How Engagement Impacts Business

How Engagement Impacts Business

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  The Importance ofEngagement! How and Why Engagement Affects Business Success HOW ENGAGEMENT IMPACTS BUSINESS How and Why Engagement Affects Business Success
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  HOW ENGAGEMENT IMPACTS BUSINESS (Howand Why Engagement Affects Business Success) Senior executives and leaders many times don’t fully understand the impact engagement or conversely disengagement has on their business operations and organization. Simply stated, employee engagement can affect virtually every aspect of a successful company including profit. Engagement is really about people and positive emotions and ultimately is one of the critical drivers of high performance. I am sure everyone has heard the philosophy “Emotions control behaviors and behaviors control actions and actions control results!” This theory has been discussed, explored and researched in a variety of psychological and human behavior studies and journals over the years. Examples include Daniel Goleman’s work in the field of emotional intelligence. Related Research (that explores the connection between emotions and performance). Links/Articles/Books: http://hbr.org/2004/01/what-makes-a-leader/ar/1 http://www.businessballs.com/eq.htm http://www.danielgoleman.info/ http://www.danielgoleman.info/topics/emotional-intelligence/ Positive emotions such as motivation, desire, commitment, inspiration, determination, creativity, enthusiasm, pride, caring, perseverance…… all have significant impact on the attitudes and actions required for high performance and results. Similarly, negative emotions such as anger, frustration, annoyance,
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  hopelessness, depression, insecurity,negativity, selfishness, resentment, jealousy ….decrease productivity and performance. Senior leaders must understand it is an organization’s employees, who create and produce products and services sold into the marketplace, plan and implement business strategies, overcome difficult obstacles and challenges and generate business results. Their actions and performance, either directly or indirectly, influence costs, processes and the behavior and attitudes of customers, and it is customers who drive an organization’s profitability through their purchases. It is an employee who commits to high productivity and quality work! Is it an employee who is inspired to innovate, improve and find new solutions…..you get the picture! But what do these emotions actually have to do with business and company success. Let’s take a closer look. Here are several performance related factors that are affected by emotions and engagement, that play a key role in business success. 1. Productivity- When employees perform their responsibilities with energy, enthusiasm and motivation higher productivity will result. Productivity can be described as the amount of output for any given goods or services produced per man hour or comparable metric. Higher productivity will lead to lower costs to produce goods and services and make any business more competitive in their marketplace. Engagement levels not only affect productivity but also impact the extra discretionary effort that can make a significant difference in desired outcomes. Engaged employees are 20% more productive that the typical employee. Corporate Executive Board 2004 ‐ http://www.gaebler.com/Employee‐Engagement‐Statistics.htm 2. Advocacy for One’s Company- In this day and age when negative comment can spread like wildfire on the internet, social media channels or blog articles negative comments from employees can cause serious harm to any company. How? By reducing the potential to attract employees and top talent, by influencing customers that may not now try your product or service due to negative publicity, by community and corporate responsibility/sustainability programs and results. Alternatively positive comments can help create a very positive image for any company that can impact the bottom line. Consider recruitment costs alone.
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  Companies like Google(who annually ranks amongst the best companies to work for in the world) receive thousands of applications for a few job opportunities every year. Imagine how this improves their ability to select the candidates with the proper skills and qualifications they need. 3. Absenteeism-Research indicates that absenteeism costs companies $2,000.00 per employee per year. Unfortunately studies indicate that employees will often call in sick in many cases when they are not sick or ill at all. They may feel they need a day off or are tired of the issues, conflicts with other employees, politics, pressures and demands of their daily responsibilities. Even if this represents only 10% of actual absenteeism costs for a 200 employee company this would represent $40,000 per year. Highly engaged performers miss 20% fewer days of work and are almost 80 percent more likely to be top performers. Towers Watson 3/09 ‐ http://www.watsonwyatt.com/render.asp?catid=1&id=20884 4. Turnover and Retention- In many cases companies can face significant challenges in loosing key employees. Not only is there retraining and potential lost productivity involved but there can be a significant costs and financial losses resulting from turnover. It is estimated a lost employee can costs anywhere from 50-150% of their annual salary to replace. No company can realistically eliminate turnover, and this is not really the goal, but even if you can reduce turnover and retention issues by 10-20% or more it can have a significant impact on your bottom line. We have all heard the phrase “employees don’t leave their job or the company but instead leave their manager” The manager-employee relationship needs to be strong, productive and benefit both parties. A- The Society of Human Resource Management recently reported that are either actively or passively job searching (41% passively and 31% actively). B- Companies with large numbers of dis-satisfied workers experienced turnover that was 51% higher than their peers.
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  http://www.gaebler.com/Employee‐Engagement‐Statistics.htm (quoting a Galluppoll) 5. Innovation-How important is innovation to your organization? For many businesses and industries this is the lifeblood to success and bottom line results. Yet in order for employees to commit to improvement, finding new efficiencies, innovation and creativity they must be in the proper frame of mind and must be engaged. Would someone really invest their full energy and potential in solving a difficult problem and improving an existing product if they were angry, frustrated and upset with a manager, colleague or the company in general? Not Likely! Engaged workers are 3 times more creative. Gallup 2006 ‐ http://gmj.gallup.com/content/24880/Gallup‐Study‐Engaged‐Employees‐Inspi re‐Company.aspx 6. Quality- Whether clients are internal or external, high quality is important to business success. Mistakes and defects can lead to customer complaints, increased scrap, wastes and rework, affect your brand and reputation and more. Studies show employees who are engaged produce higher quality products and services. 7. Presenteeism-When employees are on the job but their mind is elsewhere this has a negative impact on results. People who show up to work and are physically or emotionally distracted or not engaged in achieving keys tasks and objectives or unable to function at 100% can affect several operational factors including communication, mistakes, costs, service issues, sales and more. 8. Stress and Mental Health- If the working conditions, atmosphere and culture at your company are stress filled from work overload, demanding deadlines, lack of required tools and resources to accomplish goals the organization will suffer. Organizations need to create a work environment that fosters a productive work experience and the teamwork necessary for success. 9. Customer Relationships and an Organization’s ability to meet client’s needs. Do your employees have and exhibit an “eager to please” attitude (this was cited as a very important criteria that leads to customer satisfaction and repeat customers and potential for additional sales to customers) when dealing with clients and customers? Or do they
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  sometimes show theirfrustrations? The sale of products is not always about price. Relationships, a high service commitment and customers being treated properly (with an eager to please attitude) also play very important roles. As well, customer referrals and/or “word of mouth” can help promote your products and services to other potential customers or, if negative, hurt your organization. 10.The correlation between “Engagement” and Business Results- A few facts: Lost productivity of actively disengaged employees is estimated to cost the US economy over $300B annually on an average year. Gallup 2006 ‐ http://gmj.gallup.com/content/24880/Gallup‐Study‐Engaged‐Employees‐Inspi re‐Company.aspx Organizations with high levels of employee engagement have 2.6x earnings per share growth rate versus others in the same industry. Gallup ‘06 – http://gmj.gallup.com/content/24880/Gallup‐Study‐Engaged‐Employees‐Inspi re‐Company.aspx High engagement companies improved their operating income 19.2%. During the same period, companies without high engagement saw a decline of 32.7%.http://chiefexecutive.net/are‐your‐employees‐engaged (Quoting an ISR study‐www.isrinsight.com) Best Buy found that for every 10th of a point increase in a store’s employee‐engagement scores, it saw a $100,000 increase in operating income. Liebs, Scott. “Measuring Up.” CFO.com. 1 June 2007. CFO Acquisitions LLC. 22 June 2012 http://www.cfo.com/article.cfm/9214066/1/c_9277557 Sirota Research
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  Using overall satisfactionas our measure we divide the companies into high morale (75% favorable) Moderate morale (between 74 and 60 % favorable) and low morale (less than 60% favorable). The stock market performance in 2002 of each company was determined and the average performance for the three morale categories was calculated. Since the different industries perform differently on the stock market over the course of a year, and the companies in our morale categories differed considerably by industry, it was necessary to compare the performance of each of our companies with the performance over the year of its own industry. The Table Below shows the average changes in the stock market price of the companies in each morale category, the average changes in the industries of those companies and the difference between the two. Average Stock Market Performance Of companies in Of Industry Comparison Difference Each category Companies Morale Category High +1.80% -18.23% +20.03% Moderate -14.41% -9.19% -5.22% Low -24.92% -19.93% -4.99%
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  Similar findings arefound for other standard measures (for example Return on Investment ROI, Return on Assets ROA). Research from the Sirota Group Some costs are more difficult to identify and measure or even establish required metrics. However they cannot be discounted. Executives need to not only look ROI (Return on Investment) with specific metrics and benchmarks but also VOI (Value on Investment) factors. Can you actually measure the financial impact of teamwork and what it means to your business? Probably not, however any astute executive would certainly appreciate that teamwork does have a positive impact on business results. When you combine all of these factors above depending on high or low engagement there will be either a substantial positive or negative influence on business success. Why is this so important to understand how employee engagement impacts business success? For any company or executive once they realize how high engagement supports business success and low engagement often leads to problems and challenges that increase costs and decrease bottom line profit they can make strategic decisions on why, what and where to invest in engagement programs. Strategy execution is important to any company and high employee performance plays a key role and is critical to achieving the organization’s desired goals and objectives. For any organization that desires to maximize performance of their staff and workforce engagement is important to make this is a reality. Using the above criteria will help any organization not only justify the need for development of engagement strategy but also secure the necessary budget and funds for the tools, services and resources required to create and sustain a highly engaged workforce.
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  Investing in strategicengagement programs is important for any business needing to optimize employee productivity and contribution as they develop plans for future success. Doug Brown Doug Brown is President of Engaged2Perform. www.engaged2perform.ca Phone 519-656-1066 Engaged2Perform provides strategies and solutions to companies that engage with employees and increase productivity.