There’s no escaping the fact that the number of engaged employees, globally, hasn’t really changed in a couple of decades. That’s despite millions and billions being spent on engagement strategies and initiatives. There’s a tome of evidence to show that sustained improvement in engagement drives up productivity, innovation, brand reputation, trust and profitability. And it drives down employee turnover, absence, presenteeism, recruitment costs and so on. So, what’s going wrong? Why doesn’t this stuff stick, more often? Why is all of the common sense communicated around engagement, still not common practice?
Well, a recent paper from EY entitled “Will there be a next if corporate governance focuses on the now?” highlights what I think is key to the issue. This to my mind is perhaps the biggest nut to crack when it comes to sustainably growing the number and proportion of engaged employees that will see more businesses (and all their stakeholders) reap the rewards.
Let’s get real. In my experience it usually comes down to the tension between short-term and long-term value focus that boards or executive teams have. Many of the issues and opportunities the EY piece brings forward could be directly applied against our global employee engagement challenge. Because, whilst you can make immediate impact with cultural change and engagement programmes, they require authentic commitment to the long game. That’s not always palatable for a Board.
Why the short term-focus?
Short-term vs. long-term thinking isn’t new, but the pandemic has caused many businesses to rethink their strategies in the face of a growing number of stakeholders (including customers and employees) who expect companies to do more around the ESG topic. Purpose has also grown in prominence and relative importance in helping communicate to a wider audience, sharing the reason why a business exists, and the part each stakeholder plays in pursuing that quest.
But still, one of the main hurdles to developing a longer-term strategy on employee engagement is that CEOs and Executive teams are largely remunerated and bonused on short-term goals. 36% of leaders surveyed by EY highlighted “CEO and Executive compensation are tied to short-term performance” as the biggest issue affecting long-term value orientation. So, perhaps some kind of reform would make a difference here? Focusing the remuneration of the leadership team on longer-term value metrics would seem like a good place to start. But that would need to tie-in with the Board and the Investors wishes. We may have another disconnect here.
EY pinpoints the major issue here being the number of institutional investors with a limited length of share ownership, or with expectations of a quick-flip. This creates pressures on Boards to focus on influencing the short-term market value of the share price. The frequency of the associated reporting and the need to see continuous growth in these short windows only serves to compound the issue of short-termism. So how do we influence that?
“You get what you seek and deserve”
I’m para-phrasing, but the article quotes Warren Buffet, the legendary investor, who made the point that boards who focus on short-term, will tend to attract the same type of investors. So, the catalyst for boards who see the value in longer-term value creation, is a need to seek out and engage with those types of investors. But you can’t just up and leave your current relationship, so engaging with existing investors to align on purpose, agree common ground and seek support for longer-term plans is what’s required. Easy to say, but harder to do. But progress is being made.
But I didn’t intend for this blog to be a re-write of the EY piece, I just think it is an interesting parallel. Perhaps the same issues of leadership remuneration focus, investor timeframes and the need to keep shareholders’ short-term interests front of mind are equally applicable for the longest game of all of creating, growing and maintaining an organisational culture, where people can feel inspired and enabled to be their best every day? Now, not every business has these challenges, and many who have had them have overcome them, possibly because they can see the benefit of balancing the short and long-term. But the reality is, that for all the stakeholders who can benefit from improving employee engagement and company culture, it needs a combination of will, commitment, consistency, and time for them to be realised. But has there ever been a more opportune time to make the necessary change to do that?
A Bow-wave of Humanity
The last year has challenged everyone. It doesn’t matter if you’ve been incredibly successful during the pandemic or been hanging on for grim death. You may have cast your company values aside to survive, put more pressure on existing people to take advantage of a short-term opportunity, laid off a bunch of people to cut costs, rapidly hired people with no time for onboarding, and all manner of other things. It’s likely that you’ve done or been exposed to one or more of those things and will need to re-engage with your people as we move forward. But there’s growing evidence of a, stronger, greater sense of humanity coming back into business over the past year, and we need to be ready for the bow-wave that will inevitably land on our shores. It’s a wave of opportunity to be ridden, not be overwhelmed and ultimately crushed by.
Customers and employees expect more. They’ve seen, heard and shared examples of better. They are making more conscious decisions to seek it out and make choices based on what a business really stands for and demonstrably backs up with its actions, how it treats its people and the contribution they are making to society as a whole. Companies who tune into this, authentically, are likely to be the long-term victors in the future, where a wider group of stakeholders benefit, not just a small group of shareholders.
So, what’s it going to take for us to crack the hardest engagement nut, the re-balancing of short-term and long-term focus? We will need to re-align remuneration and bonuses around some longer-term value KPIs. We will need to engage the Board and associated Investors in the hard, proven benefits of a long-term focus on culture and engagement, and we will need to commit to the changes and keep them alive. Not just for the rally-cry at the start, but for always. The four enablers that Engage For Success espouse of having and communicating strategic narrative; equipping and supporting engaging managers; having, listening and responding to an employee voice; and having the organisational integrity to stand behind your values even when they come under the most pressure (which is why we have them, after all), are the proven blueprint for making this work. All it takes is some long-term commitment.
Our employees, our customers, our suppliers and the communities we serve are all ready for that commitment and change. Are you?