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Posts Tagged ‘Employee Engagement’

Employee engagement measures score low – What’s Working™ study

Monday, July 25th, 2011

A recently conducted survey What’s Working™ (Mercer, 2011) in USA indicates that nearly one in three (32%) US workers is seriously considering leaving the organization now, the rate increasing sharply from 23% in 2005. Mindy Fox, Senior Partner at Mercer & US Region Leader mentioned that “the business consequences of this erosion in employee sentiment are significant, and clearly the issue goes far beyond retention. Diminished loyalty and widespread apathy can undermine business performance, particularly as companies increasingly look to their workforces to drive productivity gains and spur innovation”(Mercer, 2011).

The study results reflect that:

Only 43% of US employees believe they are doing enough to financially prepare for retirement;

Only 68% of employees rate their overall benefits program as good or very good, down from 76% in 2005, while 59% say they are satisfied with their health care benefits, down from 66%;

Base pay, the most important element of the employment deal, is less satisfying for employees (53% satisfied with base pay, compared with 58% in 2005);

Scores for career development and performance management improved compared to the study results from 2005, remaining however low: only 42% of employees today agree that promotions go to the most qualified employees in their organization, up from 29% in 2005, while 46% agree that their organization does an adequate job of matching pay to performance, up from 33% (Mercer, 2011).

Key measures regarding employee engagement registered low scores also, while intention to leave the organization is up across all employee segments, with the youngest workers most likely to be looking for a departure – 40% of employees age 25–34 and 44% of employees 24 and younger:

Key engagement measures show consistent decline among US workers

Youngest workers most likely to be ‘seriously considering leaving’ today

The What’s Working™ survey was realized over the past two quarters among nearly 30,000 workers in 17 countries, including 2,400 workers in the US. The survey, last conducted in the US in 2005, includes more than 100 questions on a range of work-related topics and reflects the overall demographics of the US workforce in terms of age, gender and job level. This research also is being conducted in 16 other countries worldwide (Mercer, 2011).

Reference

Mercer (2011), One in two US employees looking to leave or checked out on the job, says What’s Working research, available at: http://www.mercer.com/press-releases/1418665 (accessed 25 July 2011)

Tags: base pay, Employee Engagement, loyalty, Mercer, pay for performance, retention, What’s Working™
Posted in Measure, Performance Management, Report | No Comments »

Employee Engagement – a key driver of business performance

Tuesday, February 8th, 2011

Source: Compare Infobase Limited, 2007

Employee engagement has become in the recent years a hot topic. Although several scholars reported that it has rarely been studied in the academic literature and little scientific evidence is available about its antecedents and consequences (Saks, 2006; Robinson et al, 2004; Macey & Schneider, 2008), research initiatives in this area are on the rise (as illustrated by the number of journal published in the last few years).

Alignment between recruitment, retention and engagement is essential due to implications on the organizational delivery capability.

According to a research study documented by Echols (2007) cited in Bux & Tay (2010), “85% of value creation is driven by intangible assets such as people and not by asset on the balance sheet”. Searching and retaining the right talent and most of all, keeping them engaged represents today the key that drives lean organizations forward and sustains business performance in competitive and dynamic market conditions. A report on the American workforce shows that roughly half of all Americans in the workforce are not fully engaged or they are disengaged, leading to what was referred to as an “engagement gap” that it cost US businesses an estimated $ 300 billion a year in lost productivity (Saks, 2006 citing Bates, 2004; Johnson, 2004 & Kowalski, 2003).

What is Employee Engagement?

Many practitioners consider employee engagement a measure that reflects the extent to which employees contribute through their effort and enthusiasm to the success and performance of their organization.

In the same line of thought Crim and Seijts (2006) consider that an engaged employee is a person inspired, fascinated, fully involved, and committed for its work and willing to see the organization succeeding in its mission.

Accordingly, Sacks (2006) associates employee engagement with a sustainable workload, feelings of choice and control, recognition, fairness and justice, a supportive work community and meaningful and valued work.

Robinson et al. (2004) from the Institute of Employment Studies attribute several characteristics to engaged employees:

Belief in the organization
Desire to work and make things better
Understanding of business context and the ‘bigger picture’
Respectful of, and helpful to, colleagues
Willingness to go the extra mile
Keeping up to date with developments in the field

What is takes to raise the level of employee engagement?

According with Robinson et al.(2004), it’s not enough to wish to improve employee engagement, but you need to have strong “building blocks” at the base of your initiative. Here are several aspects that need to be taken into account:

Good quality line management;
Two way communication;
Effective internal co-operation;
A development focus;
Commitment to employee well-being;
Clear accessible HR policies and practices, to which all managers from all levels are committed.

References

Bux, R.S. and Tay, A. (2010), The Relationship of Psychological Empowerment, Talent Engagement and Talent Outcomes, International Review of Business research Papers, Vol 6, No. 1, pp. 215-227

Crim, D and Seijts, H. G. (2006): What engages employees the most or, The ten C’s of employee engagement, Ivey Business Journal, March/April

Macey, W.H. and Schneider, B. (2008), The meaning of Employee Engagement, Society for Industrial and Organizational Psychology, Vol. 1, pp. 3-30, available at http://www.learnership.co.uk/archive/29.pdf , (accessed 22 January 2011)

Robinson, D., Perryman S. and Hayday, S. (2004), The Drivers of Employee Engagement, a study supported by the Institute of Employment Studies Research Network, Report 408, available at http://www.managingpeople4profit.com/uploads/2/8/1/6/2816853/www-employment-studies-co-uk_drivers_of_engagement.pdf, (accessed 22 January 2011)

Sacks, M. A. (2006), Antecedents and consequence of employee engagement, Journal of Managerial Psychology, Vol. 21, No. 7, pp. 606-619

Additional resources

Lockwood, N.R. (2007), Leveraging Employee Engagement for Competitive Advantage: HR’s strategic role, Society of Human Resource Management, available at http://www.improvedexperience.com

smartKPIs.com (2010), Employee Engagement Index, smartkpis.com Blog, available at http://www.smartkpis.com/blog/2010/03/03/employee-engagement-index/ , (accessed 22 January 2011)

smartKPIs.com (2010), Gallup’s Customer Engagement Index, smartkpis.com Blog, available at http://www.smartkpis.com/blog/2010/03/11/gallups-customer-engagement-index/, (accessed 22 January, 2011)

smartKPIs.com (2010), Employee engagement and organizational performance, smartkpis.com Blog, available at http://www.smartkpis.com/blog/2010/08/06/employee-engagement-and-organisational-performance/ , (accessed 22 January 2011)

Tags: Employee Engagement, human capital, Institute of Employment Studies, Key Performance Indicators, knowledge economy, Measures, Performance Measures, recruitment, retention
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Employee Engagement at Western Union Malaysia – A case study

Friday, January 28th, 2011

Starting with 2002, Malaysia has taken important steps in recognizing the importance of knowledge, by launching a Knowledge Based Economy Master Plan directed towards transforming Malaysia in a knowledge based economy. One of the most important aspects considered in the plan was the increased importance that had to be showed to productivity and innovation, supported by effective management of both tangible but also intangible resources, such as human capital and knowledge (Husin et al, 2009).

In this context, one of the topics discussed during the conference “Performance Measurement & KPI for HR” organized by Asia Business Forum in Kuala Lumpur, Malaysia between 29^th November-1^st December was employee engagement. One of the highlights of the conference was a very interesting case study about employee engagement measurement at Western Union Malaysia.

As it emerged from the presentation and later discussions, measuring employee dynamics in general and employee engagement in particular is of grate importance for informing all the business actions that need to be taken in order to improve performance at Western Union Malaysia.

According to Anand Kadakol, country manager at Western Union Malaysia, the organization conducted two engagement surveys in the last 3 years. The main rating areas considered were:

Attrition risk due to external factors
Pride of working for the company
Personal growth and skill development story
Effort vs available resources

As the results of the survey showed, high scores were recorded on all rating areas of the employee engagement surveys making the organization to conclude that : „employees love to work for the company in Malaysia and are proud of it” .

Key Drivers of engagement at Western Union Malaysia

Among the most important aspects the management of the organization focused in order to increase employee engagement as the country managing director of the company put it were:

Trust – „ the foundation of employee engagement”
Idea pot/innovation – „is not whose idea is better, it is WHICH idea is better”
Focus on people problems – „individual issues need to be ALWAYS handled in isolation with development as focus”
Doing the right things at all levels – „ a leader need to focus on not to try doing the right things all the time”
Vulnerable leader – „ the harbinger of trust…line between hierarchy blurs”

Engagement driven results at Western Union Malaysia

Largest transaction country in Asia Pacific Region among outbound transaction markets within two years
Largest customer base country in Asia Pacific Region among outbound transaction markets within two years (Anand Kadakol, 2010)

References

Kadokal, A (2010), Sweet Success thru Employee Engagement, proceedings of the conference Performance Measurement & KPI for HR, Asia Business Forum 2010, Kuala Lumpur, Malaysia, representing Western Union (Country Director – Malaysia)

Husin, N.M., Hooper, K. Olesen, K. (2009), Assessing Quantity and Quality: The Case of Intellectual Capital Reporting in Malaysia, Department of Accounting, Auckland University of Technology, New Zealand

Additional Resources

smartkpis.com (2010), Employee Engagement Index, smartkpis.com Blog, available at http://www.smartkpis.com/blog/2010/03/03/employee-engagement-index, (accessed 22 January 2011)

smartkpis.com (2010), Gallup’s Customer Engagement Index, smartkpis.com Blog, available at http://www.smartkpis.com/blog/2010/03/11/gallups-customer-engagement-index, (accessed 22 January, 2011)

smartkpis.com (2010), Employee engagement and organizational performance, smartkpis.com Blog, available at http://www.smartkpis.com/blog/2010/08/06/employee-engagement-and-organisational-performance, (accessed 22 January 2011)

Tags: Case Study, Employee Engagement, Key Performance Indicators, Malaysia, Western Union
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10 Key Performance Indicators for 2010

Saturday, September 4th, 2010

smartKPIs.com Performance Architect update 35/2010

smartKPIs.com contains over 5,000 KPI examples from 14 functional areas and 24 industries. A question raised by many is: ‘If you are to pick a handful, which ones would stand out?’

I have selected below 10 KPI examples of what we consider to be smartKPIs: they are widely used and relevant, the superstars of KPIs. This is not to say any company should use them. Simply, a list of 10 KPI examples anyone should take note of:

% Net profit rate – A profitable business is a sustainable business. It is however important to have realistic expectations. Returns of over 30% may be speculative, while in some economies returns of under 5% are lower than interest rates.

$ Revenue – Growing revenue is an expression of having the right product/service mix, supported by the right team delivered at the right time. Converting opportunities in sales is the essence of a sustainable business.

% Profitable customers – getting the balance right is the basis for financial success. Although oftentimes it is difficult to track, it is ads a great deal of insight and informs decision making. Activity based costing is key to getting this indicator right.

# Net Promoter Score – having customers that are not only satisfied, but are actively endorsing a company/product/service. Recently is has become a favourite indicator of customer satisfaction, due to its simplicity and relevance.

% On-time delivery – an operational focused KPI with wide reaching implications. It can be used in a variety of industries and functional areas, as time is an important resource to anyone. Oftentimes it acts as a bottleneck as it is influenced by many indicators and it impacts a great deal of other indicators.

% Projects on time, on budget and according to specifications – getting the triangle right is difficult and priorities may vary from one project to another. It is however a useful base to start from. Can be customised as per the preference of project boards and project managers to cover only specific aspect of the triangle.

% Processes optimised – one key managerial responsibility is creating the right environment for the staff members to operate in. This includes using a management system that is well thought of and refined. Mapping and improving work processes is key to using a performance oriented architecture.

# Employee engagement – Some say money can’t buy it. It is that extra level of commitment that is induced by motivating purposes, inspiring leaders and working environments that facilitate happiness in the professional life.

# Proposed improvement ideas per employee – inspired by H.W. Heinrich’s work in the 1930s or “the Pyramid Theory” as some call it. They main results are visible at the top, but you need to monitor the base to ensure the right outcomes are achieved.

$ Investment in learning per employee – Not the ideal indicator of training impact, but a widely used substitute. It monitors both training spend and the wide allocation of funds to avoid serial trainees.

An issue with KPI examples is that names don’t tell the complete story. To find out more about each of these examples and thoroughly understand them a separate blog post would be required for each, complemented by a complete KPI documentation form. In the meantime, www.smartKPIs.com is available to further explore relevant and well documented KPI examples.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

Walker, Rob 1992, “Rank Xerox – Management Revolution”, Long Range Planning, Vol. 25, No. 1, pp. 9 to 21

Tags: Employee Engagement, Heinrich, ideas per employee, Net profit rate, Net Promoter Score, On-time delivery, Processes optimised, Profitable customers, Projects on budget, Pyramid Theory, Revenue, training spend per employee
Posted in KPI, Library of KPI examples, Measure, Performance Architect update, Performance Management, Performance Measurement, smartKPIs.com | No Comments »

Employee engagement and organisational performance

Friday, August 6th, 2010

Engagement is all about getting employees to ‘give it their all’. Various research studies show a strong connection between an employee’s level of engagement and the level and quality of work performance.

Elements of engagement

The concept of engagement has naturally evolved from past research on high involvement, empowerment, job motivation, organizational commitment and trust.

Dr. Paul Bernthal (2009) proposes that engagement comprises of individual value, focused work, and interpersonal support with the following sub-components that further define the meaning of engagement:

Individual Value - Employees feel more engaged when they are able to make a unique contribution, experience empowerment, and have opportunities for personal growth. The perception of meaningful work is one of the most influential factors in determining employees’ willingness to stay with an organization.
Focused Work – Employees feel more engaged when they have clear direction, performance accountability and an efficient work environment.
Interpersonal Support – Employees feel more engaged when they work in a safe, cooperative environment.

Work related roles

“Role theory” reviews different roles that people engage in at work and explains reasons why people engage in certain roles and not in others (Welbourne, 2003). Engagement is about what people do at work. The Five work-related roles differentiated are:

1. Job holder role – employees come to work and do the job that is listed in their job description.

2. Team member role – employees go “above and beyond” to help members of their team work toward common goals.

3. Entrepreneur role – employees come up with new ideas and processes and try to get those ideas implemented.

4. Career role – employees do things to enhance their career in the organization; they learn, they adapt new skills and more.

5. Organization member role – employees do things that promote and help the company even if it’s not part of their jobs or their team’s duties.

Employee engagement and performance measurement

Researches on employee engagement use different approaches. According to the global workforce study conducted by Tower Perrins, only a fifth of the respondents can be categorized as engaged (Towers Perrin, 2008). The largest segment, over 40%, is the so-called “enrolled,” perhaps best described as capable but not fully committed. The four categories of employees engagement are presented below:

Source: Towers Perrin, 2008

The same workforce study reveals that a spread of more than 5% in operating margin and more than 3% in net profit margin was observed between the companies with high employee engagement and those with low engagement. How engagement affects financial performance and retention in companies is illustrated in the figure below.

Source: Towers Perrin, 2008 (click on the image for larger size)

Another employee engagement research approach was developed by Gallup Consulting, which uses 12 questions (Q12) to measure the employee engagement (Gallup Consulting, 2008). Gallup’s latest meta-analysis (an analysis of data from more than 152 organizations) shows dramatic differences between top and bottom quartile workgroups on key business outcomes, as it is revelead in the the figure below:

Source: Gallup Consulting, 2008, 2010

Answers to the Gallup’s questions (Q12) that measure employee engagement correlate with retention, productivity, customer engagement and safety.

Why is important to measure engagement?

Some companies use engagement scores as lead measures in their HR scorecards. When an organization can show the relationship between engagement scores and bottom-line outcomes, everyone pays attention to the engagement index. Establishing this critical link between people and performance helps HR professionals prove that people-related interventions are a worthwhile investment.

How do you measure the employee engagement in your firm?

For further examples of performance measures and reports explore the Human Resources KPIs in practice section of smartkpis.com (smartKPIs.com 2010). The employee engagement index is available at: http://www.smartkpis.com/kpi-key-performance-indicator/employee-engagement-index-1836.html

References

Bernthal P. 2009, Measuring Employee Engagement, Development Dimensions International, Inc., available at: http://www.ddiworld.com/pdf/ddi_MeasuringEmployeeEngagement_wp.pdf

Gallup Consulting 2008 -2010, Employee Engagement , What’s Your Engagement Ratio?, available at: http://www.gallup.com/consulting/52/employee-engagement.aspx and http://www.gallup.com/consulting/121535/Employee-Engagement-Overview-Brochure.aspx

Towers Perrin 2008, Global Workforce Survey, Closing the Engagement Gap: A Road Map for Driving Superior Business Performance, available at: http://www.towersperrin.com/tp/getwebcachedoc?webc=HRS/USA/2008/200803/GWS_Global_Report20072008_31208.pdf

Welbourne T. 2003, Employee Engagement: Doing It vs. Measuring, available at: http://www.eepulse.com/documents/pdfs/HR.com-9-8-03.pdf

Tags: Employee Engagement, Financial Performance, Performance Measurement, X employee engagement index
Posted in Index, KPI, Performance Measurement, smartKPIs.com | No Comments »

Employee Engagement Index

Wednesday, March 3rd, 2010

In the last decade Employee Engagement has become a hot topic both in academic literature and in practice. The debate goes mostly around the implications that employee engagement can have on the success and bottom line of a company (Sacks, 2006).

It is widely known that organizations have traditionally relied on financial measures to determine their organizational value, success and financial performance through measures such as profitability, revenue or return on investment. It is also known that many soft measures or human oriented measures of traits, attitudes and behavior became in the last two decades more and more important determinants of employees and organizational performance (Peterson et al, 2001).

Many studies have shown the relationship that forms between employee cognitive attitudes, personality traits and job performance. However it was not clear until recently what is precisely the connection between all these components and how they can drive and determine organizational performance outcomes.

After 25 years of interviewing and surveying employees and managers the Gallup Organization has coined Employee Engagement Index as a driving force of the organization success and performance. (Little et al, 2006). The studies show that Employee Engagement Index has a significant implications for customer satisfaction, sustainable growth, real profit increase, stock increase, productivity and employee retention among the most important influenced factors (Gallup Consulting, 2008).

What is Employee Engagement?

Many academics and consultants tried to come with a definition of how employee engagement can be actually defined. Debates and research are still underway, but a common framework seems to emerge from the research work.

In the same line of thought Crim et al (2006) consider that an engaged employee is a person inspired, fascinated, fully involved, and committed for its work and willing to see the organization succeeding in its mission. Accordingly, Sacks (2006) associates employee engagement with a sustainable workload, feelings of choice and control, recognition, fairness and justice, a supportive work community and meaningful and valued work.

How is Employee Engagement Index measured?

Employee Engaged Index is based on a survey questionnaire that assess the employees effort and enthusiasm at work and can vary from organization to organization. According with the researchers and consultants from Burke, a leading international research and consulting firm, there are 6 important engagement components that determine a substantive Employee Engagement Index:

• Company: satisfaction with the working environment and likeliness to withstand other job offers on the market

• Manager: satisfaction with the mangers

• Work group: satisfaction with the current working group: colleagues and managers

• The job: satisfaction with the job

• Career/ Profession : satisfaction with the choice of career and career perspectives

• Customer: Satisfaction with the working relationship had with customers/clients

Employee Engagement Index: Analysis and outcomes

According with the research studies underpinned by the Gallup Organization it appears that engaged employees are more productive, more customer focused and more likely to withstand temptations to leave the organization.

The same studies frame employees in three categories:

• engaged – work with passion and are profoundly connected to the organization values

• not engaged – put time but not passion in their work and they are not connected to the organizational values

• actively disengaged – employee busy to act out their unhappiness and undermine what their engaged colleagues try to accomplish ( Crim et al, 2006)

Based on these categories Gallup built the Engagement ratio which according with them is a macro level indicator that allows organizations to track the ratio of engaged to actively disengaged employees.

The results show that:

• In average the ratio of engaged to actively disengaged employees is 1,5 to 1

• In world class organization (successful organizations) the ratio of engaged to actively disengaged employees is 8 to 1

This difference between the engagement ratio for average and world class organizations is translated in the way a suite of performance indicators are affected by employee engagement and how in the end they affect consequently the bottom line of the organization. (see graph below, Gallup – Employee Engagement)

As we have seen above employee engagement has a direct influence on a series of other performance measures which in the end consequently determine and drive the performance outcome of an organization. In this context, as the Gallup researchers acknowledge, for successful organizations the Employee Engagement Index transcends from a human resource initiative, “into a strategic approach supported by tactics for driving improvement and organizational change”

For more resources and information on human resource management please visit our performance measures and KPIs database on smartkpis.com.

References:

Sacks, M. Allen (2006): Antecedents and consequence of employee engagement, Journal of Managerial Psychology, Vol 21, No 7, pp 606-619

Peterson, J. Suzanne and Luthans, Fred (2002): Implications for managerial effectiveness and development, Journal of Management Development, Vol 21, No 5, pp 376-387

Crim, Dan and Seijts, H. Gerrard (2006): What engages employees the most or, The ten C’s of employee engagement, Ivey Business Journal, March/April

Little, Beverly and Little, Philip (2006): Employee engagement: Conceptual issues, Journal of Organizational Culture, Communication and Conflict, Vol 10, No 1, pp 111-120