Engaging staff is good for wellbeing and bottom line

Evidence is mounting that businesses with strong staff engagement succeed and make bigger profits, as Debbie Lovewell reports

Employees with bags of enthusiasm, who consistently go the extra mile, are highly productive and are engaged with the organisation’s customers, products and values are every employer’s dream.

The 2009 government-commissioned report Engaging for Success: Enhancing performance through employee engagement concluded that wider delivery of engagement could have a positive impact on UK competitiveness and performance both during the downturn and into the recovery period.

Organisations with high engagement scores are up to 70 per cent more productive and 40 per cent more profitable, according to Aon Hewitt’s Future of Engagement study. This also estimates each disengaged employee costs an organisation an average of £7,000 in profit annually.

Employee benefits can go a long way towards engaging staff. Flexible working arrangements and support with child or elder care, for example, can have a significant impact on attraction and retention.

Benefits, such as share schemes, can provide a clear link between an employee and the organisation’s performance

Peter Reilly, director of HR research and consultancy at the Institute for Employment Studies, says: “Rewards, including benefits, are quite important to why people choose [to work for] an organisation. A good range of benefits is not easy for a competitor to imitate unless they are quite quantifiable. So 25 days’ holiday could be increased to 30 days, but childcare and parental support can be harder to imitate.”

This is supported by Mercer’s What’s Working survey, which found benefits, such as paying student debt loans, improve engagement levels by reinforcing an organisation’s appeal as an employer, and acting as a foil for low pay increases and limited career advancement proposals.

Offering choice through a flexible or voluntary benefits scheme enables staff to select perks that mean the most to them. Duncan Brown, principal, reward and talent, at Aon Hewitt, says: “Even if they don’t exercise that choice, there is evidence that choice forces staff to think about their benefits and understand them rather than take them for granted.”

John Sylvester, divisional managing director of P&MM, says: “The psychological advantage employers get is employees considering leaving may reconsider if they stand to lose something they might use at some future stage.” The cost of replacing an individual can be between £8,000 and £12,000 depending on their grade, once the costs of recruitment, lost productivity and training a new recruit are taken into account, he adds.

Benefits can also be used to tackle specific, costly issues, such as high absence levels, which are often more prevalent among disengaged workers. The average cost of absence per employee a year in the UK is approximately £600, according to the Chartered Institute of Personnel and Development.

Engaged employees, however, are less likely to take time off when they are not genuinely ill and greater engagement helps tackle stress, one of the UK’s main causes of sickness absence.

Supermarket chain Morrisons, for instance, has implemented a number of initiatives to improve engagement, including an employee assistance programme (EAP) which highlighted financial worries as a significant cause of stress.

Norman Pickavance, Morrisons’ former group HR director, says: “The EAP was introduced to demonstrate to colleagues that we were interested in what they had to say and to give them an opportunity to have a confidential route to talk about issues they had, so they felt more supported.”

To further support its workforce and give employees more control over money matters, Morrisons introduced an education programme fronted by US TV financial adviser Alvin Hall. This included monthly podcasts and money makeovers for some employees.

Overall, its engagement strategy produced positive results for the business. “It halved labour turnover and reduced absence rates by over 25 per cent,” says Mr Pickavance. “Individual benefits programmes helped to improve customer service, address talent gaps, create a more engaged environment and reduce stress levels in the business.”

Including an organisation’s own products or services within its benefits package can help staff to engage with these, leading to better customer service and brand advocacy. Emily Scammell, engagement and employee insight manager at Virgin Media, says the organisation relaunched its internal discounted product scheme after its annual engagement survey identified that employees, who took up at least one product though the scheme, were more engaged.

Staff who have a vested interest in company performance are more likely to demonstrate desired behaviours, with strong engagement and productivity levels. Benefits, such as share schemes, can provide a clear link between an employee and the organisation’s performance; something Virgin Media is looking to demonstrate at the moment. “If we can find out what influences employees, we can make it better for them to stay in the business,” says Ms Scammell.

But benefits should be just one component of an engagement strategy. “The tough part is to understand what portion of productivity, engagement and so on is attributable to benefits,” says Yves Duhaldeborde, director of talent and reward at Towers Watson. “High-performance organisations get reward right, performance management right, and leadership and management support right. It’s the ability to put everything together that leads to higher engagement.”

Norman Pickavance will be speaking at HR Performance on November 21and 22 at Excel, London.

RESEARCH

Nailing the evidence

The business case for engaging employees is now so strong that the government is spearheading a campaign to improve levels of engagement in UK organisations.

Following the 2009 Engaging for Success report, produced by David MacLeod and Nita Clarke for the Department for Business, Innovation and Skills, Prime Minister David Cameron created the Employee Engagement Task Force in 2011.

Earlier this month, leaders from a number of private, public and third-sector organisations, including Marc Bolland, chief executive of Marks & Spencer, and Sainsbury’s chief executive Justin King,  met to endorse the latest evidence uncovered by the task force, which was presented alongside a number of case studies in the Nailing The Evidence report.

Francis Goss, head of employee engagement at Grass Roots, says the document provides the strongest evidence of the business case behind engaged employees that has ever been seen. “We recognise that there are still some cynics who don’t regard engagement as important,” he says. “The purpose of this is to convince those cynics with hard evidence. Employee engagement is good for the individual, for businesses and for UK growth.”

Among other findings, the task force discovered that 64 per cent of people believe they have more to offer in skills and talent than they are currently demonstrating or being asked to demonstrate at work.