As we look at the changing world of work what is very critical to the success of organizations moving forward is:
- The importance of creating and sustaining a high performing culture
- The hiring and retention of employees who understand and embrace the importance of growth
- The need for market driven organizational changes
- The flexibility and adaptability of employees as they help drive their ownership of “return on employee investment”.
Harvard Business Review May, 2014 in addressing the disengaged workforce stated that corporately 70.2% of the workforce is disengaged which accounts for $350,000,000 annually
Return On Employee Investment
THE AIM OF THIS ARTICLE is to:
- Uncover how people experience current leadership and to start a company-wide conversation about what leaders do and should do at each level to re-engage employees
- Understand the LEADERS ROLE in achieving company goals and objectives, helping create clear lines of sight as to what is driving the business and the company’s marketplace is a crucial 1st step.
- LEADERS AT ALL LEVELS reported feeling less stressed, felt more energized by their ability to act, and felt more confident that they were making a contribution to the company.
FOUR STEPS IN CREATING A ROEI CULTURE
- RESPECTED SENIOR MANAGERS spearhead the process. Their engagement is not ceremonial. They conduct interviews and draw the canvases.
- EMPLOYEES ARE ENGAGED in defining what leaders should do. The process makes employees feel more deeply engaged with their leaders because they have greater ownership of what their leaders are doing.
- EMPLOYEES AT ALL LEVELS should have some say in the final decision.
- IT’S EASY TO ASSESS whether expectations are being met. Clarity about what needs to change to move from the as-is business climate to a more engaged one is simple to monitor.
- “AT LEAST 70% OF OPERATING EXPENSES in most organizations are paid out in “THE RETURN ON INVESTMENT (ROI) is measured as a result of the total costs saved or efficiency gained, divided by the Total Cost of Ownership TCO)”
- “AN INVESTMENT is a cost that creates future value and pays out over time” ROI
- “INCREASED EMPLOYEE ENGAGEMENT has a DRAMATIC positive effect on improving job performance and capturing business value”. Or another way, ROI.
- “WHAT IS THE DISTINCTIVE DIFFERENCE between a good company and a truly great company? IT’S PEOPLE. The people who make up a company are that organizations unique and biggest asset. It’s also the largest investment”.
Return On Employee Investment
- “A COMPANY IS AS GOOD AS ITS EMPLOYEES.” We are used to talking about a company as if the organization itself is a PERSON. But an organization does not generate ideas, does not give service, and by itself is neither efficient nor productive. People make all those things HAPPEN”.
- “COMPANIES ARE ACCUSTOMED to paying competitive wages and good benefits to attract talented managers and professionals. Yet often very little is paid to creating the best circumstances for each individual in the organization to perform at his or her best potential”
- “FROM RECRUITING TO ON-BOARDING, from motivating and developing talent to supporting people managers and creating an ENGAGED workforce, the effectiveness of employee management has a DIRECT impact on business results and competiveness.”
METRICS : The Advantages of Engaged Employees
- “FOR ORGANIZATIONS, the difference between engaged and disengaged workers can equate to success or failure. Disengaged employees are estimated to cost the U.S. economy as much as $350B per year in lost productivity, accidents, theft and turnover.”
- “A MAJOR OPPORTUNITY for corporate performance improvement and employee retention lies in ENGAGING the workforce to drive better customer engagement, better revenue and higher profits”
- “MOST LEADERS AND ORGANIZATIONS know the difference between a fully engaged worker and one that is marginally engaged or disengaged. The former brim with enthusiasm, they contribute ideas, are optimistic about the company and its future, are seldom absent from work, they typically stay with the organization longer and are among the organization’s most valuable ambassadors.” Allen Schweyer
- “TOWERS PERRIN discovered that high engagement firms grow their earnings-per-share (EPS- is a crucial measurement looked at by investors) at a faster rate (28%) while low engagement firms experienced an average EPS growth rate DECLINE of 11.2%.
- “THE CENTER FOR HUMAN RESOURCE STRATEGY at Rutgers University found that highly engaged business units were ON AVERAGE 3.4 times more effective financially than units that were less engaged.
- “HEWITT FOUND THAT HIGHLY ENGAGED FIRMS had a total shareholder return that was 19% higher than average in 2009. In low-engagement organizations, total shareholder return was ACTUALLY 44% below average”
The Advantages of Engaged Employees (CONT’D)
- “A 2008 BLESSING WHITE STUDY demonstrated a correlation between engagement and RETENTION- 85% of engaged employees planned to remain with their employer for ten or more months”.
- “UPPER MANAGEMENT ESTIMATES-COST to replace a $150K executive: 300% or $450K”.
- “MIDDLE MANAGEMENT ESTIMATES-COST to replace a $80K manager: 150% or $120K”
HOW EMPLOYEE ENGAGEMENT AFFECTS FINANCIAL PERFORMANCE
Companies with LOW Engagement
Companies with HIGH Engagement
12 Month Change In Operating Income 37.2% DECREASE
12 Month Change In Operating Income
12 Month Net Income Growth
12 Month Net Income Growth
12 Month EPS Growth
12 Month EPS Growth
Eight Elements of Employee Engagement
- LEADERSHIP: Employees are desperate to have meaningful relationships with their managers.
- COMMUNICATION: Good Management starts with open, honest and continuous communication.
- CULTURE: A positive corporate culture results in a more profitable company yielding a larger return than the overall market.
- REWARDS & RECOGNITION: More than two-thirds of employees say they would work harder if they were recognized more.
- PROFESSIONAL & PERSONAL GROWTH: Find out how your employees like to stretch, giving them the opportunity for growth.
- ACCOUNTABILITY & PERFORMANCE: Everyone wants to belong to a winning team. People who perform well feel good about themselves.
- VISION & VALUES: If employees feel like a part of something bigger than themselves, they will go above and beyond to contribute to that greater purpose.
- CORPORATE SOCIAL RESPONSIBILITY: Employee Engagement levels are twice as high among employees who say they are proud of the contributions their company has made to the community.
Questions to Ponder
- As you took the leadership effectiveness questionnaire and guessed at the national metrics, and as you scored your organization, how did you do?
- How would you feel members of your leadership team would rate your company?
- What internal or external dynamics/issues are holding your company back to achieving the desired growth at both the top and bottom line and anticipated ROI sought by senior management/investors?
- How many of you or your team make it a point in partnering with or to sit with the CFO during the functional budget cycle when reviewing headcount by department i.e. during the AOP, annual operating plan, regarding rationalization of existing headcount and/or adding headcount?
- How many of you actively seek to ensure the HR function is significantly represented in the strategic planning process?
- Do you have the right people in the right positions in alignment with current business goals?
What are your next steps as you work together as a leadership team to create a culture that is focused on Return On Employee Investment?