(This post originally appeared on OpenReq.)
A large part of my consulting work with companies and clients around the world is leading workshops on the power of strategic, social employee recognition to manage organization cultures and drive bottom-line growth through increased employee engagement, retention, productivity and performance.
There is a great deal of research supporting this, which to me makes the business case for employee engagement even stronger. It’s not just one research firm or a handful of companies saying there is bottom-line benefit from increased employee engagement but at least half a dozen global, respected analyst firms and hundreds of companies.
“In 2012, Aon Hewitt examined the relationship between employee engagement and financial performance using data from 94 global companies representing nearly 9 million employees over the years spanning 2008 to 2012. The analysis uncovered a strong positive correlation between increased employee engagement and sales growth in the years following. Each incremental percentage point of employees who became engaged translated into an additional 0.6 percent growth in sales.
“For example, a $5 billion organization with a gross margin of 55 percent and operating margins of 15 percent increased operating income by $20 million with just a 1 percent improvement in employee engagement. With a 5 percent improvement in employee engagement, operating income jumped to $102 million.”
Aon Hewitt’s analysis also found a strong correlation between employee engagement levels and Total Shareholder Return (TSR).
- If you can achieve 72% employee engagement (top quartile), your Total Shareholder Return is 50% higher than organizations with average engagement.
- If your employee engagement level is 46% or lower (bottom quartile), then your Total Shareholder Return is 50% lower than organizations with average engagement.
When you combine all this with similar findings from Towers Watson, Hay Group, Bersin by Deloitte and others (including the highly successful Parnassus Workforce Fund), leadership simply cannot ignore the importance of focusing on employee engagement – or, more accurately, creating a company culture and work environment in which employees choose to engage. What does that mean? Simply this – every day when they walk through your doors, the vast majority of your employees are choosing to make a difference, give additional discretionary effort and focus on achieving what matters most to you.
Now, to help employees focus and engage in this way, you have to communicate to them exactly what you need them to do in their own, personal daily work. Strategic recognition helps to focus on them on achieving your objectives while demonstrating your core values by frequently and specifically recognizing them when they do so. This timely, positive reinforcement reminds them of the greater meaning and purpose of their work.
How do you make the business case for employee engagement in your organization?
About Derek Irvine
The VP of Client Strategy and Consulting at Globoforce, Derek Irvine is one of the world’s foremost experts on employee recognition and engagement, helping business leaders set a higher vision and ambition for their organizations. As a renowned speaker and co-author of "The Power of Thanks" and "Winning with a Culture of Recognition," he teaches companies how to use recognition to proactively manage company culture. Derek holds a B.Comm and Masters of Business Studies from the Smurfit Graduate Business School at University College Dublin.