. This is effectively the amount of effort an individual can withhold but it is unlikely to be identified that they are doing so via performance management. In other words, they will be rated as performing satisfactorily but yet there could be up to 30% extra effort they could give if they were engaged. It is this the additional effort employee engagement is seeking to gain to maximise organisational performance.
Why do all leaders need to know about employee engagement?
Just reflect on the potential impact of a significant proportion of an organisation’s employees giving 30% more effort. Better employee engagement will enable any organisation doing anything anywhere to be more effective and successful. But it is individual leaders above all who have to make it happen. Simply because the vast majority of factors that influence how engaged people are relate directly to the behaviour of their boss.
In the final analysis no matter what senior leaders are doing, no matter what HR is doing, if the employee’s own boss is not taking day-to-day action to engage them then it just won’t happen.
The Corporate Executive Board in a study of over 30,000 employees across the world found that of the top 20 drivers of employee effort 17 were actions that individuals’ bosses needed to take and the other three of which were not, in terms of importance, ranked less important than 15th. (Refer to page 13). This is why it is vital every leader understands employee engagement and how to make it happen.
Those actions which increase our engagement do so not because of the job that we do but because we are human. So, for example, my report for the King’s Fund on developing leadership in the NHS to enhance patient care submitted to the UK government enhancing employee engagement proposed the same core strategy and actions just as much as when I proposed them as a key element in enabling better financial performance at UBS and transformation at London Underground during restructuring. I’ve also helped deliver them in construction, not-for-profit, and other sectors. They work everywhere. They work not because of our job or the organisation but because we are human.
Why employee engagement? The return on investment
There is a vast resource of data based on studies of all types from organisations, professional bodies, consultancies, academic institutions, and other sources which show that high employee engagement improves performance in many areas. This vast resource of data confirms that when employees are engaged, and therefore giving their best, the positive impacts are not restricted to their own performance but apply to everything from customer service to cost efficiency and operational risk management.
Simple day-to-day employee engagement actions by their boss can significantly boost the effort that individuals give. For example, if your boss does these things versus a boss who can’t be bothered then this is the potential extra effort uplift from individuals:
When you multiply up the impact of all leaders taking these actions at a strategic level it has a significant effect. The UK Government Report, Engage for Success, for which I was part of the Expert Panel, has many examples and evidence of return on investment from employee engagement. One of the most important is that if every leader in the organisation starts to engage their people effectively you could potentially get 30% more effort, the discretionary effort, from 60% of people.
Depending on business model, margins and other factors that could deliver up to 10% on the bottom line for free. In anybody’s book, in particular a CFOs book, that’s not a bad return on investment.
Here are a few others:
- Companies with high engagement are 71% more likely to outperform their peers in the sector.
- Can produce Earnings per share 2.6 times higher than competitors with low engagement (Gallup)
- Could increase revenue by up to 43% (Hay)
- Bank branches with high employee engagement achieved 16% high-profit margin growth than those with lower scores (Standard Chartered)
- Engagement can halve days lost through sickness (CBI)
Once, after I spoke on this to a group of CEOs and CFOs on why they need to significantly increase their efforts on employee engagement, the CFO of a major telecoms company came to me and said “Chris why has nobody told me about this before? This is a no brainer! It’s a license to print money if we get it right!”. It is indeed !
How are we doing on employee engagement?
Could be much better. The latest data from Gallup would suggest that most European countries have employee engagement rates on average lower than 25%. In addition potentially with employees who are “not engaged” around 50 to 55% with another approximately 20% “disengaged”. The UK data is even worse. Low employee engagement is simply a long-term block to future success.
The fact that these figures are to some degree so dismal should make every leader reading this ask why, given how simple it is to improve employee engagement, are we languishing at these levels? But the flip side is that it’s a great opportunity for you to take action and get some great easy wins. Clearly, these are country or region-wide figures and lack the accuracy of survey results from an in-house employee survey which is run on a regular basis but they are a useful indicator.