doing more with less employee engagement and behavioural economics

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28/02/2011 DOING MORE WITH LESS EMPLOYEE ENGAGEMENT AND BEHAVIOURAL ECONOMICS By Simon Penny The Unturned Stones of Productivity All organisations worry about the state of workforce commitment given the current environment of staff reductions, outsourcing and the requirement to do “more with less”. What’s more, many HR professionals believe that an economic recovery will lead to both increased turnover and demands for heightened productivity. Engagement is the extent to which employees commit to something or someone in their organisation, how hard they work and how long they stay as a result of that commitment. Employee Engagement drives Employee Performance and Workforce Retention. Most employees are ‘up for grabs’ – neither engaged or disengaged. According to a recent “Corporate Leadership Council” (CLC) survey of more than 50,000 employees at 59 member organisations in 27 countries and 10 industries, there are real business outcomes produced by increasing employee engagement, and that highly committed employees perform up to 20 percentile points better and are 87% less likely to leave the organisation than employees with low levels of engagement. To help organisations further conceptualize the potential gains to be made by promoting Employee Engagement, the CLC analysts derived the following two rules: Ø The “10:6:2 rule” of the impact of Engagement on employee performance Every 10% improvement in engagement leads to a 6% improvement in employees’ effort levels, which, in turn, leads to a 2 percentile point improvement in performance. Ø The “10:9 rule” of the impact of engagement on intent to stay, Every 10% improvement in engagement leads to a 9% improvement in employee intent to stay with their employer over the next 12 months. Of some concern, the CLC’s research team uncovered a fairly significant level of disengagement or neutrality in commitment amongst surveyed employees. Only 11% of employees fell into the “true believer” category; these are high performers who frequently help others with heavy workloads, who volunteer for other duties, and who constantly look for ways to do their jobs better. At the other end of the bell curve, 13% of employees are not just “not engaged “, but are in a real sense “opposed” to something or someone within their organisation, or, perhaps the organisation itself. These “disaffected employees” are poor performers who frequently put in minimal effort. The real opportunity lies in the vast middle of the bell curve – the more than 76% of employees who are somewhere between these two extremes – “the agnostics”. These are

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Page 1: Doing More With Less   Employee Engagement And Behavioural Economics

 

28/02/2011 

DOING MORE WITH LESS ‐ EMPLOYEE ENGAGEMENT AND BEHAVIOURAL ECONOMICS  

By Simon Penny 

The Unturned Stones of Productivity  

All organisations worry about the state of workforce commitment given the current environment of staff reductions, outsourcing and the requirement to do “more with less”. What’s more, many HR professionals believe that an economic recovery will lead to both increased turnover and demands for heightened productivity. 

Engagement is the extent to which employees commit to something or someone in their organisation, how hard they work and how long they stay as a result of that commitment.   Employee Engagement drives Employee Performance and Workforce Retention.   

Most employees are ‘up for grabs’ – neither engaged or disengaged.   According to a recent “Corporate Leadership Council” (CLC) survey of more than 50,000 employees at 59 member organisations in 27 countries and 10 industries, there are real business outcomes produced by increasing employee engagement, and that highly committed employees perform up to 20 percentile points better and are 87% less likely to leave the organisation than employees with low levels of engagement. 

To help organisations further conceptualize the potential gains to be made by promoting Employee Engagement, the CLC analysts derived the following two rules: 

Ø The “10:6:2 rule” of the impact of Engagement on employee performance ‐ Every 10% improvement in engagement leads to a 6% improvement in employees’ effort levels, which, in turn, leads to a 2 percentile point improvement in performance. 

Ø The “10:9 rule” of the impact of engagement on intent to stay, ‐ Every 10% improvement in engagement leads to a 9% improvement in employee intent to stay with their employer over the next 12 months. 

Of some concern, the CLC’s research team uncovered a fairly significant level of disengagement or neutrality in commitment amongst surveyed employees.    

Only 11% of employees fell into the “true believer” category; these are high performers who frequently help others with heavy workloads, who volunteer for other duties, and who constantly look for ways to do their jobs better.    

At the other end of the bell curve, 13% of employees are not just “not engaged “, but are in a real sense “opposed” to something or someone within their organisation, or, perhaps the organisation itself.   These “disaffected employees” are poor performers who frequently put in minimal effort.    

The real opportunity lies in the vast middle of the bell curve – the more than 76% of employees who are somewhere between these two extremes – “the agnostics”. These are 

Page 2: Doing More With Less   Employee Engagement And Behavioural Economics

 

28/02/2011 

employees who do not go to great lengths in their jobs, but neither do they shirk their work. This group is therefore “up for grabs” – they may not yet have found reasons to fully commit to their organisations, but they may well be willing to commit to their company more deeply given the right incentives.     Research also indicates that most employees need the same things to commit to their company, exert effort and perform at their best.     

One of the top engagement drivers in fostering Employee Engagement, and by extension employee effort and retention, is the role of the local manager.     

Managers can strongly impact employee discretionary effort and retention by focusing on the three C’s: 

Ø Connection ‐ Ensuring that employees understand Organisational Goals, the connection of their jobs to Organisational Strategy, and the importance of their jobs to Organisational Success. 

Ø Contribution ‐ Refining their people and process management skills by being adaptable, setting realistic performance expectations, and helping employees to find solutions to problems at work and to break down projects into manageable components. 

Ø Credibility ‐exhibiting the qualities of honesty, integrity, and a commitment to diversity.  

Employees who are highly engaged perform better on the job and offer better customer service, leading to higher business profits as a result of that service.     A Gallup study of Employee Engagement at call centers found that the more engaged the employees were, the more satisfied customers were – and the more satisfied customers were the less customer attrition.     According to the study, a 5% to 10% increase in employee engagement at call centers resulted in an increase of 1,227 to 2,454 more calls per year.    Since researchers found that customer satisfaction is directly related to the number of calls needed to resolve a query, the extra minutes’ would contribute to fewer average calls per query resolution and, thus, less customer attritions. 

If 76% of employees are neither fully committed nor uncommitted and we know that managers are the conduit to what matters (connection, contribution and credibility) the challenge is to engage “the agnostics” who are “up for grabs” ‐ enticing them to become “true believers".    

According to the Gallup Organisation's new applied behavioral economics approach the discipline of Employee Engagement commences by embracing human nature, as we are all human beings before we are employees.    By capitalizing on basic human nature to select and position employees, to manage and motive them, to accelerate their development and unleash both their innovation and productivity, Managers hold the keys to ultimately engage the emotions of a company’s most important asset – their customers.