Lack of Employee Engagement Hurts Business Performance

December 21, 2009: IT Business Edge

by Ann All

Companies are coming off a rough 18 months. So it's time to regroup, realign business objectives in light of the economic conditions and communicate them to employees. Yet that last step might be suffering, based on research conducted by the UK's Department for Business, Innovation and Skills (Bis).

According to a YouGov survey of more than 2,100 working people, just 24 percent said their employer had clearly articulated its 2010 objectives to the work force. Thirty-two percent doubted there was a plan for their business. Perhaps not surprisingly, only 27 per cent of respondents said they were fully prepared for challenges they would face at work in the coming year.

This lack of communication could be especially worrisome for IT, which as I wrote last week faces a double whammy of low staff levels and heightened corporate expectations. While there's a lot of talk about "employee engagement," it's tough for managers to rally the troops if they're feeling uncertain themselves. Nonetheless, it's important to do so. Poor employee engagement "can put the brakes on improved business performance," said David MacLeod, adviser to Bis and co-author of a report titled "Engaging for Success." He said:

If leaders don't explain where the business is going and what it's seeking to achieve, how can people be motivated or know what they're meant to contribute? Clear goals are a key ingredient for achieving performance and productivity -- but worryingly this research suggests many employers haven't yet grasped this for 2010.

MacLeod said engaging with staff goes beyond the warm and fuzzy and yields financial beneifts. If employee engagement levels rise by 10 percent, companies can increase profits by up to £1,500 (US $2,400) per employee per year.

Need more proof? Researchers who wrote a paper soon to be published in the Strategic Management Journal correlated sales growth with an organizational culture in which employees had higher opinions of their company than did society at large. They saw a 9 percent drop in sales over a year at 28 companies where employees thought far less of their company than customers did. Conversely, sales rose 7.46 percent for the companies whose employees liked it much more than consumers did.

Notice MacLeod's mention of "clear goals?" That meshes well with what Brad Hall, managing director of Human Capital Systems and author of "The New Human Capital Strategy," told me when I interviewed him in October. He suggested coming up with specific goals for each role in an organization -- all of which should be tied to larger corporate goals, of course. Then tie employee training, performance appraisals and incentives to those goals. In that same post, I offered advice from Globoforce CEO Eric Mosley, who said giving employees rewards keyed to corporate values can help improve overall company morale.