Got Loyalty? The Surprising Secrets Behind Employee Engagement and Your Company’s Bottom Line

© 2014 Lisa Prior

What inspires employees to be loyal to your company and to be more productive at work? Unlocking the secrets to employee engagement could lead to a happier workforce and a healthier bottom line.

Stung by the feedback they had received in a recent employee engagement survey, eight executives asked for my help in uncovering why their people were discontented.

As a leadership consultant, I could have anticipated their findings. Study after study reveals that as much as 40% of the global workforce is disengaged, which means they are poised to leave their companies for a better place to work and choosing to give less than their best effort on the job. The executives were surprised to find themselves part of that statistic. Their reaction mirrors the wider problem that business leaders are still in the dark about employee engagement and how it impacts their company’s success.

What is employee engagement?

Employee engagement is the psychological connection that people have with your company. Dan Rubin, Leader of US Employee Engagement Consulting at Aon Hewitt, evaluates data that his firm collects each year from thousands of companies and millions of employees across the globe.

“Engaged employees,” he recently told me, “are willing to go the extra mile. They want to be part of the company and recommend it to others as a great place to work.”

Engaged employees have the power to sway your company’s financial performance as dozens of studies have confirmed. People who are highly engaged “demonstrate better quality, efficiency, and customer outcomes at a rate many multiples greater than the actively disengaged,” according to research from Aon Hewitt. Employee engagement – or disengagement – hits your company’s operating margin, which is how much money a company makes on each dollar of sales.

According to a 2012 report by Towers Watson, companies with the highest levels of sustainable engagement achieved a margin of 27%, seventeen percentage points greater than companies with employees who are ready to leave.

Sustainable engagement describes the productive energy people are able to bring to their work over the long-term. Towers Watson found that companies with the highest levels of sustainable engagement have policies that allow people to manage their health and stress and navigate their work and personal lives.

Change, new competitors, cost pressures and new technologies are just a few of the factors that have created today’s volatile and uncertain work environment where employees suffer from chronic stress and burnout. People put more effort and care into their company, when the company cares for their people’s well-being.

If employee engagement sounds like a good business idea, then why is it so elusive?

The psychological connection has never been more perplexing to manage. Edgar Schein, MIT Professor Emeritus, was among the first scholars to illuminate the concept. Schein called the connection the “psychological contract” when, decades ago, the relationship between companies and people was based on expectations of loyalty and security. This relationship took a dramatic turn in the 1980s.

“That was when companies like Apple began to take a public position, ‘you don’t owe us a career and we don’t owe you a job, but we’ll offer you enough training that you’ll be more employable,” says Schein. “That is when employment security was replaced by employability.”

Jobs, which were once considered long-term, were no longer secure. Employability-security meant that people were now in charge of their own careers and developing the skills that could improve their chances of future employment.

“Today, the shape of the world of work is much less predictable,” says Schein. It’s a strange, new ballgame. Global competition for jobs and emerging technologies that enhance and or replace human capability mean that the nature of work itself has changed.

What makes people feel engaged in this volatile and uncertain world?

I returned to that board room and the eight executives, lugging data from more than a dozen focus groups with one hundred employees. Career development topped the list of concerns, mirroring the broader trend.

“Career development has increased in importance in the last 5-6 years,” Rubin of Aon Hewitt says. Career development is a commitment the company makes to the person by providing opportunities to acquire new skills, knowledge and experiences. Along with the quality of senior leadership and the connection with their direct boss, it pops up consistently as a top factor of employee engagement.

Career development helps people become more flexible and skilled, which improves their chances for employability-security. You cannot promise people a job, but you can make an investment in their skills and well-being that, as described earlier, benefits your company’s bottom line. In the volatile business environment, your company must be agile in order to survive. The same is true for your people.

But isn’t pay a key tool for engagement?

When it comes to hiring new talent, salary is a top reason why candidates join your company, but career development follows right on its heels.

“Salary and job security “ according to Towers Watson, “top the list of what people want when considering a job, followed by opportunities to learn new skills and build a career, which are also routes to increased salary and long-term security.”

When it comes to keeping your people, however, salary typically takes a back seat to career development. “Pay,” said Rubin of Aon Hewitt, “does show up as a key factor in employee engagement, but usually just in developing markets and countries.”

People feel taken care of when companies support their career development. In exchange, your company will reap the rewards of their loyalty, which we understand and measure today as employee engagement. Engaged employees will stay with your company, speak positively to others, and give the extra effort that boosts your bottom line.

Got employee engagement? Here are four things company leaders can do:

1. Make career development a top priority in your talent development strategy.

Career development is the new job security for employees. People, not their managers, are responsible for their own careers; the best companies make the psychological connection a two-way street. Provide time, resources and support for people to develop new skills, learn from experience, and prepare for their futures.

2. Identify managers in your company who excel at and are invested in developing others.

Leverage their time and talent in creating your company’s approach to career development. Morgan McColl, Professor of Management and Organization, USC Marshall School of Business, noted recently the trend in increasing involvement of senior leaders in learning and development approaches. Development-oriented leaders can contribute to career initiatives by providing opportunities for growth, exposure to executives, and offering advice and guidance.

3. Train managers on how to have meaningful career conversations.

Great bosses matter more than ever and have an enormous impact on people’s development. The manager is at the center of a person’s work experience. Managers shape people’s experience of the company. With less time to be away at their desks attending training programs, learning today happens on the job: the best bosses act as coaches and teachers.

4. Listen and learn from Millennials.

The Millennials are the largest generation in the workforce after the baby boomers. Rubin and Schein each predict that they are keys to unlocking the future of employee engagement. “Leaders should pay attention to what the younger generation wants,” Schein stated. “They want to travel and to know more about other cultures. They want meaningful work where they are helping others. “That,” Ed Schein mused, “will drive some of where this social contract will go.”

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