eight recommendations to improve employee engagement by hay group

REWARD STRATEGY AND PRACTICE

Eight Recommendations to Improve

Employee EngagementTom McMullen, Hay Group*

To start, let's de�ne em-ployee engagement as the levelof commitment that employeesfeel toward their organization aswell as the level of the emplo-yee's discretionary e�ort andtheir willingness to go the extramile for their company. Engagedemployees are passionateabout their work and are morewilling to help each other andthe organization succeed, totake on added responsibilitiesand to invest more e�ort in theirjobs, share information and col-laborate with other employees,as well as to remain with the or-ganization than employees whoare less engaged. Leaders mustalso enable employees to chan-nel their e�orts productively.

This includes ensuring reason-able alignment between thework to be done and the capa-bilities of employees, ensuringavailability of resources andreinforcing management pro-cesses, including performancemanagement and rewards.

In order for organizations toachieve a more engaged andenabled workforce that deliverssuperior results, the followinglist (Figure 1) is provided as aset of recommendations foryour organization to consider ingetting more focused in improv-ing engagement in yourorganization.

Figure 1: Recommendations

to Improve Employee Engage-

ment

1. Make a business case forengaging employees

2. Measure engagement andtake action on survey re-sults

3. Make managers account-able for engagement

4. Connect people with thefuture

5. Go beyond a compensa-tion to a total rewardsmindset

6. Include employees & man-

*TOM MCMULLEN is the leader of Hay Group's North American Reward Practice, based in Chicago, IL and is accountablefor leading Hay Group's innovation, thought leadership and capability development initiatives for the reward practice. His clientconsulting work focuses primarily on developing and implementing total reward program design, including reward strategydevelopment, incentive plan design, linking reward and performance management systems, job evaluation and organizationstructure design.

In the previous issue of this column, we highlighted recent research from the Conference Board's 2013 study on CEOChallenges which found that human capital strategy concerns rank at the very top of the list. One of the key human capital focusareas for CEOs is engaging talent. This article provides some thoughts on this and in particular, the role of rewards as a strategictool in the engagement and retention of talent.

Journal of Compensation and Bene�ts E July/August 2013© 2013 Thomson Reuters

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agers in reward designand launch

7. Use engagement metricsin performance criteria

8. Communicate the value ofwhat you have.

MAKE A BUSINESS CASE

FOR ENGAGING EMPLOYEES

If your organization's leadersare uncertain or ambivalentabout the value in focusing onemployee engagement, a goodstarting point is to create thebusiness case for engaging em-ployees and identify the con-nections between engagementand business outcomes. Thefocus of engagement initiativesis not on making employeeshappier or more satis�ed, butrather on creating the condi-tions that encourage high levels

of organizational commitmentand discretionary e�ort fromemployees.

The increased attention fromCEOs on employee engage-ment re�ects the growing rec-ognition that human capital pro-vides the most sustainablesource of competitive di�eren-tiation for organizations. Organi-zations that manage employeeengagement most successfullyclearly articulate how high levelsof employee engagement sup-port core priorities such asenhancing productivity and in-novation, operating e�ciently,sustaining strong customer re-lationships, and retaining toptalent.

It is clear, now more thanever, that CEOs see the linkagebetween engaging and enabling

employees and achieving busi-ness results. A Hay Groupcross-industry analysis involv-ing more than 400 companiessuggests that while organiza-tions in the top quartile on en-gagement demonstrate revenuegrowth 2.5 times that of organi-zations in the bottom quartile,companies in the top quartile onengagement and enablementachieve revenue growth 4.5times greater. We also saw sig-ni�cant di�erences in perfor-mance across three key met-rics—employee performancerating distributions, employeeretention and customer satis-faction when comparing topquartile vs. bottom quartile per-formance on engagement andenablement (see Figure 2below).

Figure 2: Business Case for Engaging and Enabling Employees

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To establish the businesscase for engaging employees,consider using internal businessand engagement measures ifyou have them and compare thebetter and poorer performingparts of the organization toidentify gaps in engagementand the people, processes andclimate factors that drive theseengagement levels. If internaldata are not available, considerbeginning a dialogue with yourleaders around external perfor-mance norms and internal op-portunities for improvement.

MEASURE ENGAGEMENT

AND TAKE ACTION ON

SURVEY RESULTS

There is a saying that “whatgets measured gets managed”and employee surveys are im-portant tools for monitoring andmanaging employeeengagement. Employee surveysare also two-way communica-tion tools. What is measuredsends important signals to em-ployees about the organiz-ation's values and priorities andthey allow organizations to so-licit feedback from employeeson key topics related to organi-zational e�ectiveness. In thisway, an employee survey canbe an e�ective intervention evenbefore the �rst questionnairesis completed and data areanalyzed. An engagement sur-vey also should connect withthe key “value propositions” anorganization is o�ering to its

employees and alignment withobjectives not only promotesappropriate employee expecta-tions but also more actionableresults. By soliciting employeefeedback in areas of focus forthe organization, survey resultscan be more readily incorpo-rated into ongoing improvemente�orts. Most importantly, shar-ing results and an action planfor closing gaps demonstratesrespect for employee input.

If the organization is not pre-pared to share results with em-ployees and develop an actionplan for improving the organiza-tion, it is best to not embark onan employee survey in the �rstplace. An employee engage-ment survey is a means to anend and the initiative is onlysuccessful if the results of thesurvey are utilized. In this re-gard, it is critical to rememberthat the organization should notbe seeking to improve engage-ment scores for their own sake,rather there is a need to under-stand the work environmentfactors that impact key organi-zational goals and objectives. Inour work with Fortune magazineMost Admired Companies,these organizations make morefrequent use of employee sur-veys than their peers and theyuse employee input moree�ectively. These best organi-zations indicate their managersare more e�ective in generatingaction and change from em-ployee survey input. Finally,

these organizations also reportspending more energy in linkingemployee survey results to per-formance outcomes, such as�nancial success, productivityand customer satisfaction.

MAKE MANAGERS

ACCOUNTABLE FOR

ENGAGEMENT

Our experience indicates thatemployee engagement cannotbe a focus only in and aroundemployee surveys. It needs tobe incorporated into the waythe organization continuallyoperates. A company cannotpull good employee engage-ment scores out of a hat. A keyto the success of engagementinitiatives is around engagingline managers in the e�ort. If theconnection between engage-ment programs and the con-cerns of line managers is notmade clear, managers will likelysee themselves as too busywith their day-to-day responsi-bilities to play an active role.This is a deadly response in theorganization, because it sug-gests that managers are view-ing engagement initiatives notas tools provided for them tohelp accomplish their core busi-ness objectives, but instead asHR-oriented activities that arebeing done to them.

Typically, in the early stagesof an engagement initiative, linemanagers, while involved, playa secondary role to internalproject coordinators or external

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consultants. Once the informa-tion is collected and the atten-tion of the organization turns tocommunicating the resultsthroughout the organization andusing the results to drive orga-nizational improvements, exter-nal consultants and even inter-nal project coordinators needto step back and rely on linemanagers to carry the resultsforward into the organization.

CONNECT PEOPLE WITH

THE FUTURE

Engagement success isabout more than encouragingpositive views of the current or-ganization climate. Fosteringbuy-in and commitment over alonger time horizon requiresthat employees have a positiveview of the future of the organi-zation and their futures in it.Three considerations are key:

Clear and Promising

Direction. Ensuring that thepractical implications of thedirection of the organization isclear to employees is essentialto building line of sight and ef-fective execution. Connectingemployees with the bigger pic-ture is also equally importantfrom a motivational perspective.Most employees are looking foran opportunity to contribute tosomething larger than them-selves, a chance to make adi�erence. Appealing to thissense of purpose is critical topromoting higher levels of em-ployee engagement.

Con�dence in Leaders. Asmentioned above, faith in thedirection of the organization iscritical for fostering high levelsof employee engagement. Alsocritical is employee faith andcon�dence in the organization'sleaders who are charged withexecuting on the organization'sstrategic priorities. Today's em-ployees are acutely aware thattheir prospects for continuedemployment and advancementare dependent on their compa-nies' health and stability. Theycannot be expected to bindtheir futures to those of theiremployers unless they are con-�dent that their companies arewell led and positioned forsuccess.

Development Opportunities.Employees tend to know thatthey are responsible for manag-ing their own careers and thattheir futures depend on continu-ous improvement in their skillset. If employees are not ex-panding their competencies andcapabilities, they risk compro-mising their employability withinboth their current organizationas well as others. Accordingly,opportunities for growth anddevelopment are among themost important predictors ofemployee engagement.

GO BEYOND

COMPENSATION AND

BENEFITS TO A TOTAL

REWARD MINDSET

Rewards go far beyond cash

compensation and bene�ts.Most organizations provide anarray of non-�nancial rewardssuch as career growth opportu-nities, quality of work, recogni-tion and a great work climate.These non-�nancial rewards,while not often fully understoodor leveraged, are very importantto employees and constitute asigni�cant portion of the totalreward portfol io in theorganization. Given the con-straints on the �nancial ele-ments of reward programs, thisbroader de�nition of reward hasbecome more common andmore leveraged in the marketover the past decade. Non-�nancial rewards are not merelysoft nice-to-haves. They are acore component of employerbranding and the backbone ofthe employer's value proposi-tion to employees. Total re-wards are critical to the organ-ization's overall recruiting,retention and engagementstrategy. Often, employees de-cide to leave an organizationbecause of a perceived imbal-ance or inequity in these non-�nancial rewards. Most AdmiredCompanies do not necessarilyo�er more rewards (�nancialand non-�nancial), but they doa much better job leveragingtheir total rewards—communi-cating about them, gettingpeople to understand theirvalue, linking them to perfor-mance and providing tools totheir managers to better utilize



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total rewards (see Figure 3 below).

Figure 3: Total Rewards Communications

Central to the notion of mak-ing total rewards more viableand visible in the organization isin better leveraging its linemanagers. These managersalso have the primary in�uenceover the broad array of non-�nancial rewards that an orga-nization provides and managersplay a signi�cant role in estab-lishing the work climate of anorganization, in facilitating thedevelopment and career growthof employees. HR can play alead role in helping managersunderstand and promote a “to-tal rewards” view and approachwhen dealing with employees

as well as in building the coreorganization messages (em-ployment value proposition)around what is meant by totalrewards. HR has a signi�cantrole to play in developing toolsfor managers so they can ef-fectively reward employees be-yond the con�nes of compensa-tion and bene�ts and indeveloping and reinforcing com-municat ions around totalrewards.

Include employees and

managers in reward design

and launch: If the best rewardprograms are the ones that bal-

ance the needs and wants ofthe organization and its employ-ees, then it is quite logical toassume that organizationswould have a good handle onwhich aspects of the rewardprogram employees value themost and least. Unfortunately,logic does not hold up in thisregard. Our research indicatesthat the vast majority of organi-zations (i.e., approximately 80%)do not directly include theemployee's perspective in re-ward program strategy, designor execution (see Figure 4 be-low)



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Figure 4: Employee Involvement in Reward Programs

Most organizations have amindset around listening to theircustomers to learn what theyvalue in their products and ser-vices (i.e., market research).This mindset should then applyto their most important internalcustomers—their employees.Our research �nds that engage-ment is enhanced when em-ployees and managers are in-volved in the design and launchof their reward programs.Simple processes such as fo-cus groups and structured sur-vey diagnostics which assessemployee preferences in vari-ous aspects of reward programdesign (e.g., bene�ts prefer-

ences, non-�nancial rewardpreferences, base salary in-crease preferences) haveproven to be e�ective tools formany organizations.

Once these preferences areknown, HR can make structuralchanges to core reward pro-grams such as cash compensa-tion and bene�ts. In addition,and perhaps more importantly,HR can build out the manager'sreward tool kit based on hownon-�nancial reward prefer-ences such as recognition, ca-reer development, job design,work climate, etc. vary acrossdi�erent employeedemographics.

USE OF ENGAGEMENT

METRICS IN PERFORMANCE

CRITERIA

From our research and workwith clients, we see Most Ad-mired organizations placingmore emphasis in a balancedset of performance metrics intheir organization scorecards.While �nancial metrics still tendto the most emphasized, wesee Most Admired organiza-tions placing much more focuson the drivers of �nancialperformance—i.e., human capi-tal development, operationalprocesses and customer focus(see Figure 5 below).



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Figure 5: Performance Metrics

Human capital developmentmetrics often consist of mea-sures of organization health andemployee engagement. If notdoing so already, consider es-tablishing baseline measures oforganization health and em-ployee engagement levels in the�rst year of your scorecardprocess and monitor and re-ward trends in achieving en-gagement levels in subsequentyears.

COMMUNICATE THE VALUE

OF WHAT YOU OFFER

‘Best’ practices and sophisti-cated reward program designsfail if they are not properlyrolled out. Clarify and focus ona few direct messages andtools to communicate theseprograms. It is a more powerful

strategy to reduce messagesdown to their core with straight-forward business rationale ver-sus communicating a myriad ofdetails about the program.Woodrow Wilson once said . . .“if I had more time, I would havewritten a shorter letter.”

Consider using total rewardstatements if your organizationis not using them already. Totalreward statements are powerfulcommunication tools, but onlyare in use in about 50% oforganizations. If one employeere�ects on the value of theirreward package and stays withthe organization because of arenewed understanding of thevalue of the program, thenyou've likely paid for the cost ofthese statements for the year.

The new frontier in reward pro-gram design for many organiza-tions is in HR assisting manag-ers understand and use theirtotal reward tool kit to bettercommunicate reward value to(and re-recruit) employees.

If organizations can imple-ment these recommendations,they will reap the bene�ts ofmore engaged employees will-ing to invest more discretionarye�ort to make their organiza-tions successful. Coupling thisdiscretionary e�ort with en-abling work environments willprovide organizations with aneven more competitive edgethat will enable them to win inthe talent marketplace.



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