The latest and largest meta-analysis study by consultants from Gallup Inc., the world’s biggest analytics and advisory firm, found highly engaged business units and teams achieved consistent high performance across countries, industries, organizations, and teams. (A meta-analysis is a study of many studies. “This research method provides a more precise estimate of the influence of team engagement on performance outcomes than any one study can capture,” Gallup consultants state.) When comparing top-quartile engagement (in the top quarter of teams) with bottom-quartile engagement, Gallup found significant differences. Teams in the top-quartile achieved higher performance with more positive outcomes and fewer negative outcomes than bottom-quartile teams. Very emphatic results! Reporting their findings in 2020, the researchers examined 54 industries in 96 countries, 276 organizations, 112,312 business/work units and 2.7 million employees. Top quartile performance outcomes for highly engaged teams compared with the performance of bottom-quartile teams:
Greater organizational success
More positive outcomes
Fewer negative outcomes
Source: Gallup 2020 report: “Employee Engagement and Performance: Latest Insights From the World’s Largest Study“.
Firms with high levels of employee satisfaction consistently achieve superior long-term returns. Economics experts reported from their global study that “Higher employee wellbeing is associated with higher productivity and firm performance.” They found “correlations between employee wellbeing, employee productivity and firm performance across all industries and regions.” Writing a 2019 article for the World Economic Forum, researchers Ward, Krekel & De Neve, reported on their meta-analysis conducted with Gallup consultants of 339 independent studies in the Gallup database, including the wellbeing and productivity of 1·8 million employees in 230 organizations across 49 industries in 73 countries:
The above graph from the London School of Economics, published in the above WEF article, shows the impact of satisfied employees on firms’ performance, and is based on the Gallup client database, with 95% confidence intervals.
The study by Ward, Krekel & De Neve came to the conclusion that:
“Employee satisfaction has a substantial positive correlation with customer loyalty and a substantial negative correlation with staff turnover. The correlation with productivity is positive and strong.”…”importantly, higher customer loyalty and employee productivity, as well as lower staff turnover, are also reflected in higher profitability of business units, as evidenced by a moderately positive correlation between employee satisfaction and profitability.”
Researchers conducting a study in 2015 found that happiness makes people more productive. In a laboratory setting, Oswald, Proto & Sgroi from the University of Warwick made randomly selected individuals happier (more satisfied), and consequently the participants achieved 12% more productivity. Conversely, when other individuals discussed real-world shocks they had experienced (bereavement and family illness), their lower happiness levels resulted in lower productivity. The authors concluded that “these different forms of evidence…are consistent with the existence of a causal link between human well-being and human performance.”
Improved employee satisfaction is also associated with improved financial performance in three studies by Alex Edmans, Professor of Finance at London Business School. As finance professor at the Wharton School of the University of Pennsylvania he conducted the third study, below:
Further supportive analysis showing better financial performance from improved support of employees was conducted by Dr Lukasz Bryl from Poznan University in Poland in 2018. He reviewed US company performance for the period 2007-2017 and found “strategy based on human capital orientation provides high profitability and leads to above-average financial performance, mainly in the field of equity growth and stock market valuation.” [Bryl defines human capital [what an awful, dehumanizing way to refer to employees!] as a set of knowledge, company individuals’ competence, skills, experience, expertise and capabilities possessed by individuals. (Greater human capital orientation is defined as higher salaries and benefits, more training, a transformational leadership style, and better equipment.) In his analysis, Bryl found:
“In the case of human capital oriented firms, their performance measured by the increase in the share price amounted to 122.7%, which means that within the period of ten years their stocks, on average, more than doubled their value. Comparatively, the rate of return of the broad studied sample showed only a 5.6% increase. Regarding profitability, the average returns on assets, equity and sales in human capital orientated firms were positive: 7.1%, 15.6% and 9.2% respectively.”
The terms employee engagement and employee job satisfaction are often used interchangeably, but there are actually differences between the two concepts. An article by the national US Society of Human Resources Management (SHRM) states that research reveals there is some overlap in the drivers of engagement and satisfaction, but there are also key differences in the components that determine each:
Engaged employees might report feeling focused and intensely involved in the work they do. They are enthusiastic and have a sense of urgency. Engaged behavior is persistent, proactive and adaptive in ways that expand the job roles as necessary. Engaged employees go beyond job descriptions in, for example, service delivery or innovation. Whereas engaged employees feel focused with a sense of urgency and concentrate on how they approach what they do, satisfied employees, in contrast, feel pleasant, content and gratified. The level of employee job satisfaction in an organization often relates to factors over which the organization has control (such as pay, benefits and job security), whereas engagement levels are more directly controlled or significantly influenced by the employee’s manager (through job assignments, trust, recognition, day-to-day communications, etc.).
“Being satisfied at work is a weaker predictor of business outcomes than engagement and lacks the two‐way reciprocal relationship characteristic of engagement,” is a conclusion expressed by Robertson-Smith & Markwick in their 2009 review, “Employee Engagement: A review of current thinking.” The same point could be made about happiness.
The difficulty in discussing the impact of employee satisfaction/happiness/wellbeing/gratification/engagement/commitment/association is that it is not possible to demonstrate that any of these can be directly proven to be a fundamental individual cause of performance improvement in business units or the overall organization. As an example, Edmans cautions in his article, “How Investing in Intangibles – Like Employee Satisfaction – Translates into Financial Returns” that “a correlation between employee satisfaction and stock returns need not imply causation.” Also, the title of Edmans’s paper, “The Link Between Job Satisfaction and Firm Value,” reflects the same problem – there is strong evidence of a link, but not clear proof this is the single direct cause or even one of the most critical causes. A further example – Oswald, Proto & Sgroi say in their paper that various “forms of evidence…are consistent with the existence of a causal link between human well-being and human performance.” But absolute proof can’t be clearly shown.
After the confident headline of their article – (“It’s official: happy employees mean healthy firms”), Ward, Krekel & De Neve drop back from cause to correlation: “Our work is suggestive of a strong, positive correlation between employee wellbeing, productivity and firm performance. The evidence base is steadily mounting that this correlation is in fact a causal relationship (running from wellbeing to productivity).” [Words in italics are my emphasis.] They admit a causal relationship can’t actually be proven yet.
Definitions of employee engagement abound. For instance, a 2012 Ragan article lists “50 definitions of employee engagement” [Access by subscription.] As Graber observed in a 2015 Harvard Business Review article, many definitions of the term, “ranging from the simple (‘discretionary effort’) to the mind-bending (‘complex nomological network encompassing trait, state and behavioral constructs’),” have been produced by academics, consultants, and leaders who have tried in vain for decades to find a totally satisfactory definition.
Probably the firm best-known globally for specializing in employee engagement and its 12-question survey is Gallup Inc., whose consultants have been measuring engagement for more than 50 years. “Gallup defines engaged employees as those who are involved in, enthusiastic about and committed to their work and workplace,” and that “engagement describes the basic psychological needs that must be met in order to perform your work well.”
Increasing employee engagement levels is a primary objective of many organizations seeking to strengthen their productivity and financial performance – because better performance is generally recognized as developing from higher employee engagement. “Engaged employees go above and beyond what is expected of them because they feel part of a purpose larger than themselves. Purpose is the foundation of engagement – it’s the vital element that makes an engaged organization possible and the first step to creating an engaged culture,” according to Engagement Multiplier consultants.
However, the wide variation in factors present in each individual workplace defies clear analysis. For instance, major factors determining the extent of individual employees’ engagement are most likely each employee’s unique personality, needs, motives and goals, which interact with organizational factors and interventions to influence engagement levels. Also, some employees, including individual managers and supervisors, will always be more (or less) engaged and motivated than others. Consistent with this view is the fact that Gallup has found “70% of the variance in employee engagement is due to the manager” or supervisor.
Aon international consulting firm published a report, “2018 Trends in Global Employee Engagement” showing an ‘engagement model,’ (below) which lists 20 factors that can contribute to employee engagement. (A business driver is a key input or activity that drives the operational and financial results of a business. Common examples of business drivers are salespeople, number of stores, website traffic, number and price of products sold, units of production, etc.) Notice in Aon’s ‘engagement drivers’ how communication doesn’t get a mention(!), although it is central to the successful implementation of many of these factors. It is amazing how many business consultants fail to acknowledge the value of employee communication.
“The ultimate goal of engagement is the growth and development of the individual,” according to Gallup, who go on to state this goal is “about meeting employees’ ongoing needs through a culture – ‘how we do things around here’ – that helps them be their best self and produce their best work.” Also, from their decades of experience with engagement, Gallup consultants believe that “successful organizations integrate engagement into all of their most important business processes, from performance management to executive strategic planning to employee learning.”
The above Gallup graph shows average employee engagement levels for USA and globally, 2000-2018. By Gallup’s calculations, average US engagement is much higher than in many other countries, as shown for the ‘Global’ trend line in the graph. The ‘best-practice organizations’ are Gallup clients.
There is a heartening improvement in US employee engagement over the past two decades. In 2020, Gallup found the percentage of US ‘engaged’ workers reached 38%, a new high since Gallup began tracking engagement levels in 2000. This may be due to several factors arising from COVID-19 reverberations. Gallup explained the high engagement level in 2020 as largely due to:
Also heartening, was the finding that at the same time, the proportion of ‘actively disengaged’ workers – those who have miserable work experiences and spread their unhappiness to their colleagues – stayed at its lowest level of 13%. These findings are based on a random sample of 4,700 full- and part-time US employees surveyed from April to May, 2020.
Gallup observed that the average US engagement level accelerated to a new high of 38% in early May. But following the killing of George Floyd in late May and subsequent protests and riots, the percentage of US engaged employees measured during June 1-14 dropped to 31%. In July, Gallup further observed:
Now, from our most recent measurement, the percentage of engaged employees — those who are highly involved in, enthusiastic about and committed to their work and workplace — has rebounded to a new high of 40%. This surpasses the measure’s decade-long upward trajectory since Gallup began tracking the employee engagement in 2000.
Effective internal communication is considered to be a highly important foundation for employee engagement, as shown in the responses of participants in a 2013 Harvard Business Review Analytic Services global survey on the impact of employee engagement on business performance. The graph below shows that communication was the key factor in at least the top 5 of 8 most impactful drivers of employee engagement, as reported by the 568 respondents (largely senior level executives, who were all from organizations with 500 or more employees.)
Above table sourced from the 2013 HBR Analytic Services survey
In his daily emailed newsletter of 29 August 2020, international business consultant Dr Leandro Herrero offers a skeptical view of employee engagement. What do you think of his comments?
The industry of Employee Engagement (and there is a big one) says that companies with high employee engagement (as measured by some kind of artificial tool) are more successful. And produces ‘studies’ to prove it. Employee engagement is clearly portrayed as the reason for success, so the path is clear: how can we get more of it? My view is that success creates employee engagement, not the other way around. If you want high employee engagement, run a successful organization. I know it’s rather inconvenient to think this way.
The book The Halo Effect (2014) by Phil Rosenzweig opened my eyes to this. I would put this book in the list of obligatory reading to anybody in management. The subtitle of the book is explicit: ‘and the Eight Other Business Delusions That Deceive Managers’. Rosenzweig quotes the case of the UK retailer Marks and Spencer, a company which at some point scored at the top in employee engagement rankings. Then a terrible year in business performance came up and employee engagement scores went down significantly. Not a single iota in benefits, programmes, employee care, or anything had changed. Just abysmal market performance.
Employee engagement is an ongoing part of the employee experience, according to Gallup. Employee experience has been an increasing focus in recent years because “the path to engagement is through employee experience,” in the view of corporate communicator, author and lecturer Aniisu Verghese in a 2020 IPR article. Also, business consultants believe it is a more tangible concept than employee engagement. Gallup simply defines the employee experience as “the journey an employee takes with your organization.” It is the sum of all interactions an employee has with an employer, from pre-recruitment to post-exit and everything in between. “It includes everything from major milestones and personal relationships to technology use and the physical work environment.”
The following are three key phases Gallup says every organization should consider when developing an employee experience strategy:
Out of all the interactions an employee has with their employer, Gallup identifies 7 critical stages that have the most influence on employees’ perceptions of their organization. An effective communication strategy is needed for all of these stages to make a fulfilling employee experience:
Above: Gallup diagram of the employee life cycle.
“When organizations make real gains, it’s because they’re thinking longer-term. They’re going beyond what engagement scores are telling them to do in the moment and redesigning employee experience, creating a place where people want, not just need, to work each day,” said Jacob Morgan in his Harvard Business Review article, “Why the Millions We Spend on Employee Engagement Buy Us So Little,” (2017). A consultant reader of Morgan’s article backed his point: “I shifted to focusing clients on employee experience rather than engagement and it’s transformative. I find that having leaders think about employee experience is more tangible and more actionable than thinking about engagement.”
Based on his analysis, Morgan says he identified three environments that matter most to employees: cultural, technological and physical.
Two highly experienced business professors recommend 4 innovative practices (below), to help employees at any level of their organization. Professors Dan Cable and Freek Vermeulen, from the London Business School, explained the practices in their article, “Making work meaningful: a leader’s guide (2018),” published in the newsletter of McKinsey & Company, international business management consultancy. Their recommended changes are “simple, inexpensive, practical, and local.” The authors note this kind of “straightforward practice is often overlooked in ambitious corporate initiatives.” But it is critical for any company hoping to create an environment where organizational change is personal and where innovation becomes a bottom-up process of purposeful actions initiated by employees themselves. The other pleasing thing is that all 4 of the simple actions involve employee communication in various ways, even though the article doesn’t spell this out:
1. Reduce anonymity.
Talk with employees about who their customers are, and encourage each employee to connect with one. Build regular, face-to-face interactions with customers into existing processes, stimulating employees to learn who is most affected by their work.
Case study: In many cafeterias, cooks and diners do not see each other, since waiters serve as the intermediary between the two. That was changed by setting up a video feed from the grill station to an iPad in the kitchen. There was no sound and no interaction, but the chefs could see who was ordering the food that they would prepare.
Immediately, the cooks started to work differently. For example, they began freshly preparing eggs for each customer, instead of grilling several eggs in advance and plating those when ordered. Simply seeing their customer changed everything. Very quickly, employee satisfaction soared. Better still, customer satisfaction went up by 14.4%. Even though the chefs went unseen, the video feed had created a connection that added meaning to their work.
2. Help people grasp the impact of their work on their customer.
Invite customers who have had the best – and worst – experiences with your products to talk with employees in person so your team can see how their work affects customers. Helping people understand the impact of their work does not have to be complicated or expensive. It should be personal, however. These kinds of first-hand interactions should be built systematically into your organization. One useful practice is to insist that all employees – whether they are customer-facing or not – make regular on-site visits to the end users of the company’s products.
Case study: That is what Dorothee Ritz, Microsoft’s general manager for Austria, did with her Vienna-based employees. Ritz insisted that everyone see for themselves how people were implementing the company’s products and services. One manager spent several days out on the street with police officers to learn how they use remote data. Another manager spent two days in a hospital to see the impact of going paperless. Soon, Ritz noticed, employees were suggesting more pointed solutions for customers based on their on-site visits. According to Ritz, this simple practice gives employees a better sense of the real value of their work.
3. Notice, recognize and reward good work.
If you are a manager or supervisor, periodically make a note of one good thing done by each team member, thank them for it, and describe why it made things better. Create a “like” system on your company intranet or other network where colleagues or even customers can communicate satisfaction with a task or interaction (the “like” need only be visible to the recipient). If you are a member of a team, consider suggesting this initiative to your boss.
Employees want to know that their work is noticed and valued. Smart companies find meaningful ways to do this without doling out raises and bonuses.
Case study: Wikipedia relies heavily on unpaid editors who volunteer to create and correct its pages. Retaining these editors is key to the success of the company. To further this effort, the company randomly selected a number of people from a group of 4,000 eligible editors to receive an award (the remainder served as the study’s control group).
The Wikipedia award had two components: an electronic image posted on the editor’s personal page and recognition on an official Wikipedia page. Since editors use pseudonyms, the award conferred no direct personal gains in a traditional sense. Nevertheless, this symbolic award spurred productivity (up by 13% over 11 months) and retention of editors (up 20%). Many of the award-winning editors started taking on more ambitious tasks, such as writing articles from scratch, while others tackled critical behind-the-scenes coordination and maintenance. The editors also became more engaged in helping others: reward-recipients were twice as likely as other editors to answer requests for help from community members.Put simply, work becomes more meaningful when people know their actions are noticed and appreciated.
The recognition doesn’t necessarily need to be public. Also, many companies can create an internal network where employees can “like” the work of colleagues. But the personal touch is important as well. Good leaders make constructive praise a regular part of their management routine. (I believe employee recognition is so important I have written a Kindle book about it: Employee Recognition: The secret to great team performance.)
4. Connect daily work to a grander goal.
Push people to think about their work in a high-level way by asking employees a series of “why” questions for 3–5 of their most important job-related tasks.
The first three suggestions, above, offer simple ways to help employees feel that their work is valuable. This fourth suggestion offers a concrete way to help employees understand how their daily responsibilities link to a higher meaning, to a purpose larger than themselves. Almost every company says they would like to do this, but few succeed. Business leaders regularly communicate their company’s higher purpose in a vision or mission statement and try to reinforce it at conferences and workshops. While these efforts are well intended, few have a positive or lasting impact.
Sometimes, the problem is the vision itself. For instance, a co-founder of a graphic design firm, said his own company fell into such a “vision trap” when it defined its vision as “changing the way the world designs,” an expression of purpose that was too grand and too detached from daily tasks.
Sometimes, the problem is the way the vision is communicated. When leaders try to impose a vision, employees tend not to take the message to heart. Employees need to make the connection from their work to the company vision themselves.
Workplace exercise: To help leaders stimulate this bottom-up process, Cable & Vermeulen recommend a simple intervention technique. The exercise pushes people to think about their work in an increasingly high-level way and can be exercised one-on-one, during team meetings, or in internal workshops. Imagine a manager at XYZ Technology who regularly fills out performance-evaluation forms. The exercise consists of asking the manager 4 questions:
Research confirms that people are more motivated and persistent when they think about why they are doing something (for instance, losing weight to become healthy) instead of what they are doing (eating a salad). When people understand and believe in the reasons behind their actions, they display greater resilience and stamina.
The idea that employees perform better when they feel a deep connection to their work is a fundamental part of many corporate reorganizations, where agile systems and other efforts are designed to tap a company’s greatest asset: the personal creativity of its employees. But it is not enough to institute systemic changes and hope that employees will rise to the task. Instead, senior executives should take practical steps that help employees in their search for meaning at work, and make best use of employee communication activities to achieve this. When successful, these efforts provide a road map for aligning the personal aspirations of employees with the most important goals of the organization – a combination that benefits everyone.
Good workplace communication is widely seen as a significant contributor to high levels of engagement that lead to better organizational results.
However, as noted above, myriad other factors can also be associated with engagement. Professor Ana Tkalac Verčič says in her 2016 article, “Exploring the Connection Between Internal Communication and Employee Engagement” that engagement “is defined in multiple terms and has different operationalizations” and that “there are many organizational and situational factors as well as individual differences, that influence employee engagement or disengagement.”
Consistent with this conclusion, Verčič & Vokić (2018) say, “Key drivers of employee engagement include nature of the job and work environment, recognition of one’s work, social climate, personality traits, and internal communication satisfaction, as an integral part of internal communication.” Verčič also comments in her article that “what matters most is that internal communication and employee engagement ‘feed’ each other in a continuous virtual circle.”
PR professionals believe good employee communication is a primary cause of high levels of employee satisfaction, but again there is no clear, simple proof of this because other reasons can also be perceived to be significant contributors. The situation is therefore that good employee communication is associated with or there is a correlation or a link or connection with high employee satisfaction. What is concerning is that many definitions don’t even mention communication.
What type of internal communication is strongest? Verčič & Vokić conducted a survey of 104 participants to investigate “[the] relationship between:
They said “our study confirmed that internal communication satisfaction has a significant role in high employee engagement,” pointing out:
“Three aspects demonstrated a greater importance: satisfaction with feedback, informal communication, and communication during meetings, and thus are the most relevant internal communication satisfaction dimensions for employee engagement. The study confirmed that feedback, open channels of communication, communication between supervisors and employees, and sharing information with employees are vital enablers of engagement.”
Verčič & Vokić go on to advocate that organizations should:
The head of a PR consultancy specializing in communication for successful employee engagement and change management offers 10 strategies for improving employee engagement and therefore organizational performance. Alison Davis, CEO of New Jersey-based Davis & Company has written an excellent article, “How to communicate to improve employee engagement” (2018), based on her decades of frontline experience. Davis defines engaged employees as committed to the organization’s goals, understanding how they make a contribution to the company’s success and are committed to doing their best work. This desired end state simply can’t be achieved without robust communication. Here are her 10 essential strategies for communicating to create engagement:
In addition, SHRM recommends a further range of communication initiatives (below) to help build employee engagement, saying that “targeted communication initiatives can enable managers and HR professionals to stay on top of employee engagement issues, get ongoing feedback from employees and anticipate changing needs of workgroups.” These communication activities relate to the HR role, which is to be expected.
Employers have numerous opportunities for ‘engageable moments,’ when they can motivate and provide direction for employees. The SHRM lists several formal and informal ‘engageable moment’ opportunities:
Formal opportunities include:
Informal opportunities include:
The size, composition and expected responses of the target group of employees should guide the type of communication used for engagement activities. Some of the communication methods that can be used include:
“Keeping in touch.”
Different technologies allow contact to be made, including:
The US-based Institute for Public Relations (IPR) initiated a research project that looked deeply into the factors that are important for internal communication to become more valued and therefore contribute directly to greater corporate performance. Firstly, the researchers investigated the internal communication practices of 10 leading organizations from around the world, based on “global scope, market leadership and perceived effectiveness in internal communications (frequently on the most-admired or best-places-to-work lists, and award winners.” Then the research team reviewed the qualitative findings and conducted interviews with internal communication leaders in the US, UK and Europe. The two projects were:
1. Qualitative IPR research project – “Best-in-Class Practices in Employee Communication”
The first phase of the overall IPR project comprised qualitative research on “Best-in-Class Practices in Employee Communication” (2013). The resulting report identified 4 factors that contribute to top internal communication teams strengthening employee engagement and therefore driving business value:
2. Quantitative IPR research project – “What Does Good Look Like? A quantitative perspective on best-in-class practices in employee communication”
The second phase of the IPR research project comprised a quantitative industry survey following up on the qualitative survey mentioned above, titled “What Does Good Look Like? A quantitative perspective on best-in-class practices in employee communication” (2014). In-depth interviews conducted in the survey with 156 internal communicators helped identify 22 factors that communication leaders credited for their success in effectively communicating to employees across large, multi-national organizations. Even if you are not the communication leader in your organization, you can still use these “22 Factors of Success” from the survey report as the basis for discussion with your boss and other members of your team.
Above image: “The 22 Factors of Success” identified in the Institute for Public Relations research report, “What Does Good Look Like? A quantitative perspective on best-in-class practices in employee communication.”
All the research results are consistent with the view that strong employee communication leads to higher levels of employee engagement, which in turn are associated with stronger corporate performance. The takeaway: treat your employees genuinely better and your organization will perform better – a win:win situation.
This article updated in 2020.
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