Companies need to engage their workforce by using effective management – or face losing out to their competitors
The employee engagement revelation
Executive leaders and HR practitioners are more frequently recognising the importance of an engaged workforce, its potential to drive business performance and impact the bottom line. Engaged employees are highly motivated and committed to the success of their organisations and are willing to make an extra, discretionary effort. Academics, consultants, psychologists, and even financial analysts have written much on the subject of employee engagement during the past 15 years. Most of their focus has been on what drives engagement, with empirical research identifying several factors. These factors range from the employee-manager relationship, to a challenging work environment, a company’s focus on customers, outstanding performance recognition, and career development opportunities. By understanding the most important factors that drive engagement, HR leaders are able to develop effective engagement programmes. A more compelling outcome of engagement research shows that an engaged workforce impacts business performance, and ultimately, shareholder value. Put simply, companies with higher percentages of engaged employees perform better than their industry peers. Indeed, researchers at the Chartered Institute of Personnel and Development, Gallup, and Towers Watson have validated the impact of employee engagement and HR best practices on business performance.
Equally interesting, financial analysts have taken notice. A recent equities report focused on a large international bank, which cited that employee engagement scores were highly correlated with shareholder returns. Further, the report highlighted that the engagement score difference between the bank and its nearest competitor cost the bank approximately $26m (£16.7m) in additional profits per year. As a result, the financial analyst downgraded the bank’s stock. Given the mounting evidence, it should come as no surprise that CEOs, CFOs, and senior HR officials are taking serious notice of employee engagement. Companies that fail to engage their talent face significant risks – including financial ones – relative to their competitors that have established systematic engagement strategies.
Increasing demand for talent management
In the 2012 PriceWaterhouseCoopers CEO survey, 29 per cent of respondents were unable to pursue a market opportunity due to talent constraints. This alarming trend has created a sense of urgency among organisations to develop holistic talent management strategies. Leaders in all business functions – including CxOs, HR practitioners, and line-of-business managers – need accurate and accessible workforce information to make the right decisions to support their business objectives. To provide this level of visibility, organisations are integrating their HR processes and information into talent management systems. These systems encompass numerous strategic HR processes, enabling companies to effectively plan, hire, align, develop, reward, manage, and analyse a high-performing workforce. The goals are straightforward – hire great people, ensure they are properly trained, align their goals to corporate strategy, reward top performance, and provide timely motivation to retain the best employees.
Leading companies are developing talent management business cases focused on improving engagement. These business cases typically encompass current processes, business requirements, gap analyses, system/technology needs, and change management considerations. Furthermore, several core talent management processes directly impact employee engagement. As a part of their business cases, companies should map these standard talent management processes to their most pressing engagement challenges. This analysis facilitates deeper understanding of core requirements, and also helps with the provisioning and prioritisation of talent management software.
Given the significant impact that employee engagement has on business performance and the bottom line, improving engagement has become a top priority for leading companies. The risks of ignoring it, putting it on the backburner, or not funding it adequately, are simply too high.
Companies that embrace employee engagement – supported by a single, integrated talent management software platform – are reaping the rewards: better financial performance, higher customer satisfaction, higher employee retention, and more productive employees.
Combined, these benefits lead to sustainable competitive advantage.