The term employee engagement may have only come into widespread usage in the last two decades or so, but the principle behind this concept is far older.
Jeremiah James Colman of Colman’s Mustard provided a subsidised school for employees’ children and opened a kitchen offering reasonably priced meals for staff in the 1860s. Later in the 1920s, the Eastman Kodak Company gave staff a comprehensive range of benefits, from life & health insurance, profit sharing schemes and company housing.
When many think of employee engagement, initiatives like yearly surveys, casual Fridays and company-sponsored after-work drinks come to mind. While these all play a part in engagement, the solutions of today are more advanced than ever before with Big Data technologies and complex algorithms being part of the latest wave of innovations. But the motivation for these initiatives remains the same: improving the well-being and loyalty of employees. What has changed is what staff expect from employers, as well as the huge number of new employee engagement offerings.
Employees today require much more than just financial incentives with mental health support, corporate transparency to career development schemes, all being important aspects of employee engagement. Some of these solutions may add extra costs to budgets, but well-done engagement programmes can have a positive return on investment, according to Dan Rogers, co-founder of people analytics platform Peakon.
“We have a wealth of research, both internal and external, that proves engagement’s impact on business outcomes. The most obvious one is employee turnover; engaged employees tend to leave far less frequently, which is a significant saving on hiring and training costs. Some of Peakon’s customers have reduced their turnover by over 50%, which even in a mid-sized enterprise can amount to multi-million pound annual savings. Then there are other less obvious effects such as increased customer satisfaction. Generally, happy employees provide better service, which drives customer satisfaction,” says Mr Rogers.
Even as companies begin to understand how important successful engagement is to both their bottom line and staff welfare, deciphering the most effective engagement strategy can be difficult. Rather than launching a programme with little data supporting its rollout, businesses want a clearer understanding of the exact improvements these initiatives will make.
“For example, if we improve satisfaction with training, or help people collaborate more, or increase connection to organisational vision, what will the predicted bottom line impact be?” says Sally Winston, global head of employee research at business intelligence firm ORC International.
The current most popular method of measuring employee engagement is by getting staff to complete an employee engagement survey, usually once a year. This is only the first step towards developing the overall engagement strategy, but just 25% of organisations have a comprehensive action planning process to address the results of these surveys.
“The majority of organisations view engagement measurement as an objective in itself and not as an enabler which can help them deliver more effectively. Employee engagement measurement is about using more than just an engagement score; it’s about understanding the data properly and making sure organisations act on it. This is about engagement data as an essential tool for managing the success of a business,” says Michael Dunmore, employee engagement director at London-based marketing and communications agency Radley Yeldar.
According to research by Deloitte University Press, only 7% of companies believe they are excellent at measuring, driving, and improving engagement and retention, with 87% of organisations stating that culture and engagement is one of their key challenges.
One size fits all?
It can be tricky for an employer to decide what the most impactful engagement solutions are, especially as these will differ greatly depending on the type of company and its employees. Although there are a number of factors that are consistently expected to increase engagement. “Authentic and inspiring leadership, a clear and compelling vision and purpose, opportunities to grow and develop, a culture that encourages innovation and an approach to communications that is transformational are almost always the top five issues,” explains Ms Winston.
The different ways to motivate employees can be broken down into two broad categories called intrinsic and extrinsic. “Intrinsic motivation is “doing something because you want to”. Extrinsic motivation is doing something “because you are told to, or paid to”, explains Mr Rogers. Many companies focus too strongly on extrinsic motivation methods, like new perks and bonuses, while neglecting important intrinsic considerations, like offering more autonomy or on-the-job learning opportunities.
Beyond these general themes, there is little across the board agreement over what individual businesses should focus on in terms of employee engagement. “Some companies will have a high-performing culture based on creativity, some will have a high-performing culture based on goal setting, and others will have a culture based on learning and innovation,” says Mr Rodgers.
Linking together engagement initiatives with a company’s culture and values is an effective way to create a strong relationship with staff. Digital consultancy Futurice sponsors the Spice Program, an open source and social impact scheme which enables staff to contribute their time to projects with a positive social impact. Futurice pays staff who volunteer to work on these projects an additional €15 an hour, allowing non-profits to utilise skilled workers and giving employees the freedom to help causes close to their hearts with the support of their employers.
“We are seeing an increasing recognition that factors such as reputation, purpose, meaningful work and employee voice are a significant influence for people in choosing where they work and whether they stay with an organisation. Therefore, for many employees, an emotional connection to an organisation and its purpose may be a more significant influence on attraction, engagement and retention than incentives,” says Mr Dunmore.
The well-thought-out implementation of engagement tools can improve the relationship between employee and employer. However, misguided efforts to jump on the employee engagement trend often do more harm than good. The initiatives themselves may be of some value, but a lack of communication can mean poor data is collected or, worse still, cause unease among employees.
“Some recent research casts a bleak view of people analytics and their potential impact on employee autonomy, wellbeing and organisational trust – through the monitoring of employee activities. We’ve already seen well-publicised and controversial examples of employee monitoring at The Daily Telegraph and Amazon,” explains Mr Dunmore.
When journalists at The Daily Telegraph arrived at work early last year, they discovered small plastic boxes under their desks. These unannounced devices are manufactured by a company called Cad-Capture and were designed to track when staff are using their desks, with The Daily Telegraph saying they were installed in an effort to improve energy-efficiency. The sensors, named OccupEye, were quickly removed after feedback from both staff and the National Union of Journalists, illustrating the importance of employee consultation when introducing new analytics tools.
Not only is it clear that the data gained from monitoring when employees are at their desks is limited, but the feeling of being constantly monitored creates unnecessary workplace tension and doesn’t take into consideration worker productivity.
When people analytics, the method of analytics used by executives to make decisions about their workforce, are utilised correctly, it will have a significant impact on perceptions of organisational reputation, trust and attractiveness for employees and an insight into the organisational culture, says Mr Dunmore. “In a more positive scenario, we envisage people analytics being used to support more effective approaches to knowledge sharing, information access, developing personal networks and immediate access to relevant learning materials,” he adds.
Most employers are more than comfortable offering benefits around physical health, but few have been confident in providing financial wellbeing services. Pay and finances can be a touchy subject for many, leaving some employees with poor money management skills at a disadvantage. This issue doesn’t just impact an employees’ personal life with research from Barclays showing that staff who have less than three month’s salary saved up are vulnerable to financial hardship. The knock-on effect of this worry can be seen in damaged mental health, lower productivity and morale.
With some predictions indicating that all SMEs will soon have their own people analytics department, looking at productivity, turnover and the people-issues that drive customer retention and satisfaction, employee engagement will look very different in just five years’ time. “People analytics is already its own department in cutting-edge companies such as Google, Airbnb, and Facebook – and the rest of the business world is catching up fast,” says Mr Rodgers.
“The best analogy here is with marketing. If you consider what marketing looked like 15 years ago it was more ‘Mad Men’ than ‘Silicon Valley’; lots of people making decisions based on opinion rather than evidence, and doing so without any real technology. Fast forward 15 years and analytics technology proliferates so extensively in marketing that according to Gartner, CMOs now spend as much on technology as CIOs do,” he says.
As analytical techniques become increasingly advanced, opinion-based employee engagement tools will no longer be relevant. “Most organisations have more data on their employees than they do on their customers – and if they don’t, they can easily get it – so I think people analytics will actually surpass other areas in terms of sophistication quite quickly,” concludes Mr Rodgers.