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Engaging for success: Enhancing performance through employee engagement 29 Tower Perrins-ISR 10 carried out a global survey in 2006 which included data gathered from opinion surveys of over 664,000 employees from over 50 companies around the world, representing a range of industries and sizes. The survey compared the financial performance of organisations with a highly-engaged workforce to their peers with a less-engaged workforce, over a 12 month period. ●● The results indicated a significant difference in bottom-line results in companies with highly-engaged employees when compared with companies with low levels of employee engagement. ●● Most noticeable was the near 52 per cent gap in the performance improvement in operating income over the year between companies with highly-engaged employees versus companies whose employees had low engagement scores. Companies with high levels of employee engagement improved 19.2 per cent in operating income while companies with low levels of employee engagement declined 32.7 percent over the study period. 30 In evidence to the review, Standard Chartered Bank reported that in 2007 they found that branches with a statistically significant increase in levels of employee engagement (0.2 or more on a scale of five) had a 16 per cent higher profit margin growth than branches with decreased levels of employee engagement. It correlates with innovation 31 Gallup indicate that higher levels of engagement are strongly related to higher levels of innovation. Fifty-nine per cent of engaged employees say that their job brings out their most creative ideas against only three per cent of disengaged employees. 11 This finding was echoed in research for the Chartered Management Institute in 2007 which found a significant association and influence between employee engagement and innovation. Based on survey findings from approximately 1,500 managers throughout the UK, where respondents identified the prevailing management style of their organisation as innovative, 92 per cent of managers felt proud to work there. 12 32 As Professor Julian Birkinshaw of the London Business School told us: “employee engagement is the sine qua non of innovation. In my experience you can have engaged employees who invest their time in multiple directions (such as servicing clients, creating quality products) but you cannot foster true innovation without engaged employees.” His view was echoed by Kieran Preston, director general of Metro, the public transport provider for West Yorkshire: “Employee engagement is important to Metro as it drives challenge and innovation and keeps Metro at the forefront of best practice in transport.” 33 Both Sainsbury’s and O2, two companies that have recorded significant recent successes, believe that their recent growth has been predicated on a transformation 10 Towers Perrin-ISR (2006) The ISR Employee Engagement Report. 11 Krueger, J. & Killham, E (2007) ‘The Innovation Equation’. Gallup Management Journal 12 Kumar, V. and Wilton, P. (2008) ‘Briefing note for the MacLeod Review’, Chartered Management Institute 12
Chapter 1: Employee engagement – what, why and how of their approach to their workforce, based on highly developed engagement models. “In our business with almost 150,000 people, engagement is a key concern. In businesses of our scale, you don’t even get started without engagement,” Justin King, CEO of Sainsbury’s told us. Public sector impacts 34 In the Civil Service indicative evidence suggests that departments with high engagement levels (measured through staff surveys) also tend to perform well in capability reviews – a key metric of departmental performance. Seventy-eight per cent of highly engaged public sector staff believe they can have an impact on public services delivery or customer service – against only 29 per cent of the disengaged. (Towers Perrin 2007) Research in Canada suggests that the link between engagement, customer service and profitability in the private sector could translate to the public sector – with trust and public confidence at the end of the chain, rather than profit. 13 “The Civil Service faces unprecedented challenges tackling complex policy issues every day. In order to meet these challenges we must harness the talents of all our staff to the full. Our employee engagement programme enables us to do this by understanding and improving civil servants’ experience of work, helping to ensure that they have access to the opportunities they need to achieve success in their roles. This, in turn, supports our drive to deliver improved public services and better outcomes for citizens.” Sir Gus O’Donnell, Cabinet Secretary and Head of the Home Civil Service. 35 Some have questioned which is the chicken and which the egg – does engagement lead to performance or is it the other way around Marcus Buckingham, who has studied this area for many years, concludes from various longitudinal studies that it is engagement that leads to performance, and this is a four times stronger relationship than performance leading to engagement. 14 ISR, from different studies, have reached the same conclusion. 36 However, there is no single study that has proved beyond doubt that engagement explains higher performance, or improving engagement causes improved productivity and performance; it is difficult to imagine comparators where all factors are the same, which is what would be required to prove causality. But while each of the studies indicated above, together with individual company studies, are all open to some degree of challenge, taken together they offer a very compelling case. 37 And as Professor Chris Bones, Dean of Henley Business School, pointed out, it is hard to believe that the many blue chip and admired companies and organisations putting substantial effort and resources into assessing and improving engagement – 13 Canadian Government Executive: June/July 2006 – http://www.tbs-sct.gc.ca/rp/pstc-eng.asp. Acccessed 1 July 2009 14 Quoted during telephone conversation with Review team, 2009 13
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Chapter 4 Enablers of Engagement -
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Annexes Annex A Contributors to the
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