Organizations typically focus on Customer-centric Design in their Strategic Planning and overlook the critical driver of Performance, Growth, and Operational Excellence—their employees. With cut-throat competition now the norm the realization has become clearer that employees are:
- The face of the business and create lasting—or perishing—brand impression.
- Sources of innovation and organizational knowledge.
- Representation of the company’s service philosophy.
- Expected to live by its Organizational Culture and values.
Employee Engagement has emerged as one of the significant pillars on which the Competitive Advantage, Productivity, and Growth of an organization rests. What, exactly, does it mean when an employee is engaged? Employee Engagement, over the years, has been thought of in terms of:
- Personal engagement with the organization.
- Focus on performance of assigned work.
- Worker burnout.
- Basic needs (meaningful work, safe workplace, abundant resources).
- Attention on Cognitive, Emotional and Behavioral components related to an individual’s performance.
Although Employee Engagement is widely seen as an important concept, there has been little consensus on its definition or its components either in business or in the academic literature.
Kumar and Pansari’s 2015 study define Employee Engagement as:
“a multidimensional construct that comprises all of the different facets of the attitudes and behaviors of employees towards the organization”.
The multidimensional construct of Employee Engagement has been synthesized into the following 5 components (or dimensions).
- Employee Satisfaction
- Employee Identification
- Employee Commitment
- Employee Loyalty
- Employee Performance
The 5 dimensions of Employee Engagement have been found to have a direct correlation with high profitability, as substantiated by a number of research studies:
For instance, a study of 30 companies in the airline, telecom and hotel industries shows a close relationship between Employee Engagement and growth in profits. After controlling other relevant factors—i.e., GDP level, marketing costs, nature of business, and type of goods, the study found:
- Highest profitability growth—10% to 15%—in companies with highly engaged employees.
- Lowest level of profitability growth—0% to 1%—in companies with disengaged employees.
Research reveals that Employee Engagement affects 9 performance outcomes; including Customer Ratings, Profitability, Productivity, Safety Incidents, Shrinkage (theft), Absenteeism, Patient Safety Incidents, Quality (Defects), and Turnover.
The differences in performance between engaged and actively disengaged work units revealed:
- Top half Employee Engagement scores nearly doubled the odds of success compared with those in the bottom half.
- Companies with engaged workforces have higher earnings per share (EPS).
These 5 dimensions become the base for measuring Employee Engagement in a meaningful manner that permits managers to identify areas of improvement. To assess an organization’s current status of Employee Engagement, a measurement system is needed that includes:
- Metrics for each component of Employee Engagement.
- A scale for scoring metrics in each component.
- A comprehensive scorecard that pulls everything together.
Let us delve a little deeper into the first 2 dimensions of Employee Engagement.
Employee Satisfaction is the positive reaction employees have to their overall job circumstances, including their supervisors, pay and coworkers.
When employees are satisfied, they tend to be:
- Committed to their work.
- Less absent and more productive in terms of quality of goods and services.
- Connected with the organization’s values and goals.
- Perceptive about being a part of the organization.
The 5 metrics that gauge Employee Engagement in terms of Employee Satisfaction include:
- Receiving recognition for a job.
- Feeling close to people at work.
- Feeling good about working at the organization.
- Feeling secure about the job.
- Believing that the management is concerned about employees.
We take a look at another dimension central in significance.
Signifies what motivates the employees to do more than what’s in their job descriptions.
Employee Commitment is much higher for the employees who identify with the organization. This element:
- Develops over time and is an outcome of shared experiences.
- Is often an antecedent of loyalty.
- Induces employees to guard the organization’s secrets.
- Pushes employees to work for organization’s best interests.
Research has found that employees with the highest levels of commitment:
- Perform 20% better.
- Are 87% less likely to leave the organization.
The 3 metrics that gauge the Employee Commitment dimension of Employee Engagement include:
- Commitment to deliver the brand promise along with knowledge of the brand.
- Very committed to delivering the brand promise.
- Feels like the organization has a great deal of personal meaning.
Interested in learning more about these foundational pillars to Employee Engagement? You can download an editable PowerPoint on 5 Dimensions of Employee Engagement here on the Flevy documents marketplace.
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Companies face increasing pressure from governments, competitors, and employees to play a leading role in addressing a wide array of environmental, social, and governance issues in a company’s supply chain. It could range from climate change to obesity to human rights.
For the past 30 years, companies have responded by developing corporate social responsibility or sustainability initiatives to fulfill their contract with society by addressing these issues.
However, gathering the data needed to justify sustained, strategic investment in programs can be difficult. Yet, without this information, executives and investors often see programs as separate from a company’s core business or unrelated to its shareholder value. While there are companies that have made progress tracking operational metrics or social indicators, they have difficulty linking such metrics and indicators to a real financial impact.
Needless to say, there are companies that are creating great value through environmental, social, and governance activities. Increased sales, decreased costs, and reduced risks are being achieved. Environmental, social, and governance programs can create value in many other ways. We just need to know where and how.
What is Corporate Social Responsibility
Corporate Social Responsibility (CSR) or sustainability initiatives are undertaken to fulfill contracts with society to respond to environmental issues. Environmental, social, and governance refer to a broader set of CSR Programs.
Sustaining strategic investments in CSR Programs can be a challenge but there are already leading companies that are generating real value through environmental, social, and governance activities.
The Dynamic Ways of Creating Value
CSR Programs can create shareholder value. It is just important that companies must broaden their legitimacy in societies where they operate.
- Growth. As a source of value, Growth can be expressed in terms of New Markets, New Products, New Customers, Market Share, and Innovation. When this is created, it can deliver higher brand loyalty, reputation, and goodwill with stakeholders.
- Return on Invested Capital (ROIC). ROIC is generated when there is operational efficiency and workforce efficiency. When this is achieved, it can result in better workforce skills and increased productivity through participation in ESG activities.
- Risk Management. Risk Management is a source of value. It can be achieved when risk is lowered when compliance with regulatory requirements are achieved. Public support is achieved and the ability of your company to secure consistent, long-term, and sustainable access to safe, high-quality raw materials and products are established.
- Management Excellence. Management Excellence can have an impact on leadership development, adaptability, and long-term strategic view. These are 3 key areas that investors consider most important when evaluating potential partnerships. With Management Excellence, a value can be generated from these areas.
A Look at IBM: A Clear Example of CSR as a Source of Value
IBM has been recognized globally as one of the leading companies when it comes to Information Technology. In creating new markets, IBM used Small and Medium Enterprise (SME) Toolkit to develop a track record with local stakeholders, including local governments and NGOs. Free web-based resources on business management were provided to SMEs in developing economies. A total of 30 SME Toolkit sites were developed in 16 languages.
As a result of this initiative, IBM’s reputation and relationships in new markets improved. Likewise, the relationship with companies that are potential customers was developed. The strategic approach of IBM in creating markets through its CSR has provided IBM much value in creating and developing relationships which are essential in new markets.
Interested in gaining more understanding of sources of value to CSR programs? You can learn more and download an editable PowerPoint about Corporate Social Responsibility (CSR): Sources of Value here on the Flevy documents marketplace.
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