Is employee engagement a competitive advantage?


According to Peter Drucker, employee engagement is “one of the last true sources of competitive advantage”.

And why is that? It’s because, he says, few organisations are good at it.

Regrettably, Drucker’s observation has resonance but you’ve got to ask why.

I read a Corporate Leadership Council study recently that shows committed employees perform 20% better. It also reveals they are 87% less likely to leave the organisation.

A Gallup Q12 study also shows that organisations with high engagement generate 27% higher profits, 38% above average productivity, and 50% higher sales and customer loyalty.

By contrast, the Gallup study estimates the cost of disengagement at more than $39 billion in productivity alone.

So, employee engagement is a no-brainer and I would contend that being good at it is not rocket science.

Most of us recognise disengaged employees and it’s usually because they’re giving us bad service, whether behind a counter, over the phone or inside our own workplace. They don’t care about you and they don’t care about the company that employs them. Their guiding performance principle is personal comfort.

So, what is employee engagement? And why does it make so much difference?

Towers Watson research proposes that engagement involves how employees think, feel and act. If they understand what their responsibilities are (think) and enjoy doing what they’re doing (feel), they are likely to put in the extra something and do it very well (act). That extra something is sometimes called discretionary effort and it shows itself across all parts of the business, including innovation in product development, creative ways to get to market and excellence in customer satisfaction.

Engaged employees look for ways to enable the company to make full use of their talents and they are keener on learning and trying better ways to do things than simply being risk averse and doing what they’re told.

From the perspective of the organisation, Hewitts’ studies have shown that engagement is a big contributor to revenue growth, cash flow and return on investment. It also lowers staff turnover. In addition, the studies show that it generates higher productivity, lowers absenteeism and enables greater readiness for change.

From the employee perspective, engagement lowers job related stress, injury and workers compensation costs, and improves physical health.

Studies by both Gallup and Towers Watson reveal that engagement correlates with improvements in performance, innovation and cost reduction through lower turnover.  Gallup also reveals that engagement can be measured so that comparisons can be made between different parts of the organisation, and drivers can be identified.

It is no surprise that crucial factors in enabling engagement are strong leadership from the top that shows employees how their job fits within the company vision and strategy, and competent management that provides clarity and support, and also contributes to a culture in which employees can see that the organisation lives its values.

If Drucker is right, HR is looking at a big opportunity to create competitive advantage. Any thoughts on how best to do it are welcome.

Carol Webb, Education and Training Manager, Australian Human Resources Institute

10
Leave a reply

avatar
100000
  Subscribe to receive comments  
Notify me of
Isabel Wu
Guest
Isabel Wu

Peter Drucker also said, “They’re not employees, they’re people” and Henry Mintzberg who said he could think of no better term for dehumanising people than “human capital”. Engagement has to start with a shift in thinking of people as “resources” and “assets” to be quantified, to people with intrinsic capabilities and motivations.

Peter Langford
Guest
Peter Langford

How to engage employees is not a tough question – as a profession and society we know the answer. What we’ve repeatedly found in our engagement survey work at Voice Project and Macquarie University has mirrored what other researchers and consultants have been saying for decades: meaningful purpose and values, trust in senior management, involvement in decision-making, recognition for contribution, support for ongoing development of skills and career, and an organisation that is achieving its results and having a positive impact upon its customers. If you give me those, I’ll be highly engaged. The bigger question is why so many… Read more »

Gavan Hogan
Guest
Gavan Hogan

Thanks for your blog Carol. It just makes sense that we look after the people that work in our companies. Without our people we have no business. Those percentages are a very compelling argument as well and good CEO’s know intuitively that you need to look after your staff to make the business excel.

Walter Adamson
Guest
Walter Adamson

I think Drucker was right on this point as on so many others that have rung true for the decades after he pronounced them. Interestingly, right now, there is a major transformational shift happening in society and the workplace in the form of “socialization” – enabled by social media. Social media is the tool, but the fundamental change is in expectations of employees and customers in how, when, and by which channels they communicate with each other. Because of this the need for effective collaboration and communication is higher then ever. This is one aspect of the shift to the… Read more »

CH
Guest
CH

Despite a number of engagement surveys concocted over the years and numerous action plans put in place, I can’t say that I have experienced significant changes in engagement within businesses I have worked for. The first issue is that there is no clear understanding of where the accountability lies. HR facilitates the survey in most cases but businesses just don’t get that engagement of people is the responsibility of every single CEO,MD,Line manager, supervisor or team leader. We don’t get that managing people is the biggest part of any role which is responsible for leading people, and until this is… Read more »

More on HRM

Is employee engagement a competitive advantage?


According to Peter Drucker, employee engagement is “one of the last true sources of competitive advantage”.

And why is that? It’s because, he says, few organisations are good at it.

Regrettably, Drucker’s observation has resonance but you’ve got to ask why.

I read a Corporate Leadership Council study recently that shows committed employees perform 20% better. It also reveals they are 87% less likely to leave the organisation.

A Gallup Q12 study also shows that organisations with high engagement generate 27% higher profits, 38% above average productivity, and 50% higher sales and customer loyalty.

By contrast, the Gallup study estimates the cost of disengagement at more than $39 billion in productivity alone.

So, employee engagement is a no-brainer and I would contend that being good at it is not rocket science.

Most of us recognise disengaged employees and it’s usually because they’re giving us bad service, whether behind a counter, over the phone or inside our own workplace. They don’t care about you and they don’t care about the company that employs them. Their guiding performance principle is personal comfort.

So, what is employee engagement? And why does it make so much difference?

Towers Watson research proposes that engagement involves how employees think, feel and act. If they understand what their responsibilities are (think) and enjoy doing what they’re doing (feel), they are likely to put in the extra something and do it very well (act). That extra something is sometimes called discretionary effort and it shows itself across all parts of the business, including innovation in product development, creative ways to get to market and excellence in customer satisfaction.

Engaged employees look for ways to enable the company to make full use of their talents and they are keener on learning and trying better ways to do things than simply being risk averse and doing what they’re told.

From the perspective of the organisation, Hewitts’ studies have shown that engagement is a big contributor to revenue growth, cash flow and return on investment. It also lowers staff turnover. In addition, the studies show that it generates higher productivity, lowers absenteeism and enables greater readiness for change.

From the employee perspective, engagement lowers job related stress, injury and workers compensation costs, and improves physical health.

Studies by both Gallup and Towers Watson reveal that engagement correlates with improvements in performance, innovation and cost reduction through lower turnover.  Gallup also reveals that engagement can be measured so that comparisons can be made between different parts of the organisation, and drivers can be identified.

It is no surprise that crucial factors in enabling engagement are strong leadership from the top that shows employees how their job fits within the company vision and strategy, and competent management that provides clarity and support, and also contributes to a culture in which employees can see that the organisation lives its values.

If Drucker is right, HR is looking at a big opportunity to create competitive advantage. Any thoughts on how best to do it are welcome.

Carol Webb, Education and Training Manager, Australian Human Resources Institute

10
Leave a reply

avatar
100000
  Subscribe to receive comments  
Notify me of
Isabel Wu
Guest
Isabel Wu

Peter Drucker also said, “They’re not employees, they’re people” and Henry Mintzberg who said he could think of no better term for dehumanising people than “human capital”. Engagement has to start with a shift in thinking of people as “resources” and “assets” to be quantified, to people with intrinsic capabilities and motivations.

Peter Langford
Guest
Peter Langford

How to engage employees is not a tough question – as a profession and society we know the answer. What we’ve repeatedly found in our engagement survey work at Voice Project and Macquarie University has mirrored what other researchers and consultants have been saying for decades: meaningful purpose and values, trust in senior management, involvement in decision-making, recognition for contribution, support for ongoing development of skills and career, and an organisation that is achieving its results and having a positive impact upon its customers. If you give me those, I’ll be highly engaged. The bigger question is why so many… Read more »

Gavan Hogan
Guest
Gavan Hogan

Thanks for your blog Carol. It just makes sense that we look after the people that work in our companies. Without our people we have no business. Those percentages are a very compelling argument as well and good CEO’s know intuitively that you need to look after your staff to make the business excel.

Walter Adamson
Guest
Walter Adamson

I think Drucker was right on this point as on so many others that have rung true for the decades after he pronounced them. Interestingly, right now, there is a major transformational shift happening in society and the workplace in the form of “socialization” – enabled by social media. Social media is the tool, but the fundamental change is in expectations of employees and customers in how, when, and by which channels they communicate with each other. Because of this the need for effective collaboration and communication is higher then ever. This is one aspect of the shift to the… Read more »

CH
Guest
CH

Despite a number of engagement surveys concocted over the years and numerous action plans put in place, I can’t say that I have experienced significant changes in engagement within businesses I have worked for. The first issue is that there is no clear understanding of where the accountability lies. HR facilitates the survey in most cases but businesses just don’t get that engagement of people is the responsibility of every single CEO,MD,Line manager, supervisor or team leader. We don’t get that managing people is the biggest part of any role which is responsible for leading people, and until this is… Read more »

More on HRM