By Anya Levykh

“Engaged employees work smarter, not harder. They look for ways to improve performance and they find them. This means more sales, lower costs, better quality and innovative products. Engaged employees communicate—they share information with colleagues, they pass on ideas, suggestions and advice and they speak up for the organization. This leads to better performance, greater innovation and happier customers. Engaged employees go out of their way to meet customers’ needs. Customers aren’t slow to notice and this leads to higher levels of repeat business, at a lower cost to the business than that of acquiring a new customer.”
~ Allan Schweyer, “The Economics of Engagement” (pub. Human Capital Institute)

Hold hands and sing Kumbaya. Okay, are we engaged now?

Probably not. Should we care? Definitely.

Long gone are the days when organizations could afford not to care about their employees’ feelings and wishes, their individual dreams and responsibilities. As we move further and further into a knowledge-based—and ever more mobile—economy, the economic reality of making engagement the daily bread of workplace culture and ethos has become too obvious—not to mention dangerous—to ignore.

Take the 2008 financial crisis. Companies were forced to rely on fewer workers for more. “I think sometimes a crisis creates an opportunity,” says Heather Claridge, vice-president, human resources,for Omicron Canada Inc. “Some of the challenges that organizations went through after 2008 have forced people to really pay attention to the relationship between engagement and performance,because we needed to draw as much performance as possible out of the individuals that we had.”

That need still holds true in today’s uncertain economic climate. With employees demanding—and receiving—more from their employers in terms of professional opportunities, work-life balance, health and wellness programs, and much more, the need to be engaged with your workforce comes front and centre.

Defining Engagement

But what are we talking about when we bandy around the word “engagement” like some trendy bon mot at a cocktail party? “It means people who are enabled, committed and motivated to deliver,” says Claridge. “It’s that discretionary effort that really drives performance.”

Daniel Skarlicki, Edgar F. Kaiser professor of organizational behaviour at Sauder School of Business, agrees, but takes it further. Skarlicki believes that productivity is only part of the engagement equation. “You need productive employees, but their well-being quotient has to be high, otherwise, they won’t be productive for long.” Skarlicki argues that organizations must take into account both factors—productivity and well-being—in order to maintain their competitive edge.

The New Edge

“Engagement is the last competitive advantage organizations have,” Skarlicki explains. “All companies have equal access to capital, to technology, to strategies. What they don’t have equal access to is employee engagement.”

Skarlicki also agrees that engagement is a discretionary effort on the part of the employee. “Whether a worker wants to engage or not, he won’t get fired just for not being engaged.”

But why should organizations kowtow to employees’ demands? Whatever happened to “put up or shut up?” It turns out that the cost of turnover—and disengaged, as opposed to engaged, employees—can be much higher than we realize. According to The Human Capital Institute, employee disengagement in the U.S. alone costs an average of $350 billion annually. That doesn’t include the cost of the higher turnover associated with disengaged employees—about 1.5 to three times the annual salary per employee. “Engagement also has to do with the emotional connection, what we call affect, to the organization,” explains Skarlicki. Employees who feel an emotional connection to their organization are less likely to be disengaged and are more likely to stay and thrive.

“Frankly, today,we don’t want people to just do their job,” continues Skarlicki. “We want employees who will go above and beyond the call of duty.”

Figuring it Out

Understanding what that entails for any organization can be so subjective that many people shy away from defining engagement altogether. “We refuse to define it,” says Karen Jackson, president, Jackson Consulting Group. “We believe that engagement is ill-defined. There are hundreds of definitions floating around in the marketplace, and there has been a lot of research to define it as well. But we’re not in the business of defining engagement. We want organizations to fully understand what it is they want, and what it is that they’re trying to measure.”

Many companies are also starting to figure out why they don’t want disengaged employees. According to Gallup’s Q12 poll on employee engagement, disengaged employees aren’t just unhappy at work; they act out their unhappiness and even undermine what their engaged co-workers are trying to accomplish.

Skarlicki agrees and notes some factors that can kill employee engagement, like perception of fairness. “People will feel engaged to the degree that they are feeling fairly treated by the organization and its leaders. In fact, people will not only become disengaged when they feel unfairly treated, they will actively find ways to get revenge on the organization for being unfair, so they will take pencils home, for instance.”

And while money can’t buy happiness, the lack of it, according to Claridge, can also be an engagement killer. “Especially in a knowledge-based economy, your pay has to be competitive or you can’t move on to the next steps. Money gets you in the door, but it doesn’t move you forward.”

Knowledge Rules

How, then, do we not only avoid mass pencil theft, but actually engage and retain our skilled knowledge base? According to Baldev Gill, VP finance and HR, CGA-Canada, the first step is knowledge. “If you really want to engage your workforce, you have to really get your values as an organization across. Then you take a look at how your actions are tied into that. And, over time, you start to develop a culture. And when people buy into those values, believe in those values, live those values, you start to change that culture.”

Claridge agrees. “You need to understand the degree to which people are engaged with the organization before you begin. Be very targeted in your approach. Ask specific questions to understand where people are at. Based on what comes out of that, start with the things that you can control and influence most quickly. Start small, build examples of success in the organization, and leverage those examples to create momentum.”

That approach worked wonders for Gill when he started working at CGA-Canada in 2005. “When values are not clearly stated and communicated, it’s very hard to engage people. When my team and I came in, we measured engagement and found that less than 40 per cent of employees even bothered responding to the survey.”

Gill and his team took that information and took it one step at a time. The first thing he did was move the survey out of management’s hands and into the hands of an outside consultant (Towers Watson). This allowed employees to give completely anonymous feedback. Gill also took the innovative step of sharing the results of that survey with the entire company. “We wanted to share that knowledge and let people know we valued their feedback.” One of the biggest findings was that while employees understand their own jobs very well, they lacked understanding of how their job fit into the organization’s overall objectives and values and how other teams contributed.

Gill’s approach? “We started working with small teams, making them feel like part of the larger organization, helping them understand in real terms what impact their contribution—or lack of it—had on the organization.”

Knowledge, it turns out, is not only power, but also an enabler. “People need to want to stay with your organization,” says Claridge. “One key motivator of that is role clarity; people understanding what’s required of their role, understanding how their role contributes, and having meaningful work that adds value.”

Skarlicki recounts an anecdote involving Boeing that illustrates this point: “Boeing had an open house and invited all of their suppliers. One of their suppliers made small engines and a mechanic from that supplier attend the open house. This mechanic took a tour of the 777 and, as he was walking through, noticed the engine he had built that had been sold to Boeing. He saw where it went. If you had asked him what he did before that tour, he would reply, ‘I’m a machinist.’ After the tour, he said ‘I build airplanes.’ And when he went back to work after the tour, he took it upon himself to become the quality assurance guy. He became instantly engaged because he had a sense of purpose; he understood the importance of what he was doing.”

That sense of purpose is a huge part of employee engagement, notes Skarlicki. “This is something leaders can easily do to help their employees feel the value of what they’re doing. Where companies fall down is they try to do this through the reward system, and, again, you just can’t do it with money. Money doesn’t get you what you need in terms of motivating people and getting engaged.”

Managing Performance

Another key factor, according to Claridge, is support. “People need to feel supported in their roles, and they need to feel recognized for their contributions in order to grow and develop.”

One key way to create that support, according to Jackson, is through performance management. “True performance management equals true leadership, and that is how engagement is improved. I would argue that engagement is not necessarily a linear-causal relationship. A lot of research leads you to believe that if engagement is high, or higher, then results will be higher. The assumption is things will be better if engagement scores are higher. And the assumption therefore is that it is a causal relationship, because research has shown that organizations with higher engagement typically have better results.”

Jackson, however, believes that organizations or individuals that are doing well create a certain energy that make engagement intrinsically go up. “If you’re part of a winning team, for whatever reason that might be, I suggest that you’re highly engaged in that process,” she explains. “But that’s not because you’re engaged, it’s because you are part of a winning team. So it now becomes a circular relationship.”

Jackson therefore argues that performance management—i.e. listening to what your employees need and delivering on that, whether that means helping individuals interact with other team members, helping them interact with customers, get them the training that they need or simply communicating the organization’s goals and the employees role within that—is key to engagement. “When you have everyone rowing in the same direction as part of a winning team, lo and behold you have engagement.”

Skarlicki agrees. “There’s nothing more engaging than doing a great job, feeling really good about yourself and, possibly, having people recognize it.” He adds: “That ability to do one’s job to the best of one’s own abilities comes both from mastery of the skills needed for the job and support from the organization.”

Trust Key to Culture

That knowledge and support is all fine and dandy, but without the emotional connection, the “affect,” as Skarlicki calls it, you’re playing without a full deck.

“To really unlock high performance,” says Claridge, “you need people to emotionally connect with the organization —with its values and culture, and to say, ‘I’d rather be here than a similar job elsewhere.’ The role of culture is critical.”

Part of that culture component, Claridge notes, is trust. “If people don’t trust, that is a significant de-railer of engagement. There is a quantifiable impact that trust has on performance. If you don’t trust, you have to check, verify everything, it takes more time. In our organization, for instance, we are a billable environment, we need to be able to optimize the work that we do and be as efficient as possible, because the more hours we use, the more it erodes the margins on our projects. So our ability to trust our team members in terms of the work that they do and the decisions that are made has a direct impact on the time it takes to execute certain deliverables in any project. If you don’t trust, it slows things down and costs more money.”

That trust also relates to how employees react to company decisions. “Employees will not be as upset with decisions that management is making if they’re engaged from the beginning,” says Gill. “They may disagree, but at least they’ll still be engagedbecause there’s a sense of belonging to the organization.”

That trust also led to Gill noticing vast improvements in his own organization’s engagement levels over the next few years. “By the 2010 survey, we had a 90 per cent response rate. That’s when we really started to see the results, because people started believing in the process, they felt free to express their opinions and had confidence in the value of the process.”

Gill credits this belief to the fact that employees were able to see small changes—wins—after each survey. “This allowed them to have some measure of comfort that they could speak up, and even though management might not have been able to do everything they asked for, they were able to do some things, and that’s a step in the right direction.”

Measuring Results

So how do we bring it all back to ROI? How do we measure the success and value of our engagement programs? According to Jackson, engagement cannot be measured with a linear-causal equation, so what’s left? “Most companies use surveys,” says Jackson. Measuring the difference in results between one year and the next certainly worked for Gill.

According to Claridge, measurement also rests on areas like turnover. “Employee engagement is a series of metrics that tell a story,” she says. “Look at correlations with productivity metrics such as revenue or profitability per employee. It may not be a direct relationship necessarily, but you can compare attitudes people have about the company to performance metrics to determine the relationship.”

As for turnover, “I would be looking at not just our turnover numbers, but also reasons for turnover, at absenteeism, at our level of employee referrals. If you recruit regularly, it’s important to look at what percentage of new hires comes through employee referrals, because an employee will not refer someone to an organization that they don’t really like, respect or want to be a part of.”

Rewards and Recognition

“In order to maximize productivity, you have to communicate recognition,” says Gill, “not just once or twice a year during a review, but on a regular basis, whether that’s in the form of a bonus or a gift card or something else. You [as an organization] need to be engaged with them, in order for them to be engaged with you.”

Claridge agrees. “I’m a fan of simpler, quicker, temperature checks, and taking quicker action, because people need to see results. If they’re asked for feedback and don’t see results, then they’re going to become skeptical about whether change will really happen.”

Gill’s company also takes note of the impact that engagement has on an employee’s family. “As part of engagement, families pay a big price. We, as a society, spend more time at work than we do with our families, so we had to look at a way to show our appreciation for that.”

Gill initiated company-wide events like family picnics, galas, and a children’s Christmas party that is now the most-attended event of the year. “We wanted to show our employees that we value not just them, but their families as well, so we launched this annual event, and have Santa Claus hand out gifts to every child. We ask the parents what their kids like, and then the HR staff go to Toys R Us for a huge shopping spree. At first, management just saw this as an unnecessary expenditure, but now they see the value. Employee retention is much higher, and more people are not just satisfied, they are connected to the organization because they feel that we care about them and their families.”
Closing Notes: Keys to Engagement

Remember that engagement is individual and discretionary. “Why I choose to engage with an organization may be different from someone else,” notes Claridge. “The organization’s responsibility is to create an environment that enables people to be engaged. And then, whether I choose to engage or not is up to me.”

The grass isn’t always greener. “Don’t worry about how you compare to other organizations,” counsels Jackson. “Decide for yourself what’s important to you and where you want to focus your efforts. Engagement is a very complex issue that is time-specific, context-specific and organization-specific.”

“Walk the floor,” says Gill. Get out there and talk—and, most importantly—listen to your staff. Gill encourages managers to do this in order to “get a better sense of what people are feeling and talking about.”

Walk the talk. “Don’t measure anything something if you’re not going to do anything about it,” says Jackson. Skarlicki agrees: “If it’s seen as window-dressing, that you’re collecting data and not doing anything with it, employees can become cynical.”

Look in the mirror. Sometimes engagement and results are incompatible. “Things like company strategy, the exchange rate, the financial crisis…all of these factors “contaminate” ROI,” says Skarlicki. “You may be working for highly engaged company, and everyone feels energized, but the strategy that the company has chosen with which to compete in the workplace may simply be the wrong strategy. That’s something that’s beyond the control of the employees.”