CREDIT UNIONS

Trends in Employee Engagement

Credit Unions

Trends in Employee Engagement

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What is Employee Engagement?

TalentMap defines engagement as the extent to which employees connect,

both logically and emotionally, to their organization, resulting in high levels

of commitment and discretionary effort – and ultimately leading to better

employee performance and positive business outcomes.

Positive business outcomes are the mandate for every market, but especially

in a volatile market – and no market is more volatile than the current

Financial Services market, Credit Unions included - engaging employees has

become serious business.

Employee engagement has been identified as one of the top three concerns

for the war on talent, the single biggest challenge for Credit Unions –

especially competing against the larger banks with somewhat deeper pockets

for compensating employees.

Engagement can be seen as the connection between an individual’s “head”,

“heart” and “hands”

Engagement research consistently links employee engagement to positive

business outcomes. A recent meta-analysis of 58 independent studies found

compelling and overwhelming evidence that employee attitudes and

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behaviours have strong correlations with customer satisfaction and indirect

relationships with financial performance1.

Based on current literature, countless studies, and TalentMap’s research, as

illustrated in the diagrams below, we establish a direct correlation between

levels of employee engagement, productivity and member satisfaction. Our

TalentGage survey questionnaire is a comprehensive instrument based upon

engagement and corporate culture.

TalentMap’s Engagement Model

Why It Matters

• Organizations with high levels of engagement (65% or greater) continue to

outperform the total stock market index and posted total shareholder returns 22%

higher than average in 2010. On the other hand, companies with low engagement

(45% or less) had a total shareholder return that was 28% lower than the average.

(Trends in Global Employee Engagement , Aon Hewitt, 2011)

• Business/work units scoring in the top half on employee engagement double their

odds of success in comparison to those in the bottom half. Those at the 99th

1 Y.Hong, H Lio, J, Hu, K, Jiang, “Missing Link in the Service Profit Chain:A Meta-Analytic Review of the Antecedents,

Consequences and Moderators of Service Climate,” Journal of Applied Psychology, 98/2, 237-267 (2013)

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percentile have nearly five times the success rate as those at the 1st percentile.

Median differences between top-quartile and bottom-quartile units were:

Q12® Meta-Analysis: The Relationship Between Engagement at Work and Organizational Outcomes, Gallup, 2009

(examination of 199 research studies across 152 organizations in 44 industries and 26 countries.)

• Organizations with high employee engagement had a 19% increase in operating

income and nearly 28% growth in earnings per share (EPS). Conversely, companies

with low levels of engagement saw operating income drop more than 32% and EPS

decline 11%. (How Employee Engagement Drives Business Success, Mosley, Eric, 2011, ci ting

Towers Watson s tudy of 50 companies over a one-year period)

• Increasing an individual’s level of engagement can improve their performance by up

to 20% and reduce the probability that they will leave by 87%. (Institute for

Employment Studies (IES) 2008 publication, Going the Extra Mile)

The Current Picture for Credit Unions – The Challenges are

Real

While Canada has been the darling of the financial world, and ranked by the

World Economic Forum as the most sound banking system in the world 6

years in a row, the industry as a whole is facing continuous challenges in a

tumultuous business climate. Canada is not immune to these challenges.

Among the key issues - increased competition, evolving and complex

regulatory reform, convergence of industries and consolidation, responding

to global competition, need for innovation in products/processes, evolving

customer service expectations, and of course, attracting and retaining talent.

More and more executives are coming to terms with the concept of

employee engagement. They realize that their people are their biggest asset,

and their people will drive their ultimate success. That realization brings

home the point that they need to make their organizations a really great

place to work, and that that will ultimately lead to their success.

12% in customer ratings 49% in safety incidents 16% in profitability 37% in absenteeism 18% in productivity 41% in patient safety incidents 25% in turnover (high-turnover orgs.) 60% in quality (defects)

49% in turnover (low-turnover orgs.)

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The Canadian Financial Services industry employs 4% of the Canadian

workforce – 783,000 employees. In Toronto, the Financial Services Industry

employs a whopping 8% of its population, the most Financial Services

workers per capita in North America. And they are a talented bunch.

The Canadian Financial Services Industry hires better quality staff than any

other industry in Canada. There is a disproportionate amount of university

level graduates in the industry – 57% which is 20% higher than industry

average. Many employees hold multiple professional designations.

No industry has a larger impact on the workforce. And as such, no industry

has a greater need to look at the threats to its workforce.

Being a smaller fish in a big sea, such is the case for Credit Unions, only

serves to amplify this challenge.

The War to Develop and Retain Talent – Top 3 Concerns

Deloitte and Touche’s study on Global Human Capital Trends for 2013

indicated that the war to develop and retain talent is the single biggest issue

facing the financial services industry. The study indicated that the top three

pressing HR and talent concerns facing the Financial Services Industry are

Developing leaders and succession planning,

Sustaining employee engagement and morale, and

Creating career paths and challenging job opportunities for employees.

So How Does a Credit Union Sustain Employee Engagement?

You may be interested to hear that overall engagement in Financial Services

is higher – by more than 5% - than the average engagement scores across all

other markets. That said, engagement scores in Financial Services

organizations have dropped 2% over the past three years. What does this

mean? This translates into higher expectations from Financial Services

employees and a challenge to Financial Services employers in their HR

strategies to attract and retain top talent.

Credit Unions need to be that much more strategic to achieve a similar

result.

To sustain, maintain, and grow employee engagement, you have to know

what drives employee engagement. To measure what drives employee

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engagement requires a strategic, research-based, statistically sound, proven

approach. Engagement needs to be measured regularly, action plans need to

be developed and implemented, and it is important that these are regularly

assessed for effectiveness and change in the environment.

While it is true that there are some basic and common truths about engaging

employees, every market, and every organization within that market, has its

own challenges and idiosyncrasies.

TalentMap has interviewed thousands of employees within the Financial

Services Industry and has found that engagement in this sector is driven by

Professional Growth Organizational Vision

Teamwork

These drivers are entirely consistent with Credit Unions.

In addition to these drivers, there has also been forward motion in the areas

of Innovation, Senior Leadership and Compensation. These items are picking

up more and more influence on employee engagement in the industry.

So if the challenge is engaging employees and we know exactly what the drivers of

engagement are for this industry, maybe we need a little more insight into what is

going on in Financial Services that is precipitating these trends.

Professional Growth

Professional Growth is consistently the number one driver of engagement for all

employees across all organizations, across all vertical markets. This is true regardless

of the size of the organization or the type of industry. All industry-related research

supports this without exception. Growth and career development is not only the

number one driver of employee engagement in Canada, but in North America, as well

as internationally, including Asia Pacific and Europe.

What is the research trying to tell us?

In general, people are not satisfied with status quo. It is human nature to want to

continue to grow, achieve, and feel that sense of personal accomplishment.

We want to keep pace with current standards. We want to stay relevant, and up-to-

date. The pace of change is faster than it’s ever been and a feature of the normal we

live and work in. If you stand still, you will be left behind and the currency of your

knowledge and skills become outdated quickly.

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Professional growth is about becoming more effective in the workplace, advancing in

your career and moving into positions where you can lead, manage, influence, coach,

and mentor others.

It keeps you interested and interesting. It increases confidence, and helps you sustain

your career, not becoming irrelevant.

And if you work as part of a Credit Union, this just became amplified because change in

the industry is rapid and employees in this sector are educated, which means they will

want this even more. And with the up and coming generation, this is only going to be

magnified.

Employers in this sector have their work cut out for them and as such it is important to

find out specifically what your employees are looking for, what you are doing well in

your organization, keeping the dialogue open, and be innovative and intentional in

professional development strategies. What sets people apart in this industry is

versatility.

Development is not always “traditional”. It can include a lateral move. It is about

listening to your employees, understanding their strengths, and giving strong

performers opportunities. Development can include role-rotation assignments, special

projects, on-the-job training, job shadowing, mentoring opportunities, etc.

Organizational Vision

Companies that enjoy long-term success have core values and purpose that remain

fixed while their business strategies and practices must constantly adapt to the world

around them.

Truly great companies understand the difference between what is genuinely sacred

and shouldn’t change and what is not and needs to adapt. This ability to manage

continuity and change is what builds a strong and compelling Vision.

The Vision provides guidance about to preserve and what to adapt in order to progress

forward. A strong Vision is articulate and coherent. It defines what an organization

stands for and why they exist. The envisioned future is what a company aspires to

become, and to achieve -something that will require significant change and progress to

attain. In short, it’s a roadmap and if done well, it’s powerful.

How well the Vision is shared, communicated and escalated down and through the

organization is a measure of an organization’s commitment to the Vision and

ultimately will determine the success of the Vision, and as such, the company.

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Employees that can get behind company Vision and its core values understand what

needs to be done for the company to succeed long term, and they connect the work

they do to it. These by definition are engaged employees.

And when Organizational Vision is the number 2 driver of employee engagement – as is

the case with Credit Unions, it becomes a paramount measure that needs close

monitoring, refining, and adaptation.

How can you measure if your employees are buying into the Vision? Employees who

are engaged and respond to the vision exhibit the following characteristics:

They can see what the organization aspires to be like in the future

The understand what needs to be done to succeed in the long run They see the organization’s long-term purpose and direction

The feel their leaders have painted a compelling vision

Therefore, it important for organizations to find ways to frequently measure how their

employees are connecting to their Vision, and to develop action plans to continuously

monitor, improve and adapt their strategies to ensure this connection is there, while

staying on top of the continually changing market place and adapting the strategies

that will stay true to the core values and purpose of the organization.

Teamwork

It is interesting to note that Teamwork is a driver that is unique to this sector

with this item rarely coming up as engagement drivers in other industries.

So, why teamwork?

Teams are formed when individuals with a common taste, preference, liking,

and attitude come and work together for a common goal. Teams play a very

important role in organizations as well as our personal lives.

“Coming together is a beginning. Keeping together is progress. Working

together is success” -Henry Ford.

This proverb by Henry Ford highlights the importance of working together in

teams.

Every employee is dependent on his fellow employees to work together and

contribute efficiently to the organization.

But Financial Services firms, Credit Unions included, have long been known to

work in silos. The concept of being connected to your colleagues has been all

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but foreign. The workers are highly educated and highly independent and

that has been the culture.

But the climate has changed and is continuing to evolve. Products are

changing, there is cross-bundling, integration of services, optimization, and a

need for stronger focus on the member.

Employees in this industry are recognizing the importance of teamwork more

and more and showing a desire to move away from the silo mentality and

trading it in for the spirit of collaboration. We are not only seeing it in the

raw data and statistical analysis, but in the open ended comments where

employees are encouraged to expand on their thoughts.

What are they saying?

Remove barriers

We operate in silos Need more interaction, more collaboration

More sharing of ideas

Less “us” vs. “them” Let’s work towards a common goal

People are not willing to give up information

People are seeking own self interest

Need to be more cohesive Less “every man for himself”

No employee can work alone; he has to take the help of his colleagues to

accomplish the tasks efficiently. It has been observed that the outcome

comes out to be far better when employees work in a team rather than

individually as every individual can contribute in his best possible way. In

organizations, individuals having a similar interest and specializations come

together on a common platform and form a team.

So what is an organization that has traditionally worked in silos do to move

towards a more collaborative environment?

Understand that the problem is there. Then break the silos to fix the system.

It’s a bit of a philosophical shift for the industry, but the research indicates to us that it is time to address the shift.

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But What About the Member?

We have discussed what drives engagement for employees of Credit Unions.

What is perhaps even more interesting is what does not seem to drive

engagement. Could this be an indicator of a larger problem?

Member Focus– an area of pivotal concern for the Credit Unions – has ranked

near the bottom of areas that drive employee engagement for the past four

years. In other markets, this dimension tends to rank higher.

While Member Focus may not be affecting employee engagement, it is

strongly affecting members, and as such the industry as a whole. Of

paramount concern to rebuilding trust and member confidence in both the

brand and reputation of each firm. There is a burden of responsibility on

organizations in the industry to fix the negative market perception.

The need to develop better processes to drive performance and improve the

member experience will be paramount in its success. The word of the day is

“optimization”. Understanding the member and their unique needs, cross

bundling products, creating one point of contact, improving loyalty

programs, and cross-selling is the way of the future and should be driving

business strategies in this sector.

How does a Credit Union get its employees invested in focusing on the

member?

There is a need to focus on human capital strategies to stay competitive

Perhaps tying Member Focus into the Organization’s Strategy is the key. We

know that employees get engaged through Vision, and they get engaged

through Development opportunities. Perhaps the answer is to tie the

member into both in an obvious way. If your people believe that the

member is the key to professional growth and staying innovative, they may

see a much clearer link between the organization’s objectives and their role

in achieving them.

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Conclusion

Credit Unions as a whole have challenges for it in the years ahead. The opportunities are exponential for those who capitalize on them. Organizations that optimize their talent and understand what it takes to engage them, will find themselves in a position of power – both to attract and retain the top talent. Continuous monitoring of employee engagement and what drives engagement both in the industry as a whole and at an organizational level will help keep these firms competitive where they need to be. By implementing strategies to address the emerging HR trends in the market, like the ones identified, firms in the industry will be able to win at least a few battles in the war for talent, and as a result, attract and retain top performing staff who continuously contribute to their positive business outcomes.