How to Convince Your Executives that Employee Engagement Drives Profit
Step 1: Show Them Current Engagement May be Lower Than They Think
Harvard Business Review (2013) reports that executives are too optimistic about engagement levels in their organisations. Managers lower down in the hierarchy, however, are more in touch with “day-to-day employee issues” and thus tend to have a more realistic insight into engagement. They consistently report lower levels of employee engagement than the executives.
In fact, the world’s most comprehensive study of employee engagement, conducted by Gallup, finds that only 14% of employees in Western Europe are engaged; 66% are disengaged!
Step 2: Show Them Employee Engagement Raises Profits
Gallup’s 2016 meta-analysis finds that firms with high levels of employee engagement report 21% higher profitability.
MIT’s Sloan Review finds that firms with high levels of employee engagement report higher profit growth (10–15%) than firms with low levels of employee engagement (0–1%).
Towers Perrin finds that firms with high levels of employee engagement increased their operating income by 19% over a twelve-month study period, while firms with low levels of employee engagement report decreases in operating income.
Gallup finds that firms with high levels of employee engagement generate earnings per share (EPS) 342% higher than the industry median.
AON Hewitt finds that firms with high levels of employee engagement generate total shareholder returns 22% than the average. Firms with low levels of employee engagement, on the other hand, generate total shareholder returns 28% lower than the average.
Step 3: Show Them the ‘World’s Most Admired Companies’ Use Employee Engagement for Strategic Purposes
Hay Group and Fortune Magazine find that 94% of the world’s most admired companies say engagement creates competitive advantage.
Step 4: Show Them Employee Engagement Raises Productivity
Gallup’s 2016 meta-analysis finds that firms with high levels of employee engagement report 20% higher productivity.
McKinsey finds that engaged white-collar employees have a 16% higher productivity and engaged blue-collar employees have a 27% higher productivity.
Hay Group and Fortune Magazine find that 85% of the world’s most admired companies say engagement reduces performance issues.
The Corporate Executive Board finds that the most engaged employees put in 57% more effort on the job.
Step 5: Show Them That Employee Engagement Lowers Personnel Costs
Gallup finds that firms with high levels of engagement see 41% lower absenteeism rates. The Corporate Executive Board finds that engaged employees are 87% less likely to leave the organisation than disengaged employees.
Step 6: Dismiss Their Misconception that Salary Equals Engagement
Research published with Harvard Business Review Press finds that 95% of managers believe pay is a powerful motivator.
However, this is utterly wrong:
Harvard Business Review discusses the relationship between pay and motivation in one of its articles. The magazine referred to a comprehensive meta-analysis of 92 quantitative studies. The analysis found that the correlation is very week and “there is less than 2% overlap between pay and job satisfaction levels”.
McKinsey finds that non-financial incentives are more effective motivators than the three highest-rated financial incentives.
Supplied by Armin Kammerlander of Sideways 6