Reward and employee engagement must be the focus for HR professionals in the future, says IES' Duncan Brown
Richard Pascale's book Managing on the Edge profiles the ever-faster rise and fall of management fads over the past 50 years, illustrating the futile search for quick solutions to improve company performance through people.
In a recession with mounting redundancies, the future for employee engagement and total reward initiatives might not appear rosy. Fuelled by the credit boom and conference endorsements, employers jumped on the employee engagement bandwagon. Although after Google references to the term doubled between 2001 and 2006, they then declined by 25% in 2008.
In tough times, management rhetoric is exposed. Companies focus on what works in the struggle to survive. US reward experts Jay Schuster and Patricia Zingheim have criticised the best-place-to-work movement that saw fringe benefits and employment costs rise, with no business return.
However, our research at the Institute for Employment Studies shows that employee engagement is not a fad destined to go the same way as quality circles and T groups. Whatever the economic climate, it provides scope for reward professionals to leverage a powerful impact on their organisation's performance. An engaged employee is one who is aware of their business context and works with colleagues to improve their performance for the benefit of the organisation.
Research demonstrates that in our service-based economy, employee engagement is a major driver of organisational performance. Engaged employees deliver improved customer service, as is shown in the famous research by retailer Sears; they are more productive (by 20% on average, according to a study by The Conference Board); and they are less likely to leave or be absent.
As Generation Y comes into employment in the years ahead, with their "I want it now" attitude, it is also vital that employers devote time to working out how to maximise the contribution of the various "tribes" in our increasingly diverse workforce.
Research also shows that rewards have a major influence on employee engagement. Pay and benefits contributed to engagement in the National Health Service, according to research by IES; performance-related pay had a strong impact on the engagement of high performers in a WorldatWork study; and Brown and West found that employee engagement and customer service in 25 UK organisations were strongly influenced by a range of HR and reward practices and the way line managers used them.
Engagement is not a new fad. As is made clear in The Enthusiastic Employee by David Sirota and colleagues, there is little to add to what psychologist Elton Mayo wrote on the subject, using different terminology, 80 years ago. But we have not been good at applying Mayo's wisdom and it needs to be reinterpreted for our post-industrial workforce and economy.
Recession or not, employee engagement today, and in the future as a new generation enters the workforce, is a critical driver of organisational performance, and what we do with rewards has a major influence on it.
But we cannot just implement a flexible benefits plan and assume it is sorted. We need to research employees' views and use the full range of rewards to meet their needs and aspirations. The Employee Benefits Research 2008 placed the benefits package and bonuses at 17th and 18th in a list of factors driving engagement. The most important factors were interesting work, work-life balance and the working environment.
US sociologist Studs Terkel spent his working life documenting the attitudes of ordinary workers, and the essence of human needs and motivations shines out from his writing. One interviewee, Nora Watson, told him: "I think most of us are looking for a calling, not a job. Most of us have jobs that are too small for our spirit." Employee engagement and reward are about seeking out, addressing and benefiting from the human spirit.
Duncan Brown is director of HR business development, Institute for Employment Studies
Key Points
- Employee engagement influences organisational performance.
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