The Business Benefits of Employee Engagement

Today organisations are trying to achieve more with less, move faster at the same time as improving quality and customer service without increasing costs. As they do this they realise that what makes the difference is not just strong brands, state-of-the-art technology, new products or new markets. Increasingly organisations realise that they also need to inspire their employees to go the extra mile and feel passionate about the future of their company. They need to motivate them to exert maximum effort, deploy maximum intelligence, and apply maximum creativity in their work for the benefit of the organisation as a whole. In a nutshell, many organisations now realise that engaged employees are a powerful source of competitive advantage.

An engaged employee is willing to put discretionary effort into their work in the form of time, brainpower and energy, above and beyond what is considered adequate. An engaged employee has a desire and commitment for always doing the best job. They grip any task with energy and enthusiasm. They bring fresh ideas, infuse their teams with their own engagement and are less likely to seek opportunities to work elsewhere. They believe in the purpose of their organisation and demonstrate that belief through their actions and attitudes.

An engaged workforce can help put a business ahead of its competitors. But despite this recognition, new evidence suggests that UK businesses could benefit by redoubling their focus on this aspect of organisational culture. According to the results of the Towers Perrin 2007 Global Workforce Survey only 14% of employees in the UK are fully engaged and this points to a major opportunity for UK PLC to unlock the competitive power of its workforce.

One key to unlocking the full potential of a workforce is to understand and address the organisational factors that drive employee engagement. According to the Global Workforce Survey the number one driver of engagement is a belief amongst employees that their leaders are sincerely interested in their well-being. The survey also reveals that employees are now increasingly concerned about the reputation of their employer. Indeed, an organisation’s reputation for social responsibility is the fifth most important driver of employee engagement.

fig 1

Employee engagement has it roots in business psychology. The model (Fig.1) we’ve developed through our research has three dimensions, rational, emotional and motivational. For both businesses and employees to reap the full benefits of engagement, people must be connected to the business on all three levels.

The business benefits of an engaged workforce are far reaching. The more engaged employees are the greater their belief that they make a measurable contribution to customer satisfaction, product or service quality and cost effectiveness. Employee retention is also likely to improve, 54% of fully engaged employees say they have no plans to leave their organisation, compared to just 13% of disengaged employees.

Recent research by Towers Perrin-ISR has proved that there is a link between employee engagement and financial performance, and it provides some compelling evidence.

We studied 50 companies across the globe, looking at both their employee engagement scores and their financial data. Our analysis focussed on the impact of employee engagement on operating income, net profit and earnings per share (EPS). Over the 12 months studied, organisations with high levels of employee engagement outperformed those with below average levels of employee engagement on all three financial measures.

• Operating income. Companies with highly engaged employees collectively saw operating incomes rise by $389.95 million or 19.2%, but companies with below average levels of engagement collectively saw it fall by $664.14 million or 32.7%.
• Net income growth. The group of companies with highly engaged employees saw net income grow by 13.7% or $121.38 million but it fell by 3.8% or £33.67 million among companies with low levels of employee engagement.
• Earnings per share. Organisations with highly engaged employees collectively saw earnings per share increase by 27.8% compared to companies with low levels of engagement which saw a fall of 11.2%.

Higher levels of employee engagement in an organisation can clearly help improve business performance. But where should companies begin? To foster a sense of engagement in a workforce it’s vital to have leaders that motivate employees and win their respect.

Leaders should act as role models and inspire employees. However, in the UK, employees think there is a disconnect between what leaders do and what they say. The 2007 Global Workforce Survey highlights some areas for improvement. To foster a sense of engagement in an organisation people need to believe that their senior management is sincerely interested in their well-being, but only 29% of UK employees think that this is the case.

Communication and transparency are two other areas that require a greater focus from business leaders. Only 31% of employees currently feel that their senior managers communicate openly and honestly. Moreover, only 41% agree that senior managers try to be visible and accessible.

A sense among employees that they are trusted and respected by their senior leaders also helps inspire employee to be engaged. Currently only 3% of employees believe that senior managers treat them as if they are a key part of the organisation. In addition, too many employees say that they think they are treated as if they don’t matter, with 60% reporting that they feel that their senior managers treat them as just another organisational asset to be managed.

Overall the benefits of fostering engagement in a workforce are far reaching for both organisations and their employees. Businesses that successfully reach this goal are likely to see significant improvements in performance, a rise in profits and a greater ability to attract and retain the best employees. Employees will be more likely to feel motivated to work hard to ensure the success of their company and have a greater belief that they are making a significant contribution to that success. Furthermore, they will be less likely to look for opportunities elsewhere. The workforce in many UK companies represents an untapped reservoir of competitive advantage. The rewards for companies that successfully engage their staff are multiple and are clearly worth the investment.

Dr Graeme Ditchburn is Research Director at global professional services firm, Towers Perrin - ISR. As a Chartered Occupational Psychologist Dr Ditchburn specialises in identifying the inter-relationship between organisational culture, employee attitudes and organisational performance.