Lately, some pundits have been critical of employee engagement and its research. Gallup is arguably the most prolific researcher of employee engagement and has been publishing its State of the Global Workforce report for 16 years. In its latest report, Gallup found that only 13% of the global workforce is engaged at work. 63% is not engaged with their jobs and 24% are actively disengaged.[i]
What is interesting is that these percentages haven’t changed much since the report began in 2000, causing some to wonder if Gallup is simply describing a disposition of the human genome. Ever since Gallup initiated these reports, actively engaged employee scores have ranged from 13% and 20% and disengaged employee scores from 26% to 30%. Can you significantly impact employee engagement? If you drive up employee engagement does it provide the company with increased financial performance?
Is employee engagement a hoax?
If you look at which companies score the highest on Gallup’s survey, or Glassdoor’s company ratings, or the Fortune 100 Best Companies to Work For, you will see that the companies in the top have higher levels of engagement and financial performance.
Let’s look first at Gallup’s analysis. Gallup reports that, “Work units in the top 25% of Gallup’s Q12 Client Database have significantly higher productivity, profitability, and customer ratings, less turnover and absenteeism, and fewer safety incidents than those in the bottom 25%.”[ii] Organizations in Gallup’s database with an average of 9.3 engaged employees for every actively disengaged employee experienced 147% higher earnings per share compared to their competition. Yes, that number is 147%. That is HUGE! Organizations with an average of 2.6 engaged employees for every actively disengaged employee, on the opposite extreme, experienced 2% lower earnings per share than their competition.
What about companies who do well in the Fortune 100 Best Companies to Work For? Do they also benefit from improved financial performance? An analysis by Greg Filbeck and Diane Preece in the Journal of Business Finance and Accounting found that portfolios that invested in Fortune’s 100 Best Companies to Work for in America had higher risk adjusted returns than the Standard and Poor’s 500 over the period 1999-2005. They discovered that these firms also had higher price/book ratios. Investments in the top 25 of the Fortune 100 Best outperformed the remaining firms in five of the seven years studied.[iii]
Aon Hewitt publishes its own research on employee engagement. They have found that organizations with high levels of engagement (65% or higher) outperform the total stock market index, with shareholder returns that are 22% above average.[iv]
Employee engagement is no hoax.
Leaders who learn how to engage their employees break the long-standing averages of engaged and disengaged employees, and their reward is higher financial performance! The sad truth is that too few companies put any effort into employee engagement—despite the evidence.
Want more evidence? Email me at email@example.com, and I will provide the names of even more studies.
Employee engagement is the emotional commitment that employees have toward their work and employer, especially the employer’s purpose, mission and goals. It also drives the relationships that employees have with each other at work.
It is not a new idea! Employee engagement is built on the research of Frederick Herzberg, Hygiene Factors and Motivation Factors, which he wrote over 55 years ago[v]. Herzberg’s research identified two different categories of employee needs that are independent of each other and impact behavior in very different ways. These categories are hygiene factors and motivators.
Hygiene factors are what employees expect of a company, such as a safe working environment, competitive pay, and fair treatment by management. Hygiene factors vary by industry. In high tech companies for example, employees also expect casual attire, free breakfast bars and espresso. Hygiene factors produce no growth in worker output, but when hygiene factors are below industry standards, employees become dissatisfied and de-motivated, and that starts them to think about leaving and looking for other employers.
Motivators, on the other hand, are often linked with the job itself, and an employee’s relationship with the boss and co-workers. Motivators include: challenging work, a sense of achievement, learning, growth and development, recognition and accomplishment, and increased responsibility. Motivators drive higher employee discretionary effort, performance, output, and higher levels of job satisfaction and retention.
Employee engagement is a critical component of any talent management strategy, and it directly impacts your bottom line. It is no hoax! I have direct experience with management teams who changed to more engaging leadership styles. They benefited from increased employee engagement scores on surveys, and increased levels of discretionary effort, creativity and productivity!
What is your experience?
Do you believe that employee engagement is a hoax? Or, is it a way to engender more discretionary effort, raise retention numbers and improve your bottom line?
Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and is a Managing Partner of InnovationOne.US. He works with key decision makers and human resources leaders on talent management, leadership development and coaching, innovation, and other strategic initiatives. Please e-mail Victor at firstname.lastname@example.org or visit www.victorhrconsultant.com. For innovation visit www.InnovationOne.US.
[i] Gallup. State of the Global Workplace Report, 2013.
[iii] Greg Filbeck and Diane Preece, “Fortune’s Best 100 Companies to Work For: Do They Work for Shareholders?” Journal of Business Finance and Accounting 30 (June 2003)
[iv] Aon Hewitt, “Trends in Global Employee Engagement, 2011,” Found at http://www.aon.com/attachments/though-leadership/Trends_Global_Employee_Engagement_Final.pdf.