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Cover Story: Getting an "A" in Engagement
August 07, 2008
What do Amgen, a biotech-driven pharmaceutical company, and Avnet, a distributor of high-tech parts, have in common? World-class global recognition programs.
By Leo Jakobson
In the past few years, employee engagement has become one of the biggest and fastest-growing management trends, and with good reason: There is ample evidence it works. While part of this is common sense—an engaged employee is almost by definition a happier, more productive employee—hard numbers back it up as well.
As part of its 2007-2008 Global Workforce Study, consulting firm Towers Perrin surveyed 90,000 employees in 18 countries about a number of topics, including what drives engagement—the desire and willingness of employees to go the extra mile in their jobs, to put in discretionary effort. While the firm came up with a number of answers about how companies drive engagement, the most eye-catching part of the survey was why. Towers Perrin compared the financial results of 50 multinational companies. In the course of one year, the companies with high employee engagement posted a 19 percent increase in operating income and a 28 percent increase in earnings per share; conversely, those with poor employee engagement scores saw operating income decline by nearly one third, and earnings per share drop 11 percent. More broadly, the firm has concluded that a 15 percent improvement in engagement will cause a 2 percent improvement in a firm's operating margin.
"For a Fortune 500 company, two percent equals billions of dollars in shareholder value," says Eric Mosley, CEO of Southborough, Mass. and Dublin, Ireland–based Globoforce, which specializes in global recognition programs designed to drive engagement. "What was a small topic of interest to a few progressive companies a few years ago now is across the board. When people believe something will provide business benefits, they will get involved."
While the incentive industry has traditionally focused on sales programs that recognize the best employees, generally the top 10 to 20 percent, this new focus on employee engagement is clearly driving a change. For one thing, it focuses on every employee, sales and non-sales alike. For another, it frequently involves peer-to-peer recognition, not just top-down recognition by management. An engagement-targeted recognition program seeks to shift "the ability to reward discretionary effort to the employees," Mosley says.
"In many ways, sales incentives are completely independent of employee recognition and engagement programs," Mosley says. "Sales incentives are part of every company's sales strategy, and always will be." Recognition programs, on the other hand, "operate independently of sales incentives," he adds. "They have different business objectives. They have no effect on sales incentives' budgets."
So what are engagement programs' objectives? "An engaged employee performs better," says Steve Church, the senior vice president and chief human resources development officer of Avnet, a distributor of computer and electronic components and a Globoforce client. "They stay longer and they're your best recruiters. They go above and beyond. They perform better so the company performs better." And as the company performs better, "there are more opportunities for advancement, [employees'] compensation is better, and there is a sense of winning, of succeeding in the marketplace," Church adds. "What does that do? It builds more engagement. If you think about it, it's sort of a symbiotic relationship, and that's what we're trying to accomplish."
If that sounds like a difficult task for any company, try doing it at a multinational with offices spread around the globe—often with employees who speak different languages and even have different cultural sensitivities. In this article, Incentive will look at the employee engagement and recognition programs of two companies that have very little in common besides a global workforce and an executive team convinced that an engaged workforce is an invaluable asset.
Continue to "Amgen: A Culture of Recognition in Record Time."
Send comments to ljakobson@incentivemag.com
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