Monday, December 17, 2007

Vital Sign: Workforce Engagement. 38% of Worksforce are partly to fully disengaged!

In his recent book about management innovation, the Future of Management (p.57), Gary Hamel identified a 2005 Towers Perrin report with a particular performance measure about employee engagement and concluded that the challenge is to reinvent our management systems so they inspire human beings to bring all of their capabilities to work every day.

In the 2007 version of the Towers Perrin Global Workforce Study, this report identified a significant 'Engagement Gap' among the Global Workforce. According to the October 2007 Towers Perrin news release:

Just 21% of the employees surveyed around the world are engaged in their work, meaning they're willing to go the extra mile to help their companies succeed. Fully 38% are partly to fully disengaged. The result is a gap - which Towers Perrin has dubbed the "engagement gap" - between the discretionary effort companies need and people actually want to invest and companies' effectiveness in channeling this effort to enhance performance.

The study found that companies with the highest levels of employee engagement achieve better financial results and are more successful in retaining their most valued employees than companies with lower levels of engagement.

"It's impossible to overstate the importance of an engaged workforce on a company's bottom line," said Julie Gebauer, managing director and leader of Towers Perrin's Workforce Effectiveness consulting practice. "The Global Workforce Study establishes a definitive link between levels of engagement and financial performance and, for the first time, begins to quantify that link. It demonstrates that, at a time when companies are looking for every source of competitive advantage, the workforce itself represents the largest reservoir of untapped potential."

The most striking data about the linkage between employee engagement and financial performance come from a study of 40 global companies which involved a regression analysis of company financial results against engagement data. It found that firms with the highest percentage of engaged employees collectively increased operating income 19% and earnings per share 28% year to year. Those companies with the lowest percentage of engaged employees showed year-to-year declines of 33% in operating income and 11% in earnings per share.

The last line above is particularily interesting and helps make the link between the Finance and HR functions of today's leading organizations. Assuming that this is a non-financial vital sign, Finance should ensure that Workforce engagement is included in the exceutive team's business performance management scorecards.

Download the summary here.