What ROI could you gain from increasing employee engagement?

Our intuitive perception is that organisations with engaged employees achieve higher business performance, and a growing body of evidence shows that real engagement adds value to the bottom line. What could this mean for your organisation?

What are the benefits other organisations report they are achieving?

In an organisation with high engagement, some of the behaviours we would expect to see include:

• Reduced employee turnover and increased retention
• People relating very well with customers
• People working well with their managers and teams
• Respectful relationships between managers and team members
• Colleagues supporting each other in their work
• Responsibility and accountability devolved to others with confidence and clarity.
• A calm and collaborative atmosphere
• Attention automatically focused on the critical business issues

A couple of years ago, I made a visit to a UK Central Govt agency responsible for a key back office function. During the visit, one of the most interesting observations I made was that people at lower levels in the organisation were handling work that would normally have been the province of their managers or superiors, and doing so with obvious confidence. This was motivating for them and cost effective for their managers, and delivered two key benefits:

• 18% reduction in management time
• 22% increased productivity through faster decision making

Needless to say, this information was delivered by the key workers themselves with an infectious amount of pride and personal delight. Their managers were on the sidelines, obviously supporting their team and encouraging their enjoyment of the opportunity for personal development. It was a visible reinforcement of the adage that ‘People are our greatest asset’

It is an interesting exercise to extrapolate the Return on Investment of a small change in productivity through a number of indicators which could include:

• Employee turnover
• Days lost through sick and absence
• Product or process cycle times
• Customer satisfaction improvement
• Profitability through decreased cost or increased revenue
• Throughput measures
• Recruitment and training costs

An accumulated ROI calculation, resulting from achieving small improvements in each of these areas would be attractive for any company.

As a company, B&Q is one of Europe’s largest home improvement companies. They had always believed that people made a bottom line difference to the company, but in 2003 had statistically relevant evidence that, for them, engaged people increased productivity and customer engagement.

They discovered that they could save ??35m per year purely in reducing employee shrinkage. They also found that stores in the top half of employee engagement generated ??3.4m more in sales each year and ??1m more in profits than stores in the bottom half. And the difference depended on the manager and their actions.

However, in June 2005, costs began rising faster that sales. To resolve this situation, they decided to shift the six-monthly employee survey from being a barometer or employee perception to a more business critical measure. They used the idea of an ‘employee customer profit chain’ working on the principle that if you recruit talented people and engage them effectively, that translates into a better customer experience and better business performance.

Linkage analysis has proven beyond doubt that if a store has high engagement, it always leads to better sales performance, lower absence and lower stock loss. They have been watching for change in the ratio between engaged and disengaged employees and can now show that for every one disengaged employee they have seven engaged people. This represents a change from the previous situation of one disengaged for every two engaged people. If their salary budget is ??500m per year, they estimate this represents more than ??100m in resources they didn’t have at their disposal last year. This tangible improvement shows them that they are on the right track.

What are the key steps they recommend in putting employee engagement at the heart of your business success?

• The first is to measure critical aspects of engagement and link these to key result areas
• The second is to ensure that day to day HR works in delivering the staff profile you need
• The third is to gain the full support and commitment of senior executives and the board
• The forth is to ensure you maximise honesty and trust in your business culture

What result would you like to achieve?