Showing the Money

By Ian Heggs Vice President and General Manager, Europe, Middle East & Africa on April 06, 2011

All the analysts seem to agree, socialising across the enterprise will deliver benefits. But how do you translate these soft benefits into real ROI?

Having spent the past few months introducing HR Directors and Internal Communication Managers to Clearvale and the topic of Social Intranets, there is a clear theme emerging: Employee Engagement. Existing intranets/portals are too static to engage an employee, content is in the hands of ‘the few’, and user generated content is frowned upon. Email is point-to-point even if you are on the cc list.

There have been many studies by academics in the HR world to illustrate that employee engagement is associated with high levels of performance and reduced intent to leave. It is therefore legitimate from a corporate perspective to focus on and to prioritise improving levels of employee engagement. A ‘people-centric’ strategy will deliver sustainable competitive advantage; so where’s the return?

We often quote the Towers Perrin (now Towers Watson) ISR Employee Engagement Report whose studies over a 12-month period showed that those companies with high employee engagement scores demonstrated a 13.7% improvement in net income growth whilst those with low engagement saw net income decline by 3.8%. These metrics are still valid. Towers Watson also points out that those companies with a highly engaged workforce improved operating income by 19.2% over a 12-month period, whilst those companies with low engagement scores saw operating income decline by 32.7% over the same period. This is a significant differential.

Gallup, that well-known survey group, cited in Melcrum’s report on Employee Engagement found that engagement levels can be predictors of sickness absence with more highly engaged employees taking an average of 2.7 days per year, compared with disengaged employees taking an average of 6.2 days per year. The UK CBI reported recently that sickness absence costs the UK economy more than £13 billion a year!

On the issue of retention, the UK Corporate Leadership Council highlighted that engaged employees are 87% less likely to leave an organisation than the disengaged. The cost of high turnover among disengaged employees is significant some estimates put the cost of replacing each employee at equal to annual salary and those with considerable length of service with retained knowledge and IP, at considerably more.

The analysts and academics agree: give employees a voice; develop a sustainable open organisation and culture of trust; develop a communications strategy leveraging Web 2.0 technologies with regular evaluation on the use and effectiveness of these technologies. Engaged employees take fewer sick days, they are less likely to leave, and engaged employees are much better advocates of their own companies. The latest blog on people management continues to promote the theme that employee engagement is good for the bottom line