Is there ROI in employee engagement? Asking the wrong question always leads to the wrong answer

Dr. Rod Gutierrez Article

Some organisations still struggle with the prospect of investing time and effort into employee engagement, whether it be the measurement, assessment or improvement activities. The perennial question is of course, what is the return on investment of all of these. And, does the output of efforts outweigh the costs of the inputs? At a time where much organisational decision making is undertaken on the balance of a carefully weighted cost-benefit analysis, it’s perplexing that still, organisations need to be convinced of the benefits of an engaged workforce.

With over 20 years of research, there is a well-established link between positive organisational outcomes and high levels of employee engagement across a number of measures. Yet we still ask the question. A more useful question might be, what is the cost of a disengaged workforce and how do I avoid this massive organisational risk?

What the research actually tells us

Business engagement and performance:

For some organisations, there has been a significant focus towards investing in growth and away from cost reductions. With the new emphasis on growth and investment, some organisations view human capital investment is critical to success, (A report by Harvard Business Review Analytics, 2013). Undeniably, many studies have been conducted and showed that there is a firm correlation between employee engagement and business performance across all sectors of the economy, (Rayton, B., Dodge, T., D’Analeze, G., 2012, Hromei, A. 2014 , Nawaz, S., Hassan, M., Hassan, S., Shukat, S. and Asadullah, A.M., 2014, Insync Surveys Pty Ltd. (n.d.), Kazimoto, P. 2016).

A study carried out by Tower Perrins 2006, compared a group of highly engaged workers versus those of their disengaged counterparts; results showed that:

·    84 per cent employees positively affected the quality of their company’s products, compared with 31 percent of the disengaged;

·    72 percent employees positively affected customer service versus 27 percent of the disengage;

·    68 percent of highly engaged group positively impacted costs in their job or unit, versus the 19 percent of the disengaged;

·    59 percent of engaged employees were committed to staying in their current job, compared with just 24 percent of the disengaged;

·    And those workers who are highly committed to their organisations performed 20 percent better on the job, (Tower Perrins, 2006).

A study conducted on retirement issues found that 66 per cent of workers did not feel motivated to drive their employer’s business goals, 40 percent of workers felt disconnected from their employers, and 25 per cent of employees were just ‘‘showing up to collect a pay-check’’. Another retirement study which conducted a survey of almost 5000 retirees, found out that almost two-thirds of those who were dissatisfied with their job at the time they made the decision to retire did not feel valued by the company or that their work did not have long-term value as a significant contribution. In conclusion, employees who chose to retire had not been highly engaged in their work, (Employee Benefits Research Institute, 2008).

Furthermore, communication appears as the key in driving employee engagement. It has been shown that effective communication with employees proved to be a predictive indicator of organisational financial performance, (Watson Wyatt, 2003, 2005a, 2007). As an example, a cohort of companies with the most effective internal communications programs delivered a 91 percent total return to shareholders, compared with a cohort of companies that communicated least effectively, only delivered 62 percent return. The study also found that a significant improvement in communication effectiveness over time was associated with a 16 percent increase in market value of the company, (Watson Wyatt, 2003, 2005a, 2007).

Low engagement is often measured indirectly through high turnover rates, which can be disruptive and costly for organisations. Studies suggest that organisations with high levels of engagement showed turnover rates 40 percent lower than organisations with low levels of workforce engagement, (Rayton, B., Dodge, T., D’Analeze, G., 2012). A report released by The Corporate Leadership Council 2008, highlighted that highly engaged organisations had the potential to reduce staff turnover by 87 percent, and those disengaged employees were four times more likely to leave the organisation than the average employees, (Corporate Leadership Council 2008; Rayton, B., Dodge, T., D’Analeze, G., 2012).

What about the customers:          

Customer satisfaction is also impacted by employee engagement with research illustrating that highly engaged employees carried their positive attitudes over to their customers. They are also engaged in discretionary efforts required to deliver high levels of customer service, (Rayton, B., Dodge, T., D’Analeze, G., 2012).

A study carried out by Podsakoff et al 2009, showed the connection between engagement and effective team working, and team work appeared to be driven by clear communication as well as the assignment of challenging, meaningful, achievable tasks (Richardson, J and West, M 2012). A research conducted within a high- performance global bank by Tower Watson highlighted that effective team work in branches increased customer perceptions of courtesy and competence, that resulted in improved customer loyalty and market share, (Towers Perrin, 2009).

The National Health Service (NHS) in the UK revealed the important relationships between employee engagement, patient satisfaction and patient mortality, (Topakas, A., Admasachew, L. & Dawson, J. (2011). “Employee engagement emerges as the best predictor of NHS trust outcomes. No combination of key scores or single scale is as effective in predicting trust performance on a range of outcomes measures as is the scale measure of employee engagement”, Professor Mike West, Lancaster University, (Submission to the Task Force, 2012).

On Health and Well-being:

Research conducted by Burud and Tumolo 2004, concluded that having human capital practices and benefits that emphasised positive mental health, work–life balance and company-wide wellness, tended to have overwhelmingly positive effects on employee productivity, creativity, commitment, health, recruitment, and retention. Burud and Tumolo analysis also showed positive associations

between higher levels of use of human capital practices that emphasised employee engagement and various measures of overall financial success of the company, (Burud and Tumolo, 2004).

Studies carried out at the organisational level (Pugh and Dietz, 2008), examined the attributes of organisations selected as being among the best companies to work for. Results of the studies suggested that companies that support employee well-being, and with a higher quality of work environment such as an opportunity for career growth, a culture of support and openness, were more likely to have higher profits and success compared to those with a lower quality of work environment (Lau and May, 1998).

Companies who have disengaged workforce have more workplace incidents when compared with those engaged counterparts. The Olympic Delivery Authority in the UK, had Injury Frequency Rate of 0.17 per 100,000 hours worked (2011), the statistic was less than half of the construction industry average. This achievement was attributed to improved employee engagement (Rayton, B., Dodge, T., D’Analeze, G., 2012).

Fresh thinking and Innovation:

In this current uncertain climate, organisations’ ability to innovate is key to the survival and business continuity. Alfes et al 2013, analysed data from over 2000 employees of a recycling and waste management company, showed that line manager behaviour and organisational practices drove employee engagement. As a result, engaged employees drove innovative behaviour at work, (Alfes, K., Truss, C., Soane, E., Rees, C. and Gatenby, M., 2013). Furthermore, higher levels of engagement led to more innovative work behaviour, as engaged employees are more motivated to explore new methods, techniques or instruments to problem solve and convert innovative ideas into useful applications, (Alfes, K., Truss, C., Soane, E., Rees, C. and Gatenby, M., 2010).

A survey conducted by The Chartered Management Institute in 2012 revealed a significant association and influence between employee engagement and innovation.

They established that “The prevailing management styles in growing businesses are far more likely to be open, empowering, innovative, entrepreneurial and high trust environments”, (Worrall, L. & Cooper, C. L., 2012).

So what’s the answer?

Would you rather your customers be served by people who feel positively about your organisation, who would vouch for you as a company at a BBQ on the weekend, who would defend your brand in a social media or would you rather be that company no one wants to work for? That company we have all heard about. 

This paper aimed to provide insights and evidence to show that there is a strong correlation between employee engagement and organisational performance. And before the statisticians rush out to tell us that correlation does not mean causation, think of this. Would you rather your customers be served by people who feel positively about your organisation, who would vouch for you as a company at a BBQ on the weekend, who would defend your brand in a social media or would you rather be that company no one wants to work for? That company we have all heard about.

The argument is simple, there are well established benefits, significant and tangible ROI associated with employee engagement, however some things in the modern business world are beyond ROI; they are necessities of good corporate citizenship, like gender equality. The question should never be about what is the return on investment; some things we should invest in and foster because inherently they are the right things to do.

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