Do benefits drive employee engagement?

Debi O’Donovan, editorial director at Employee Benefits: Employee engagement is one of those buzz phrases that has been doing the rounds on the HR circuit for sometime now – even though I suspect only a few HRDs actually understand its true implications and business benefits. Most seem to think it is simply a simile for staff ‘satisfaction’.

However, it is a buzz word, and buzz words are good for grabbing attention. So pensions and benefits people have also been increasingly hooking onto ‘engagment’ (or at least adding it to their marketing material and business reports!).

The primary driver for this increased interest in employee engagement is data demonstrating the measurable impacts of employee engagement on business results.

In 2004 benefits consultants, Towers Perrin conducted a European Talent Study among 5,000 UK employees. The consultancy measured the employees’ engagement levels and compared them to the financial data of the companies for which the individuals worked. The results demonstrated a strong correlation between higher-than-average employee engagement levels and higher-than-average (compared to industry sector) operating margins.
And so to the million pound question – do benefits drive employee engagement? To date, no study has shown a strong correlation between benefits and engagement (although Employee Benefits magazine is currently running a survey with YouGov into this topic, so I reserve the right to be proven wrong when the results are published in October 2007).

What is more common is that a lack of benefits leads to negative employee attitudes and engagement (no surprise there!). Benefits are a classic ‘hygiene factor’, have them and no one notices, don’t offer any (or be miserly about them) and everyone moans.

Benefits are a useful way keep a weather eye on employee engagement (after all, you be doing can’t do staff surveys all year round to measure engagement). If staff are signing up for a company pension scheme or taking an active interest their pension investments, then chances are they are engaged in their employer more generally.
Similarly, flexible benefits schemes are a useful barometer. The more active staff are about making choices the better.

Switched-on employers are using this insight to encourage staff to interact with their benefits. If they spot that someone has been checking out the travel insurance options on the voluntary benefits scheme, they might drop them an email to remind them of discounts on related holiday products in the scheme. By using customer relationship marketing (CRM) techniques to measure which type of benefits are most popular within a particular workforce or division, corporate advisers can also suggest which other popular new benefits should be offered.
Employers such as Nationwide and Royal Bank of Scotland have been doing this type of CRM for staff for quite some time – to great effect. The employees appreciate it, which drives engagement. This, in turn, has a knock-on effect on customer service levels and ultimately profit levels.

There is plenty more to be done in this field and I would be interesting in finding out how seriously finance directors are taking all this talk about employee engagement; or is it simply another bit of navel gazing by HR?

Debi O’Donovan, editorial director at Employee Benefits