You Asked * Bottom Line Value of Engagement & How to Onboard Well

I recently received a couple question from Tom G. through my box at the bottom of the Globoblog (feel free to send your questions to me directly, too). I think his questions warrant an answer directly on the blog. Tom asked:

“I was recently at a large firm where there was a big employee engagement effort over a couple of years. There was an engagement problem and it improved by some measures, although one question I have is whether it paid off on the bottom line. How do you help client companies prove the bottom-line benefit beyond just customer satisfaction and loyalty metrics?”

This is an excellent question with no simple answer. To track engagement improvements and the impact on the bottom line, companies must first establish a clear baseline of current engagement levels and then set goals for improvement, define how the recognition program is expected to impact those scores, and set metrics to measure improvement against those goals and definitions.

The statistics from the industry analysts are also powerful:

• Towers Perrin calculates: “A 15% improvement in levels of engagement correlates with a 2% improvement in operating margin.”

• WorldatWork calculates: “For the typical S&P 500 organization a significant improvement in employee engagement is associated with a $95 million increase in revenue.

It’s important to keep in mind that these statistics are derived from surveys of many companies, so to figure this out for your own company, you will need your own data (as discussed above) to track what changes historically. That way you start to see the patterns of impact employee engagement will have on the bottom line.

Best Buy did exactly this for significant results, as Human Resources Executive reported last year:

"Best Buy says they're able to track their survey scores to profits. If a store's engagement score increases by a tenth of a point (on a five-point scale), that store's profits will increase $100,000 for the year, says Joe Kalkman, the company's vice president of human resource capabilities."

We also recommend companies use recognition as another form of performance measurement. Consider that strategic recognition, especially when opened up for peer-to-peer recognition as well as manager-to-employee recognition, is a powerful indicator of performance specifically in those areas the company has defined as necessary for success – the company values and strategic objectives. For example, you can track recognitions against individual employee performance or division/group/company productivity rates, which would give a direct correlation of recognition to productivity and therefore bottom line results.

Tom also asked: “One of my ‘ah hahs’ from working with several employers is that the first couple of months on the job in a new company, the ‘on-boarding,’ are often not well managed, yet it's probably a critical time to develop the new employee's engagement. Do you offer a lifecycle approach to employee engagement which addresses this initial phase with a specific reward strategy for new employees?”

Establishing your company culture with a new hire is critical to their sustaining their engagement levels with your company. Company leaders need to honestly evaluate what a new hire perceives as the culture when they walk through the door – is it the culture you really want to have? It is more important now than ever to establish a company culture that will drive the employee productivity and company performance levels to carry you through the recession and prepare you for a solid start out of the blocks when the economy turns. We advocate a culture of appreciation in which employees are recognized for their efforts and they also understand why those efforts are critical to the company achieving its strategic objectives.

I’ve blogged before on this topic of onboarding, recognition and engagement here and here.

Regarding including recognition in onboarding, we strongly encourage clients to include training on our recognition program as part of the onboarding process, perhaps including a small value reward as a way for employees to experience the site for the first time. We also encourage sharing stories of appreciation garnered from the program both in onboarding training sessions and throughout the company on an regular basis.

I’d like to thank Tom again for his questions. If you’d like to submit a question, just send it to me through the “Ask Derek” section below. (email subscribers, click through for access.)