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Corporate Social Responsibility (CSR) and Sustainability

Employee Engagement: A Crucial Metric for Company Performance

To date, senior management has paid attention to employee engagement as a means to reduce company costs, and rightly so. The bottom line will always be the most telling benchmark of company performance, and it is no secret that employee turnover packs a punch. The majority of Leadership considers recruitment costs and new employee onboarding costs when working with Human Resources on human capital management issues. However, there are numerous absence costs resulting in process and productivity disruption, as well as very serious exit costs that may come about with involuntary termination. As we have discussed on numerous occasions with our partners at Nater Associates Ltd., workplace violence issues tend to stem from simple, overlooked cases of employee disengagement that then avalanched into full blown issues. Many of these cases would have been handled effectively with an effective and timely employee advocacy program in place.

According to a 2012 Center for American Progress study by Heather Boushey and Sarah Jane Glynn, the quantified business costs of employee turnover is revealing:

  • It costs at least 16% of the annual salary for high-turnover in jobs earning under $30,000 a year.
  • It costs at least 20% of the annual salary for high-turnover in jobs earning under $50,000 a year.
  • Very highly paid jobs and those at the senior or executive levels tend to have disproportionately high-turnover costs, up to 213%.

These above cited costs do not take absence costs, exit costs, and company reputation management costs into consideration. Driven by the desire to curb costs, CSUITE leadership began to explore means to better understand and develop enterprise-wide employee engagement. Harvard Business Review Analytic Services’ 2013 in-depth interview of over international 550 executives highlighted Leadership’s vested interest in employee engagement, where 71% of all executives believed employee engagement to be in the top three indicators of successful company performance, third only to effective communications (73%) and excellent customer service(80%). The HBR Analytics Services study found an interesting trend: senior managers were pro employee engagement as a catalyst for innovation and company growth, while middle managers saw employee engagement as a means to cut costs. This is an encouraging trend where CSUITE leadership is fast becoming a proponent of employee advocacy for company growth and innovation.

To date quantifying both the data aspect of human capital management as well as marrying the analytic with the human aspect of advocacy has been hard won. Even large fortune 500 companies have found quantifying employee engagement for meaningful development sometimes elusive.

The Harvard Business Review Analytics Services study cited two employee engagement models which companies may use to create long lasting advocacy and engagement, the Service Profit Chain and Net Promoter System (NPS) models. Both models expect customer loyalty and satisfaction to be a result of effective employee engagement.  The Service Profit Chain model focuses initially internally, starting with employee expectations of internal service quality as proposed by leadership and demonstrated by management. The SPC model works through communications with all internal stakeholders, focusing on heavy leadership participation.  The NPS model focuses on feedback from external stakeholders, namely through customer feedback data. The NPS model thus helps set reward and recognition programs for employees directly involved with customers, such as the company sales team, by working from external data to foster internal productivity changes.

An excellent example of the Service Profit Chain model at work enterprise-wide is found in the employee engagement program, Engagement Multiplier. The model focuses on enterprise wide internal stakeholders – a company’s greatest asset - by engaging all employees with an anonymous, online survey every 90 days, Each employee has a personal dashboard to view the quantified and qualified results of set questions on Company Purpose, Ownership, Leadership, Coworkers, Individual engagement, and customer engagement.  The company then receives an overall engagement score and guidance on how to improve over the next 90 days. Reported data can be analyzed and quantified in terms of group demographics, which is much more valuable than measuring solely the volume of survey participants per question.

What is also very unique about the Engagement Multiplier model is the employee’s ability to anonymously offer any form of feedback to Leadership in the form of two personal action items. Leadership can then view and comment on these action items, engaging in two-way direct communication, with employee anonymity completely guarded at all times. In this qualified, dynamic portion of the online dashboard, anonymous employees from any point along the organizational hierarchy can have an ongoing, anonymous chat with Leadership, enabling Leadership to take communication to the next level – adding value for their team, their organization, and themselves. All ideas and feedback are exchanged real time through a 100% confidential online portal. This is an excellent method that Vezta Triumph Ltd. recommends to combat disengagement, potential workplace problems, and also to foster growth and enterprise-wide innovation.

Figure 1.  Engagement Multiplier Team Feedback Dashboard

Vezta Triumph Ltd. strongly proposes having employee engagement as a required metric to be added to Board of Directors risk management oversight duties to ensure strong governance. While it is not appropriate to ask the Board to execute employee advocacy, the Board of Directors of any company has the responsibility to set strategic direction along with senior management. Employee engagement is frequently severely overlooked as solely a middle management HR issue that is somehow separate from organizational governance. This gap needs to be fully addressed. Board risk management oversight processes may involve human capital management from a business risk and operational risk standpoint, but many times not as a potential risk to company expansion via innovation in talent management. We recommend that all Board of Directors risk management responsibilities include effective employee advocacy and engagement that must also detail quantifiable and qualified risk tolerance thresholds to be monitored at specific intervals.

Cameron Keng of Forbes Magazine reports that the average raise a loyal employee may expect over a 2 year period is 3%, whereas the average negotiated salary increase for the same employee who goes to the competition is anywhere from 10% to 20%, or higher depending on the employment level. This fact already puts a spoke in the wheel of employee advocacy and retention. We encourage companies to hire employees with the highest skills set and most positive attitude. Yet, once this talent is on the ‘inside’ we tend to silo their talents and expect our employees to follow sometimes robot-like procedure without input, without question. In today’s competitive corporate landscape employee advocacy must fully put to practice to ensure business continuity through human capital development, and employee engagement must be included as a quantifiable metric of company bottom line performance.

REFERENCE

  • “The Impact of Employee Engagement on Performance.” Harvard Business Review Analytic Services. Harvard Business Review Online. September 2013. hbr.org/hbr-analytic-services

Views: 121

Comment by Wayne Harris on October 30, 2016 at 7:47am

Nice article. I must admit engagement of employees by senior leadership is lacking in general. Often organisation fail to address true engagement.

Comment by Astrid F. Kowlessar on June 3, 2017 at 4:56pm

Thank you. So many companies fail to see that employee engagement is indeed part of sound governance. 

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