employee engagement li presentation april 7 2011

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Employee Employee Engagement Engagement

How Can you raise the value How Can you raise the value contributions of your people?contributions of your people?


Defining the Defining the Terminology Terminology

Employee Engagement: Employee Engagement: It is the extent to which employees It is the extent to which employees commit to something or someone in commit to something or someone in their organization - the amount of their organization - the amount of discretionary effort they provide and discretionary effort they provide and how long they stay with an organization how long they stay with an organization as a result of that commitment. (CLC, as a result of that commitment. (CLC, 2004) 2004)



Employee engagement is the level of Employee engagement is the level of commitment and involvement an employee has commitment and involvement an employee has towards their organization and its values towards their organization and its values (Vazirani, 2007). Engagement is the willingness (Vazirani, 2007). Engagement is the willingness and ability to contribute to company success, the and ability to contribute to company success, the extent to which employees put discretionary extent to which employees put discretionary effort into their work, in the form of extra time, effort into their work, in the form of extra time, brainpower and energy (Towers Perrin, 2007). brainpower and energy (Towers Perrin, 2007). Often used as a synonym for motivation or Often used as a synonym for motivation or motivation and retention; engagement is really motivation and retention; engagement is really more fundamental. more fundamental.



Engagement is an employee's decision to Engagement is an employee's decision to apply his discretionary effort to the goals of apply his discretionary effort to the goals of the enterprise, to accept those goals as his the enterprise, to accept those goals as his own and wholeheartedly commit him/herself own and wholeheartedly commit him/herself to achieving them. (Fineman & Carter 2007) to achieving them. (Fineman & Carter 2007)



Return on Investment (ROI): Return on Investment (ROI): For recognition programs, the ROI is the For recognition programs, the ROI is the method used to measure the benefit method used to measure the benefit gained as a function of the cost of the gained as a function of the cost of the program. program.



Value on Investment (VOI): Value on Investment (VOI): VOI is another approach to ROI that emphasizes VOI is another approach to ROI that emphasizes both the financial and non- financial impact of both the financial and non- financial impact of recognition. VOI includes all tangible and recognition. VOI includes all tangible and intangible benefits and overall value (financial and intangible benefits and overall value (financial and non-financial) produced by a business initiative -non-financial) produced by a business initiative -financial and non-financial. Too often, the use of financial and non-financial. Too often, the use of ROI focuses exclusively on only the financials and ROI focuses exclusively on only the financials and does not include the "softer" measures of value, does not include the "softer" measures of value, such as teamwork and cultural values. such as teamwork and cultural values.


The Challenge The Challenge

Disengaged workers cost organizations money Disengaged workers cost organizations money in many ways especially in productivity . in many ways especially in productivity . Engaged and disengaged workers of equal Engaged and disengaged workers of equal skills, knowledge and abilities do not skills, knowledge and abilities do not contribute equally. Gallup estimates the cost contribute equally. Gallup estimates the cost of employee disengagement in the u.s. of employee disengagement in the u.s. annually to be $375 billion in direct costs with annually to be $375 billion in direct costs with total costs exceeding $1 trillion or 10% of total costs exceeding $1 trillion or 10% of Gross Domestic Product annually. (Gallup, Gross Domestic Product annually. (Gallup, 2004a, 1)2004a, 1)



Unfortunately, few measures exist that Unfortunately, few measures exist that quantify the impact of engagement in quantify the impact of engagement in financially tangible terms. And those that do financially tangible terms. And those that do exist are hard to be implemented in exist are hard to be implemented in organizations that fail to see the merit in organizations that fail to see the merit in measuring human capital to this measuring human capital to this degree. degree.


The Challenge The Challenge Why do we not see more attention to this? Why do we not see more attention to this?

The practice of tracking ROI on a piece of The practice of tracking ROI on a piece of equipment is more ingrained. equipment is more ingrained. Employee recognition and engagement is Employee recognition and engagement is often misunderstood meaning often misunderstood meaning different things to different people. different things to different people. Accounting is not set up to track this Accounting is not set up to track this expense. expense.


The Challenge The Challenge Why do we not see more attention to this? Why do we not see more attention to this?

Only some HR disciplines are able to bring Only some HR disciplines are able to bring the measurement of HR capital the measurement of HR capital to the surface. to the surface. It has traditionally been in a world of soft It has traditionally been in a world of soft measurement. measurement. Hard to justify to owners and investors. Hard to justify to owners and investors.



Some best measures do exist, along with Some best measures do exist, along with Return on Investment (ROI) methodologies Return on Investment (ROI) methodologies that impact intangibles (such as turnover) can that impact intangibles (such as turnover) can be measured and therefore contribute to a be measured and therefore contribute to a quantifiable understanding of the benefits of quantifiable understanding of the benefits of employee engagement. employee engagement.



These measures are important because These measures are important because initiatives designed to drive engagement are initiatives designed to drive engagement are often time and resource intensive and while often time and resource intensive and while we may firmly believe that they are worth the we may firmly believe that they are worth the investment, we must also strive to investment, we must also strive to demonstrate that potential in terms that demonstrate that potential in terms that senior executives and investors can quantify senior executives and investors can quantify to the bottom line success of the company. to the bottom line success of the company.


Two Formulas for Two Formulas for Measuring Human Measuring Human

Capital Capital

Human capital ROT = Revenue - (Operating Human capital ROT = Revenue - (Operating expense - labour cost) + labour cost and expense - labour cost) + labour cost and Human capital Value Added = Human capital Human capital Value Added = Human capital ROJ + number of employees ROJ + number of employees



Capital Capital

When we consider that financial data is a When we consider that financial data is a lagging indicator, it provides even more lagging indicator, it provides even more importance on the leading indicators - such importance on the leading indicators - such as employee engagement - to see early as employee engagement - to see early warning signs and take action. warning signs and take action.



Capital Capital

In the era of cultivating the engaged In the era of cultivating the engaged workplace in the knowledge-based economy, workplace in the knowledge-based economy, the paradigm shift is for HR professionals to the paradigm shift is for HR professionals to become key stakeholders in the process of become key stakeholders in the process of measuring employee engagement to ensure measuring employee engagement to ensure that VOI and ROI are built in to the process that VOI and ROI are built in to the process and to ensure all Employee Engagement and and to ensure all Employee Engagement and recognition investments are clearly aligned recognition investments are clearly aligned with company goals. with company goals.


A Starting Point A Starting Point 1.1. Understand the relationship between Understand the relationship between

people and business performance people and business performance 2.2. Find a simple and consistent way to Find a simple and consistent way to

measure value and report it measure value and report it 3.3. Spend time analysing results rather than Spend time analysing results rather than

arguing about the data arguing about the data 4.4. Act on the outcomes to improve bottom-line Act on the outcomes to improve bottom-line

performanceperformance


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employee engagement li presentation april 7 2011

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