EMPLOYEE ENGAGEMENT

WHY YOU CAN’T AFFORD TO GET IT WRONG

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WHAT is employee engAgemenT?

04 08 10 11WHy is employee engAgemenT imporTAnT?

WHATAre THe cosTs of geTTing iT Wrong?

HoWdo i geT employee engAgemenT rigHT?

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What does that mean for your business?

Source: Gallup1

ONLY 1 OUT OF 3 EMPLOYEES IS HIGHLY ENGAGED AT WORK

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What is employee engagement?

employee engagement has been generating a lot of buzz, and organizations of all sizes are trying to understand and get better at it. But what exactly is employee engagement?

one clinical definition of the term is:

Employee engagement (n.): discretionary effort given by an employee; when an employee goes above and beyond in his/her work

But most experts agree there’s more to engagement than just that definition. other definitions of engagement focus on the daily realities of doing business.

you can recognize an engaged employee when you see these three factors:

1 Energy and motivation Highly engaged employees bring energy to their work. They are motivated to go

the extra mile. Their engagement is a tangible, contagious aspect of the organization. shirley lapiana-martin, paycor’s Vp of Hr, sums it up: “When employees are engaged, you can see and feel the buzz. it’s a much more energized workplace.” increased energy and motivation translate into higher productivity and job satisfaction.

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3How they talk about your company How your employees talk about your company says a lot about their level of

engagement. one of the most telling aspects of this is whether or not they would recommend you as an employer. This factor is so important that it is included in the Workplacedynamics “Top Workplaces” survey. What are your employees saying about you?

2 Connection to your companyengaged employees believe in the value proposition of the company, and as a

result they are more connected to their work. employees must feel they are making an impact and that their work is important—no matter their occupation. According to lauren Ammon, Hr manager at paycor, “engagement is about a connection to a company; if employees are connected, they will be inclined to give more. you could call it the ‘get up’ factor—they are energized to come in and do their job well.”

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the bad neWs about employee engagement

employee engagement is a must-have for today’s organizations. But the alarming truth is that only one out of every three employees is highly engaged at work, according to a recent gallup poll. The other two thirds are either not engaged, or worse, actively disengaged. employees who are not engaged—more than half the American workforce—could also be referred to as neutral. They don’t love their job, and they may not put in any extra effort, but they will get their work done.

Workers who are actively disengaged detract from your organization: they may be hostile towards the business, looking to do damage or change jobs as soon as possible. These are the employees who exert a negative influence over neutral employees and bring down the workplace atmosphere.

Source: Gallup2

HOW ENGAGED ARE EMPLOYEES?

HIGHLY ENGAGED

NOT ENGAGED ACTIVELY D

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20%

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Source: Gallup2

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in a paycor survey of our mid-sized clients, 91% ranked “reducing costs” as important or very important, while 72% gave “employee engagement” the same ranking.3 employers are focused on cutting costs and increasing profits, but they may not realize the impact employee engagement—and disengagement—has on the bottom line.

72% OF MID-SIZED BUSINESSES RANKEDEMPLOYEE ENGAGEMENT AS IMPORTANT! EMPLOYEES=ASSETS

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Why is employee engagement important?

your employees are your greatest asset. As Bob nelson says in 1501 Ways to Reward Employees, “Today’s top executives understand that their employees, far more than any strategy they learned at business school, are truly their competitive edge.”4 The organizations recognized as best-in-class are actively focused on engaging and nurturing their people.

Today, organizations everywhere are being asked to do more with less. “feelings of overload and burnout are default emotions in today’s organizations,” said a Harvard Business review report on employee engagement. This is not likely to change soon: “Higher demand and fewer resources are the new normal.”5 This fact makes recognizing the value of your employees more important than ever.

it may be clear that your employees are an important resource, but are you aware of the financial impact of their engagement—or lack thereof—to your company?

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The bottom line: four benefits of an engaged workforce

1 INCREASED PRODUCTIvITY organizations with highly engaged employees see 25% higher productivity.6 in addition, committed employees

have been shown to deliver 57% more effort than their uncommitted colleagues.7 As paycor’s sales enablement director Becky falvey put it, “engagement drives productivity. This is especially important in growth companies, where employees must go above and beyond to help the company hit its goals.” Today’s organizations are being asked to grow and perform with limited or strained resources, and an engaged workforce can provide the edge they need to achieve success.

2 LOWER EMPLOYEE TURNOvER companies with high employee engagement have 13% lower turnover rates.8 your turnover rates matter because

replacing employees is expensive—losing an employee could cost you as much as three times their salary.9 in addition, the talent game has changed: over the past several years, the number of jobs has started to exceed the supply of qualified workers for the first time since the Baby Boomers entered the workforce. it’s harder than ever to find productive new hires to take the place of employees who leave. in the war for talent, you need your high-performing employees to stay with you and drive success for your business.

3 INCREASED PROFITS AND REvENUE GROWTH companies with high levels of employee engagement see a 19% increase in operating income and outperform

disengaged firms fourfold in revenue growth.10,11 A motivated team translates into stable and satisfied customers—the foundation of financial success. When your good people are going the extra mile and staying with you, the financial benefits are significant. A study by people metrics found that a 5% increase in engagement leads to a 25%-85% increase in profit; this is a significant return on investment and proof that investing in your people is worth it.12

4 BETTER COMPANY REPUTATIONHaving engaged employees means a better reputation with potential employees as well as with customers. A

solid reputation as an employer of choice is vitally important in a world where half of businesses struggle to fill critical positions.13

What’s more, engaged employees create happy customers. A study by Wright management found that 70% of engaged employees indicate they have a good understanding of how to meet customer needs, while only 17% of non-engaged employees say the same.14

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DIRECT FINANCIAL COSTS

When employees are not engaged, their organizations suffer. A Towers Watson study found that companies with low levels of employee engagement see a 33% decrease in operating income.15 When disengaged employees walk out the door, you pay an average of $20,000 per employee in turnover costs, such as lost productivity, new hire sourcing and training costs.16 A Quantum Workplace study found that 28% of employees are at risk of turning over at any given time.17 When you do the math, $20,000 times 28% of your employees adds up to a lot of financial risk. plus, 70% of employees are poised to take the next good opportunity, even if they’re not actively looking for a new job.18 That means an even higher risk to your bottom line.

on top of turnover costs, disengaged employees cost your company in other ways: lower productivity, lost customers and limited growth. gallup research has found that lack of employee engagement costs the average company 35-50% of total payroll.19 in addition, active disengagement costs the Us economy between $450 and $550 billion every year in lost productivity.20

OPPORTUNITY COSTS

The opportunity cost of turnover is what your company loses when talented or experienced employees leave, taking their expertise elsewhere. When you don’t make employee engagement a priority, you risk losing the expertise that is your biggest competitive advantage.

Another opportunity cost is the time your managers waste “managing to the exception”—when your managers are investing their time and energy putting out fires connected to disengaged employees, they have less time to spend developing talented veterans and new hires who are willing to make a contribution.

What are the costs of getting it Wrong?

We’ve discussed what employee engagement is, why it’s important and the benefits of getting it right. But what about the costs of getting it wrong? The costs of a disengaged workforce can be broken down into three categories: direct financial costs, opportunity costs and influence costs.

Recruiting & Hiring

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Development & Retention

Promotion to Management

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TURNOVERCOSTS AN AVERAGE OF

$20,000 PER EMPLOYEE

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hoW do i get employee engagement right?

most business leaders understand that engagement is important—they just don’t know how to create it or even where to start. An Accor study found that 75% of leaders have no engagement plan or strategy, even though 90% said employee engagement has an impact on business success.22 so how do you, as a company leader, make sure your employees are engaged?

Engaging employees throughout their careers

According to Karen crone, chief Human resources officer at paycor, “employee engagement is not magic—it’s about everyday interactions that show your employees you care about them, and that you are in a career partnership with them.” There are countless books, articles and presentations full of employee engagement best practices. Here we will focus on suggestions for engaging employees throughout the four stages of their development within your company:

INFLUENCE COSTS

disengagement is like a virus, and negative employees are contagious. Actively disengaged employees exert a negative influence over neutral employees—accounting for over half your workforce—who can be easily swayed by either side. Thus, the impact of an actively disengaged employee in a management role is significant. since managers and leaders have more influence over employee engagement than anyone else, it is imperative that they are not spreading the disengagement disease.

Actively disengaged employees in customer-facing roles are also extremely hazardous to your business. Think about yourself as a customer: how likely are you to return to a business where the employees don’t care, and don’t care if you know it? As leigh Branham writes in 7 Hidden Reasons Employees Leave, “employee disengagement creates customer disengagement, and employee defections create customer defections.”21 can your organization afford to have disengaged employees interacting with your customers?

Recruiting & Hiring

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Development & Retention

Promotion to Management

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TURNOVERCOSTS AN AVERAGE OF

$20,000 PER EMPLOYEE

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recruiting and hiring

hire the right person for the Job ensure employees are engaged from the very start by hiring the right person for the job. Keep job descriptions straightforward and realistic, prepare the right questions

to ask and make sure the applicant’s career goals and passions are in line with the position requirements. look for helpful Hr resources that can provide you tools, checklists and templates to assist in this process. The nature of the work employees do has a significant impact on their engagement levels: 59% of engaged employees say that their job brings out their most creative ideas, while only 3% of disengaged employees say the same.23

manage the hiring eXperience demonstrating organization, respect and efficiency during the hiring process contributes to your company’s good reputation and sets a positive expectation for potential new hires. A surefire way to engage applicants from the start is to keep them informed about where they are in the process, making them feel important and cared for.

it’s also important to keep the hiring process moving at a quick, steady pace. This not only saves you time and money, it ensures that you hire the best talent before a competitor snatches them up. in addition, a streamlined process that ensures the right talent gets to the right position at the right time will please hiring managers, supervisors and other internal customers.

ensure adequate “pre-boarding” Keep your new hires engaged even before day one. it doesn’t take more than a simple gesture:

send an email welcoming them to the company. Have their manager give them a phone call or invite them

to lunch. share an interesting article, book or piece of information

about the company with them. create a short, personalized video to welcome your new hire

to the team.

Any one of these small touches can help your new hires feel more prepared and excited for their first day.

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make sure transactional elements go smoothly managing the transactional aspects of a new hire—such as entering their personal information, documentation and pay rate

into the system and making sure their work area is set up—helps ensure the first-day experience is pleasant and consistent for all new hires. reducing paperwork headaches starts them off on the right foot and paves the way to transition into other aspects of onboarding.

manage the Welcome eXperience on an employee’s first day, you should teach them about your company, your mission and value proposition and how their job fits into the big picture. for example, you could walk them through the company’s organizational chart and explain which people are in key roles. post a welcome sign or leave a hand-written note at their desk. make sure meetings are set up with employees the new hire will be working with. Assign them an “onboarding mentor” who will show them the ropes. When new hires immediately feel they are part of a team and that their work is important and valuable, the stage is set for high engagement.

for an example new hire engagement checklist, go to www.paycor.com/engage.

train and prepare neW hires Have a structured training program in place to ensure employees know how to perform their job functions. from day one, help employees envision a clear path for their future—to additional opportunities, challenges and more responsibility. Whether you’re a small business with limited promotion opportunities or an enterprise offering unlimited upward mobility, showing you care about employees and their future growth within the company can make the difference between employees seeing their duties as “just a job” versus a long-term career.

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development and retention

communicate With employeesengagement requires open, candid communication. employees should feel there is a two-way channel of

communication where their voices are heard. it’s also important to share company plans and visions to build trust in leadership. Using a company intranet or online portal is a great way to facilitate this type of communication. managers can also schedule regular one-on-one meetings to check-in with direct reports. employees who feel valued and understand where they fit within the organization’s overall goals will feel more dedicated and connected to their work.

train and develop them on an ongoing basis new hire training alone is not enough—employees will feel you are truly invested in their success if you make ongoing training a priority. Keep track of their training, certifications and education credentials, and give them opportunities for enrichment, such as attending conferences or shadowing a peer to learn a new skill. it’s also a good idea for Hr leaders and managers to schedule periodic one-on-one check-ins to make sure employees are satisfied with their development opportunities and to listen to their feedback.

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recognize them for a Job Well done studies have shown that 58% of the difference between high and low employee performance is predicted by recognition. in high-performing workplaces, recognition is even more important than compensation.24 What’s more, employees who receive recognition are seven times more likely to stay with the company and eleven times more likely to feel completely committed to the company.25 employee recognition does not have to be elaborate—it can be as simple as writing them a message on their birthday or work anniversary, taking the time to say “thank you” for a job well done or sending them a handwritten note. revieW their performance and drive conversation engagement levels rise when employees know you take their development seriously. A formalized, consistent performance review process helps motivate career conversations and lets employees know their development is important to you. Whether you conduct performance reviews or appraisals once a year, every six months or on a monthly basis, having open conversations with employees about their job performance and career goals and offering constructive feedback increases their engagement. Having a streamlined online process for reviews makes this easier to accomplish.

empoWer them With self-service options engaged employees feel empowered. A simple way to increase the feeling of empowerment among your employees is to give them self-service options for managing their personal and education information, benefits enrollment, time-off requests, direct deposit and pay stubs online, anytime, anywhere.

understand What makes them tick Having the right employee data and analytics helps you better understand your workforce and allows you to make strategic decisions. reports on compensation, benefits, employee tenure, demographics and certifications help you make critical decisions. in addition, having quick-and-easy access to employee information such as birthdays, children’s names or hobbies can enable you to engage with them on a more personal level.

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promotion to management

realize hoW much influence they haveone of the key themes across employee

engagement research is the importance of managers. As management expert gregory smith explains, “When an employee leaves, he hasn’t quit the company—he has quit his boss.”26 direct supervisors have the most power over engagement and retention. As you develop your employees and promote them into higher positions, it is important to be aware of the disproportionate influence they will exert over the engagement of their direct reports.

give managers the tools they need given this amount of influence, it’s imperative to equip your managers for success. streamlined and efficient administrative processes enable managers to devote their time to developing and engaging their direct reports. Access to analytics and business intelligence gives them visibility and insight into key metrics. Written policies and procedures minimize the risks of non-compliance. lastly, just because an employee has moved a few rungs up the ladder does not mean you should stop developing and engaging them. remember: employee engagement is a constant, ongoing process.

so What’s the takeaWay?

We’ve reviewed what employee engagement is, why it’s important, what it costs to get it wrong and how you can get it right. if you, as a leader in your organization, are not currently taking employee engagement seriously, you are putting yourself and your company at risk of hidden costs and missed opportunities. your organization simply cannot afford to get employee engagement wrong.

today is the day to start realizing the benefits of engaging your greatest asset, your competitive edge and your biggest driver of success: your people.

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hoW paycor can help you engage your employees H

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PAYCOR CA

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HR management

• Manage transactional elements of onboarding and important Hr tasks such as benefit enrollment with ease, freeing up more time for employee development

• Simplify performance reviews and ratings, driving career conversations with employees

• Communicate news and important information through a secure employee portal

• Drive process efficiency by integrating HR with payroll and timekeeping

• Track onboarding training and continuing education certifications

• Retain employee files and records for compliance

• Access hundreds of helpful HR guides, templates, checklists and law alerts to keep Hr up-to-date and focused on employee development

• Have an HR professional on speed dial who can answer your specific questions

Applicant tracking

• Streamline the hiring process to ensure you are hiring top talent while driving efficiency and reducing costs

• Improve decision making with powerful analytics and custom reports

• Gain visibility as to where applicants are in the process and automate communications to keep them informed

• Maintain EEO/OFFCP compliance

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Employee self-service

• Enable employees to manage their own personal information and documentation from day one from a secure and intuitive system

• Empower employees to manage time off, enroll in benefits, change direct deposits, connect with colleagues, access compensation history and more using mobile, tablet and desktop applications

• Allow managers and HR staff to be more efficient, no longer spending valuable time on routine employee requests

Reporting & analytics

• Track and report on unlimited custom fields such as emergency contact information, training, certifications and expiration dates using simple, intuitive software

• Create custom reports to make strategic decisions about employee recognition and engagement opportunities

• Gain insight into your workforce to inform decision making about your organization

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SOURCES1., 2., 19., 20. gallup, state of the American Workforce (2013)

3. paycor, client needs survey (2013)

4., 25. nelson, Bob, 1501 Ways to Reward Employees (2012)

5. Harvard Business review, “How employee engagement Hits the Bottom line” (2012)

6. Towers Watson, WorkUsA report (2009)

7., 8., 10., 15. Towers Watson, global Workforce study (2012)

9. Warrell, margie, forbes.com, “70% disengagement: 3 Ways to engage Those Who Aren’t” (2013)

11. The Hay group, The Harvard Business review, “creating the Best Workplace on earth” (2013)

12. people metrics, employee engagement report (2011)

13. manpower, Talent shortage survey (2012)

14., 22., 23. The social Workplace, employee engagement statistics (2011)

16. lendio, The True cost of employee Turnover (2011)

17. Quantum Workplace, 21 Employee Turnover Insights (2013)

18. Kaye, Beverly, Love ‘Em or Lose ‘Em: Getting Good People to Stay (2008)

21. Branham, leigh, 7 Hidden Reasons Employees Leave: How to Recognize the Subtle Signs and Act Before It’s Too Late (2012)

24. pellett, lizz, Fundamental Human Requirement: Recognition (2006)

26. smith, gregory, Fired Up: Leading Your Organization to Achieve Exceptional Results (2010)

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