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Business Results Strongly Related to Engagement Regardless of Economy
 

By Pamela Babcock  4/9/2013
 
 

Employee engagement appears to be just as important in tough times as it is during good ones.

Despite a global recession that has led to widespread layoffs and restructuring, the link between engagement and key organizational results has remained remarkably consistent regardless of the organization, industry or country, a recent Gallup Inc. study found.

Business or work units that scored in the top half of their organization in terms of engagement were better performers and had nearly twice the likelihood of success based on financial, customer, retention, safety, quality, shrinkage (theft) and absenteeism metrics when compared with those in the bottom half.

The findings were released March 21, 2013, in Engagement at Work: Its Effect on Performance Continues in Tough Economic Times. Gallup did the research in 2012 by looking at 263 research studies covering 49,928 business units at 192 organizations spanning 34 countries.

James K. Harter, Ph.D., Gallup’s chief scientist for workplace management and the study’s lead author, told SHRM Online in an e-mail that the research shows that engagement remains an important competitive differentiator.

“What has been most surprising to me, as a researcher, is the consistency of the findings during very different economic times,” Harter wrote in the e-mail. “In good economic times, engagement is the difference between good and great. In bad economic times, engagement is the difference between sinking and holding your own.”

Harter added that engagement also is key to whether employees embrace organizational strategy.

“Having your people behind you can make a big difference in how they interpret the threat of a down economy,” and whether they feel victimized “or can see the future opportunity and feel a part of the solution,” Harter wrote.

Some Key Findings

This was the eighth time the study has been done since 1997. In the current study, Gallup probed engagement’s effect on nine key metrics: absenteeism, turnover, shrinkage or theft, employee safety incidents, patient safety incidents, the number of product defects, customer loyalty/engagement, productivity, and profitability.

Business units scoring in the top quarter on engagement (compared with those in the bottom quarter) had lower turnover and absenteeism, less employee theft, fewer employee and patient safety incidents, and fewer quality defects, as well as higher customer loyalty/engagement, productivity and profitability. Specifically, business units in the top quarter had:

  • 37 percent lower absenteeism.
  • 25 percent lower turnover (in high-turnover organizations).
  • 65 percent lower turnover (in low-turnover organizations).
  • 28 percent less shrinkage (employee and/or customer theft).
  • 48 percent fewer employee safety incidents.
  • 41 percent fewer patient safety incidents.
  • 41 percent fewer quality incidents or defects.
  • 10 percent higher customer loyalty/engagement.
  • *21 percent higher productivity.
  • *22 percent higher profitability.

Just Who Is Engaged?

While the study doesn’t address how many employees report they’re engaged in their work or their workplaces, Harter said employee engagement in the U.S. has remained relatively flat despite the downturn and recovery.

Based on ongoing Gallup polling figures from 2012, Harter said about 30 percent of U.S. workers are engaged; 52 percent report that they’re not engaged, and 18 percent say they are actively disengaged.

Anecdotal Evidence

Bob Kelleher, president and founder of The Employee Engagement Group in Woburn, Mass., and author of Louder Than Words: Ten Practical Employee Engagement Steps That Drive Results (BLKB Publishing, 2010), said the research supports the experiences he has had with clients and other research he has seen.

“The key takeaway for the HR professional is to take these quantitative metrics to help convince the C-suite that engagement must be a business driver and part of the overall strategic planning process,” Kelleher wrote in an e-mail to SHRM Online.

The fact that the study shows a link between engagement and performance despite tough times is not surprising, Kelleher added. The challenge is getting leadership to focus on engagement in tough times.

“Employee engagement is all about those things you should do,” Kelleher wrote. “Unfortunately, during tough times, firms tend to focus their energies on the things they must do.”

Key Beliefs of Engaged Employees

The study identified 12 things that employees said contribute to engagement. All are important, but Harter said three are management basics that organizations often overlook:

  • At work, I have the opportunity to do what I do best every day. Great managers understand innate talents and put people in positions where they can leverage those talents. “This is about selection of the right people for the right jobs and how people are developed,” Harter wrote.
  • There is someone at work who encourages my development. How employees are coached can influence how they view their future while benefiting both the employee and the organization.
  • At work, my opinions seem to count. Employees are often closer to day-to-day factors such as the products or the customer that affect the overall organization. Employees involved in decision-making take greater ownership for outcomes.

Harter added that “great” managers improve employees’ lives while improving performance.

“One thing the 12 engagement elements teach us is that doing what’s good for employees and business doesn’t have to be opposing,” Harter wrote. “Rather than focusing on ‘happiness’ of employees, when managers focus on the right elements, they can improve the organization at the same time they improve the people.”

Steps Organizations Can Take

To help make the most of the link between engagement and results, Harter said HR should:

  • Get alignment. Understand business objectives and align your engagement strategy with those objectives. “It has to start at the executive level, then cascade,” Harter wrote.
  • Measure the right engagement elements. Focus on those elements that are proven to link to important outcomes consistently, across both organizations and economic circumstances. Report them locally for manager-led teams at all levels.
  • Get serious about education. The best education and training occurs when managers can learn from top managers within your organization. Workgroups within the same organization vary widely when it comes to engagement, and that’s due in large part to how managers are selected and developed.
  • Track results and hold people managers accountable. Engagement should be treated like any other outcome that managers are responsible for, including productivity, retention, customer service, safety or profit.
  • Link engagement to outcomes, track it and keep educating people. Statistically link engagement results to outcomes, and track changes. Educate management over time by adding important communication and development elements based on organizational readiness.

Pamela Babcock is a freelance writer based in the New York City area.

 

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