A highly engaged workforce can increase innovation, productivity, and bottom-line performance while reducing costs related to hiring and retention in today’s highly competitive talent markets. Companies with a greater number of engaged employees typically have lower operating costs, higher customer satisfaction and higher profits. As a result, employee engagement has become a top business priority for senior executives. However, connecting engagement to business performance requires considerable effort and top management focus — and, to a large degree, it is about how you do it. In this article, Dave Gorin explores some useful strategies for business leadership that will help generate a reciprocal response from a more committed and connected workforce.
A familiar but increasing concern among CEOs, globally, is the availability of talent and the reduced prevalence of key skills. Projections are that, for the next decade at least, corporate demand for college-educated talent will exceed the supply in most parts of the developed world.
Indeed, the 21st Century talent landscape is being ruptured by overarching global megatrends, the most fundamental of which is demographic pattern change arising from urbanization, increasing workforce mobility, and — perhaps most central in its direct influence upon the workplace — the reshaping age structure of the world’s overall population and employment pool.
Millennials dictating the new engagement construct
Companies today have the most diverse and multigenerational personnel structures in history. Older cohorts need to keep working as improved worldwide longevity is juxtaposed with increased financial pressures and a reduced social security net. At the other end of the spectrum, Millennials currently comprise over one-third of the world’s working population and this will increase to 75 percent by 2025, according to the Deloitte Millennial Survey conducted in 2014. This has significant implications for labor force and work setting dynamics.
Overall, it should not come as a surprise that employees today seem increasingly disaffected or only sporadically committed — and that, globally, only 13 percent of employees may be fully engaged.
In relation to their professional lives, Millennials have distinctly different aspirations — and these link more cogently and directly with their attitudes toward society and community. They seek employment that inspires passion and affords them varied work experiences, as opposed to a singular occupation or a career path defined in linear terms. Their numbers and influence is shifting employee expectations of the work milieu, especially in areas such as corporate accountability, the speed and extent of career development, and flexibility.
The digital revolution — and its disruptive influence
There is a real risk that technology can overwhelm employees, especially if it contributes to a sense of task overload. As the juggernaut of digitization and convergence permeates the work environment, an always-on connectedness can — ironically — seed disconnection from work or, at the very least, cause distraction: Millennials, for example, check their mobile phones on average 43 times per day, some as frequently as every six minutes.
The pace of technological change, when overlaid with other forces such as global economic rebalancing and political uncertainty in many areas of the world, is realizing a broad sweep of social change which, in the workplace, manifests as a heightened desire for equity, expectations of improved remuneration prospects and wider benefits, and assumptions of corporate transparency. Overall, it should not come as a surprise that employees today seem increasingly disaffected or only sporadically committed — and that, globally, only 13 percent of employees may be fully engaged, as stated by a recent Gallup report.
Does employee engagement influence the bottom line?
Concurrently, CEOs are facing the ongoing challenge of driving cost reductions. It is a balancing act — one with a necessary focus, as the importance of an energized workforce in spurring growth, operational excellence and customer satisfaction is supported by a growing accumulation of data.
Since 2010, Gallup has monitored and tracked nine performance metrics and deliverables. Consistent across different countries and industry sectors, there is a positive differential of up to 48 percent in comparing the top- to bottom-quartiles of almost 50,000 work teams. US companies with the highest proportion of engaged versus actively disengaged employees (averaging a ratio of nine to one) delivered 147 percent higher on earnings per share (EPS) than their direct competitors. The reverse also holds true: corporations with the poorest ratios (less than three to one) achieved 2 percent lower on EPS. Actively disengaged employees cost American companies between US$ 450 billion and US$ 550 billion in lost productivity per year; in Germany the estimated range is €112 billion to €138 billion.
These figures prove beyond any doubt that a committed, participative workforce is a key organizational asset which makes financial sense, reaps competitive advantage, and gears the bottom line.
Net profit margins are not the stuff of dreams
A famous anecdote from the 1960s is of a visit by President Kennedy to NASA’s Kennedy Space Center at Cape Canaveral. The President briefly chatted to a janitor who proudly asserted that he was helping to put a man on the moon. Apocryphal it may be, but the story illustrates the motivational force emanating from a succinct, ambitious and actionable goal.
Yet it is revealing that, in the US as an example, almost 60 percent of employees confess to not knowing what their company stands for and what differentiates it from its competitors. This represents a major barrier in the path toward an energized workforce; like the space mission, personnel at all levels want something with which to link their contribution and leaders must convey this purpose, convincingly if not passionately, as a starting point in defining this beacon — the company’s North Star. This is the crux of the notion that the single most important requirement for business leaders is to lead.
But meaningful leadership around the engagement agenda does not have a silver bullet. Complex and interrelated domains — encompassing behavioral psychology, group dynamics and motivational techniques — must be navigated. As an ongoing transformational initiative, this requires concerted planning and actions involving all levels of an organization’s workforce; CEOs should ensure there is a five-point strategy which will comprise a solid yet adaptable framework.
1. Nurture a culture of commitment
PricewaterhouseCoopers’ “Psychology of incentives” study confirms that employees are motivated by more than financial remuneration: Autonomy, recognition, achievement and personal development are important elements of the composite employment proposition; indeed, higher pay is necessary to compensate for the sacrificed motivation when a position is overall less rewarding. Ultimately, however, it is about the work and it is crucial to set the tone for dynamic work behaviors embodying, and flowing from, the company’s vision.
2. Pay attention to people, at all levels
Feasibly, a scenario that regularly plays out in companies across the world unfolds to this effect: The CFO challenges the CEO by asking: “What happens if we invest in developing our people, but they leave?” To which the CEO, one with a direction for the company and a willingness to transform and reinvent, replies: “What happens if we don’t and they stay?”
This embraces the concept of empowering people. Google, for example, facilitates both career-oriented development as well as personal growth programs — not only for management candidates, but also for all employees. By investing in people holistically, companies have a greater likelihood of unleashing “passionate explorers” — those who extend the engagement paradigm into fresh territory and are motivated and inspired to generate transformative insights, innovation and competitive advantage.
By investing in people holistically, companies have a greater likelihood of unleashing “passionate explorers”.
Get the right people into management positions. Capable, empowered and motivated managers drive the company purpose throughout the organization. More importantly, there is a correlation between employees’ trust in their direct line manager and their degree of engagement within the company as a whole. Personal relationships matter, and the development and training of managers and supervisors should encompass connection and communication capabilities as well as the more obvious technical, delegation or tactical skills.
Manage the uncertainty which the rapidity of technological change can cause. Understand the underlying technology trends and their effect and impact upon employees. There is a heightened risk that an always-on environment seeds “hyper-employment” — a euphemism for overwork. This is not the same as productivity. Mitigate the information overload factor for key executives so that they can, in turn, prioritize business and managerial issues.
Broaden diversity. People — employees, customers, wider stakeholders — incline toward companies that mirror society’s diversity, so this makes business sense beyond the engagement objective. Importantly, consider the gender balance within the organization: There is some evidence that women are statistically more engaged than men, especially in developed countries, and Facebook COO Sheryl Sandberg’s injunction for women to “lean in” can only grow as a movement; companies should be poised to embrace this philosophy.
Flexibility, as an enabler of agility, should be an option. The encouragement of a balance between personal and professional life underpins an employee’s sensibility of alignment between personal and corporate goals. Traditional workplace boundaries are becoming more blurred and remote-work opportunities — provided they do not compromise interaction as the root of collaboration — may form part of an innovative and rewarding talent paradigm. Indeed, evidence suggests that, on the whole, remote employees are more engaged; Yahoo CEO Marissa Mayer was seemingly wrong when she banned telecommuting.
3. Promote the company’s employment brand
A compelling employee value proposition should never be assumed. Engagement requires the consistent promotion and communication of the company’s activities and successes, serving to reinforce its vision and mission. Southwest Airlines, for example, is one of America’s most admired companies and a benchmark for customer service. Every week, it shares with its 46,000-strong workforce stories about how employees have assisted passengers in extraordinary ways. Some of these narratives are also used in expanded marketing campaigns to nurture the consumer-facing brand. In this way, the company underscores its reputation as an innovative and vibrant place to work, and personnel experience proof that their company practices what it preaches.
4. Benchmark, track and take action
Talent analytics — including developments involving predictive techniques — is a widening field now enabled significantly by technology. But take care to measure the right things. Focus on a manageable band of engagement metrics paramount for key business outcomes — for instance, staff turnover in mission-critical departments such as Research & Development, as opposed to the overall company. Similarly, an annual personnel survey may be irrelevant; instead, techniques may be implemented for ongoing employee feedback about what really matters to them. The most important aspect may be to take the appropriate remedial actions, urgently and transparently, as a clear indication that leadership indeed prioritizes engagement issues.
5. Re-energize the role of the Human Capital division
There is a Swedish proverb to the effect that there is no such thing as bad weather, only the wrong clothing. The looming period of economic volatility and hybrid business challenges requires proper preparedness. Evidently, however, most companies are far from having a world-class human capital function: a Deloitte report on global human capital trends revealed that 65 percent of HR departments acknowledge they are just adequate — or worse. This correlates closely with the predominant belief of CEOs that their HC divisions are suboptimally prepared for the challenges ahead. Clearly, re-energizing HR’s role may be necessary so that engagement has a championing fulcrum, with a redefined mandate to action practicalities around pressing issues such as generational and gender balance, cutting-edge usage of recruitment methodologies and tools, and active management of the company’s employment brand. If talent management is not already represented at board level, consider that this is probably crucial in order to align engagement initiatives fully with the organization’s strategies.
The key to engagement
Economic, demographic and societal change is accelerating, and within the context of a transforming, highly competitive talent environment, CEOs are under pressure to deliver growth and improved margins. Productivity and performance needs to be re-energized, requiring CEOs to actively nurture a culture in which passion and purpose can flourish. Precisely because the global talent crunch is mutating into a crisis, talent management inertia — or tinkering at the margins — is no longer an option. Business leadership needs to spur a deeper, enhanced employee engagement strategy in order to generate a reciprocal response from a more committed and connected workforce.
This resource has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained herein without obtaining specific professional advice. Competitive Capabilities International (CCi) does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this resource or for any decision based on it.