I am delighted to share an article from Phil Walker of WTT Results Ltd and a fellow Associate of Win Hearts and Minds. For more than 15 years, Phil Walker (firstname.lastname@example.org) has delivered transformational change for organisations, businesses, teams and individuals.
Employee Engagement – real world facts
One of the four streams of the Chartered Institute of Personnel and Development (C.I.P.D.) annual conference held in November 2012 was “Engagement and Motivation”. Employee Engagement is surely a hot topic in the world of Human Resources. Yet it is less so amongst commercial, operational and strategic leaders outside of the HR community, be they in the private, the public or the third sectors. Why is this?
Is it, perhaps, that Employee Engagement is seen by many as “soft and fluffy”? The importance of Employee Engagement is being recognised, with the July 2012 CBI Harvey Nash employment trends survey identifying Employee Engagement as the top workforce priority, ahead even of controlling labour costs. But whilst I hear people talking, not many are actually systematically rolling out programmes of work to improve Employee Engagement. If you aren’t already, what will it take for you to take action? Perhaps you need more information.
Studies, conducted by academics, consultants and leaders of organisations in all three sectors, show the links between Employee Engagement and improvements in all of the following:-
1. Income growth
2. Productivity and performance
3. Customer/client satisfaction
5. Absence and well-being
6. Staff retention
7. Health and safety
My aim is to save you time. I will document the findings of these studies in this article. If you want to do additional research, you will find much more supporting material than I can include in this relatively short piece. Alternatively, you can save even more time and just get on designing and implementing the programmes to improve Employee Engagement, perhaps with help from someone who has already done so.
Sainsbury’s have found that the level of Employee Engagement can contribute up to 15% of a store’s year-on-year growth.
Organisations that were in the top 25% for the level of Employee Engagement had twice the net annual income (profit attributable to shareholders) than those organisations in the bottom 25%; furthermore they returned 7 times more to their shareholders over 5 years than did the bottom group. (Source: Kenexa Research Institute 2008).
Dorothy Perkins found that stores with high engagement demonstrated 12% higher growth in sales, delivered 10% improvements in operating savings, and experienced 35% lower stock loss. They calculated that a store with an average monthly turnover of £2.3m could yield an annual gain of £445,000 from the 12% higher growth
Gallup data (2006) has also been used to show that the earnings per share growth rates of those units with engagement scores in the top 25% were 2.6 times those of units with below average engagement scores.
Organisations with high levels of engagement (65% or greater) continue to outperform the total stock market index and posted total shareholder returns 22% higher than average in 2010. On the other hand, companies with low engagement (45% or less) had a total shareholder return that was 28% lower than the average (Aon Hewitt 2011).
Productivity and performance
85% of the world’s most admired companies believe that efforts to engage employees have reduced employee performance problems (Hay 2010).
RSA found in their MORE TH>N call centres that engaged people have 35% lower average wrap times (time between calls) than disengaged people. Engaged staff are able to talk to an additional 800 customers per year on average. In other words, for every eight engaged people they employ they get the equivalent of an additional member of staff without any additional pay cost.
A Gallup study (2012) looking at data from over 23,000 business units has demonstrated that those with the highest engagement scores (the top 25%) averaged 18% higher productivity (and 12% higher profitability) than those with the lowest engagement scores (the bottom 25%).
Serco uses the Net Promoter Score (NPS) to measure customer loyalty; customers are asked to assess the likelihood that they would recommend the company to others. Those who score the question highly are classed as ‘promoters’, those who score the question poorly are classed as ‘detractors’, and those in between classed as ‘passives’. Serco worked with Aon Hewitt to look at 274 Serco client contracts and found correlation between Employee Engagement and the NPS. Those contracts serviced by employees whose engagement had improved over the year had NPS scores 24% higher than those employees whose engagement had declined.
70% of the more engaged have a good understanding of customer needs against only 17% of the disengaged (PWC). Similarly, 67% of engaged employees were happy to advocate their organisations compared to only 3% of the disengaged.
78% of the more engaged employees in the public sector felt they could impact public service delivery positively; only 29% of the disengaged felt the same way (Towers Watson 2007).
A CBI-AXA report from 2007 found that 70% of engaged employees indicated a good understanding of how to meet customer needs; while only 17% of non-engaged employees said the same.
Encouraging shop floor input at BAE and creating a more engaged workforce led to more than £26 million of improvement opportunities being identified by the shop floor in the first year, and during the second year the time taken to build the Typhoon aircraft fell by more than 25%.
59% of the more engaged employees say that work brings out their most creative ideas, against 3% of the less engaged (Gallup 2007).
In 2010 the Welsh Government launched the ‘Managing with Less’ initiative to respond to the reductions in budgets needed in tough financial times. It secured the active engagement of most of their 5,500 employees. 98% of employees were aware of the ‘Managing with Less’ initiative, 83% of employees participated in discussions to identify cost- and efficiency-savings, and 86% of employees felt their colleagues were committed to the ‘Managing with Less” approach. In 2010-11, ‘Managing with Less’ resulted in spending reductions of more than £20m without the need for compulsory redundancies.
Absence and well-being
The annual cost to the UK economy of sickness absence is over £17 billion according to the CBI. They found that engaged employees take an average of 2.69 days sick a year; the disengaged take 6.19. Engaged employees, on average, cost 3.5 days per year less sick pay.
A Children’s Hospice who implemented Employee Engagement programmes found that their sickness absence fell by one third, very similar to the situation in US Federal Government organisations where those with the highest levels of Employee Engagement had sickness absence levels one-third lower than those with the lowest levels of engagement.
Nampak, a leading plastic bottle producer, achieved a 26% reduction in absence levels following the introduction of an engagement programme that improved Employee Engagement by 5%.
Aon Hewitt found similar in 2012 – companies with highly engaged staff report employees taking an average of 7 absence days per year, approximately half the 14 days per year reported in low engagement companies (bottom 25%). Organisations with high levels of Employee Engagement also report significantly less workplace stress, 28% versus 39% for the less engaged organisations.
Rentokil found the teams that most improved engagement saw staff retention increase 6.7%, providing an estimated saving of almost £7 million.
We all know that replacing employees who leave is time consuming and expensive – it can cost up to 150% of the departing employee’s salary and their job is most likely not getting done, or done well, until they are replaced with suitably trained staff. The Corporate Leadership Council (CLC) identified that organisations with high Employee Engagement have the potential to reduce staff turnover by 87%; the disengaged are four times more likely to leave the organisation than the average employee (CLC 2008).
Gallup showed in industries such as Retail with high staff turnover (over 60%), those companies with the lowest engagement (bottom 25%) had a 31% higher turnover than those in the top 25% for Employee Engagement. Very similar findings emerged in organisations with lower staff turnover, showing the strong connection between Employee Engagement and staff retention.
According to The Hay Group, companies with high levels of engagement show staff turnover rates 40% lower than companies with low levels of engagement.
Health and safety
The Health and Safety Executive estimated the costs of workplace injuries and ill health at £14 billion in 2009/10, and better managing these events opens the possibility of reducing the human and financial costs of workplace injury and accidents.
The Olympic Games of 2012 was seen as a great success for many reasons. The Olympic Delivery Authority achieved an Accident Frequency Rate of less than half the construction industry average, and attributed this to strategies known to improve Employee Engagement.
Gallup reports that those organisations in the bottom 25% for Employee Engagement averaged 62% more accidents than those in the top 25% (Gallup 2006).
54% of the disengaged say work has a negative effect on their physical health as against 12% of the engaged (Gallup).
So those are the findings. What now?
The UK has a productivity problem. The most recent Office of National Statistics (ONS) survey found that output per hour in the UK was 15% below the average for the rest of the G7 industrialised nations in 2011. On an output-per-worker basis, UK productivity was 20% lower than the rest of the G7 that year. This is the biggest gap seen for 16 years.
Survey after survey on Employee Engagement shows that only around one third of UK workers are engaged – a figure which leaves the UK ranked ninth for engagement levels amongst the world’s twelve largest economies as ranked by Gross Domestic Product (GDP) (Kenexa 2009).
There is very strong evidence that productivity and Employee Engagement are linked; I have only covered a very small selection of findings. Investing in programmes of work to improve Employee Engagement in your organisation will improve performance in the 7 areas identified at the beginning of this article and may have other benefits as well. It is time for you to take action in your organisation – there are others, some of whom are identified in this article, who are ahead of you!