human resources outsourcing and consulting firm, Hewitt
Associates, has just released new data showing the strongest
link yet between engaged employees and business success.
Their analysis of 1,500 companies over a four-year period
showed that companies with higher engagement levels
had markedly higher total shareholder return. Companies
with between 60 per cent and 100 per cent engagement
achieved an average return of 24.2 per cent, whereas
those with lower engagement (49 per cent to 60 per cent)
had lower return at 9.1 per cent. When engagement is
below 25 per cent, those companies suffer a negative
total shareholder return.
What is an engaged employee? One simple way to show the difference is an employee who shifts from the personal ("I") to a sense of team and organisation ("We"). Hewitt says the engaged employee says the right things about the organisation, stays with it and strives to do a better job.
The data shows engagement creates more sales, more market value, higher return on capital. On the other side, it shows reduced absenteeism, fewer accidents, greater customer loyalty and retention. These are all direct drivers of profit and success.
But the Gallup Organisation over at least two decades has found in the USA that as many as 69 per cent of employees are "not engaged", that only 16 per cent are engaged. This engaged group drive organisational success. The vast majority is not engaged; they drag performance down. What would a similar survey find in India?
Northrop Grumman, a Los Angeles-based provider of defence electronics and systems integration, is a $15-billion business with 79,000 employees, and it faced a problem in its 'internal information services' organisation. As chief information officer, Tom Shelman, puts it, "We were losing people with 20 years invested in the company. Our attrition rate was in the mid-teens and rising. And the corporation was demanding a higher level of IT expertise."
Communication at management level was found to be the major problem. Shelman says, "Our mission, our vision – all those things we assumed the managers understood – we learned we weren't communicating."
According to Hewitt consultants Larry Tucker, "Lack of communication emerged as a primary reason for disengagement. The engagement study clearly showed how a lack of trust in leadership created the morale problem that cascaded down to employees."
Northrop Grumman developed a bottom-up programme to get employees engaged, a leadership campaign to improve communication of leaders and created a new internal communication programme.
Turnover decreased dramatically – from 8.2 per cent to 2.6 per cent - translating into at least $3-million savings in the costs of turnover. But Shelman points to greater success being the productivity improvement of staff. "We are doing more across the organisation, and spending less, than ever before."
India's Tata Group, established in 1868 and now having 91 companies across seven business sectors and 220,000 employees, places considerable focus on employee communication and engagement.
As Satish Pradhan, Tata's executive vice president, group human resources, says, "Independent yardsticks bear out the truth that Tata companies are, by and large, engaging employees and creating a wholesome environment for them.
Adds Pradhan, "This is permeating value right across the group in a variety of ways in terms of accountability and responsibility, not only to ourselves but also to our businesses, our communities and our stakeholders."
New employees are well trained in the Tata approach and history, while those moving up the scale receive training via the Tata Management Training Centre.
Clearly this company knows that the good news, according to Gallup, is that most people see their workplace as full of potential; they want to learn and make a worthwhile contribution. They also want recognition for that contribution. Most importantly, people want face-to-face communication so they can better understand their place in the organisation.
Leaders at all levels are obviously the critical link, rather than just the one at the top. "Leaders" includes managers, supervisors and team leaders. In the day-to-day of the workplace, they are the ones who win or lose discretionary effort and engagement.
We know exactly what are the communication needs of employees; things like timely and accurate information, coaching and feedback, real communication, a feeling of being valued, understanding of the business and real human contact.
Unfortunately, most of these leaders, despite their best efforts, have never been trained in communication and have little understanding of it. People are more often promoted in the US for their specific sector skills rather than the ability to communicate, and this is probably the case in most of India.
Cargill Incorporated is an international processor, marketer and distributor of agricultural, food, financial and industrial products with 97,000 employees in 59 countries.
Nancy Siska, corporate vice president, human resources, says "We benchmarked a group of companies and ended up with compelling evidence that if we want to succeed as a customer solutions provider, we have to excel at employee engagement."
The company has a diverse workforce, ranging from futures traders in Geneva, plantation workers in Indonesia and meat packers in Kansas. It has found different things engage employees in different cultures.
It's all backed up from the very top. As Siska says, "Engagement is synonymous with high performance at Cargill. Our CEO talks about it in virtually every speech he gives."
She added, "We believe the engagement work will help us achieve sustained business results, lower turnover and increased retention of the right people."
We all pay lip service to how "vital" communication is; but really more often than not among business leaders communication is poorly understood and badly executed.
On the employee side, a major problem is the sheer volume of information they receive, meaning that they often do not know what to do with it and what it all means. This is the result of communicating without a strategy. Strategic communication is the reverse of this chaotic approach: it brings focus and understanding.
Research has shown that what employees are really looking for is "communication" that helps them do their jobs well. They also mostly say that they prefer to get this kind of information from their managers, supervisors and team leaders. So the challenge is how to unlock the power of this opportunity; how to make those managers, supervisors and team leaders the very best communicators for employee engagement.
*The author, a member of the committee of management of the Australia India Business Council, is a communications consultant, trainer and author of You Can Communicate (Pearson 2002).
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