Employee engagement gives you the edge

2nd February 2009

greater engagement correlated with increased profitBeing able to engage your employees really can give you an edge over your competitors, research suggests. A study by consultancy Towers Perrin has concluded that organisations with higher levels of employee engagement outperform their competitors in terms of profitability.

The Towers Perrin study analysed engagement levels at companies and their impact on three key financial indicators plus operating margin. Companies with engagement levels above their industry sector’s average outperformed their peer group, on average, by 17% in terms of operating margin. The report stressed it was not making a direct causal link between employee engagement and profitability (arguing there were too many variables). But it did suggest there was now clear evidence of a significant relationship between engagement and financial performance.

Senior consultant Chris Charman said: “All companies want to maximise their financial performance, and part of that process involves ensuring that staff are engaged and willing to make that extra effort. “Managers must first understand what engages their employees and what factors are driving engagement,” he added.

And talking separately about the growth in ‘total reward’ packages, Chris said that organisations with highly-engaged employees tend to have better operating margins and a lower cost of goods sold, while their people costs also tend to be lower. The more effectively a company retains its employees, the lower its people costs. In turn, that can have a knock-on effect on the cost of producing goods and services because the employees are likely to be working more efficiently and effectively.

Another important aspect of the working environment is the quality of leadership or management. Research shows that in the best organisations managers understand the people they manage. They do not simply regard them as units of production. Other aspects of this element of total reward can include learning and development opportunities as well as the chance to become involved in interesting work.

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