Employee Engagement –  Why should a board of directors monitor employee engagement?

Employee Engagement – Why should a board of directors monitor employee engagement?

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I’ve been hearing  a lot of discussion about employee engagement and how ineffective it is in impacting business. Business managers also frequently ask if they should focus on business or focus on employee engagement. I agree wholeheartedly with people who believe that we should not invest time in employees. Instead they should concentrate on our business.

CASE STUDY

Employee Engagement & Well-being in Services Sector

As a consultant I had the opportunity of working with numerous great CEOs and CHROs. I had the opportunity to learn a lot from these clients. I was meeting the managing director of a telecom company.

MD: Prashant I believe in employee engagement and well-being. I feel engaged employees deliver better customer service, higher revenue and profits. Therefore, we invest a lot of money, time and effort every year in employee engagement. As the market is maturing, we have to manage costs better. My colleagues are questioning our investment. How should we convince them?

ME: You have a valid point. Your colleagues are also right. Let us look at the business performance of all the circles for the 3-month period after the last survey.

employee engagement

My colleague quickly tabulated the engagement of the teams for each of the circles against the business performance of the circles, provided by the CFO, while I was engaging with the MD. As she ran a correlation between the two, both the MD and I were pleasantly surprised to see a correlation of 0.86.

MD: Can you translate this correlation to dollar revenues?

My Colleague: Why not? (She rearranged the data). The circles with high employee engagement are delivering 130% of the targets, while those with low engagement levels are achieving only 70% of their target.

ME: So, your colleagues have to engage their teams if they want to exceed their targets and outperform competition in all the circles.

MD: I am impressed with your ability to quantify the soft behavioral data into dollar revenue. Let us present this analysis next month in the leadership retreat.

Employee Engagement & Well-being in Manufacturing

 Let us go through another situation of a cement manufacturing company. I met the Managing Director a huge cement manufacturing company. He told me that cement was produced by not people, but kilns. He advised me that investing in employee engagement was beneficial to firms where people were a key the source  of production, such as the service industry.

I told him that I agree with him totally and asked him to educate me if he had any patented kilns that his competitors didn’t have. I went on to question if this was the explanation for his company’s big profits while the others didn’t.Perhaps he had patented kilns which others did not have. He went on to say that the kilns were made by four companies around the world. And that all the cement manufacturers in the world used the same kilns. He went on to explain that kilns could run on their own for 300 days, but at that point, production facilities were losing money, whereas at 345 days, production plants proved highly profitable.

When I asked him if all of the factories of his company were up and running at 345 days. He said no. When I asked him what differentiated high-performing plants from the others, he said it was the people. He said that while they chose personnel with identical qualifications and experience, the enthusiasm and passion of the plant leadership team, in particular, made a significant impact. Needless to say, he implemented a program for employee engagement, which also included executive leaders. MD’s focus on business and ensuring consistent and sustained plant performance led to his sponsorship of the employee engagement program.

3 Steps to establishIMPORTANCE OF EMPLOYEE ENAGAGEMENT

Identify business reason to engage employees:

Clearly, there must be a reason for employee engagement. It’s important to remember that business, not HR, owns human resources. As a result, any intervention that does not deal with commercial challenges will fail.

Employees who are engaged are more likely to invest in the work they do, resulting in higher-quality results.

Your company will be able to increase productivity, work quality, customer satisfaction, and retain top talent by investing in employee engagement.

Sustained Performance vs. Short Term Performance:

There are companies or teams which in the short-term drive business performance through processes or hard task orientation. However, such performance is not sustainable.

A very large company in BFSI sector followed coercive techniques to align people to business objective. The targets were met in the short term. But the quality of assets fell, which led to erosion in market cap after ten years. The CEO and CHRO had retired by then. The new CEO and CHRO are struggling to fix the problem which is deep rooted now.

Monitoring Employee Engagement by Subcommittee of Board of Directors:

To avoid a situation of long-term damage to shareholder value, it is important that the employee engagement is tracked and reviewed at the board level. There are two assets in most of the businesses – financial and people. If the health of financial assets is monitored by the board of directors, the health of people should also be monitored by them.

We have a board subcommittee for (financial) audit and nother for nominations and remuneration. Getting the right people in place and apying them appropriately only helps in getting one third of the productivity. To harness the other two thirds of the human productivity employee engagement and well-being is important.

It is imperative that all forward looking companies have a board sub committee to monitor employee engagement, well-being, and employee experience at every touch point.