High employee engagement rates help companies keep staff, reduce their costs and even produce a better financial outcome for the business, according to new research.
The study, The Future of Engagement Trends and Innovations in Measuring Employee Engagement, by global research and advisory firm Gartner, shows there's a direct link between employee engagement and financial performance.
“Organisations with high levels of employee engagement report financial outcomes - such as return on assets and profit margin - three times higher than organisations with low engagement," says Aaron McEwan, HR advisory leader at Gartner.
McEwan says that high levels of engagement are also associated with higher employee performance.
Customers of organisations with high employee engagement are 9% more satisfied than customers of organisations with low employee engagement, he adds.
Three factors indicating employee engagement
McEwan says that most employee engagement efforts aim to lift three key factors.
The first factor is the employee's intent to stay in the business, he says. The second factor is discretionary effort – meaning the extra work an employee will put in to deliver additional value. The third factor is whether an employee will talk positively about your business.
“Talent has become prominent for investors. This and culture has become a really important factor in how organisations are measured," he says.
McEwan believes the more engaged the employee is, the better their performance, which has a direct impact on profit and revenue.
“If you're retaining your best talent, it means you avoid the cost of replacing them. But you are also keeping people who are getting better at their job as time goes on. So that's going to impact profit by lowering your costs, but also driving higher value," McEwan advises.
He says Gartner's research shows businesses that have a good employer brand spend 15 per cent less to attract good people into their organisation.
“If your brand is really strong, then it means someone's willing to take a 15 per cent pay cut to work for you," he says.
The seven drivers of employee engagement
McEwan suggests seven drivers of employee engagement starting with role clarity.
“If we want to help people achieve role clarity, we need to define their goals. We want to help them understand their role in achieving business outcomes. And most importantly, help them prioritise, so that they put their effort into the most impactful work that they can do," he says.
Career management is also important, says McEwan. Organisations with high employee engagement put effort into designing compelling career pathways that align employees' expectations with where they can go in the organisation. They also invest in helping their managers help employees with their careers.
Performance management is the third driver. This involves having a career pathway for employees through the business. Appropriate development opportunities are also key, whether that is training or access to growth opportunities.
“Those are the things that will help staff improve their employability. And what's interesting is that if you improve team members' employability, it makes them more loyal and more engaged," McEwan advises.
The fourth variable is employee networks. This involves connecting employees with each other and helping them navigate internal networks to ensure that they can get the support they need to perform their job. Social media is increasingly a part of this.
Rewards are another factor to consider. Companies with high employee engagement design and implement reward and compensation strategies that are well thought out and linked to performance. They use pay to effectively reward and engage employees, and they help managers navigate those conversations.
The work environment is the sixth dynamic, which is about enabling employees to make a visible contribution to business goals. “Aspects of location also matter, such as whether the office has a good feel and layout. Many companies have gone a bit overboard in the past with things like free lunches and beanbags in the office and there's not a lot of evidence to suggest that drives engagement. It's more about whether the office is easily accessible with amenities like dry cleaners close by," he adds.
The final element is whether organisational values are defined and sustainable and help the workforce. The link between values and culture is becoming hugely important, as demonstrated by recent corporate scandals involving this issue.
“If you have strong values and a strong culture, and your employees are empowered to live that, and they're engaged, you lower your reputational risk," McEwan suggests.
Turning back the tide
Despite the growing body of knowledge around this area, Gartner's research suggests there's change ahead in the way employee engagement is measured – and there are questions around its usefulness.
“Employee engagement may be approaching its best-by date as a useful thing to measure in organisations," McEwan says.
“Work done on customer experience is starting to inform HR about the employee experience," he adds.
Engagement is typically measured once or twice a year through very detailed surveys contrasting with customer satisfaction, which is evaluated continuously. Employee engagement could follow the same path.
As a result, more frequent, less formal measures of engagement are emerging, including the possible use of devices such as a Fitbit in measuring employee engagement.
“Rather than answering a survey, you might have a meeting with your manager and your Fitbit or your Apple Watch measures how stressful that was," says McEwan.
Alternatively, companies could measure how often employees are smiling throughout the day using CCTV cameras as an indication of day-to-day engagement.
Says McEwan: “We're approaching a point where technology is becoming very sophisticated and we might be able to measure engagement less intrusively, more accurately, and in real time."
Technology is likely to play some part in future measures of employee engagement. But for the moment, most CFOs will benefit from a good understanding of how – and why – to measure employee engagement, and what strategies can be used to improve it.
Key Takeaways
- High levels of employee engagement are increasingly important to investors.
- Companies with a high level of employee engagement reduce costs through better staff retention rates.
- In the future, devices could measure employee's physiological responses as a measure of employee engagement.