The new rules of engagement

How companies can enhance business performance by tapping into employees’ discretionary effort

By Jeff Pekar

In the 1980s, employees were perceived as a company’s highest cost. By the 1990s, they were referred to as “our greatest asset.” Today, leading employers consider their workforce to be their most important investors — of time, energy and skills. And, like investors of financial capital, investors of human capital have choices of how much of their resources — their talent — they will invest in their organization every day. 

There’s not a people shortage, there’s a talent shortage

It is important to note that talent shortages are not just hitting Western Canada.  According to a 2007 Manpower study, two out of every five companies are having trouble filling jobs, most notably in sales, skilled manual trades, operations, engineering, and accounting and finance staff. “Demand remains strong for highly-skilled accounting and finance professionals, particularly those whose functional expertise is complemented by excellent communication and technology skills,” said Max Messmer, CEO of Robert Half International. CMAs, therefore, are in a great position to benefit from this economic reality.

Employee engagement — the new competitive advantage

A significant challenge for companies today is to recruit and retain the right people who not only possess the proper skills but who are also a good fit in terms of corporate culture and values. In a business environment characterized by a global war for talent, it is not enough to have employees simply show up to work and “do their jobs.” For an organization to be successful in differentiating itself and to have a real competitive advantage, it must engage its employees.

High engagement means a strong connection exists between what employees think (rational drivers), how they feel (emotional factors), and what they do (motivational influencers). In other words, fully engaged employees clearly know what their roles are, they want to do their work out of a sense of pride and commitment, and they are not only willing to act, but are also empowered to take action to achieve their organization’s goals.

Engagement insights

Towers Perrin recently released its Global Workforce Study of 88,600 employees in 18 countries (including more than 5,000 in Canada). This study, the largest of its kind, sheds new light on what drives employees to invest their discretionary effort towards ensuring their company’s success.

Although there are consistent themes, the top engagement drivers vary by region and other demographics. For example, the perception that an organization develops leaders is not listed as an overall “Top 10 Drivers.” However, leadership development is the number one driver for employees 18-24, the so-called Generation Y employee.

That’s why an organization’s HR strategy needs to take a segmented marketing approach, not only in the way it positions its employment brand, but also in the way it addresses the needs of various employee groups. By gaining deep insight into the workforce, companies can tailor the programs used to engage employees more effectively by acknowledging the unique needs of each group.

For example, career advancement is not a top 10 engagement driver for those over 45 years of age.  However, it is the number two driver of engagement for those between 18 and 34.  “We held focus groups after our own employee engagement survey,” says Pat Brosseau, vice-president, human resources, HSBC Bank Canada. “It became clear that setting up career fairs in our main locations would have a great impact in addressing the need for career mobility, not only to promote job opportunities, but also to demonstrate more transparency of how people can grow within the organization.”

Perhaps somewhat surprising to some is the absence of “pay for performance” within the top 10 engagement drivers. “We have found that a competitive compensation package is important for recruitment and retention, but not necessarily for engagement,” says Brosseau.  “However, if people are underpaid, that can cause dissatisfaction,” she says.  In other words, good pay isn’t necessarily a motivator; it is a satisfier ... poor pay, on the other hand, can easily disengage an employee.”

Disengaged employees negatively affect bottom line

The Towers Perrin study found that engaged employees are much more likely than disengaged employees to feel that they can impact the quality of their product or service, customer satisfaction, revenue growth, and costs. Given the importance of engagement on these key financial, service, and productivity measures, employers who do not have a clear understanding of what drives engagement at their organizations may be at a real risk of losing the people they most want to retain, while retaining those who should be leaving.

The study also found that companies with higher levels of employee engagement achieve better financial results and are more successful in retaining their most valued employees.  Forty companies were analyzed over a three-year period, and those with more highly-engaged employees increased their operating income by 19 per cent and their earnings per share by 28 per cent year-over-year. By contrast, companies with the most disengaged employees showed year-to-year declines of 33 per cent in operating income and a decrease of 11 per cent in earnings per share.

According to the study, organizations are the most important influencers of engagement — not solely the front line manager, as was commonly believed. The organization  controls and shapes the work experience through facets such as its reputation in the community, its approach to social responsibility, and its customer service, each of which are top 10 engagement drivers.  However, when it comes to the top driver of engagement — that of senior management taking a sincere interest in employee well-being — many organizations are falling short. Only 6 per cent of employees feel they are treated as the most important part of the organization. Only one-third (35 per cent) feel senior leaders communicate openly and honestly, while less than half (47 per cent), feel senior leaders are visible or accessible. 

To help improve these results, senior leaders need to inspire employees by demonstrating — and communicating — the company’s vision and commitment. Steve Phinney, senior vice-president of corporate services at Progistix-Solutions Inc., a leading Canadian logistics management company, says, “The leader’s role is to guide, help, and recognize employees as they achieve the organization’s goals and to provide feedback on how they are doing.” 

A new set of competencies for future leaders is required. The challenge for senior management is to recognize the value of employees’ untapped potential and to channel it in ways that yield real improvements in business performance. Turning employees’ energy and ambition into engagement — and ultimately into significant performance lift — will demand attention, focus and clear follow-through on organizational practices.

Although there is no one “right model” for a high performance culture, employees will invest more to help the company succeed — if they see the return on their investment, whether that return be work/life balance, career opportunities, or a higher degree of pride in their organization, to name a few.

Jeff Pekar (jeff.pekar@towersperrin.com) is a consultant at Towers Perrin. Details of the Global Workforce Study can be found at www.towersperrin.com/gws.

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