Read David and Nita’s introduction
We were asked by the then Secretary of State for Business in the autumn of 2008 to take an in-depth look at employee engagement and to report on its potential benefits for companies, organisations and individual employees. When the new Secretary of State, Lord Mandelson, met us in the spring, as the recession was biting, he encouraged us to examine in particular whether a wider take up of engagement approaches could impact positively on UK competitiveness and performance, as part of the country’s efforts to come through the current economic difficulties, take maximum advantage of the upturn when it comes, and meet the challenges of increased global competition.
Our answer is an unequivocal yes. In the course of the past eight months we have seen many examples of companies and organisations where performance and profitability have been transformed by employee engagement; we have met many employees who are only too keen to explain how their working lives have been transformed; and we have read many studies which show a clear correlation between engagement and performance – and most importantly between improving engagement and improving performance.
We believe that if employee engagement and the principles that lie behind it were more widely understood, if good practice was more widely shared, if the potential that resides in the country’s workforce was more fully unleashed, we could see a step change in workplace performance and in employee well-being, for the considerable benefit of UK plc.
Engagement, going to the heart of the workplace relationship between employee and employer, can be a key to unlocking productivity and to transforming the working lives of many people for whom Monday morning is an especially low point of the week.
We deal with the different definitions of engagement in the report. But at its core is a blindingly obvious but nevertheless often overlooked truth. If it is how the workforce performs that determines to a large extent whether companies or organisations succeed, then whether or not the workforce is positively encouraged to perform at its best should be a prime consideration for every leader and manager, and be placed at the heart of business strategy.
Where this happens, in places like John Lewis Partnership, Tesco, the London Ambulance Service, Sainsbury’s, Standard Chartered Bank, BAE Systems, Toyota, Babcock Marine Clyde, Google, Telefónica O2 UK and many more, the results can be transformational – because employee engagement enables an adult, two-way relationship between leaders and managers, and employees, where challenges can 3 Engaging for success: Enhancing performance through employee engagement be met, and goals achieved, whether it be improved patient care, higher quality production, or more satisfied customers.
Of course a sustainable business strategy and access to cash are vital, just as good policy and planning are for successful public services. But in a world where most factors of production are increasingly standardised, where a production line or the goods on a supermarket shelf are much the same the world over, employee engagement is the difference that makes the difference – and could make all the difference as we face the realities of globalised competition and of the millions of graduates and even more skilled and committed workers that China, India and other economies are producing each year.
As our public services face the reality of an end to the years of rapid growth in investment, it is hard to see how the quality of service we all aspire to see – employees and citizens alike – can be achieved without putting the enthusiasm, commitment and knowledge of public service employees at the forefront of delivery strategies.
Nor is employee engagement only relevant in retail, where customers expect a cheerful face on the till, rather than a languid hand waving them to a far-off aisle in response to a query about the availability of marmalade, and where employees’ attitudes demonstrably and immediately impact on customer satisfaction. As Sir Alan Jones, Chairman Emeritus of Toyota UK told us: “Wherever you work, your job as a manager is to make your people be the best they can be – and usually they don’t know just how good they could be. It’s individuals that make the difference”. For Toyota, this approach is not based on altruism – though it is based on a profound respect for its members. It is predicated on the firm belief that the most valuable asset the company has is its people, and that enabling them to have an intellectual and emotional relationship with their work, as well as a financial stake in the success of the company, is the key to continuous product and productivity improvement from the shop floor to the boardroom. Toyota’s people are their competitive advantage.
The way employee engagement operates can take many forms – that is one of the most fascinating aspects of the topic – and the best models are those which have been custom-developed for the institution. As everyone knows, John Lewis Partnership is a company owned by its employees – but the company is clear that its model of shop-floor voice and engagement, which is such a critical factor in its continued success, is not simply a function of its ownership structure, but stems from a profound belief, first articulated by its founder, that people working in the business are central to its success.
Many company leaders described to us the ‘light-bulb moment’ when an understanding of the full potential significance of employee engagement dawned. Tesco Chief Executive Terry Leahy has recorded his reaction when he realised that the company knew more about its customers than it did about its employees, how the company then set about understanding what the workforce wanted, what motivated them at work and what workplace approaches would best build on those understandings, working in partnership with the retail workers’ union USDAW. As Tim Besley, leading economist and member of the Monetary Policy Committee put it, “there is an increasing understanding that people are the source of productive gain, which can give you competitive advantage.”
Individual employees in companies with strong engagement strategies described to us how their working lives have been transformed for the better. Mandy Symonds of United Welsh said: “Being involved not only gives me real opportunities to influence the decisions which affect me and my future, it also means I am more aware of the wider picture. As a result I can be confident United Welsh are going places, so for me it’s the place to be.”
Company accounts that show the workforce as a cost on the balance sheet, alongside capital depreciation, encourage a boardroom mindset which ignores the people factors. Many people we spoke to also pointed to the limitations of an approach which regards the workforce en masse as ‘human resources’ leading to a monolithic and one-dimensional view of people. As Will Hutton, Executive Vice Chair of the Work Foundation told us: “We think of organisations as a network of transactions. They are of course also a social network. Ignoring the people dimension, treating people as simply cogs in the machine, results in the full contribution they can make being lost.”
Within the public sector there is a growing understanding of the importance of engagement as a medium for driving the performance and well-being of public servants. This is reflected in the decision of the Civil Service to carry out its first service-wide survey of employee engagement later this year; it is expected to be one of the largest single surveys of its kind ever carried out in the UK, covering some 500,000 civil servants.
We hope this report will set out a compelling case to encourage more companies and organisations to adopt engagement approaches. We believe the evidence we cite of a positive correlation between an engaged workforce and improving performance is convincing. We have also set out to demystify engagement by defining what it is and what it can do for organisations and individuals. We look at the crucial role of leadership, of so-called soft skills, the role of line managers, the importance of employee voice and the positive role trade unions and employee representatives can play.
Furthermore we hope it makes the case why, faced with the challenges of recession, “although adopting employee engagement strategies is challenging for firms at this juncture, actually it’s more important than ever.” In the words of David Yeandle of the EEF, the manufacturers’ organisation: “It will be hard to get through the recession without engaging your workforce.”
That is why our core recommendation to government is a concerted effort involving all the stakeholders in the employment field, to raise the profile of this topic, so more and more people ‘get it’. We propose a national awareness campaign, facilitated by the Department for Business, Innovation and Skills (BIS). We are delighted that so many of the leading business figures we have spoken to in the course of this review have agreed to join a national high level sponsor group to promote a real discussion, should the Secretary of State accept our recommendations.
Engagement is about establishing mutual respect in the workplace for what people can do and be, given the right context, which serves us all, as individual employees, as companies and organisations and as consumers of public services. It is our firm belief that it can be a triple win: for the individual at work, the enterprise or service, and for the country as a whole.
During this review we have heard from hundreds of people with fascinating and often inspirational stories to tell. We have spoken to many individual leaders, companies and organisations, as well as representative bodies including the Confederation of British Industries (CBI), the Trades Union Congress (TUC), the Institute of Directors (IoD), the Federation of Small Businesses (FSB), Business in the Community (BITC) and British Chambers of Commerce (BCC), as well as professional bodies such as the Chartered Institute of Personnel and Development (CIPD) and the Chartered Management Institute (CMI). We’ve discussed the topic with practitioners, and with academics and thought leaders in the field. A series of regional road shows was also held, attended by a wide range of stakeholders. We also visited many organisations practising engagement. We received a wide range of evidence, and an open call for submissions on the BIS website recorded over 300 responses. A full list of contributors is included at Annex A-D.
We are also very grateful for the time and commitment from the practitioners, experts and leaders, who so generously gave their time individually and collectively to greatly enrich this report. Throughout, we have been supported by a superb team from BIS, led by Tom Ridge. Rob Vondy, Area Director of Acas North West, has also been an invaluable source of advice and support. We owe them all a huge debt; this report could not have been produced without them.