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What is the value of having employees who care passionately about your business? Stated more bluntly, what is the cost if they don’t care?
Based on your past experience and common sense, you can guess that employees who are committed and engaged are also more positive, productive and profitable. But can you measure the value of engagement empirically? Recent research is doing just that, and the evidence is startling.
These studies demonstrate that the gap in performance and profitability is significant. Sadly, the research also shows that only a small minority of employees are actively engaged and invested in the future of their organizations. This fact reveals a stunning competitive opportunity for those firms who can increase employee engagement.
In this article, I will summarize the research findings of several national consulting firms and describe the four main drivers for creating a highly engaged and committed workforce.
The High Cost of Low Commitment What do we mean by “engaged employees?” Although each study used slightly different language, here is the core definition: engaged employees are those who feel a vested interest in the organization and devote discretionary time, effort and energy to help it succeed. Engaged employees see the company’s success as their success. Not surprisingly, engaged employees significantly outperformed their non-engaged peers.
Some examples include:
- High engagement firms experienced a 28% Earnings-Per-Share growth rate, while low engagement firms experienced an 11% decline in Earnings-Per-Share growth rate.[i]
- Public organizations in the top quartile of employee engagement have Earnings-Per-Share growth 2.6 times greater than those with below average engagement.[ii]
- Engaged employees are 3 times more likely to believe that their individual performance could impact their company’s profitability.[iii]
- Best Buy reports that stores increasing employee engagement scores by a tenth of a point (on a five point scale) will see a $100,000 increase in annual sales.[iv]
- JC Penney found that stores in the top quartile of employee engagement generated 10% more sales per square foot and 36% more operating income than stores in the lowest quartile.[v]
- There is a clear correlation between engagement and retention. In one study, 85% of engaged employees indicated they intended to stay with their current employer.[vi]
- Another study found that engaged employees perform 20% better and are 87% less likely to leave their organization.[vii]
- Gallup estimates that actively disengaged employees cost US businesses $300 billion a year in lower productivity.[viii]
But these same studies find that only a minority of staff are engaged. Studies by Blessing White and Gallup found that less than a third of employees feel engaged at work. Far worse, the Corporate Leadership Council found that only 11% of employees showed strong commitment to their company.
What can leaders do to increase employee engagement? The same studies quoted above found several drivers of employee engagement. I have summarized their findings into four broad categories. If your employees are not highly engaged, it is probably because your organization is deficient in one of these areas:
- Creating a sense of direction
- Fostering a sense of achievement
- Building a sense of community
- Nurturing a sense of relationship with their boss
The good news is that most employees want to feel highly committed to their work. By making improvements in these areas, any workplace can tap into the natural motivation of its people and create a high-commitment, high-performance organization.
Creating a Sense of Direction People are motivated to give their best effort when they can see how their daily work is connected to the larger purpose and goals of the company. This connection is often lost in complex organizations where the division of labor is highly specialized and communication between units is poor. Keeping this connection is even harder in the dizzying chaos of change in today’s business world. When a firm makes quick, adaptive moves to meet rapidly changing market conditions, it often creates the impression that it is lurching from one idea to the next without a clear plan.
To engage your staff and create a sense of direction, assess whether you need to improve in one of the following areas. First, does your organization have a well defined vision and mission that is communicated consistently to employees? The vision is the image it holds for the future it is intending to create. The mission is the company’s purpose, its role in achieving the vision. Second, does it have a well conceived strategic plan that has high level goals, performance measures, and strategies for moving the measures toward realistic targets. The strategic plans and workplans of each division and sub-unit in the organization should be linked to the high level strategic plan of the organization.
This makes it easier to explain to every employee how the goals, measures and accomplishments of their unit are helping to accomplish specific goals aimed at achieving the company’s vision. As new projects or changes are announced, they should be clearly connected to the strategic goals they are intended to support.
Fostering a Sense of Achievement People want to know that their work matters, that it has a positive impact in the world. They want to work in a place where they can discover and use their inherent gifts and talents. Matching people with work that hones their natural strengths is a double win. It is energizing for the employee because doing something you are good at is naturally fulfilling. And it is good for the company because the employee is naturally good at the task you have given them. Companies waste too much time trying to train, motivate, and manage employees who are improperly matched to a job that requires skills they are not good at.
People also know that their work matters when they are given feedback. Feedback is important in two different areas. First, employees want feedback on whether they are achieving important goals. Individual and unit targets are easiest to monitor and give feedback on. But it is also important to explain to employees how individual or unit goals help the company achieve its organizational goals. Second, at a higher level, people want feedback on their general progress and development. They want to see how their current achievements will help them reach longer term career goals.
The key to effective feedback is that it be given continuously over time, not just at a once-a-year performance appraisal. Continuous feedback can be given in team meetings, informal hallway conversations, or during regularly scheduled one-on-one meetings. Make it a point to know the strengths and career aspirations of all your people and work constantly to tie your feedback to their development.
Building a Sense of Community People enjoy being part of a community. One reason is that we are social creatures who want to feel a sense of connection and relationship with the people around us. Ask anyone you know who loves their job and I bet they will tell you they enjoy the people they work with. Building bonds between people at work does more than just make them feel good. It creates the trust and cohesion necessary for superior performance.
But there is another reason community building is important and it relates to the previous idea of fostering a sense of achievement. People want to be part of something larger than themselves. They want to feel they are participating in the achievement of something they cannot accomplish by themselves. This feeling of achievement through group synergy is one of the most rewarding experiences one can find in the workplace.
Nurturing a Sense of Relationship with Their Boss People want to have a positive relationship with their boss. Part of this is due to the inherent power dynamic of the relationship. A boss approves work schedules, vacations, assignments, appraisals, and ultimately, has the ability to hire and fire. So there is an element of security to being in the boss’s good graces.
But deeper than that is the fact that the boss represents the company in microcosm. The boss is the one who can best create an environment that fosters the previous three ideas of direction, achievement and community. The direct supervisor is the one who can best communicate the company goals and direction to his or her work unit; who can give meaningful feedback to each employee; and who can create a work environment that either builds or destroys a sense of community.
Some managers shy away from the relational aspect of their job, fearing that growing too close to their employees can become a liability. But to do so is to give up the greatest power a manager has: the ability to motivate and grow their staff through the use of positive relationships.
These are the four main drivers for creating a highly committed workforce. If your employees are not demonstrating the levels of engagement and commitment you would like, I recommend you assess which of these areas is lacking. You can make major improvements in any of these areas with an investment of a little time and even less money. The costs of doing nothing could leave you far behind the pack.
[i] Towers Perrin, 2007-2008 Global Workforce Study
[ii] Peter Flade, Director of Finance, Gallup, 2007
[iii] Towers Perrin, 2007-2008 Global Workforce Study
[iv] “Terms of Engagement,” Scott Flander, Human Resource Executive, January 1, 2008
[v] “Are your Employees Truly Engaged?” John Engen, Chief Executive, March, 2008
[vi] Blessing White, The State of Employee Engagement 2008
[vii] Corporate Leadership Council, Driving Performance and Retention Through Employee Engagement, 2004
[viii] “Getting Personal in the Workplace,” Steve Crabtree, Gallup Management Journal, June 10, 2004
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