How to gauge a return on investment on employee engagement initiatives

Need to know:

  • Measuring the return on investment (ROI) on employee engagement initiatives needs to be about much more than carrying out an occasional staff satisfaction survey.
  • Employee key performance indicators (KPIs), staff turnover, absence statistics, exit interviews, customer feedback, evidence of collaboration and employee participation can all be valuable measures to assess.
  • The process needs to be built around trust and genuine dialogue, rather than just box-ticking.

Fewer than a third (30%) of employers use people analytics to calculate the cost, impact and return on investment (ROI) of reward and benefits in their organisation, according to research conducted by Employee Benefits for Equiniti published in September.

The finding, from a survey of more than 200 employers, is curious, not to mention a little depressing, when one considers that many HR, benefits and reward professionals recognise that good data and analytics are one of the key ways to understand and unlock employee engagement within their organisations.

Measuring engagement
So, why the disconnect? More widely, how can employers best use data and analytics to measure the ROI of their employee engagement initiatives, to measure how these are affecting their bottom line, for good or ill?

Yves Duhaldeborde, a director at Willis Towers Watson, says: “Many employers do not know how to measure engagement, or how to do it well. Some employers do get the best out of the data they collect, but not all.

“Even when [they] do people surveys, and even though the technology can now link to employee-level information, often the basics are missing, for example whether employers are really listening to their employees, really purposefully following-up.”

Adi Reed, head of engagement at reward and employee engagement platform Avinity, adds: “HR often has its hands tied; it is told surveys are rubbish and it needs to do ‘something’ about it,” agrees. Then it comes up with a plan, only for the business to say, ‘this is costing us too much money’. Often HR does not have the power to get the statistics it wants.”

Data to support engagement
But what sort of data are we actually talking about? Given that employee engagement is a notoriously nebulous thing to measure in the first place, let alone determine whether it has changed, what data can support employee engagement?

The best answer appears to be whatever data set best reflects the reality of what engaged means within an organisation. “It is anything that is going to give [the employer] a sense of what it is [its] employees are wanting or experiencing, whether they are satisfied with their opportunities,” says Duhaldeborde.

This could be straightforward employee performance and KPI information, the results of a regular engagement survey, absence statistics, or exit interview feedback. However it could also  be customer feedback, mystery shopper results, evidence of collaboration or idea generation, or, conversely, silo working. Or it could be production line units, billing hours or employee participation in, perhaps, benefits, training or wellbeing initiatives.

“What the board really cares about is numbers, whether the organisation is increasing profits, reducing losses or improving productivity,” says Reed. “So [employers] need to be looking at statistics linked to that. That might be, for example, staff turnover and/or the cost of replacement, customer satisfaction or brand awareness and loyalty. Most HR teams are dealing with multiple data systems that often do not match up or talk to each other. So, often people need to step back and join it all together.”

Employee feedback
To get honest feedback, employees have to believe any data used is both anonymous and secure, says Andy Weston, sales director at analytics firm Engagement Multiplier. “A lot of [employers] come to us that have run annual surveys and felt them to be a waste of time because it takes ages to get the data back and then hone it down, by which time [they’ve] lost momentum.”

Its programme, by contrast, runs quick employee surveys every 90 days based around a set of core questions focused on attitudes to leaders and engagement with organisational vision. The assessment results are available as soon as the window is closed and the employer is able to share the results with every person in the business. Employees can also look at their own personal engagement report. “It is about helping HR to become more transformational and less transactional; it is about knowing better which areas to focus on and which are not a problem,” explains Weston.

Engagement and the bottom line
Finally, what about the ‘Holy Grail’ of showing how employee engagement initiatives impact or affect a business’ bottom line?

Katharine Moxham, spokesperson at group risk industry body Group Risk Development (Grid), says: “Measuring employee engagement ROI in pounds is extremely difficult and what we find is that, often, employers simply decide to use other measures beyond the monetary.

“Frequency of usage of benefits products can be one useful measure, especially ones that perhaps support the main product, for example take-up of the support tools, [employee assistance programmes] EAPs, legal advice, second medical opinions or nurse-led support, often bolted on to group risk products.”

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ROI on the bottom line is still very much out there, but a lot of employers are focusing on the wider engagement piece, says Anna Spender, director at Psyon Insights, the data analytics and actuarial division of Punter Southall Health and Protection. “There is a lot about engagement that is intangible, but there is a lot that is tangible too.”

So it is important for employers to remember that when putting an initiative in place, especially if it is through a third-party provider, they need to have a conversation about data upfront. They need to be clear about what it is they want to see or find out. Only then will they be able to apply this to specific aims such as identifying their ROI on employee engagement.