SDR Retention on a knife edge: The role of employee engagement in talent management

A DECADE ON from the official start of the last War for Talent, commentators are predicting the return of a global talent war in 2007. Organisations, so the message goes, are managing retention on a knife edge and they need to be careful. The CIPD 2006 recruitment, retention and turnover survey, to reinforce the point, reports that staff retention is the most pressing issue for its members with 82 per cent of organisations reporting difficulties recruiting and 69 per cent reporting difficulties retaining employees (CIPD, 2006). For 41 per cent of senior HR professionals the retention of key staff is their organisations most critical HR issue (RightCoutts, 2006 reported in Management Issues, 2006). With low and static unemployment at 5.5 per cent, and increasing market confidence leading to a predicted 12 per cent growth in new jobs, employers it would seem have got their work cut out to hold on to their best staff over coming years. Over the past five years or so, market conditions have favoured employers rather than employees. If the stories about the state of the employment market are to be believed and the tide does indeed begin to turn, more elaborate strategies for attracting and retaining talent will need to be devised in order to maintain that all important competitive edge and secure longterm survival. And even if the positive market conditions dont sustain, which is of course possible given recent and future predicted interest rate rises, there are other compelling reasons why organisations should look at their own people practices sooner rather than later. Recent studies suggest just 15 per cent of employees are highly engaged in their work, while 21 per cent are actively disengaged Selection & Development Review, Vol. 22, No. 5, 2006

Martin Stairs, Martin Galpin, Nicky Page & Alex Linley

(Towers Perrin, 2006; Flade, 2003; CLC, 2004). That means a significant proportion of incumbent talent is currently lying dormant within UK organisations. Historically there has been insufficiently compelling data supporting employee engagement as a concept, though this picture has changed significantly over recent times. Studies conducted over the past six years show that increasing engagement levels within an employee population are associated with reduced absenteeism (Gallup, 2004, reported in People Management, 2004; DDI, c.2005), greater employee retention (DDI, c.2005; Harter et al., 2003; CLC, 2004), increased employee effort and productivity (CLC, 2004), reduced error rates (DDI, c.2005), increased sales (HayGroup, 2001), increased income and turnover (Maitland, 2005; ISR, 2006); Harter et al., 2003), higher profitability (Harter et al., 2003), enhanced customer satisfaction and loyalty (Harter et al., 2003), greater EPS and shareholder return (ISR, 2006; Hewitt Associates, 2004), faster business growth and higher likelihood of business success (Hewitt Associates, 2004). Engaged employees are also more likely to promote their organisation as an employer of choice. With such widely reported claims for ROI, it is not surprising that engagement, as a concept, has attracted the attention of business leaders and the wider HR industry. Whilst employee engagement as a term may be a fashionable one, its principles, if clearly defined and rigorously grounded, offer a compelling way 19

forward. And with its focus on optimal performance and the factors that make life worth living, positive psychology offers a valuable additional perspective, particularly in terms of advancing understanding of the critical roles that strengths and positive emotions have on performance in the workplace, and consequently our understanding of how best to drive engagement.

The changing nature of motivators

The traditional model of what motivates and engages employees relied heavily on financial reward. Employees tolerated poor management, long hours, even poor working conditions, provided their basic physiological, safety and belonging needs, in Maslows terms, were satisfied and money was key to achieving this (Goble, 1970). Through the 1960s and 1970s, career progression emerged as an additional motivator as employees strived to satisfy their need for achievement, status and recognition, or esteem needs as Maslow defined them. Todays Generation Y workers those born in the 1970s to 1990s make up an increasing proportion of the workforce and are more focused than previous generations on finding work that is meaningful to them and allows them to make a useful contribution. For them, the factors that drive engagement go beyond tangibles like reward, benefits and prospects, to intangibles like meaning, values fit and the ability to contribute something worthwhile that draws from the best one has to offer. Having grown up in a world of choice and rapid change, they are less inclined to settle with an employer for lengthy periods of time unless these self actualisation needs, in Maslows terms, are satisfied. For many, two-and-a-half years with an employer is sufficient. It is perhaps no great surprise, therefore, to learn that around 40 per cent of UK employees are actively considering alternative employment opportunities (Mercer, 2005; YouGov IiP Survey, 2005; Watson Wyatt, 2005). And with the rise of job boards and corporate sites, it is now easier than ever to go in search of the next job move. Upload your CV, tick a range of preferences, and you can be head hunted via your inbox.

88 per cent were actively seeking to improve employee engagement (IRS, 2004) there has been piecemeal, and at times contradictory, advice in respect of what engagement is, how to measure it, and what organisations need to do to build levels of engagement. Even some of the most well-known engagement experts are unclear about how they define engagement. To add to the mix, engagement has increasingly become a competitive PR-led exercise which means organisations risk losing the full value that a valid and robust approach to driving engagement, and consequently individual and business performance, can bring. We define engagement as the extent to which employees thrive at work, are committed to their employer, and are motivated to do their best, for the benefit of themselves and their organisation. Derived from our research-driven model of engagement, our definition focuses on three core elements of best self, loyalty, and performance-motivation. Critically, it also makes reference to both the personal and organisational benefits that can be derived through building high levels of engagement. If managed effectively engagement is a genuine double win for organisations and employees alike.

Measuring engagement

Defining engagement

Whilst the majority of businesses are actively working to develop an engaged and committed workforce a recent survey, for example, showed 20

Following on from a previous SDR article (Stairs, 2006), we have, over the past 12 months, undertaken a comprehensive review of the engagement literature, including academic and practitioner research. Through this research our thinking has evolved and has highlighted the importance of differentiating very clearly between measurement of how engaged employees are, and measurement of the factors that drive or hinder engagement the why in other words. The trend in the engagement market appears to have been towards the development of shorter, statistically driven measures of engagement in which the distinction between these two elements is often blurred. Without a clear distinction, results from a measurement process will at best be interesting, but not particularly useful. Workplace motivation is a complex issue, beyond the generational differences already referred to different combinations of factors influence engagement levels for individuals and different groups of employees. A robust approach to engagement, as well as providing an indication of the degree of alignment between employees and their organisation valuable for Selection & Development Review, Vol. 22, No. 5, 2006

monitoring purposes has to enable the organisation to take action to tackle the right things, for the right people, in the right way to improve the experience of work for employees. Without a comprehensive audit of the drivers of engagement this simply is not possible. So what do engaged employees look like? As we have already reported they are in the minority, so are likely to stand out from the norm. They are motivated, proud, loyal and committed and experience work as enjoyable, absorbing and fulfilling. They willingly get involved in extra role activities and when necessary put in extra effort. It is of course unrealistic to expect all employees to be totally engaged 100 per cent of the time that is the aspirational target but the more an organisation works to create an environment whereby individuals can flourish the better. As a new CIPD report reinforces (CIPD Working Life Report, 2006), direct line managers have a critical role to play in creating that environment for their people, and in order to do this effectively they need robust data to work with which is where an audit of the drivers of engagement comes into play. And what drives engagement? Our knowledge of the engagement literature, combined with our experience of applied research and practice in the domains of occupational and positive psychology, tells us that in order to engender the highest levels of engagement, organisations need to focus their efforts in the following areas. Organisational affiliation Employees need to believe in something that is bigger than themselves in order to feel emotionally committed. In the work context, a strong sense of affinity can be achieved through strong corporate values and ethics, high quality products and services, and high customer service standards. For a few organisations, the nature of the work itself particularly for those involved in health care or charity work will instil a sense of purpose and belief. Where it doesnt, organisations can help to create meaning for employees or offer alternative opportunities such as career breaks, secondments, community involvement programmes, and voluntary/charity sector assignments. Role factors Employees need to feel that the work they do is valuable and that it contributes in a meaningful way to the achievement of the organisations objectives. They will also deliver a Selection & Development Review, Vol. 22, No. 5, 2006

higher level of performance if they have frequent opportunities to play to their strengths and perform in ways that allow them to be at their best. Managers in particular have a key role to play in bringing the value of an individuals contribution to life, to make them feel their piece of the jigsaw is important and valued. Autonomy and influence Employees, on the whole, value the opportunity to be in control of discrete elements of work and influence the way things are done. Often the best solutions can be found by asking individuals with the most experience of the problem. Employee suggestion schemes, provided they are well managed and valued by senior individuals in the business, can also go along way to building a culture in which individuals at all levels feel valued and appreciated. Work-work and work-life balance Employees have multiple life roles within and outside work. In order to feel truly engaged, they need to be supported to achieve an acceptable balance in order that they are able to meet the multiple demands placed on them. This is more important now than ever before given todays always on environment. Acceptable means different things to different individuals and openness, variety and breadth are key to ensuring any formal flexible work policies are truly effective. Opportunities for growth In order to feel motivated employees need to feel they have opportunities to develop and progress. Challenge plays a key role in facilitating personal growth provided of course that the challenge offers stretch and can be overcome successfully but is not so great that it leads to stress and disengagement. As Mihaly Csikszentmihalyi, author of FLOW: The classic work on how to achieve happiness, writes it is in this opportunity for growththat the key to motivation lies (Csikszentmihalyi, 2002). In the work environment this can be achieved by providing employees with an ongoing variety of appropriate and flexible challenges. Reward culture Employees need to feel they are fairly rewarded for the work they do. Reward is most powerfully delivered through a combination of financial (i.e. pay, bonuses) and nonfinancial (e.g. voucher schemes, extra holiday) rewards. Over and above reward, employees also 21

need to feel appreciated timely and appropriate feedback and recognition can go a long way to keeping employees happy. The value of a simple, sincere thank you, for example, should not be underestimated. Quality of relationships A recent survey showed that relationships with managers were cited as the biggest influence on the satisfaction and commitment of employees by 63 per cent of respondents, followed by relationships with colleagues (IRS, 2004). Positive relationships are good for business and can be built through formal and informal social events and team building activities. Work culture Openness, trust, respect and fairness lie at the heart of a positive work culture, one in which individuals feel valued and respected for their contribution and uniqueness. Creating a fair and inclusive culture is not just about making employees feel good tangible organisational benefits can be achieved, not least in terms of innovation, safety and financial performance. Work environment Employees appreciate working in an environment where they feel looked after and cared for. Some factors, such as safety, are critical; others are desirable. Often it is the small things, such as workstation comfort, convenient and secure parking facilities, and quality coffee and refreshments that can have the most impact. Asking employees themselves what they like and dont like is critical to ensuring any intended investment has the desired impact. Organisational communication Employees need to feel the communication they receive is timely and relevant. To achieve this, communication needs to be tailored for individual functions and groups. Mapping the formal and informal communication mechanisms that exist is an effective way of evaluating communication efficiency within an organisation. Leadership effectiveness As well as believing in something, in a work context believing in someone is also important. Employees need to have faith in the leadership of the organisation and this is most powerfully reflected through the integrity, role modelling and authenticity shown by the leadership team, especially in the current 22

climate of leadership mistrust following the Enron and WorldCom scandals. Formal contracting and accountability can contribute significantly to building consistency in the way leadership teams work together. Quality of supervision As key cogs in the organisational structure, the behaviour and personal engagement of line managers has a direct influence on the engagement levels of their immediate direct reports (DDI, c.2005). Historically, organisations have focused a significant proportion of their training and development investment on their top talent, arguably at the expense of the broader employee population. To build levels of engagement, organisations should ensure the needs of their middle talent population are sufficiently catered for, in particular through working with line managers to ensure that they are engaging with and managing their people in a way that will serve to build positive emotion, harness strengths, and drive engagement.

Conclusion

By delivering an improved employment experience to employees, organisations and HR departments specifically have a critical role to play in getting the best from staff, which is a key driver of performance in todays economy. Financial and material rewards lose their ability to satisfy above a certain, identifiable level, and organisations need to develop and adopt broader strategies to harness the intellectual and emotional resources within their workforce and satisfy the increasing demands employees are making in their desire for personal fulfilment and meaning. To be successful in the future, organisations should aspire to and focus on making their organisations truly great places to work and on developing future generations of work happy employees individuals who are genuinely challenged, committed and engaged. A wellmanaged employee engagement strategy, when coupled with tools and approaches emerging from the science of positive psychology, offers inspirational promise as far as delivering the real human advantage is concerned. For many organisations this could be the Holy Grail that helps to move the issue of talent management from the knife edge to a more stable platform.

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Barber, L., Hayday, S. & Bevan, S. (1999). From people to profits: The HR link in the service-profit chain. IES, Report 355. CIPD (2006). Recruitment, retention and turnover: Annual survey report. CIPD. CIPD Working Life Report (2006). Hear me now. People Management, 23 November. Corporate Leadership Council (2004). Driving performance and retention through employee engagement: A quantitative analysis of effective engagement strategies. Corporate Executive Board. Csikszentmihalyi, M. (2002). FLOW: The classic work on how to achieve happiness. Rider. DDI (c.2005). Employee engagement: The key to realizing competitive advantage. DDI. DDI (c.2005). Predicting employee engagement. DDI. Flade, P. (2003). Great Britains workforce lacks inspiration. Gallup Management Journal, 11 December. Goble, F.C. (1970). The Third Force: The Psychology of Abraham Maslow. New York: Grossman. Harter, J.K., Schmidt, F.L. & Keyes, C.L.M. (2003). Well-being in the workplace and its relationship to business outcomes: A review of the Gallup studies. In C.L.M. Keyes & J. Haidt, Flourishing: Positive psychology and the life well-lived (pp.205224). APA. HayGroup (2001). Engage employees and boost performance. HayGroup. Hewitt Associates (2004). Employee engagement higher at double-digit growth companies. Hewitt Associates. Hunter, J.E., Schmidt, F.L. & Judiesch, M.K. (1990). Individual differences in output variability as a function of job complexity. Journal of Applied Psychology, 75(1), 2842. IRS (2004). It pays to talk: Gauging the employment relationship. IRS Employment Review, Issue 811. ISR (2006). Engaged employees boost the bottom line. ISR Press Release, 26 June.

References

Maitland, R. (2005). How happy employees mean bigger profits. People Management, 14 July. Management Issues (2006). HR failing to develop employee engagement. Management Issues, 21 March. Mercer (2005). Whats working. Mercer HR. People Management (2004). EU workers less productive. People Management, 28 October. Robinson, D., Perryman, S. & Hayday, S. (2004). The drivers of employee engagement. IES, Report 408. Stairs, M. (2005). Work happy: Developing employee engagement to deliver competitive advantage. Selection & Development Review, 21(5), 711. Towers Perrin (2006). Ten steps to creating an engaged workforce. Towers Perrin. Watson Wyatt (2005). European total reward survey. Watson Wyatt. YouGov IiP Survey (2005). Employers urged to focus on motivation to maintain productivity. Personnel Today, 28 October. Martin Stairs is an independent chartered occupational psychologist and runs his own consultancy practice. He can be contacted on +44 (0)7788 718987 or via e-mail at martin.stairs@gmail.com. Martin Galpin is a Director of occupational psychologists Work Positive Ltd. Nicky Page is a Principal Psychologist working for the Centre for Applied Positive Psychology. Alex Linley is the founder and Director of the Centre for Applied Positive Psychology (CAPP), an independent, not-for-profit, membership organisation that exists to enable people to be at their best in the areas of work, education, and health.

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