Global engagement levels sinking

A report by Hewitt Associates illustrates the disconnect between overall economic conditions and employee engagement, with more than half of the 900 organizations polled around the world reporting a significant drop in engagement levels at the end of the June 2010 quarter—the largest decline Hewitt has seen in 15 years. This is due to growing tension between employers—which are struggling to stabilize their financial situations—and employees, who are exhausted after 18 months of stress, uncertainty and confusion thanks to the recession and their employers’ actions.

Hewitt’s research shows that about half of the organizations polled historically improved their engagement levels in a one-or-two year period, while 15% experienced a decline. However, the percent of organizations with declining engagement has been steadily growing over the past two years, with 46% of organizations reporting falling engagement levels in the quarter ending June 2010. Only 30% saw an improvement.

“The economic situation over the past two years has clearly strained the connection between employers and employees, and the stress continues to increase,” says Ted Marusarz, leader of global engagement and culture at Hewitt. “Organizations are struggling to improve employee engagement, but they need to stay focused. The extra effort companies put forth now will make a difference in how successful they are at boosting employee morale and retaining top talent as the economy stabilizes and employee opportunities open up.”

Financial performance = engagement
It comes as no surprise to learn that Hewitt’s analysis found a clear link between employee engagement levels and financial performance. Organizations with high levels of engagement (65% or more of employees are engaged) outperformed the total stock market index and posted total shareholder returns 19% higher than the average in 2009. Conversely, companies with low engagement (less than 40% of employees are engaged) had a total shareholder return that was 44% lower than the average.

How to get there
Hewitt has uncovered a number of key factors attributable to organizations with higher engagement levels and offers the following advice:

Focus on the long term:
While many of these organizations did cost cutting and reductions in staff, they made changes consistent with their principles and values and without losing sight of their overall goals.

Obtain buy-in from leadership:
Leaders must make engagement a top priority. They must be visible and provide ongoing updates to reduce employee uncertainty and stress.

Implement measurable actions:
Successful organizations use employee information as a call to action rather than an assessment. They define specific and measurable actions and take steps in areas where the organization will see a clear impact.

Involve all stakeholders:
Organizations with improved engagement understand that creating a “high engagement” environment requires the involvement of multiple stakeholders—the organization (leadership, policies and program), managers and employees. Organizations communicate to these stakeholders to ensure everyone is clear on their role in the process and on the employment proposition.

Understand key employee segments:
Successful organizations understand that not all employees are necessarily equal. They focus on key segments and critical talent so that they’re able to engage or re-engage them once the job market improves.

Utilize a broader array of information and analytics:
Hewitt’s analysis shows that 34% of organizations help employees through the on-boarding process to minimize the dip in engagement most organizations see in the first year of employment. Additionally, almost three quarters conduct exit surveys to understand why employees are leaving and proactively identify potential hot spots.

“Understanding what drives employee behaviour—in good times and in bad—is critical to business success,” says Marusarz. “All organizations face similar pressures. Companies that are successful at improving engagement in spite of these pressures are the ones that create an environment focused on key human capital elements. They may make adjustments to their engagement strategies, but they don’t lose sight of their overall goals.”