Employee Engagement: essentials and challenges

research C O R P O R AT E R E S E A R C H F O R U M

February 2015

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Employee Engagement: essentials and challenges

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”Abilities wither under fault-finding, blossom under encouragement.”

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research C O R P O R AT E R E S E A R C H F O R U M

February 2015

Employee Engagement: essentials and challenges Andrew Lambert

research CORPORATE RESEARCH FORUM

FOREWORD

Foreword Employee engagement continues to be a critical concept in the workplace. However, the workplace is changing and it is important that the way we evaluate and enable worker effort, motivation and commitment has continued relevance.

Dr. Sheri Feinzig Director of the IBM Smarter Workforce Institute

One such change in the workplace is the growth of diverse work arrangements. Just last year the IBM Smarter Workforce Institute conducted a global study of independent workers and found that they actually report higher levels of engagement than regular employees (IBM, 2015). We also found that one of the key drivers of satisfaction among independent workers is autonomy. This finding is supported by research highlighted in this report, confirming that allowing workers the freedom to do what they do best is an important characteristic of a high performing organisation.

A further change in the workplace concerns technology. This impacts not only the way employee engagement can be measured (new approaches involve continuous listening) but also how workers from different types of work arrangements, as well as different generations, collaborate in the workplace. Collaboration is often key to organisational effectiveness, and today’s technologies can be an invaluable enabler.

Generational differences, technological changes and diverse work arrangements are just a few of the advances facing those interested in workforce performance, and they are also among the many topics being researched by the IBM Smarter Workforce Institute. We have a fundamental belief in the importance of applying scientific rigor to understanding the workplace. That's one of the reasons why we welcome this Corporate Research Forum report and why we continue our research efforts to bring robust, actionable evidence to the wider HR and business community.

Dr. Sheri Feinzig Director of the IBM Smarter Workforce Institute

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INTRODUCTION

Introduction It is probably several thousand years since an employer first noticed that employees responded better if they were motivated rather than bullied or bribed. The term ‘employee engagement’ first gained currency well over two decades ago, and is now widely regarded as a business priority.

Andrew Lambert

About the author Andrew Lambert Andrew Lambert is an associate of CRF, and a partner in Creelman Lambert, advisers on corporate and HR governance. He was MD of People in Business, a founder director of Smythe Dorward Lambert, and director of Wolff Olins, the corporate identity specialists. He also ran communications functions for TSB and Midland Montagu.

He was a Director of CRF, has authored many CRF reports – and has provided consultancy to over 90 organisations on management and communication issues.

Any employer concerned about its reputation will declare that maintaining a healthy relationship with employees is a continuing imperative. Boards increasingly use employee survey data to assess organisational health and shine a spotlight on the governance of people practices. Engagement is seen as core ingredient of ‘high performing work’ practices.

CRF last examined this topic in depth in 2010, in the context of how organisations were coping with recessionary pressures. Some five years on, nagging questions remain and new challenges have emerged to test relationships with and within organisations.

• Regular surveys continue to indicate relatively low average levels of engagement and trust in organisations and their leaders. Some organisations and countries do rather better than others.

• The digital age is forcing organisations to re-think most aspects of how they operate – including how they manage and measure relationships and performance – despite many senior executives and core functions struggling to understand and adapt both to technological change and generational differences.

• Simultaneous politico-social, demographic and economic threats don’t make it any easier for organisations to provide certainty about their future – impacting confidence in many ways.

• The UK government gave its backing to the 2009 ‘Macleod report’ in the hope that productivity and competitiveness would increase, but results so far are mixed, judging by official data.

• Some academics express concern that the term employee engagement is imprecise, that consequently measurement is compromised, and that research claims about improved performance are un-substantiated and/or exaggerated.

This brief commentary builds on CRF’s comprehensive report Employee Engagement and Organisational Performance (2010) which you are strongly advised to re-read. It provides pointers on tackling challenges and dilemmas, achieving more precision and focus in addressing engagement, and adapting to the future.

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‘Workforce engagement’

1.1 What is ‘employee engagement’?

Patterns of employment and contractual deals are shifting, such that it may be more accurate to refer to workforce rather than employee engagement.

• Contingent workforce expansion – partly due to recessionary pressures, contractors, short-term and temporary workers make up an increasing proportion of an organisation’s workforce.

• Porous organisational boundaries – the trend is towards more flexible and fluid structures in order to adapt to fast-moving contexts and work increasingly centred around projects.

• Employee preferences – Millennials tend towards greater job mobility for various reasons, and a growing number of older skilled workers also elect for selfemployment.

Nonetheless, all organisational contributors should be engaged if service and brand promises are to be delivered.

‘Workforce’ isn’t a particularly attractive term, but at least it is accurate.

Employee engagement (EE) is hardly a new term, and even less a new idea. So why do organisations need to articulate what they mean by ‘employee engagement’?

Multiple definitions • Any word or phrase used in business is subject to variable interpretation – for example ‘leader’, ‘manager’, ‘strategy’, ‘quality’. This can be problematic, especially when measurement is involved.

• EE suffers less from lack of definition but rather from a superfluity of definitions – the Macleod report refers to over 90 – due partly to consultants and academics riding a bandwagon.

• Several academics have attracted attention by criticising EE for its inexactitude. Do they have a point? Or are they dancing on the end of a terminological pin?

Anecdotal evidence is that many HR practitioners are not particularly concerned or even aware of this question. There are definition and measurement models that they have been using for many years.

Nonetheless, EE ‘initiatives’ require investment of time, energy and money – particularly where negative organisational contexts require significant behavioural change. Any lack of clarity makes it more difficult to define practical goals and requirements that address the real issues. Arguably that is why some organisations record engagement scores that are disappointing or worse.

Some straightforward points help to resolve this debate, and facilitate shared understanding.

Differentiate between ‘process’ and ‘outcome’ The 2010 CRF report was the first publication to explain that EE has two dimensions.

• As an outcome, engagement is not about mere satisfaction, but employees being positively stimulated – even excited – by their work and role, inspired to align with organisational goals, making discretionary effort, and being enthusiastic advocates for the organisation.

• As a process, engagement is not just about surveying opinion, but offers a structured way to understand, stimulate, measure and manage the level of employees’ attachment to the organisation and its objectives.

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“Organisations will have motivated and satisfied employees if they create attractive work environments that reward individuals for performance. It is as simple as that.” Ed Lawler III

It’s an ‘umbrella’ term The simple reality is that EE is an ‘umbrella’ term that can contain many ingredients – literally anything that impacts whether employees feel more or less engaged.

• Lack of precision about what the EE term covers? Actually, it is useful to have a catch-all name. Just as with the word ‘investment’, one has to qualify the term in order to arrive at something that is precise and measurable.

• EE overlaps concepts such as job satisfaction that are longer established and more measurable? Sure, assessing the health of EE involves measuring its component parts.

Newman & Harrison in 2008 usefully described EE as a ‘mega job attitude’ rather than a scientific construct. And the leading suppliers in this field, such as Towers Perrin and Gallup, have robust and well-tested models that describe the components of EE quite reliably. Organisations can choose to add important factors that may be applicable in their particular circumstances.

1.2

Three myths about EE IBM Smarter Workforce Institute (see bibliography) challenges what it says are three common myths.

• Engagement levels are constantly declining.

• Its recent research indicates average employee engagement is rising globally (2012 compared with 2011-10), in contrast to gloomier assessments by rival surveys.

• People join companies but leave managers.

• People more often leave companies because of poor leadership, not because of their manager.

• Recession is a major reason for low engagement.

Performance and engagement The most potent benefit ascribed to EE is that it enhances productivity and performance.

However, caution needs to be exercised before accepting this as a definitive truth.

‘Performance’ needs defining too

• The economic crisis is not a good scapegoat.

Leaders cannot blame the economy if their scores are low. Conversely, good leadership has shown its worth even in challenging conditions.

• ‘Performance’ is also a catch-all term that needs qualifying definition. EE will impact some aspects of performance but certainly not all.

• We also need to distinguish between individual, team and broader organisational performance. Any goal-setting and measurement needs to allow for these quite distinct dimensions.

How performance and engagement correlate Some academics also allege over-claiming by EE enthusiasts about the enhancement of organisational performance in particular, including that the Macleod report quotes research that does not meet scientific standards of proof.

• This is a useful challenge, as there is undoubtedly some sloppy ‘research’ around. There are always dangers where enthusiasm parts company with reality and evidence.

• However the 2009 Macleod report, echoed in a 2012 report by Engage for Success, stated that no single study yet proves beyond doubt that EE explains higher performance. Rather, taken together, the large numbers of indicative statistics and case studies make a convincing case.

Where the criticism falls down is where it ignores some simple mathematical principles applying to the linkage between EE factors and performance.

• The relationship is not causal but about creating the conditions for higher performance.

• It is also about probability – ie increasing the chances of better achievement.

• Third, ‘triangulation’ should be used – the accumulation of different types of evidence in circumstances where one or two sources are merely indicative.

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“Exceptional leadership leads to engaged employees leads to customer satisfaction leads to business results.” Karen McKay, VP, HR and L&D, Eli Lilly Canada

How much engagement should we aim for?

As with most things in life, extremes are best avoided.

The dangers of disengagement are clear: low effort, loss of talent, potential for negative and destructive behaviour – the latter being particularly dangerous in the digital age.

Note however the dangers of ‘overengagement’, ranging from stress and burnout to extremes of loyalty to an organisation, where perceptions of what is truly right and wrong can get blurred.

As regards the proportion of engaged employees to aim for, is there a ‘right level’ to aim for? It is plainly unrealistic to expect 100% high engagement. No organisation will be perfect, and indeed a degree of internal questioning and challenge is essential to provide momentum for improvement.

For most organisations, the simple reality is that they need to work continuously to sustain and improve engagement and minimise disaffection. Those that do achieve high scores need to avoid complacency and yet also avoid panic if scores dip – this is just a reminder that ‘excellence’ requires constant effort.

Beware common traps It has long been pointed out that organisations can slip into various traps in measuring employee engagement. For example…

• focusing more on measuring than follow-up improvement • not measuring things that matter – is that deliberate or poor knowledge?

• not involving employees in the design • poor use of comparators • not linking measurement of engagement to assessment of other performance factors.

Getting measurement of EE right becomes even more important if this is used as an influence on the pay and prospects of leaders and managers – which in principle it should be if reward is a genuine differentiator in performance.

A matter of investment This is just the same as with many types of investment – from infrastructure to marketing and training – where two simple accounting principles also apply.

• Depreciation – the performance of an organisation not investing in engaging with its employees is highly likely to degrade over time. People and their capability are assets, not costs.

• Opportunity cost – any assessment needs to take account of the cost of not investing.

Probability theory is the key. In simple language, an engaged workforce is more likely to perform better than a disengaged one.

And the return-on-investment? EE requires little money to stimulate, but a considerable amount of effort to ensure good management. Just what any sensible investor would want.

1.3 Measurement There is little about the principles and methods in employee research that was not articulated in the 1980s and well documented in the 1990s.

Advances in technology have made survey processes quicker, easier and cheaper – and, where Big Data genuinely applies, potentially more penetrating – but there is as much need as ever for careful thought and skill in design and execution. Here are some points to consider.

• The underlying purpose should be to profit from the experience, insights and ideas of core stakeholders in an organisation. Failure to do this well puts an organisation’s health and prospects at risk. It is also a test of how well leaders connect with all their colleagues.

• Engagement is not the only issue to consider. There are other important or useful things to consult colleagues about, whether or not as part of a regular survey process.

• There are a variety of techniques to use – qualitative and quantitative. A survey is just one.

For example, ‘pulse’ tools provide timely perspectives on priority topics, even if annual or biennial reviews may be more comprehensive.

• Balance brevity with thoroughness. Think brief and frequent rather than long and occasional.

Think business partners in regular conversation about mutual priorities rather than bosses checking intermittently whether the ‘serfs’ are liable to riot.

• Even more timely information is now offered by ’sensing’ tools that analyse social media traffic. However, their applicability for employee surveying depends on the quantity and quality of internal social media usage. Many organisations have a long way to go in terms of developing both the systems and trust that would allow this approach to displace surveying tools.

Action – planning and follow-through • Creating an engaged workforce does not start with a survey, but with the way the organisation’s values are set, and embedded in its behaviours and processes.

• Measurement provides a health check and identifies areas that need addressing, but is only part of what should be a continuing process of learning and improvement.

• The level of engagement is only part of the issue. Drilling into the factors that increase or decrease engagement provides insight into core performance drivers.

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“While most executives see a clear need to improve employee engagement, many have yet to develop tangible ways to measure and tackle this goal.” HBR, Impact of Employee Engagement on Performance, September 2013

• Follow-up action applies at every level, from whole organisation to within teams.

• Any lack of rigour in follow-up undermines the credibility of organisational leadership and its perceived adherence to positive values. It signals unwillingness to listen – which triggers workforce disillusionment and non-participation. That’s why questions about action taken since any previous survey are particularly significant.

Organisational maturity While employee surveying is now well-established practice, the maturity of organisational experience in managing the entire process varies considerably.

• Regular surveyors – the challenge they can face is maintaining energy and enthusiasm.

Addressing this is a test of leaders’ ability to collaborate with employees in keeping things ‘fresh’.

• First timers – it is common for a host of issues to emerge. Use prioritisation to avoid being overwhelmed, and to find the right balance between over and under promising.

This also applies if there hasn’t been any process to measure and enhance engagement for some time.

• Take-overs, mergers and major re-structuring present great opportunities to consult employees on what needs improvement, with obvious benefits in terms of learning and winning commitment. Yet not only is this often neglected, but the whole process can be highly disengaging, helping to explain why so frequently organisational value gets diminished rather than enhanced.

True maturity is exhibited when • the process of assessment and improvement becomes a core and continuing part of how the organisation manages its performance • engagement scores – together with other important human capital health measures – are on a par with sales, productivity, market share and other critical performance indicators

Where’s the balance?

The conventional mental model underlying employee surveying, whether for engagement or anything else, is something of a one-way relationship. The organisation – its leaders and/or HQ functions such as HR and Comms – decide what the questions are and want answers, in order to take decisions. Professor Theresa Welbourne, of the University of Nebraska-Lincoln, and a leading academic in the EE field, refers to a ‘lack of equity’ – most research and rhetoric is about what the employer gets, not the employee.

A high involvement organisation does thing very differently. Survey questions are influenced by what employees feel are important to help them do a great job and address organisational issues.

The quality of organisational leadership and of the service from corporate functions are very much part of what gets measured.

Meanwhile, the truly connected and engaged organisation is one where there is a continuing dialogue about how best to manage the organisation and improve its performance.

Change and improvement can be driven bottomup and laterally (peer-to-peer, inter-function), and is not purely the product of top executive teams and their corporate functions. For further guidance see CRF’s report on Employee Surveying (in bibliography).

• responsibility for engagement is fully reflected in managers’ performance reviews, particularly the leading executives who set the organisational ‘tone’.

EE thus becomes intrinsic to how the organisation is managed, not an extrinsic ‘initiative’ that can be regarded by managers as an add-on.

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A role-based perspective A recent article by Professor Theresa Welbourne (see bibliography) about the issue of multiple definitions of EE points out that most research concentrates on two dimensions of employees’ roles at work – their core job and being a ‘corporate citizen’. She proposes five roles to assess in order to understand the whole person and their activities.

• Core functional job holder

Here are some long-standing issues impacting engagement, about which new questions arise as the world of work evolves. (For a fuller explanation of EE drivers, see the 2010 CRF report.)

2.1 Work content and roles Engagement inevitably evaporates where work is boring and unsatisfying, especially in a knowledge economy. Disaffected talent is more mobile than ever.

Job design This raises fundamental questions about how good organisations are at job design.

• Entrepreneur or innovator (eg improving processes, generating ideas, facilitating innovation) • Team member (participating, working with others) • Career (learning, developing skills and knowledge) • Organisational member (citizenship activities, doing good for the company, advocate).

In performance management terms, what expectations are there for each? What engagement issues arise? She argues that these roles are simpler to understand, more concrete and measureable than concepts such as ‘above and beyond behaviours’.

All five roles should be considered simultaneously, as there are trade-offs and weightings to consider. Welbourne points out that pay and promotion are generally based on the core job role, whatever else is communicated. Yet she argues the other ‘non-core’ roles help to create competitive advantage and long-term performance, and build relational capital. For employees they can all be positively challenging and developmental. Thus there should be greater clarity about what is expected and what is rewarded.

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• How many jobs are ‘designed’ with careful thought, and how many are shaped on the fly, reactively rather than pro-actively? And how many roles are (and should be) self-designed?

• An increasing proportion of jobs are becoming automated. The emerging consequences are an overall reduction in levels of job interest and of jobs available – not just manual but many white-collar jobs. There will be consequences for EE, and indeed for organisational and societal cohesion. Is your approach to this challenge technology-centred or humancentred?

For further guidance see • the CRF diagram on the next page for guidance on desirable job characteristics, and how these relate to psychological states such as being engaged, and thence to desired organisational outcomes • The Challenge of Designing Knowledge Work, by Dr. Susan Mohrman, of the Center for Effective Organisations, University of Southern California • the sidebar for a more rounded approach to designing and managing job roles than is typical, proposed by Professor Theresa Welbourne.

Minimise hassle Research by Amabile and Kramer tracked the day-to-day activities, emotions and motivation levels of knowledge workers over several years.

• Managers assumed that ‘recognition’ would head the list. In fact knowledge workers said what makes a great work day is ‘a sense of progress’ – making headway, being supported and well-resourced, and removal of blockages to doing a good job. Second highest was ‘collaboration’.

• Also important is autonomy. Characteristics of a high-performing organisation include picking and developing great people, and then giving them the freedom to do what they do best.

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“The sheer slog of doing the right things with your people every day, when you have a million things distracting you (all of which will be very urgent and important), presents the real challenge to engagement.” David Smith (former IT, People & Loss Prevention Director, Asda)

Progression for all The ability to progress is for many an essential feature of an organisation’s job offer. For the ambitious, the weaker the opportunities, the faster they leave for pastures more plenty. Preoccupation with ‘talent’ is sensible, but may result in organisations neglecting other segments.

For example, not everyone is ambitious to climb to the top. And contingent/temporary workforces are growing. Organisations also need to ensure they enrich job experiences, retain the interest and maximise the contribution of the solid achievers that form the backbone of the workforce.

Job Design

Job Characteristics Skill variety Avoid repetition Blend of motor/ mental Thinking/ doing Avoidance of unnecessary subdivision Social Inclusion Part of a team Part of a process Chance for interaction Control over tea & coffee!

Task Identity What is expected of me?

How can I do more?

How can I grow my job How does this job “fit in” Task Significance Who wants output of role?

What is impact?

Consequences of failure?

What is added values?

Psychological States

Desired Outcomes

Meaningfulness of work

Higher Performance

Accepted responsibility for outcomes

Better Customer Satisfaction

Learning & Growing

Good Place to Work

Employee Engagement

Improved Employee Retention

Autonomy Something ”that’s mine” No unnecessary bureaucracy Empowerment Knows extent of decision making authority Self net performance targets Feedback On action (How) On outputs (What) Recognition How am I doing?

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”Trust facilitates change, encourages successful co-operation and teamwork, promotes and facilitates partnerships and joint ventures and decreases operating and transaction costs – managers spend less time monitoring staff.” Professor Veronica Hope-Hailey

Uncertainty

2.2 Trust

Confidence evaporates fast when uncertainty sets in. Decisions and entrepreneurialism stall, and the organisation starts to seize up.

The operating environment is progressively more tricky in this respect. The ‘old certainties’, in so far as they existed, are hard to find in a world that is VUCA – volatile, uncertain, complex and ambiguous. Organisations find it harder to agree long-term strategies, even if investors are increasingly demanding greater focus on long-term value creation.

This requires leaders to raise their game, in two important respects.

• Thinking harder about the future, about risks and opportunities.

• Building resilience within their organisation – its culture and capabilities – so that it is able to flex, adapt and cope with the unexpected.

How good is your organisation’s leadership in creating confidence amidst constant change?

It is hard to conduct any business activity without trust, and employees never feel engaged unless they can trust and feel trusted. The degree of ‘involvement’ – without which employee engagement is always undermined – correlates with mutuality of trust.

CRF’s 2014 report on Trust extensively explored the interlinkage of trust and engagement.

Here we pull out a few points relevant to the future.

• As social media becomes all-pervasive, brand and reputation are more important than ever. Employee, customer and other stakeholder perceptions influence each other as never before.

• Mistrust of ‘big business’ in general is high. Whole sectors are in the dock – banks, payday lenders, utilities. Moving beyond outbursts of street protests, some action groups are turning to destructive internet attacks and hacking, for ethical or unethical reasons. One dimension of the December 2014 attack on Sony was the attempt to destabilise employeremployee relations.

• Multiple surveys, eg Edelman’s Trust Barometer, show that mistrust within organisations can be worryingly high, with top management rating well below line managers on average.

So far most organisations survive low trust levels – unless the trust breakdown is catastrophic, as with the News of the World and Ratners. But how much more effective and resilient could they be if they became high-trust organisations?

Should stakeholders continually and explicitly hold organisational leadership to account for their track record in building trust? Enforced resignation post-debacle is plainly too late. So, how should this be done? It is now easier than ever for data about customer and employee trust to be obtained, and made available to boards, investors and regulators. It just requires the will to do so.

2.3 Reward Pay is an important aspect of EE, which some organisations fear to debate honestly.

• Pay attracts and to a degree retains employees. Yet experience shows that financial reward does not win genuine commitment – lasting loyalty cannot be bought. Reward tied to specific goals does influence behaviour, but bonus/ performance pay schemes are too often a cause of friction.

• Hence discussion about EE focuses mainly on boosting the intrinsic attractions of the employee experience rather than pulling the ‘mercenary’ pay lever.

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“Transparency drives belief in pay fairness which drives engagement which drives business results.”

Mark A Szypko, IBM

• Yet this seems to apply least at the top of many organisations, where large pay packets are deemed necessary to retain the interest of organisational leaders. (The divide between top and bottom pay has expanded hugely over two decades.) As inherent role models for the rest of the organisation, leaders only have themselves to blame if other employees also behave as mercenaries. If employee bargaining power is weak, they may turn to unions for help.

• Fairness is a critical issue at any level. Am I being paid my true worth? Am I doing less well than my peers? When other forms of recognition and support are weak, relative pay is the main way employees assess how their employer values them. Engagement will be low if that is the case.

• Use of short-term and zero-hours contracts and minimum wage levels have spread considerably in recessionary times. This clearly saves employers money, but what does it tell us about the health of engagement between employer and employee?

If EE is so important, surely it should be included in assessment of executive pay and promotion. Wouldn’t any investor interested in organisational health demand this? Yet to date few CEOs and top teams have actually put their pay at risk for EE scores. Here are some questions to consider.

• Given that direct cause-and-effect is hard to identify, how feasible is it to reward individual contribution to enhancement of engagement? Could new technological innovations in performance measurement help?

• How does one avoid any EE reward scheme being perverted, especially if relying on scoring?

Selection and development Working on the ‘engaging’ capabilities of managers has been a central feature of L&D programmes in recent years, with good reason.

CIPD’s ‘Megatrends’ survey highlights giving feedback, coaching and addressing development needs – all core engagement requirements – as the average manager’s weakspots. ‘Training’ helps those open to development, and indicates to all managers what the organisation feels is important.

However, courage is also needed to use the ‘selection’ lever. Typically when an organisation gets serious about EE it finds it has a proportion of executives that are frankly never going to be great ‘engagers’, whatever other strengths they have. Some qualities are just not ‘trainable’.

Organisations need to ensure that • leaders are selected who can be visible role models – otherwise the different tone will not be set and old behaviours will persist • new talent and young managers need similarly to be recruited with the right characteristics

• If responsibility for EE is NOT included in reward frameworks, is it inevitably undermined?

• ‘old guard’ managers need to be helped to find places that are right for them, inside or outside the organisation – it’s not their fault they were over-promoted, but they may struggle to meet the new norm.

2.4

Both selection and development are needed if a healthy tipping point is to be reached.

Managing hard times Every organisation goes through ups and downs. The good ones prepare, learn and become more resilient. The poor ones stumble through, or collapse or get taken over.

Recessionary conditions persisting since 2008 have provided ample learning about what it takes to sustain an organisation through thick and thin. They have highlighted the divide between high-performing organisations and the rest. In better companies there has been greater • focus on honest, timely and two-way communication – with employees, investors and other stakeholders • imagination and flexibility in managing and adjusting HR policies • attention paid to retaining key talent (whose continued presence helps to re-assure others) • emphasis on non-financial recognition and less on financial reward.

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“Tough times have certainly helped to concentrate the minds of a lot of businesses to do the right things.” Dr Tim Miller, Standard Chartered Bank

Job security and engagement While people are concerned to keep their jobs, whether or not they are engaged is a very separate issue, even when job security is at risk.

• The most skilled and talented may bale out at the first sign of trouble, as they are reemployable, unless they are so effectively engaged that they feel better off staying.

• Others will hang on or accept things they don’t really like. That can include valuable people who may be the first to leave when things improve.

• There’s a danger of being left with the employees who are least equipped to aid recovery.

Employers earn trust during tough times if they • avoid ‘slash and burn’ approaches to cost reduction that treat people as expendable costs • communicate early and transparently, and minimise uncertainty for every individual • trust employees by sharing business realities honestly, respecting their colleagues as adults • involve employees in finding savings, and stimulating ideas for improvement and innovation • are firm but fair in removing ‘dead wood’.

Organisations can thus build capital in their ‘engagement bank’ to increase survivability.

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In particular there has been greater attention paid to involving employees, and stimulating their loyalty by demonstrating care. Consequently engagement levels in such organisations have stayed stable and even increased – largely due to leaders doing the right thing. The 2010 CRF report provides more detail.

Unfortunately there are still instances where short-termism, self-interest, secrecy, dishonesty and plain bad management dominate – as for example in the collapse of the UK courier company City Link on 24 December 2014. Increasingly however there are lasting consequences for poor leaders and profiteers, even if no laws are broken. It is harder to hide in the digital age – reputations stay damaged longer and regulators get pressured harder to take remedial action.

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WHAT’S NEW AND EMERGING

EE needs some re-thinking due to a new generation entering the workforce, accompanied by new technology. Leaders and HR functions face challenges that some find uncomfortable.

Multiple generations For several years it has been clear that leaders should recognise and manage the intrinsic differences of at least four generations in the workplace, with the proportion of Millennials steadily rising.

This especially applies as new technology is introduced – those lacking confidence about new ways of working should be helped to acclimatise. Different behavioural tendencies should be used as sources of strength rather than friction – as in all aspects of profiting from diversity.

Everyone needs to pull together in using smarter technology to enhance – not damage – communication, teamwork and productivity.

Digital competence Too often it is senior executives who are holding organisations back, both general managers and functions like HR. Ignorance of and under-investment in IT has been reflected in a wide range of security and operational systems failures. Leaders should update their communication practices too.

Investors should be concerned about organisations that have un-integrated IT, are weak in supporting flexible and mobile working, and have cumbersome, old-fashioned work and learning support systems. Increasingly, perceptions of poor digital competence also damage the employer brand.

Millennials especially value smart use of technology – as many surveys show – and are not attracted to employers/leaders/EVPs that lag behind the times. Wise organisations tap into this as a strength, giving say and responsibility to more tech-savvy employees, and using them to coach upwards, even at director level. The first wave of Generation Y leaders can provide further acceleration.

Observational technology Much of the commentary on emerging work support and learning technology enthuses about ‘positive’ sharing characteristics, spreading and delegating the power to drive improvement and innovation. However, there is a darker side that needs debate, as it can kill collaboration and engagement stone dead.

Advances in performance monitoring technology potentially offer unparalleled ability to track what everyone is doing. This is not just about government security agencies, hackers and criminal gangs. Funnelling work through mobile, GPS-tracked devices; the spread of wearable technology; the increasingly pervasive ‘internet of things’ – these are already stimulating software companies to develop increasingly sophisticated performance management tools for employers.

A major trust issue arises. When does performance observation cross the line and become not just spying but stultifying control, plunging a dagger into the heart of engagement?

If they are to avoid crippling the potential for collaboration and innovation offered by technology, employers and employees need to arrive at a social compact balancing privacy and protection. This is something governments have so far signally failed to do.

Digital relationships Organisations need to think ‘personal’ as well as ‘digital’ in managing relationships with both external and internal stakeholders, and understand what being engaging represents in that context. Impersonal and overly complex systems will not wash, and slapdash data management not only breaks relationships but invites regulatory action. Organisations are now in a social media goldfish bowl, and their reputations are constantly on the line.

Systems and behaviour should treat everyone like a valued customer, inside and outside the organisation. New systems offer the facility to target and personalise as never before.

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CORPORATE RESEARCH FORUM

WHAT’S NEW AND EMERGING

“Don’t allow technology and big data to rule at the expense of the person.” Darren Harris, Paralympian, in BBC Radio 4’s “For Thought”, 31.12.14

Corporate performance reporting EE performance reporting is becoming the norm, not just internally to governing boards but in annual reports. Should this become a formal expectation for all significant employers?

There is a global movement to improve corporate reporting standards, aiming for a more holistic, integrated account of how longterm value is being created. It requires more and better non-financial information, that provides the story behind the financial numbers and which is more future-focused.

Better human capital information is central to this development – and engagement surveys potentially provide the most valuable insight.

Research by Creelman Lambert (see bibliography) explains what progress organisations have made in working to new standards, and the challenges HR faces in getting its priorities, capabilities and information systems up-to-scratch.

Here are a few of the questions arising.

• Can there be common standards comparable to financial accounting? Or should this remain optional and discretionary? If so what are the implications?

• Do analysts recognise EE as essential to organisational health? If not, should they be persuaded otherwise?

• Why would an organisation want to explain low engagement scores?

• What should be the consequences for leaders of organisations with low EE scores – whether in the private, public or NFP sectors?

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Collaboration and innovation Collaborative working and engagement have always been interlinked. Siloed organisations are unhappy and inefficient places. The ability to operate collaboratively is now increasingly a business essential in order to innovate, minimise cost and spread risk. This also plays to a recognised characteristic of Millennials, who are generally more attuned to work socially, share information and ideas, and establish digital relationships.

Social organisations More fluid, flexible and agile organisational models will increasingly emerge, challenging inefficient hierarchies. Engagement is critical here, providing both glue and energy in place of the de-motivating and inflexible command-and-control cultures commonly found in lowperforming organisations. However, technology can both help and hinder – see the sidebar on the previous page.

Self-service Improved HR information and learning systems should boost self-management by the workforce, but key to success is ensuring systems are customer-centric and hassle-free. HR needs to replace its data administration role with added-value OD and consultative capabilities, helping managers at all levels to use new systems and data so as to be more effective performance and engagement leaders. This typically also requires considerable reorientation and up-skilling within HR. Sustainability In an uncertain, rapidly evolving world of work, employees focus harder than ever on whether an organisation’s leadership provides a convincing vision of future sustainability and has a track record of building resilience. AON Hewitt’s research (see bibliography) highlights how ‘best employers’ score highly on employee engagement coupled with strong scores for leadership, performance and brand – and how their business results outperform less good employers on multiple dimensions.

Meanwhile a global movement to improve the transparency of performance reporting is putting a spotlight on the human capital drivers of sustainability. Investors and employees are increasingly asking the same questions (see the column).

Note that workforces, like the public in general, are also generally concerned that their organisations don’t sacrifice environmental sustainability in the cause of financial gain.

Millennials tend to be particularly alert to an organisation’s ethics and responsibility of purpose.

Disengagement and whistle-blowing can lead rapidly to reputational and financial loss.

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CONCLUDING GUIDANCE

“The big ‘elephant’ in the room is that companies treat their employees as objects not as people.

Employee engagement is about human relationships not human resources.” Luis Suarez, IBM Community Builder

Here we summarise some points emerging from our commentary. See also the checklist that follows.

Is EE as important as it ever was?

Be clear – about what you mean by employee engagement, what you measure and manage to drive engagement, how this links to both organisational and personal performance goals and standards, and what happens if there is a shortfall.

There’s always the danger in business language that a term becomes a fad and also decays through over-familiarity. Take ‘business process engineering’ and ‘quality’, for example.

Don’t re-invent the wheel – there are robust definitions and models that point in the same direction, but ensure that everyone knows what is expected to fulfil your promise as a good employer, and how the workforce can help the organisation succeed.

Leading engagement – observe three essentials. Appoint the right people; develop them to be effective leaders; and create a culture where good leaders at every level can flourish and create a healthy succession pipeline. Easier to say than do, so therefore…

Buy or build the right qualities – the 2010 CRF report explains what a genuinely engaging leader looks like. At a time of diminished deference and increased scrutiny, this is different from what it used to take to claw your way to the top. Judgement and courage are as necessary as ever, but now shed the ego, be an inclusive relationship manager, be aware of self as well as others, become an authentic story-teller and savvy user of communication technology.

HR supporting engagement – to be effective and credible facilitators means embracing the OD skillset and role, thence adding value to what should be a core management responsibility, not an ‘HR process’. Success comes from working in partnership with other core functions - eg Communications, Strategy, IT – to guide/support organisational leaders.

Enhancing performance, productivity and capability should be core to HR strategy and workforce planning – and engagement is a primary lever.

We have explained that ‘employee engagement’ is in reality a useful umbrella term that both refers to a timeless need and which interrelates with longer established – and often more concretely researchable – concepts such as job satisfaction and motivation. It forms part of good people, communications and relationship management practice.

It might now, however, be more accurately relabelled ‘workforce engagement’.

Arguably it is gaining even greater traction as both an indicator of organisational health and a cornerstone of brand reputation, at a time when organisations need to work harder than ever to survive the scrutiny of a range of stakeholders.

An engaged workforce is an important indicator of organisational effectiveness; a disengaged workforce is a sign of potentially fatal decay.

Engagement maturity – exemplified by co-creating engagement strategies, measures and action plans with the workforce; making EE core to managing and improving the organisation, while also keeping that process fresh; adapting pro-actively to new generations and new technology, integrating these harmoniously with existing core strengths; having the courage to be transparent about failures; always focusing on learning and improving; and making relationship management a core strength, as reflected in both the customer and employer brands.

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EMPLOYEE ENGAGEMENT ESSENTIALS

Governance and standards

Approach and practices

• Ensure clarity of organisational vision and strategy, and agreed and well-understood objectives and quality standards throughout the organisation.

• Embed a relationship management approach to cover the lifecycle of employment, from recruit to alumnus – focus on employer brand and EVP, psychological contracts, employee segmentation, targeted and relevant development.

• Articulate a clear definition of workforce engagement (EE), ensuring all stakeholders understand both the process and intended outcomes, and how these support objectives/standards.

• Identify and communicate to stakeholders* the principal drivers of engagement, which you will invest in and measure. (Most drivers are universal, some vary by context.)

• Select and develop leaders with strong capabilities to engage colleagues* at all levels to give of their best, and to act as role models.

• Ensure clear accountability for achieving positive engagement results – starting with the CEO and top team, and reflected in the objectives and performance appraisal of all managers. This should have clear significance for the promotion prospects of all people managers.

• EE achievement should be a significant component of the performance-related reward packages of top executives, including heads of business units and corporate functions.

• EE results should be included in formal corporate performance reporting – not just overall figures but results for critical areas such as leadership, improvement, management of change.

• Ensure that governing boards are oriented and equipped to provide effective oversight of workforce engagement performance, starting with leadership capability, behaviour and ethics. * Especially the full-time and contingent workforce

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• Care for people – create a people-centric culture that demonstrates concern for wellbeing.

• Talent – build a reputation for developing and rewarding talented people, and a place where the best help the rest.

• Treat employees as partners in achieving high performance, continuing improvement, change.

• Invest in collaboration, organisational improvement and cocreation – addressing both systems and behaviour.

• Teamwork – minimise silos, maximise mutual understanding across the organisation.

• Make work as interesting as feasible – pay attention to job design and content; match individuals and teams with what they do best; provide ample opportunities to progress and take responsibility.

• Adopting new technology – employees should feel the benefit, both in terms of purpose and being well supported in acclimatising, so that work practices adjust and align rapidly.

• Transparency – share good and bad news in an open and timely way; balance privacy and protection, and address what really needs to be secret/confidential through mature, inclusive and regular debate.

• Resilience – sustain confidence among the workforce (and other stakeholders) by relentless focus on building the capability to meet expected and unexpected challenges.

research

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CORPORATE RESEARCH FORUM

EMPLOYEE ENGAGEMENT ESSENTIALS

Measurement and action

HR role

• Balance annual/biennial comprehensive surveying of EE drivers, blockers and outcomes with use of regular pulse-taking tools.

• Ensure ownership of engagement process belongs to the organisational leadership, and that they share it with the workforce – both full-time and contingent.

• Provide ample opportunities for feedback and improvement ideas, not just perception checking.

• Enable rigorous debate of results and follow-up action at all levels in the organisation, and test the quality of outcomes subsequently. Ensure the employee voice is included in prioritisation.

• Share learning and perspectives across the organisation.

Performance and reward

• Work as an engagement strategy facilitator – with the top team, with business unit heads, with other central functions (especially Communications) – deploying a full range of OD capabilities.

• Stay up-to-date with emerging approaches, techniques, software and research, and be expert in supplier commissioning and management.

• Workforce engagement should be a primary influence on people strategy and workforce planning.

• Enable employees to do a good job, and what they are best at, aided by supportive coaching, development, resources and systems; removing blockages and constraints; listening to what they say they need.

• Review performance continuously and in a motivating way.

• Recognise and reward effort and achievement thoroughly, fairly and proportionately. Reward for impact – behaviour that leads to positive individual and team performance, as well as achieving end results.

• Ensure clarity and fairness in recognising, understanding and addressing underperformance.

• Select and train managers to manage situationally, as appropriate for context and employee needs, and with skill in facilitating performance discussions, providing feedback and guiding development.

• Balance the importance of creating a sense of teamwork and mutuality with pressures to provide relatively high rewards to top executives and talent (who have a responsibility as role models).

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BIBLIOGRAPHY For a fuller list of reading material, please refer to Section 9 of the 2010 CRF report (see below).

Articles

Edelman Trust Barometer 2014

Amabile T and Kramer SJ, What really motivates workers, Harvard Business Review, Jan-Feb 2010

Gallup, State of the Global Workplace, 2013

Briner R, What is employee engagement and does it matter: and evidence-based approach, (see Robinson & Gifford below) Kahn W.A.. Psychological conditions of personal engagement and disengagement at work, Academy of Management Journal, 33: 692–724, 1990 Lawler E, An Idiot's Guide to Employee Engagement, Forbes Magazine, 8 November 2014 Lawler E, Engagement and Performance: Old Wine in a New Bottle, Forbes Magazine, 9 September 2013 Makhija N. The Future of Employee (Re)Engagement, People Insights Quarterly Vo2, Issue 3 Mohrman S, The Challenge of Designing Knowledge Work, Center for Effective Organizations, 2006, Paper G 06-3 (492) Newman DA and Harrison DA, Been there, bottled that, Industrial and Organizational Psychology (1), 2008 Welbourne T and Schlachter S, Engaged in What?, Incentive Research Foundation, 2014

Reports and surveys Aon Hewitt, 2014 Trends in Global Employee Engagement Bassi L, Creelman D and Lambert A, A Smarter Annual Report: how companies are integrating financial and human capital reporting, Creelman Lambert & McBassi, 2015 Blessing White, Engagement Research Update 2013 CIPD, Are UK organisations getting better at managing their people?

CIPD Megatrends survey 2014

Hay Group, Enjoying Hearts and Minds – preparing for a changing world, 5 February 2015 Hope-Hailey, V et al – Where has all the trust gone?, CIPD, 2012 Impact of Employee Engagement on Performance, Harvard Business Review Analytical Services, September 2013 IBM, Employee Engagement Survey Overview, IBM Kenexa 2014 Kowske B, Employee Engagement: Market Review, Buyer’s Guide and Provider Profiles, Bersin, 2012 Jolton J and Hayes B, Big Data helps bust the top three myths of employee engagement and leadership, IBM Smarter Workforce Institute, 2014 MacLeod D and Clarke, N, Engaging for success - enhancing performance through employee engagement, 2009, Department for Business, Information and Skills, London Rayton B and Dodge T (Eds), Report of ‘Nailing the Evidence’ Workgroup, Engage for Success, 2012 Robinson D and Gifford J (Eds), The Future of Engagement: Thought Piece Collection, Engage for Success Thought Leadership Paper 2014-01 Szypko M, Pay Fairness and its Impact on Employee Engagement, IBM, 2014

CRF publications Lambert A, Trust, 2014 Lambert A, The impact of social media and technology on learning, 2012 Lambert A, Employee engagement and organisational performance, 2010 Lambert A, Making the most of employee surveying, 2006 Lambert A, The employer brand and employee engagement, 2005

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