Are You Prepared?
This link is not just conjecture.
Highly engaged firms, according to a 2008 Towers Perrin study, have an earnings-per-share growth rate of 28 percent. By comparison, low-engagement firms have a decline of 11.2 percent. That's a difference of nearly 40 percent.
Similar results were uncovered by the Gallup organization in an earlier 2006 survey. Gallup researchers found that the earnings-per-share growth rate in the top quartile of companies fostering employee engagement was more than 250 percent greater than below-average companies.
Research has also been done on disengaged employees, noted Peter Hart, president and CEO of Rideau Recognition Solutions, headquartered in Montreal, Canada. "This kind of a workforce costs the American economy anywhere from $300 to $350 billion annually," he said.
"Clearly," he continued, "having people who want to come to work, and who are really performing while at work, makes a huge difference in customer service, which results in an increase in shareholder value. Engaged employees make a difference in that way—they are the people delivering the company's brand. And if they are disengaged, how well are they going to deliver that company's brand?"
Michelle M. Smith, vice president of business development for O.C. Tanner and president of the Forum for People Performance Management and Measurement at Northwestern University, agrees with Hart. "It's almost academic," she said. "Unless business leaders have been living in a cave for the last several years, these studies, and others of a similar nature, have probably reached their desk. But, whether a company chooses to accept it—and more importantly, act on it—may mean the difference between their organizations weathering the current economic storm or being consumed by it."
Adding to Smith's contention is a white paper written and released by Jennifer Rosenzweig, global employee practice leader at Carlson Marketing, based in Minneapolis. Rosenzweig writes that engaging your employees—and your customers, vendors, channel partners and shareholders, as well—isn't just what you should be doing when times are tough. It should be done all the time.
In good times, she elaborated, a positively engaged workforce distinguishes itself from competitors by keeping the creative pressure on and serving customers in meaningful ways. And when times are tough, as they are now, it helps build resilience, so that as waves of bad news hit the business, the employees have the fortitude to continue forging ahead.
A positively engaged workforce also keeps employees tied closely to the organization, even when the recession breaks and employee recruitment begins again.
"It makes infinite sense to utilize this effective strategic business tool at all times to optimize your business processes and the results from those efforts," Smith said. "Smart leaders have enthusiastically embraced this practice, and many are continuing to engage their staff and other stakeholders to gain the advantages that a hyper-competitive marketplace requires."
These progressive leaders entered this downturn with a workforce fired up and committed to leveraging the available resources to turn things around as quickly as possible. Not only are their efforts likely to do just that, Smith added, "but they'll also be perfectly positioned to leap forward in a redefined, healthier economy, unlike their competitors who may be just starting to think about engaging their staff at that time and finding themselves falling further behind the curve."
Patty Saari, vice president of client services, engagement and events for Carlson Marketing, noted that a more engaged employee population is more likely to give you discretionary effort. "There is a strong correlation between engagement and discretionary effort. That ability and willingness to go above and beyond comes from that engagement and commitment that employees demonstrate when they are feeling like they are being appreciated," she said. "Whether the economy is good or whether the economy is bad, you definitely want to have engaged employees."
Critical in Any Economy
Recognition drives engagement, many experts say. So it's vitally important to organizations that they have some kind of recognition mechanism in place.
"We're always looking for engaged employees," Hart said, adding, "but it really starts with engaged employers. You'll never get employee engagement without employer engagement. And the biggest driver of that is recognition. Recognition is a tool that is not used strategically as much as it could be, or to its full potential."
But what if a company's budget for recognition and rewards has been drastically cut? Then, what do you do? How can an organization keep employees motivated and engaged, despite the cuts?
Smith of O.C. Tanner made this recommendation: "If your recognition budget has been cut, my first suggestion would be to fight like heck to get the full recognition budget reinstated—it's that important to your company's future."
Recognition and rewards are no longer a "nice to have" but an essential business tool that is woefully underutilized, she continued. "Tom Peters has been making this case for years, and was recently quoted as saying, 'My suggestion, on bended knee: When you finish your annual or project budget, go back and cut the capital expenditure by 25 percent, and put the money directly into people programs!'"
If Smith's (and Peters') ideas don't work with your leadership, there are several things you can do to make the most of the recognition budget you have left.
Smith suggests trying to touch as many employees as possible with your recognition initiatives, which may mean that you'll have to bring down some of the award values so that you can give more awards within that budget. It's also a great time to take a deep look under the hood of your program to assess whether or not all the behaviors and activities that you're rewarding are still the most effective and beneficial to your organization. Unless you've tweaked your program in the past 18 months, it's highly likely that program goals will need to be adjusted for the new market realities in which you're operating.
"I'd highly recommend getting professional advice from an established recognition and incentive company," Smith explained. Now is not the time to go it alone with a sub-optimal program or risk unnecessary expenditures due to a lack of expertise in the art and science of motivation and behavioral economics.
Peter Hart also believes that while budgets might have been slashed and your organization might not be able to afford the same rewards, recognition should never stop. It should, if anything, be enhanced in a down economy, he insisted.
"You should never, ever cut back on recognition," Hart said. "There's no need to. Because one of the most powerful recognitions is simply the words, 'Thank you. Thank you for a job well done.' Now, with budgets being cut, your employees might legitimately expect and even understand why material rewards have to be cut back, but not the recognition. Everybody craves recognition. I think this also ties into something that is really important, and that is communication. How the message gets out."
At a time where budgets have undeniably been cut, Hart believes companies should be transparent with their employees. "You have to be able to communicate with them and establish that bond of trust," he said. "You should say, 'Look, this is what our situation is.' Employees aren't children, and you don't want to treat them like children. You should explain to employees why certain things are happening and why certain things are being done. And communicating need not be expensive these days, with so many technological tools available at a very low cost."
Hart cited another reason for keeping employees engaged. There are indications that high potentials within the organization are showing a disproportionately high drop in engagement. This is a concern and quite possibly a trend, he said.
"Those who are most valued are more quickly becoming disengaged; and those are the folks that any company is least able to sacrifice," Hart explained. "The numbers are very, very compelling on this point. If organizations ignore this trend, their best people are not going to be around very long."
Smith also believes it's a huge mistake if companies wait until the economy begins to rebound to focus on employee engagement. "The time to do that is right now," she said.
Smith believes that overcoming the corporate challenges that organizations are all facing these days requires a workforce that's completely engaged in their jobs and in line with the priorities of their employers. Engaged employees will accelerate their companies' progression out of this downturn and provide a competitive market advantage that is being squandered by those firms that are waiting until the economy improves to invest in the very thing—their employees—that has the biggest potential to make that turnaround happen sooner rather than later.
Clearly, employee engagement is critical at all times, not just in a down economy. As the economy turns toward positive growth and employees get mobile again, the companies that have engaged employees will be the companies where people want to go to work. In that sense, it's all about corporate culture. The word "fun" is rarely used when describing a work environment, but if you can create a culture where your most valued employees want to go and work, and have fun while they are working, those employees won't want to leave.
"'Fun' is a word that you should want to create in a workplace to drive engagement," Hart said.
Ignore Engagement at Your Own Risk
Simply stated, those organizations that ignore engagement will lose their best people, our panel of experts said. Ignore it, and you are not going to be as good a company as your competitors.
"This financial crisis is eventually going to stop," Hart said. "It's going to end. You can feel it, you can see it. All the predictors are there. The unemployment rate might be rising, but that's a lagging indicator. The talent crisis is not going away. This is huge. And it's happening."
It is projected that by the year 2015, there will be a worldwide deficit of 30 million workers. In the United States alone, experts project a deficit of 15 million workers by that year. The shoe is going to be on the other foot soon. How organizations treat people today in these bad times is going to be an indication of what they'll be doing in the good times.
The talent crisis is here, Hart said. It's going to stay, and if you are not an employer of choice, when things pick up you better believe that your employees are going to have choices. And you won't be that choice. There will be people walking out the door for better opportunities.
"That's why corporations should want to make sure they're treating folks right," he explained.
Smith expressed serious concerns about those organizations that are being "penny-wise and pound-foolish" right now when it comes to motivating and rewarding their staff to accomplish what needs to be done to keep the company afloat and positioned to successfully sail into calmer waters.
"There's an abundance of research," she explained, "that brings to light how prevalent it is that employees are keeping score about the treatment they're receiving from employers during these challenging times, and how those employees who feel they've been taken advantage of are planning to leave as soon as things begin to turn around. This quietly disgruntled group often includes some of the best and brightest employees in a company. We know that high performers have been disproportionately affected by organizations' responses to the recession."
Indeed, a "2009-2010 U.S. Strategic Rewards Survey" by Watson Wyatt and WorldatWork found that employee engagement levels for all workers at the surveyed companies have dropped 9 percent since last year—but the number was nearly 25 percent for top performers. Likewise, the "2009 Employment Dynamics and Growth Expectations Report" revealed that 45 percent of employees plan to change jobs, careers or industries when the economy recovers.
"I suspect that most employers are unaware of the rising tide of the turnover tsunami that's about to hit them," Smith added.
Smith and Hart agree that waiting until the economy turns around to re-invest in incentive and recognition programs to ignite employees once again may well be too little, too late. Even more troubling is this: Those companies may find themselves with few people left to motivate—having experienced a mass exodus of talent as top performers elect to put their skills to work in an organization that has demonstrated that it will respect and appreciate employees for their efforts and results.
Incentive, Reward, Recognition Strategies
The common theme of communication and soft rewards is compelling enough for even those organizations with little or no budget to begin incentives, rewards and recognition programs. But how to start is the question.
Patty Saari of Carlson Marketing suggested leveraging some sort of low-cost communication medium, adding that even a basic e-mail communication can be effective. "Some other programs could include non-tangible recognition certificates or electronic cards of gratitude," she said. Hours off or days off are also appreciated by employees.
"These are all low-cost mechanisms, and a great way to start," she said. "Secondarily, those soft rewards are ways your organization goes over and above the norm, and people realize it. In this way, they might actually be more meaningful than a hard-dollar-value reward."
"If I had nothing," Peter Hart added, "the first thing I would do is to make sure to have a well-defined strategy—one that is linked into a corporation's vision, mission, values or certain business objectives—because all too often, these recognition programs are viewed as an expense as opposed to an investment."
Hart believes this is so because many programs are "out there in left field, with no relationship or correlation to what your business strategies are."
It's therefore critical to make sure there is a link to the vision, mission value, to a specific thing within the organization, such as improving retention, improving engagement or reducing absenteeism.
Next, you need to make sure management buys into the program. At that point it moves from being an expense to an investment because people who make the decisions can see what the return is going to be.
Start with recognition as the foundation to the program, Hart said. It should be as basic as day-to-day recognition, in whatever form that you choose.
"I believe that all too often, programs fail because they don't have a proper day-to-day recognition," he said. "Ninety percent of organizations in North America have recognition programs. According to the Gallup organization, 60 percent of employees do not feel recognized. It's a huge gap, and I think part of the reason for the gap is we have the formal strategies in place, the material rewards and incentives, but we don't do a very good job on the day-to-day stuff, which is really the pat on the back, the appreciation of a person for who they are and the recognition of what they do, even if it's not big. There doesn't have to be a gold watch attached to it every time you recognize somebody. You don't always have to have dollars attached to something. I think day-to-day recognition is probably the most underused tool in our business. In order for it to work, however, it has to be sincere, specific and timely. Those are things you can put into place immediately."
There's never a good excuse for not being able to appropriately recognize and reward people who deserve to be acknowledged for exceptional work. If you don't, there are competitors out there who will be more than willing to appreciate extra effort and are using this downturn to poach disgruntled but talented staff. Budgets can be found for priority projects, and there are always low-cost or no-cost things leaders can do to build a culture of recognition and engagement.
Michelle Smith suggested something as simple as having good manners during challenging times. "It's easy," she said. "A simple and sincere 'please' goes a long way in helping employees and colleagues feel appreciated and respected, which is essential in building engagement. Making eye contact, smiling and saying hello to everyone you pass in the workplace is another no-cost activity that has been proven to improve engagement scores and reduce absenteeism and turnover, too."
"We would be wise," Smith continued, to work at positively impacting employees in these key areas, which are criteria used to measure engagement:
In the final analysis, most experts advise taking a really hard look at what your business issues are right now.
"The reason for that," explained Saari, "is that your employee base is probably better equipped than any to help you get out of or deal with those issues firsthand. So soliciting their advice, their involvement and making sure that you are really understanding or at least soliciting their opinion on what's working and what's not in your organization" is critical.
"I'm always surprised to hear how many companies don't actually survey their employees to find out what is valuable to them, what do they feel the culture is like, how do they feel they can make a difference," Saari said. "Starting with a very basic survey could be one of those foundational elements from which you can build additional strength and can find ways to overcome those short-term issues and then build on creating the right culture going forward to catapult your company out of the recession and into a successful future."
Invest in employee engagement, Smith added, "…and do it now."
Start wherever you can with whatever budget you have. Leverage the no-cost, low-cost ideas. Add or phase in other initiatives as you're able, but start to do something immediately. If you have programs in place, do an assessment to make certain they're still aligned with organizational priorities and have the full impact and reach you're hoping for. Seek professional help if you even think you might need it—it will be well worth the investment.
"The tide is rising," Smith said. "What side of the wave will you be on—the top or the bottom?"