A new study examines the impact engagement has on driving business outcomes.
By Dr. Scott Mondore
Does engagement cause business outcomes or do other elements of the work environment play a bigger role in driving outcomes? This is what SMD set to find out using advanced cause-effect analytical methods. Unfortunately the phrase, “Everyone knows that engagement drives business outcomes,” has been uttered countless times by hopeful human resources professionals over the past 20 years. Why? It seems plausible and certainly makes a connection between HR work and the bottom line. But often, it is not based on facts, data, and research. Academic research (Work & Stress, Journal of Applied Psychology, and Journal of Vocational Behavior) has demonstrated, at best, mixed results in connecting engagement to outcomes.
Engagement’s impact on business outcomes is not supported by meaningful and accurate analysis. Some have stated that organizations with high engagement scores outperform those that have low scores but the issue is that the statement isn’t based on a true analysis. There is no proof for which factor is causing a positive or negative effect on another.
The SMD research study aimed to assess how often each of the most commonly measured employee attitudes was found to be a statistically significant driver of business outcomes. SMD combined various financial metrics under one group—financial performance—and combined customer and patient satisfaction—HCAHPS—measures into one customer satisfaction group. SMD also assessed the linkage of the survey categories to employee performance, voluntary turnover, and turnover risk. See Figure 1 on page 79 for the results.
The results of the study were clear. Across a large percent of respondents who had administered employee surveys in the past 18 months, engagement was a key driver of their business outcomes only 28 percent of the time. That means if these organizations had solely focused on improving engagement, they would have put forth time, effort, and resources to an initiative that would not have provided bottom-line improvement 72 percent of the time. What should organizations do?
1. Use real analytics to connect HR directly to business outcomes. By using analytics to determine which aspects of employee experiences are most critical to an organization’s business outcomes, HR can build credibility as a business partner. One of the most important findings from this study is that none of these categories matter all the time for every outcome across all organizations—there is no silver bullet that works for every organization. A one-size-fits-all approach doesn’t apply when it pertains to understanding and taking action on employee experiences. Organizations can, and should, be doing a better job of strategizing how to use their employee survey data in a way that will drive business results. This is done by integrating employee survey data with business outcome data and analyzing it. This can reveal the specific elements of the work environment that are driving business results. Narrowing in on engagement, or any other employee attitude, is a dangerous strategy if you are not able to show the direct connection between survey scores and business metrics.
2. Show the actual ROI of your employee survey. By connecting employee survey data with business outcomes, HR will be able to show how certain initiatives moved the needle on key business drivers and business outcomes by a specific percent. ROI can be shown by clearly defining the business results that impact the survey and where the corresponding improvement is. For example, by showing an increase in sales, leaders will better understand the money spent on the survey.
3. Make survey results actionable and impactful for front-line leaders. Front-line leaders have a tendency to look at survey results as either punitive (if they don’t score high enough) or as an HR exercise with little to no value. Conducting a survey and taking targeted actions based on the results can show the impact. The results can show leaders their performance, where they need to improve, and the biggest areas of business impact. The conversation then changes from “you need to score higher on the survey” to “if you focus on these few areas on the survey, you will make more money.” That is a story that front-line leaders will be interested in.
For HR leaders, the good news is that employee surveys are still a foundation for reading workforce attitudes.The difference is using the data in a way that shows direct impact on business outcomes and arming leaders with the tools to take action. HR already has the requisite organizational development skills to create great programs and initiatives based on what is uncovered from the employee survey—the upside is that HR can now show the ROI of investing in these programs and initiatives. Bottom-line: Chasing engagement scores has little value; driving business outcomes has immense value—and getting there isn’t far away.
Dr. Scott Mondore is cofounder and managing partner of SMD. About the study: The respondents represented a variety of industries including healthcare, non-profit, retail, manufacturing, and professional services. These organizations also ranged in size from less than 100 employees to several hundred thousand employees. SMD examined data across nearly 30 organizations and over a half a million employees.