Engagement focus helps employers through tough times

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Reference: HR Daily 29 April 2013 7:28am

Organisations that reduce their spend on engagement initiatives are also more likely to see falls in productivity and profits, according to a new report.

The annual Employee Engagement Capabilities study, by RedBalloon and AltusQ, broadened its scope this year to ask the 1500 companies involved specific questions about the economic climate's impact on their engagement strategies.

Spend on engagement activities has dropped since last year, the report shows.

"The vast majority of organisations with less than 80 per cent engagement have slashed their training and development, coaching, incentive and reward budgets," it says.

Key differences between highly-engaged and other organisations include that the former are more likely than the rest to:

operate a buddy program (33% v 17%);

use cash bonuses (69% v 39%); and

invest in a coaching program (44% v 29%).

Although the report says "it is not as simple as 'spend X to get Y'", it suggests that "you are far more likely to achieve a high engagement outcome if your spend is at least $1000 per person per year". (Some 50.3% of these companies have high engagement, compared to 29.4% of those spending less.)

Importantly, the 2013 report found that organisations with the highest levels of engagement outperformed others in every commercial metric. Specifically, among employers with 80 per cent or greater engagement:

68.4 per cent reported an increase in productivity;

64.1 per cent increased customer satisfaction;

63.2 per cent increased their ability to attract talent;

63.2 per cent increased customer loyalty;

60.7 per cent saw their percentage profit rise;

50.5 per cent improved staff retention; and

50.4 per cent had higher sales and turnover.

Employers with lower turnover either reported no change or a decrease in these commercial metrics, the study found.

According to RedBalloon engagement consultant James Wright, "It's no coincidence that organisations with highly engaged employees have also seen an uplift in commercial metrics".

"Employees deliver when their environment gives them the tools and space to flourish, and also recognises them for their efforts."

The gap gets bigger

The study found that although "engagement capability" (an organisation's self-rated ability in 20 areas known to affect engagement) continues to rise in the top organisations, it has fallen significantly in those with lower scores, suggesting that in a tougher operating environment, "those organisations at the lowest rungs on the engagement ladder have been quick to drop the ball on the basics".

The most highly engaged organisations, on the other hand, have the greatest capability in the areas of "culture" (what is important to the business and what guides behaviour), "KPIs" (meaningful indicators and clear accountability) and "purpose" (a clear purpose beyond money that all employees can engage with), with the report noting that if employers get these three things right, "everything else starts falling into place".

"Average" performers - employers with 40-60 per cent engagement - would benefit most by focusing on developing their frontline leaders, and improving internal networks, the report says.

"The difference between the top performers and the rest is that they have better skills and practise their skills to drive the transference of strategy, processes and desired behaviours through their organisations.

"Think mentoring, buddying, coaching, recognition and internal networks built on strong foundations of a clear sense of purpose, well understood targets along with strong recruitment, training and development programs," it says.

Culture is still king

For the third year running, the report shows that "culture" is the capability where the top-performing companies "have the most depth".

An "overwhelming majority" of participating organisations also report that culture is the key to their performance, it adds.

The report's top five tips for a solid culture are:

Shared values;

Lived behaviours that match the values;

Unique rituals and practices that bring them alive;

Language and stories to help you remember them; and

Visual identity that makes you feel and look like them.

Not measuring engagement yet?

Those organisations not yet measuring engagement can expect to perform no better than "average", and only slightly better than companies achieving an engagement score of 40 per cent or below.

"Their biggest skill gaps sit in the same place as those of the worst performers," the report says, namely in the areas of culture, purpose and KPI.