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High engagement + employer brand = higher profit growth

By 8 July 2013No Comments
Organisations that were rated ‘best employers to work for’ in a recent study achieved profit growth rates of an average four times higher than other organisations. Most of them also had an explicit employer brand, unlike the majority of other organisations.Surveys of employee engagement are widely conducted and the link between high engagement and better organisation performance is well documented by now. However, this survey, the 2013 Aon Hewitt Best Employers Study for Australia and New Zealand, is one of the best-regarded studies, having now been conducted for 13 years. The 2013 study covered 125 organisations and over 100,000 employees, and resulted in 19 companies gaining accreditation as Aon Hewitt Best Employers.
Trends identified in latest study
Results of the latest study noted that many organisations are attempting to restore growth after having cut costs in response to the global financial downturn of 2008–09. Improving and maintaining employee engagement remains a fundamental priority, but the economic challenges have also seen some new trends among the Best Employers, including:
developing people leadership capability as a core competency rather than one with secondary focus
devoting greater effort towards connecting middle-level managers with the overall business strategy
increased willingness to identify and single out the highest-performing employees for additional rewards.
Other lessons for improving engagement to emerge from the study included the following:
Align engagement and organisation culture closely with the business strategy.
Use tailored engagement strategies for the most critical workforce segments (in terms of executing business strategy).
Increase reward differentiation at both ends of the employee performance continuum.
Position the organisation to attract and retain the best talent with a compelling and differentiated employment brand. Embed the branding into all HR programs and policies to ensure alignment, and take account of the employee life cycle (eg generational differences).
Quantifying the financial benefits of improving engagement
It’s not rocket science to say that improving employee engagement will benefit the bottom line, but this study has attempted to put actual dollar amounts on the change. For an ASX100 $1 Billion company with a 10 per cent operating margin, it claims:
A 1 per cent increase in the engagement score will increase operating income by $2.79 million per year.
A 5 per cent increase will increase it by $13.96 million and a 10 per cent increase will double that amount.
Over the previous year, 38 per cent of organisations in the study claimed to have improved their levels of engagement by at least 3 per cent, despite challenging economic conditions for many. One-third reported little or no change.
For all organisations, the average engagement score was about 55 per cent, and this score did not vary according to organisation size.
What the Best Employers do differently
The study examined what the 19 Best Employers did differently in terms of engagement, leadership, culture and employment branding.
Highly engaged employees were much more likely to say positive things about their employer, and were much more likely to remain with it. They had more positive perceptions of critical drivers of engagement such as leadership, organisational change and communication, employer brand alignment and career development.
There was little difference between the overall engagement scores of the various generations of employees, but Best Employers generally had talent management practices that took into account the diversity of their workforces. Career development opportunities and delivery of a consistent employment promise were key engagement drivers for all generations, and sense of accomplishment was the most important driver of sustained engagement. Younger employees placed a higher priority on enjoying their work tasks, Generation X employees placed higher priority on being fairly rewarded for their contributions, and older employees gave priority to well-managed change.
As noted above, connecting middle managers with business strategy has a high degree of influence on engagement. Their highest priority factors were well-managed change programs and ensuring performance management processes provided them with adequate support and challenge. Linking employee engagement levels with these managers’ performance feedback and reviews is recommended. Employee engagement levels, on the other hand, should be linked with key business outcomes, such as sales, financial performance and customer satisfaction.
The most significant differentiating factors here are:
change programs are managed effectively
senior managers are highly visible and accessible during periods of change
employees are provided with opportunities to influence how changes are managed
middle-level managers are supported, enabled and empowered to make strategic objectives resonate for their team members — this includes investing in development activities
managers are held accountable for driving employees’ performance, with clear expectations set for them
there are frequent and authentic performance-related conversations between managers and employees
managers spend significant amounts of time coaching and developing their team members, and are accountable and rewarded for developing high performers
managers receive feedback on how their leadership style impacts on their team members
more resources are devoted to succession planning — conducting an annual talent review was of particular importance
looking deeper into the organisation for talent and identifying talented employees at an earlier stage of their careers.
High-performance culture
Providing disproportionately higher remuneration and other rewards to very high performers, and disproportionately lower remuneration and rewards to poor performers were differentiating behaviours of Best Employers. There was a very obvious benefit from being a high performer. Another factor was the ability of managers to have honest and authentic conversations with their employees about remuneration.
Provision of access to various financial wellness initiatives was another differentiating factor. The initiatives included access to financial advisers, retirement planning, mortgage advice and investment and financial education seminars.
Employment branding
Best Employers almost always had a very distinctive employment brand, which they used to attract, engage and retain talented employees. Their HR practices were strongly aligned with the promises made and implied by the branding. In other words, they delivered on their promises.
The report commented that the first two years of employment were critical to obtaining a high engagement level, and organisations needed to focus very strongly on building engagement during this period.

Purnima Kabra