The study found that companies with the highest levels of employee engagement achieve better financial results and are more successful in retaining their most valued employees than companies with lower levels of engagement.
The Towers Perrin Global Workforce Study, the largest of its kind, draws upon two unique sources of data that come directly from employees. One is a survey of nearly 90,000 workers in 18 countries, which uses an analytic model to calculate both engagement levels and the impact that those levels have on performance, retention and a host of other factors. The other is the world’s largest employee normative database - updated annually, with more than two million employee records in total - including data from organizations with both above- and below-average financial performance.
“It’s impossible to overstate the importance of an engaged workforce on a company’s bottom line,” said Julie Gebauer, managing director and leader of Towers Perrin’s Workforce Effectiveness consulting practice. “The Global Workforce Study establishes a definitive link between levels of engagement and financial performance and, for the first time, begins to quantify that link. It demonstrates that, at a time when companies are looking for every source of competitive advantage, the workforce itself represents the largest reservoir of untapped potential.”
The most striking data about the linkage between employee engagement and financial performance come from a study of 40 global companies which involved a regression analysis of company financial results against engagement data. It found that firms with the highest percentage of engaged employees collectively increased operating income 19% and earnings per share 28% year to year. Those companies with the lowest percentage of engaged employees showed year-to-year declines of 33% in operating income and 11% in earnings per share.
In a related study over a longer time horizon (three years), the firms with the highest levels of employee engagement achieved a 3.7% increase in operating margins, while those with the lowest levels of engagement suffered a drop of 2%.
Engaged employees also are more likely to see a direct connection between what they do and company results, according to the study. More than 80% of engaged employees believe they can and do contribute to the quality of products and services, and to customer satisfaction. Only half as many of the disengaged share that view.
In addition, engagement has a direct impact on retaining employees. Half of the engaged employees had no plans to leave their company, compared with just 15% of the disengaged -- and roughly a third of the workforce overall. Less than 5% of engaged employees said they were actively looking for another job compared with more than one in four of the disengaged employees.
The Towers Perrin study also debunks a widely held view that engagement is an innate trait. Rather, it is the organization itself – and most particularly, its senior leadership – that has the biggest impact on engagement levels.
“One of the study’s key finding is that the organization itself is the most powerful influencer of employee engagement,” said Gebauer, Towers Perrin HR Services. “Personal values and work experience factors have less of an impact on engagement than what the company does - particularly the extent to which employees believe senior management is sincerely interested in their well-being. This was the number one element driving engagement on a global basis and also in the U.S.
“People’s views about the company are also shaped more by what senior leaders say and do than by what the individuals’ direct bosses say or do. This too contradicts conventional wisdom and suggests that companies have a real opportunity to dramatically improve both engagement levels - starting with listening to what their own employees have to say.”
The study’s findings point to three areas of focus for companies to increase engagement and tap the reservoir of employee discretionary effort.
1. Employees need their senior leaders to demonstrate inspiration, vision and commitment. Only 38% of employees surveyed felt senior management communicates openly and honestly, and just 44% agreed senior management tries to be visible and accessible. In addition, only 10% of employees agreed that “senior management treats us as if we’re the most important part of the organization.” More than half felt that senior management “treats us as just another part of the organization to be managed” or “as if we don’t matter.”
2. Employees want to give more to their companies and their jobs, but also want a clearer picture of what’s in it for them. The study shows that employees are optimistic about their jobs and have a strong desire to learn and grow. More than three out of four employees love or like their job (86%) and their organization (77%). In addition, 83% “look for opportunities to develop new knowledge or skills,” and 84% “enjoy challenging work that will allow them to learn new skills.” But, as the engagement scores show, they are not delivering the full discretionary effort these views would suggest because they don’t feel their companies and leaders are meeting these needs and creating the conditions that will sustain engagement. For instance, just 36% agreed they have excellent career opportunities at their organization, and more than two-thirds said they are sometimes or frequently frustrated by their organization’s people-related decisions. And while 68% agreed their organization has a reputation for financial stability, only 54% agreed it had a reputation as a great place to work.
3. Employees want to work for a company that is seen as a leader. A big part of what’s in it for employees is an organization’s reputation. Employees worldwide show a desire to work for an organization that strives for excellence in the eyes of its employees, customers and the world at large. According to the survey, top drivers of higher engagement - all within the organization’s control -- include senior leadership behavior, a commitment to corporate social responsibility, the company’s reputation, and sufficient opportunities for learning and development.
“At the end of the day,” said Gebauer, “our study paints a picture of a workforce that is energetic, ambitious and committed to working hard and giving its best. This lays to rest several persistent stereotypes: that employees are loyal only to themselves and their careers and are looking to do the minimum to get by. But turning people’s energy and ambition into engagement – and ultimately into significant performance lift – demands attention, focus and some very different behaviors from senior leaders, as well as clear follow-through on a number of organizational practices. The challenge for senior management is to recognize the value of employees’ untapped potential and to channel it in ways that yield real improvements in business performance.”
