Employee Engagement - CIPD

Published by the Chartered Institute of Personnel and Development,151 The Broadway, London SW19 1JQFirst published 2011© CIPD 2011The right of the CIPD to be identified as author of this Work has been asserted by them in accordance with sections 77and 78 of the Copyright, Designs and Patents Act 1988Pages marked with the following icon may be customised, printed out or photocopied and disseminated within thepurchasing organisation. Consultants may also customise, print out or photocopy and disseminate them to clients.Otherwise, all rights reserved. No part of this publication may in any other circumstances be reproduced, stored in aretrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise,without the prior written permission of the publisher.This publication may not be sold, lent, hired out or otherwise dealt with in the course of trade or supplied in any form ofbinding or cover other than that in which it is published without the prior written permission of the publisher or a licencepermitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency. No responsibility for lossoccasioned to any person acting or refraining from action as a result of any material in this publication can be accepted bythe editor, author or publisher.Design by CurveTypeset by Fakenham Photosetting Ltd, Fakenham, NorfolkPrinted in Great Britain by Antony Rowe Ltd, ChippenhamBritish Library Cataloguing in Publication DataA catalogue of this publication is available from the British LibraryISBN-13 978 1 84398 270 8The views expressed in this publication are the author’s own and may not necessarily reflect those of the CIPD. The CIPDhas made every effort to trace and acknowledge copyright holders. If any source has been overlooked, CIPD Enterpriseswould be pleased to redress this for future editions.Chartered Institute of Personnel and Development151 The Broadway, London SW19 1JQTel: 020 8612 6200Email: cipd@cipd.co.uk Website: www.cipd.co.ukIncorporated by Royal Charter Registered charity No. 1079797CD24949 prelims.indd 2 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore04/11/2010 09:16

ContentsIntroductionReferencesviixiSection 1: The foundations for engagement 1Section 1.1: Building block 1 – Exploring the business case forengagement 3How others are making the case for engagement 3The metrics 15Section 1.2: Building block 2 – Assessment: where are you now? 35How to gather data about engagement 00Creating your own engagement survey 00The employee survey 00The managers’ interview 00The customer survey 00Section 1.3: Building block 3 – Clarifying the foundations forengagement 00Defining the organisation’s purpose 00Pitfalls to avoid 00The role of values 00Creating a values statement 00Defining the organisation’s expectations of its employees 00Understanding employees’ expectations of the employer 00Section 2: Defining the blueprint for success 00Section 2.1: Teams and their role in engagement 00The motivated team member 00Self-managed teams 00Virtual work teams 00Team reviews 00Teamworking strategies that work 00Coping strategies – teams under pressure 00Fun at work 00Section 2.2: The line manager’s role in engagement 00Empowering individuals – the CAP model 00Building a leadership brand for engagement 00iiiCD24949 prelims.indd 3 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore04/11/2010 09:16

How to improve your communications channels and processes 00Collaboration and communication with employeerepresentatives 00Communicating in times of crisis 00Section 4: Learning and engagement 00Section 4.1: The conditions for engagement 00External scenario assessment 00The internal focus 00Section 4.2: The engaged organisation 00The engaged organisation must be a learning organisation 00The organisation’s approach to learning and development 00Section 4.3: The engaged individual 00Induction and engagement 00Working with comfort zones – learning agility 00Coaching to help people achieve ‘flow’ 00Energy cycles 00Are you keeping your ‘millennials’ happy? 00Developing your managers to enhance engagement 00Managerial capability self-assessment tool 00ContentsvCD24949 prelims.indd 5 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore04/11/2010 09:16

introduCtioncrèche. There was a coffee bar on the ground floor and I joined the queue. I listenedinto the conversations around me.Most were business-related: colleagues ‘sounding out’ before attending a meeting orputting together a team for a forthcoming project. There were others there, too:clients, union representatives, even the local MP.I took my coffee and wandered over to the notice board. It advertised forthcomingtalks that had been organised, on both work and non-work-related topics. There was athank you letter from an employee who had run the London Marathon and had raiseda very large sum for charity with the help of her colleagues. Many had ‘cheered her on’on the day. The president of the company would be giving out awards for ‘Team of theYear’ the following Friday ‘for the most innovative idea for a new product or service’.The winners would be treated to an evening at a local restaurant.A man came up behind me. ‘Susan?’ he asked. ‘Delighted to see you here so early.’ Itwas Jim, my supervisor. He bought me another cup of coffee and directed me to atable. ‘Let me tell you about my plan for today. . .’ He then escorted me to the officeand introduced me to the team. I was to spend time with each of them over thefollowing days, learning about all aspects of the department. I was given a full inductionand joined them all for a welcome drink on the Friday evening.So, which of these really happened?Both, actually. Needless to say, Susan didn’t thrive at the first organisation. Hercolleagues turned out to be very pleasant people, but they were given little opportunityto develop or to enjoy their day-to-day work. As a consequence, they wereunmotivated, kept their heads down and spent their weekdays making plans for theweekend.The second organisation was known for having a high level of ‘employee engagement’.Its regular employee surveys revealed that over 85% felt ‘highly motivated’, and notjust because there was a coffee bar on the ground floor!The ToolkitThis Toolkit looks at the various components that need to be in place to help to createthe second scenario. It also gives you insights into why so many organisations fall intothe first.viiiCD24949 prelims.indd 8 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore04/11/2010 09:16

introduCtionAccess and terms of use for Toolkit toolsYou can access the downloadable tools by visitingwww.cipd.co.uk/tsmIf you work in an organisation you can use them as a facilitator with your employees.The tools can be customised to suit your organisation. For instance you can add yourown logo, insert or delete whole chunks of text or images, and change the formattingto suit your company branding. If you wish to place the electronic files on a companyintranet or use them across multiple sites/offices, please email publishing@cipd.co.ukto apply for a multi-user licence.If you are a consultant you can adapt the tools to the needs of your client for a specificproject. Your client and their employees have the right to keep and reuse the tools forthe lifetime of this project. Unlicensed file-sharing is, of course, a breach of copyrightlawxCD24949 prelims.indd 10 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore04/11/2010 09:16

ReferencesACAS. (no date) Information and consultation of employees [online]. London: Advisory,Conciliation and Arbitration Service. Available at: http://www.acas.org.uk/index.aspx?articleid=1598ALIMO-METCALFE, B. and ALBAN-METCALFE, R.J. (2008) Selected reports from the12th World HR Congress, London.referenCesALIMO-METCALFE, B. and ALBAN-METCALFE, R.J. (2001) The developmentof a new transformational leadership questionnaire. Journal of Occupational andOrganisational Psychology. Vol 74. pp1–27.ALLEN, R. and HELMS, M. (2002) Employee perceptions of relationships betweenstrategy rewards and organizational performance. Journal of Business Strategies. Vol 19,No 2. pp115–139.ASHKENAS, R. (2009) Simply effective: how to cut through complexity in your organisationand get things done. Boston: Harvard Business School Press.BAND, D.C. and TUSTIN, C.M. (1995) Strategic downsizing. Management Decision.Vol 33, No 8. pp36–45.BERR website: www.berr.gov.uk/policies/employment-matters/rights/info-conBESTCOMPANIES GROUP website: www.bestcompanies.co.ukBLESSINGWHITE. (2008) The state of employee engagement – highlights for UK andIreland. Skillman, NJ: BlessingWhite.BLOOM, B.S. (1956). Taxonomy of educational objectives, handbook i: the cognitivedomain. New York: David McKay Co Inc.BOYLE, M. and COLLINS, J. (2007) Q&A with management guru Jim Collins. FortuneMagazine. 14 March. Available at: http://money.cnn.com/magazines/fortune/fortune_archive/2007/02/19/8400260/index.htmxiCD24949 prelims.indd 11 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore04/11/2010 09:16

eferenCesLOMBARDO, M.M. and EICHINGER, R.W. (2001) The leadership machine: architectureto develop leaders for any future. 3rd ed. Minneapolis, MN: LomingerMACEY, W.H. and SCHNEIDER, B. (2008) The meaning of employee engagement.Industrial and Organizational Psychology. Vol 1, No 1. pp3–30.MACLEOD, D. and CLARKE, N. (2009) Engaging for success: enhancing performancethrough employee engagement. Report commissioned by the Department for Business,Innovation and Skills. London: The Stationery Office.MARITZ RESEARCH. (2005) Maritz poll: bosses not ‘on the same page’ as employeesregarding recognition. St Louis: Maritz Research.MONE, M. and LONDON, M. (2009) Employee engagement through effective performancemanagement. London: Routledge Academic.SELIGMAN, M. (no date) Questionnaires on authentic happiness. Penn State University.Available at: http://www.authentichappiness.sas.upenn.edu/Default.aspxSENGE, P.M. (1990) The fifth discipline: the art and practice of the learning organization.London: Random House.SHAH, P.P. (2000) Network destruction: the cultural implications of downsizing. TheAcademy of Management Journal. Vol 43, No 1. pp101–112.SLOMAN, M. (2003) Training in the age of the learner. London: Chartered Institute ofPersonnel and Development.TAMKIN, P., PEARSON, G., HIRSH, W. and CONSTABLE, S. (2010) Exceeding expectations:the principles of outstanding leadership. London: The Work Foundation.TOWERS PERRIN. (2009) Turbocharging employee engagement: the power of recognitionfrom managers. Part 2 – the circle of recognition. New York: Towers Perrin.TOWERS WATSON. (2010) The new employment deal: how far, how fast and howenduring: insights from Towers Watson’s 2010 global workforce study. New York: TowersWatson.xivCD24949 prelims.indd 14 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore04/11/2010 09:16

TRUSS, C., SOANE, E., EDWARDS, C., WISDOM, K., CROLL, A., and BURNETT,J. (2006) Working life: employee attitudes and engagement. Research report. London:Chartered Institute of Personnel and Development.VENTRICE, C. (2009) Make their day! Employee Recognition that works. 2 nd ed. SanFrancisco, CA: Berrett-Koehler.WALTON, S. (1993) Made in America: my story. New York: Random House.referenCesWATSON WYATT. (2006–07) WorkUSA survey. Washington, DC: Watson Wyatt.WATSON WYATT. (2004) Connecting organisational communication to financial performance– 2003/2004 communication ROI study . Washington, DC: Watson Wyatt.WYSOCKI, A.F. and KEPNE, K.W. (2001) EDIS document HR 009. A publicationof the Department of Food and Resource Economics, Florida CooperativeExtension Service, Institute of Food and Agricultural Sciences, University of Florida,Gainesville, FL.xvCD24949 prelims.indd 15 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore04/11/2010 09:16

CD24949 prelims.indd 16 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore04/11/2010 09:16

Section 1:The foundations forengagement‘People are like electricity, of no use unless switched on.’Professor Peter DruckerWhile preparing to write this Toolkit, many people gave us very helpful advice. Itwas apparent that everyone has their own view about what makes for a high levelof employee engagement. The one point they all agreed on, however, was: we knowemployee engagement is vital to competitive advantage; it is for the most part excruciatinglydifficult to get all of the pieces in place at once. On the face of it, it is notcomplex, since we all seem to recognise it when it exists, so why is it so hard toachieve?It seems that there has to be a set of basic ‘building blocks’ before any kind of interventionscan be made to enhance engagement. The Tools in this section focus onthese building blocks.The first building block (Section 1.1) is to make the case for engagement. You knowthat engagement is important; we know that because you have purchased this Toolkit.The tools in the first step are to help you make the business case to others.The foundaTions for engagemenTThe second building block (Section 1.2) is then to assess where you are starting from.We include some assessment tools that will help you to identify where your organisationis now in relation to some of the key aspects of engagement.The third building block (Section 1.3) is to lay some foundations for buildingengagement. Here we consider organisational purpose and values and explain howthese can help or hinder the engagement process.Finally, we then turn to the tricky issue of clarifying expectations – yours of theemployees and the employees’ expectations of the organisation. Often there is agap between these two perspectives, which can be a major barrier for addressingconcerns about employee engagement.1CD24949 section1.indd 1 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

The foundaTions for engagemenTWhat are the benefits of making changes?‘Great companies consistently outperform the FTSE All Share. Over the pastfive years the best companies would have earned an investor a compoundedannual return of 12.1 percent, compared with 5.8 percent decline in the FTSEAll Share index as a whole.’Source: Sunday Times 100 Best Companies to Work For list, 2003, Statistics by FrankRussell Company.2CD24949 section1.indd 2 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Section 1.1Building block 1 – ExploringTool 1the business case forengagementHow others are making thecase for engagementFacilitator’s notesIntroductionWe have gathered a few examples here of research into employee engagement. Thesewill date, so you will need to seek new and updated versions over time. This Tool istherefore an overview of current thinking, with the PowerPoint slides provided foryou to make presentations to your organisation. There is also a summary of importantresearch and where to find it so that you can build a tailored presentation. You canalso use the sources to keep yourself up to date with current thinking.Aim of the ToolTo provide a source of current business cases for employee engagement with accessto an online forum.Materials neededYour own data on employee engagement, which, when combined with our slides, canbe used to create a tailored business case.Building Block 1 – exploring The Business case for engagemenT3CD24949 section1.indd 3 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTProcedureWorking on your own or with a small group, consider the data presented below.You may want to explore:• how this compares to your own situation• the potential benefits to you or your organisation of making a positive change• what data you still need to gather.Create your own presentation to make the case for engagement.Evaluating its useHave you been able to convince your organisation to make changes? How have youimpacted commitment, engagement, retention, profit?4CD24949 section1.indd 4 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

The ToolThe business case foremployee engagementBusiness case 1Lousy bosses can kill youThe researchWe start with the most extreme case, which was presented in a McKinsey companynewsletter in August 2010.Lousy bosses can kill you – literally • A 2009 Swedish study tracking 3,122 men for ten years found that those with bad bosses suffered 20–40% more heart aQacks than those with good bosses. • Bosses maQer: more than 95% of all people in the workforce have bosses, are bosses, or both. The Business case for employee engagemenT• Source: McKinsey 5This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 5 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTNotesThis then leads us to a particularly tricky issue: line managers are critical to employeeengagement. They can derail your work if they are not capable. In fact, a Swedishstudy found that they can actually be much more harmful. The following extract wasreported by McKinsey (2010):Bosses matter. They matter because more than 95 percent of all people in theworkforce have bosses, are bosses, or both. They matter because they set the tone fortheir followers and organisations. And they matter because many studies show thatfor more than 75 percent of employees, dealing with their immediate boss is the moststressful part of the job.Bosses matter to everyone they oversee, but they matter most to those just beneaththem in the pecking order: the people they guide at close range, who constantly tanglewith the boss’s virtues, foibles, and quirks. Whether you are the CEO of a Fortune500 company or the head chef at a restaurant, your success depends on staying intune with the people you interact with most frequently and intensely.6This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 6 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Business case 2The recession’s impact on engagementThe researchThere are conflicting sources of data on this subject and both were produced in2010. The earlier research in February indicated that the recession had not impactedengagement and we refer to this in the Introduction.The later research, which was presented in November, indicates a different picture. Aswith all data, consider it and then use it to help you determine what to look for in yoursector to see what the real picture is for your organisation. This Tool includes the laterresearch by the Boston Consulting Group in association with the World Federation ofPeople Management Associations (WFPMA) and the European Association for PeopleManagement (EAPM) (Caye et al 2010).When we consider the conflicting reports, it may be worth remembering the twotypes of engagement expressed in the Introduction: emotional engagement – theextent to which employees derive pride, enjoyment, inspiration, or meaning fromsomething or someone in the organisation; and rational engagement – the extent towhich employees feel that someone or something within their organisation providesfinancial, developmental or professional rewards that are in their best interests. TheCIPD research that indicated no change to engagement is more focused on rationalengagement. The BCG research included below seems to focus more on emotionalengagement.The Business case for employee engagemenT7This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 7 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTOne-­‐third of companies troubled by low employee engagement (BCG & WFPMA) • Employee engagement – the willingness of workers to go the extra mile at work – took a big hit during the recession and has not bounced back. Research conducted by the Boston Consul>ng Group (BCG) and World Federa>on of People Management Associa>ons (WFPMA)/European Associa>on for People Management (EAPM) (2010) Six areas of disengagement 1. structured career management that recognises appropriate behaviours 2. clear consequences for individuals not living the company values 3. performance linked to compensa\on 4. managers ac\ng as ‘resources’ or coaches 5. training and development for people management prac\ces 6. recogni\on beyond compensa\on 8BCG-­‐WFPMA/EAPM (2010) This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 8 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Two overarching conclusions First: The recession damaged engagement in three areas closely related to the six problem spots: – performance management: the processes and systems that set targets, collect feedback, and link ac\ons to results – recogni\on: formalised ways of acknowledging and rewarding strong performance – people manager capabili\es: people skills and leadership behaviours through the organisa\on BCG-­‐WFPMA/EAPM (2010) Two overarching conclusions Second: The decline in scores was most drama\c among middle managers: – Between 2007 and 2009, their engagement as it relates to performance management and recogni\on dropped by 14%, and by 10% in the people-­‐manager dimension. The Business case for employee engagemenTBCG-­‐WFPMA/EAPM (2010) 9This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 9 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTBusiness case 3Engagement differs amongst industriesThe researchThe third case relates to engagement levels by sector and industry. We were tryingto understand if engagement levels differed by profession and this is the research thatcame nearest to our requirement. It makes for very interesting reading – particularlywhen we consider that most employee engagement projects will be initiated by HR orexternal consulting firms.Blessing White research 2008 • Sectors with the largest number of engaged employees are: – HR consulDng and training (46%) – Energy/uDliDes (40%) – Legal and business services (34%) – AssociaDon/not-­‐for-­‐profit (34%) 10This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 10 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Blessing White research 2008 • Industries with the fewest number of engaged staff are: – Academia or higher educaDon (23%) – High technology (24%) – Chemicals (24%) – Retail (24%) – Government (25%) The Business case for employee engagemenT11This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 11 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTBusiness case 4Every engaged employee is worth about $5,000 inadditional profitThe researchHewitt Associates (2009) estimates that every ‘engaged’ employee is worth about$5,000 each year in additional profit. Its research shows that companies that score 60%or higher have an average five-year shareholder return of 20.2%.Of the key levers that determine employee engagement, 22 of the top 25 directlyinvolve manager-led activities. Overall, these manager-led activities have the potentialto impact employee discretionary effort by 20% or more.These manager-led activities fall into two major categories: managing employeejob performance and managing an employee’s relationship with the organisation.Specifically, the top ten management-led activities that leverage engagement are:Management activityEmployees understand the connection between work andorganisational strategyEmployees understand the importance of their jobs toorganisational success12Percent impact ondiscretionary effort32.830.3Internal communication 29.2Manager demonstrates strong commitment to diversity 28.5Manager demonstrates honesty and integrity 27.9Manager adapts to changing circumstances 27.6Manager clearly articulates organisational goals 27.6Manager possesses needed job skills 27.2Manager sets realistic performance expectations 27.1Manager puts the right people in the right roles at the right time 26.9This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 12 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Business case 5The 10:6:2 and the 10:9 rulesThe researchEmployee commitment has a positive impact on discretionary effort, performance andretention (Corporate Leadership Council 2006).Highly engaged employees provide as much as 57% more discretionary effort than thedisengaged.Highly committed employees will seek ways to improve the effectiveness of their work.Increasing employee discretionary effort from the lowest level to a high level improvesperformance by as much as 20%. Remember the 10:6:2 rule: a 10% improvement inengagement results in a 6% improvement in discretionary effort, which delivers a 2%improvement in performance.Survey data and analysis from the CLC suggests that employee commitment directlyimpacts retention. This is captured as the 10:9 ‘rule’: every 10% improvement incommitment will decrease the probability of departure by 9%.The Business case for employee engagemenT13This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 13 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTBusiness case 6There must be alignment between business strategy andengagement to achieve performance improvementsThe researchTop 25%AlignmentindexMiddle 50%Engagement correlates with business14.9% 15.9%Three year6.7%performancedifferentialsBottom 25%Bottom 25% Middle 50% Top 25%Commitment indexFigure 1.1: Engagement correlates with business strategyEngagement without alignment will not result in higher performance. You need acombination of the two. This London Business School research indicated that if youhad both alignment and commitment you could expect to see a 27.6% performancedifferential over three years. This data was presented to the CIPD Annual Conferencein October 2006 by Vicky Wright of the London Business School (and HonoraryChair of the CIPD until November 2010).On the face of it, this is a very simple finding. However, many engagement projects failto deliver performance improvements. This failure is most likely to be because of alack of alignment with the business strategy (see Tool 9).1427.6%21%Vicky WrightThis document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 14 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Tool 2The metricsFacilitator’s notesIntroductionThe meTricsHow do you measure your success in building engagement (which is, in essence, an intangibleasset)? Well, it is difficult but it is not impossible. This Tool will provide you with sometools to help you do just that. It starts with an overview of the key areas for the collectionof data. It also provides a document to help you track your performance over time.It is important to identify a few key measures that are pivotal in your context. Ifyou try to measure too many variables, energy will be dissipated into measurementrather than delivery. In one organisation, we found that if they stopped measuring fora year they would free up the equivalent of ten full-time employees. It is crucial foryour credibility and that of the engagement work that you are selective about whatto measure and how to report. We offer two methods here. The first is a straightmultiple-choice tool – we offer you suggestions but you select ones that will workin your environment. The second tool may at first look like you are justifying yourexistence (or the existence of the engagement working party); don’t be deterred bythis. The tool is intended to show the opportunity cost and is helpful for you whenmaking your business case, as mentioned earlier.Selecting the right metric is important. Communicating the metrics can be a fraughtaffair. Think about how and what you will communicate to key stakeholders. When wevisit organisations, we look to see if they have posted their metrics and their progressagainst them. We also do a reality check: how does the metric compare with ourexperience?There is an airport we both frequent and sometimes we have an exceptionalexperience. Many times, the experience is less than satisfactory either because thequeues are lengthy, staff are unhelpful or there may be inadequate areas for us to beable to use our laptops. None of these things appear on the airport’s key performanceindicator list. Two of them are linked to employee engagement and if improved wouldreally enhance the flying experience.15CD24949 section1.indd 15 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTMetrics you may wish to consider include:• absence• strikes or other industrial action• participation rates• health and safety issues• return on investment• profit• turnover• customer satisfaction• goal achievement• market segmentation• output rates• quality rates• cost-effectiveness• additional metrics for the public sector in particular include: response rates, costsavings, sustainability and particular key targets, such as beds filled in hospitals,levels of education achieved, and so on.A word of cautionBest practice in one organisation is not necessarily best practice. Look for goodpractices and adapt what others use to your context. Look for analogous organisationswith which to compare yourselves. You do not always need to benchmark against yourcompetitors. Best practice adopted unskilfully may end up being worst practice in yourorganisation.Aim of the ToolTo provide you with a starting point for identifying the key metrics for your organisation.We provide a series of metrics you can use, as appropriate. For a number ofthe more complex ones, we offer some methods for calculating them.16CD24949 section1.indd 16 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Materials neededYou will need outputs from the assessment section below and other data on key areasof organisational activity or experience.ProcedureWith a group of key stakeholders, identify the key metrics that would indicate you aremaking progress. Consider involving your customers in the selection of key metrics. Besure you measure what is important to them.The meTricsAssess your current situation and identify where you are in relation to the externaldata.Try to put a value on an improvement in any metric selected. This may be an estimateat first, but over time you will be more able to pinpoint actual cost or benefit as yourmeasurement techniques improve.Communicate the metrics to key stakeholders in a way that engages each of them.Evaluating its useAre you better informed about the progress your organisation is making? What arethe trends or patterns and are these improving?17CD24949 section1.indd 17 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTThe metrics – selection gridMetricsA standard (with someexamples)Absence 6.4 days per annum (2009)down from 6.7 (2008)Cost per employee per annum£595 (2009)Absence cost variesconsiderably bysector, with direct costs in thepublic sector 50% higher onaverage than inthe private sector.The indirect costs of absenceare harder for organisations tomeasurebut they are substantial, onaverage totalling £465 peremployee (see Source 4).Why use this?It may be an indicatorof disengagement,particularly if you havehigh absence of one ortwo days’ duration.Loss of productivityis seen as the singlemost important costof absence, followedby the cost of sick payitself and the cost ofstaff to cover for thosewho are absent.Make sure you haveidentified the numberof days on averageper employee perannum, the actual costplus the indirect costsof absence and anychanges to productivitylevels.A one-day changecan mean a significantimprovement incost management.Triangulate yourabsence rates withyour engagementrates to see if you canidentify a relationship.YourcurrentmeasuresTargetfor thisyear withthe costbenefit ofachieving it18CD24949 section1.indd 18 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

MetricsAbsence– BradfordIndicatorA standard (with someexamples)Bradford IndicatorThis is a formula, devised bythe University of Bradford totake account of the disruptiveeffect of frequent shortabsences as well as long-termabsence.The Bradford Index formula is:S 3 S 3 D 5 (INDEX)Where:S is the number of occasions(spells) of absence andWhy use this?Use this tool to helpyou pinpoint theimpact of short-termabsence. If you attacha cost to the ratio, youwill start to see thatshort-term absenceis a major cost to theorganisation. Any stepstaken to improve it andreduce it will have anexponential impact.YourcurrentmeasuresTargetfor thisyear withthe costbenefit ofachieving itThe meTricsD is the total number of daysabsent.For example:Five absences of one or twodays (211121211) givesS 5 5, and D 5 8.Thus (5 3 5 3 8) 5 200A single long absence of sixweeks (30 days) scores1 3 1 3 30 5 30But if that person had anotherabsence of three days, the newcalculation would show:Cost savings2 3 2 3 33 5 13219CD24949 section1.indd 19 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTMetricsCost ofrecruitmentCustomerloyaltyA standard (with someexamples)Identify the average cost ofrecruitment per employee.Customer appraisal keyperformance indicator(KPI)1 % sales turnover of newcustomers:• this rate 5 turnover fromnew customers / total sales• The rate indicates whatpercentage of increasedsales of the company isfrom new customers.2 Number of newcustomers• this rate 5 number of newcustomers / total customers3 The average sales percustomer per year• this rate 5 total sales / totalcustomers• The rate lets you know howmuch sales turnover yougained from each customer.• Do you have any methodsto increase revenue percustomer or not?Why use this?As engagementincreases so doesretention, which shouldmean your costsfor recruitment willdecrease over time.Identify the cost toyour business to attractone new customer.Consider the costto build a strongrelationship.Now estimate the costof losing that customerand replacing them.Employee engagementshould result inhigher customerengagement, loyaltyand satisfaction. Thisshould then result inhigher sales over time.If your organisationdoes not focus onsales or revenue, youmay want to considerthe impact a newcustomer has on yourbusiness – pinpoint thecost and identify otherindicators that doapply, such as returnvisits.YourcurrentmeasuresTargetfor thisyear withthe costbenefit ofachieving it20CD24949 section1.indd 20 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

MetricsA standard (with someexamples)4 Average sale per VIPcustomer• this rate 5 total VIP sales /total VIP customers• Compare this ratio toaverage sales per customer.5 The rate of profit of acustomer• this rate 5 net profit / totalcustomers• The rate lets you knowthe average profit that iscreated by a customer.• This makes customer carepolicies more relevant, onceyou know better whichcustomers bring you moreprofits.Establish a priority list andmonitor achievement ratesover time.Why use this?YourcurrentmeasuresTargetfor thisyear withthe costbenefit ofachieving itThe meTricsGoalsachievedHealth andsafety issuesNumber of workplacefatalities: Q1 2010 totalemployees 5 31 and membersof public 5 15Average days lost per workerfor illness and injury 5 1.24Average days lost per case5 15.9 (refers to personssuffering from a workplaceinjury or a particular typeof work-related illness) (seeSource 7).Publish these goals andprogress against themin prominent places foremployees and clientsto see.Employee commitment(both rational andemotional) is requiredif you wish to createa safe workingenvironment.High levels ofdisengagement canrelate to misconduct,which could result innegligence (intentionalor otherwise).21CD24949 section1.indd 21 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTMetricsHumancapitalInventoryand deliveryratiosA standard (with someexamples)Human capital return oninvestment (ROI)Revenue 5 (operatingexpense – [compensationcost 1 benefit costs 1 otherrelated employee costs) /(compensation cost 1 benefitcost)Lead timeLead time is the amount oftime from when the product isordered to when it is deliveredto the customer. Shorteninglead times can improve salesby increasing the numberof total available selling dayswithin the product’s sellingseason.Variability (customerorder fill rate & cycletimes)Cost of goods sold (COGS) /average Inventory during theperiodThe optimal inventoryturnover is a fine balancebetween fulfilling customerservice commitments andminimising inventory carryingcosts.Sales / average inventoryduring the periodThe inventory turnover ratiois often calculated by dividingsales (rather than cost ofgoods sold) by the averageinventory for the period (seeSource 5).Why use this?Engagement is aboutcommitment andenergy. Higher levelsof commitmentshould result in betterinventory and deliveryratios, which in turnwill result in highercustomer loyalty.YourcurrentmeasuresTargetfor thisyear withthe costbenefit ofachieving it22CD24949 section1.indd 22 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

MetricsLabourcosts to netincomeA standard (with someexamples)Labour cost to net income 5(salaries, wages and benefits) /net incomeThis ratio measures the extentto which labour costs (numberof employees 3 average wageand benefit per employee)affect net income.This ratio indicates theextent to which a reductionin unproductive labour (asa percentage of total labourcosts) may increase netincome.Why use this?This can be used as astarting point for you.What are the levelsyou currently achieveand what is the impactover time?The intention is toincrease net income tolabour costs.YourcurrentmeasuresTargetfor thisyear withthe costbenefit ofachieving itThe meTricsLabourturnoverHow many people leave yourorganisation in the:• first six months• first year• first two yearsMarketsegmentationOutput ratesParticipationrates• or, after three years?(See Source 3.)See Bank of England report.Pay Average weekly rate £431(excl. bonus)1.8% increase (2009–10)(See Source 1.)Women’s hourly rate is £11.39and men’s is £12.97 (2009)(See Source 2.)How does your weeklyor hourly rate comparewith the average?Is there a differencebetween the ratesof men and women?What action are youtaking to close the gap?ProfitQuality ratesA perception ofunfairness in pay ratesis a major source ofdisengagement.23CD24949 section1.indd 23 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTMetricsResponseratesRedundancyA standard (with someexamples)This can include both responserates to surveys, marketingcampaigns and viewer ‘hits’ onan organisation’s website; also,in a different sense, responserates in answering customerqueries or responding tocomplaints or problems.Redundancy intentions arehighest in local government(63%) and education (45%).Manufacturing and productionemployers are least likely tomake redundancies (23%),in line with the spring surveyfindings and well belowthe trends reported duringthe recession. Redundancyintentions are highest in thenorth of England (35%),London (28%), the south-eastof England (42%) and Scotland(38%).Those organisations that areplanning to make redundanciesexpect to make 5.5% of theirworkforce redundant onaverage, up from 3.6% in thespring report. This is, however,still lower than the 6.2%average recorded in the winterreport (see Source 6).Why use this?Redundancy has anegative impact onemployee engagement.If you are planning tomake redundanciesat the same timeas working onengagement, you mustensure you initiatesurvivor workshopsand engage as manyemployees as possiblein the consultationabout the futurestate. One deep cut isbetter than many small(salami-type) slices.YourcurrentmeasuresTargetfor thisyear withthe costbenefit ofachieving it24CD24949 section1.indd 24 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

MetricsReturn oninvestment(ROI)A standard (with someexamples)ROI is a performancemeasure used to evaluate theefficiency of any investmentor to compare investments.To calculate ROI, the benefit(return) of an investmentis divided by the cost ofthe investment; the result isexpressed as a percentage ora ratio.The return on investmentformula:ROI 5 gain from investment– cost of the investment / costof the investmentReturn on investment is a verypopular metric because of itsversatility and simplicity(see Source 8).If you measure this over time,you would hope to see anincrease in sales per employee.The formula is:Revenue ratio 5 sales /number of people employedIn organisations that arelabour-intensive, the ratio willbe smaller than in less labourintensiveorganisations.Why use this?YourcurrentmeasuresTargetfor thisyear withthe costbenefit ofachieving itThe meTricsSales/revenueper employeeratioThe reason you areembarking on workon engagement is toimprove revenue (ifin the private sectorand some parts of thepublic sector). Use thisratio to ensure you aremaking a difference.You should use this asa long-term metric –things may get worsebefore they get better– it’s called the lageffect and is very real.So longer-term studieswill help you to makethe case.25CD24949 section1.indd 25 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTMetricsSpan ofcontrolStrikesor otherindustrialactionA standard (with someexamples)Average span of control withinthe organisation/department.Span of control is the numberof people directly reporting toone manager.In the UK in 2009, 435,000days were lost to industrialaction, which equates to 19days per 1,000 employees.Average cost per day of astrike varies by sector: BritishAirways estimate the cost tobe £7 million per day.Rail strikes cost the economyof the UK an estimated £600million per day.Why use this?When a span ofcontrol becomestoo large, it can limitthe growth of anorganisation. Even thebest managers tend tolose their effectivenesswhen they spend allof their time managingpeople and their issuesand will be unable tofocus on long-termplans and competitivepositioning for thebusiness as a whole.Employee engagementcan suffer if employeesdo not have regularaccess to managerswho don’t have timefor them because ofthe wide spans ofcontrol.YourcurrentmeasuresTargetfor thisyear withthe costbenefit ofachieving it26CD24949 section1.indd 26 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

MetricsSocialresponsibilityTenureTurnoverA standard (with someexamples)This is increasingly important.What percentage of yourincome is spent in thecommunity? How much timedo you allow for staff topursue their interests in thisfield?Total tenure of employees (forexample, in years) divided bythe number of employeesEmployee turnoverExample:• Number of employees:1,000• Annual turnover: 30%• Number of employeesturning over: 300Why use this?The latest generationto join the workforceare increasinglyinterested in defininghow their work servesa greater purpose.If you wish to increaseengagement rates,you may need to takeaction to ensure youare at the leadingedge on this metric.Review the workundertaken by someof the best companiesor employer of choiceorganisations.Note that direct costsmight include the costsof recruitment, training,cost of supervision andadministration, salaryand benefits, plusthe costs of any exitpackage.YourcurrentmeasuresTargetfor thisyear withthe costbenefit ofachieving itThe meTrics• Average turnover cost peremployee: £2,000• Total annual cost: £600,000• Savings from reducingturnover by 10% to 20% is:£100,00027CD24949 section1.indd 27 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTMetricsA standard (with someexamples)Labour turnoverHow many people leave yourorganisation in the:• first six months• first year• first two years• or, after three years?Why use this?For a moresophisticatedcalculation, and one thatlinks more closely toemployee engagement,you can also add in‘indirect’ costs – moredifficult to calculate,but these can add upto as much as two tosix times the cost ofdirect costs, and couldinclude the additionalcosts of disruption,cost of reduced moraleand productivity, andthe administrationinvolved in managinga non-performingemployee out of theorganisation.YourcurrentmeasuresTargetfor thisyear withthe costbenefit ofachieving itSource notes1 http://www.statistics.gov.uk/StatBase/Product.asp?vlnk519442 http://www.statistics.gov.uk/cci/article.asp?ID523703 http://www.bankofengland.co.uk/publications/inflationreport/irlatest.htm4 http://www.cbi.org.uk/searchresults.shtml?cx5007280629144655152682%3A32gtai0mswu&cof5FORID%3A11&q5absence1survey#10405 Microsoft business solutions6 CIPD survey reports Labour Market Outlook http://www.cipd.co.uk/subjects/hrpract/hrtrends/_qtrends.htm?vanity5/labourmarketoutlook7 http://www.hse.gov.uk/statistics/lfs/0809/swit1.htm8 http://www.investopedia.com/terms/r/returnoninvestment.asp28CD24949 section1.indd 28 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

The ToolAn example of using metricsin your HR communicationsThe impact of HR tasks and their financial value to theorganisationKey tasks/activitiesHR strategic inputImpact if taken away/put on hold• lack of strategic alignment between theorganisation’s people management practicesand investment in L&D with achievement oforganisational goals and ambitions; relegationof HR to a primarily transactional and reactivefunction• inability to read, network, benchmark toassess current performance against futurepotential• loss of the strategic direction andco-ordination of all aspects of HR and staffdevelopment to facilitate effective talentmanagement• impaired ability to measure the organisation’sperformance in people management termsand relate all measures of performance toimproved practice• loss of one of organisation’s major uniqueselling points and sources of positive profileand reputation• inability to deliver against key contracts asthese depend on flexibility of HR directorand deputy director interchanging rolesinternally where necessary to backfill for highpeak demands of these contracts• dependence on consultants to design,implement and review key processes, forexample job evaluation scheme, competencyframeworks and 360-degree feedback systemsEstimatedfinancial value tothe organisation(an example)Savings onexternalconsultancyprojects and legalfees per yearestimated at£15,000an example of using meTrics in your hr communicaTions29This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 29 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTKey tasks/activitiesManagementof in-houserecruitmentserviceBusinesspartnering rolewith all managers:• managementinduction of allnew managers• joint problemsolvingto solvebusiness-criticalissues, forexample staffingmodels• high-levelemployeerelations advice• quarterly HRsurgeries withall managers toassess needsand progressin peoplemanagementpracticesImpact if taken away/put on hold• dependence on costly solicitor or externalexpert advice for changes or transactionswith complex legal ramifications, for exampleTUPE, negotiations to changes in terms• increase in recruitment costs becausenobody to co-ordinate most cost-effective,just-in-time solutions to all recruitment needs• increase in agency costs if nobody keepsrelationships with agencies and costs underongoing review• bungling of internal secondments and internaltransfers• insufficient in-house capacity and expertise tointerpret psychometric test centre results• lack of timely and thorough induction of allline managers in practice and expectations• greater decentralisation of HR responsibilitiesso managers dragged into this and away fromservice development work• less consistency of management practiceacross the organisation with correspondingdips in staff satisfaction with line managementand greater risks of employee relations issuesbeing protracted and ultimately going toemployment tribunalEstimatedfinancial value tothe organisation(an example)Estimatedsaving in directrecruitment costs5 £80,000 perannumOPP/CIPD statistics(2008) suggestthat workplaceconflict is costing anaverage of 12 daysper employee peryear in lost time.An example ofthe average wageper employee withon-costs for anorganisation 5 £130.£130 3 160 staff 5£20,800 per dayIf 12 days lost overall,cost 5 £249,600 perannumAssumingorganisation losesno more than 3 daysper person, cost 5£62,400Difference(saving) 5£187,20030This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 30 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Key tasks/activitiesManagement ofattendance• reconciliationof timesheets(sharedwith HR &recruitmentassistant)• prompting andmonitoring offormal sicknessmeetings• co-ordinationof occupationalhealth referralsRegulation andmonitoring ofemployee relationsissues, including:• induction ofall staff intocontracts, codeof conductand keyexpectations• maintenanceand updating ofcomputerisedrecords on allstaff• helplineresponse today-to-dayemployeequeries on allemploymentrelatedissuesImpact if taken away/put on hold• loss of money through failure to pick uplevel of mis-recording currently picked up(estimated at 2 days per employee per year)• increase in sickness absence• failure to maintain the high levels of accuracyin regulation and recording of all aspects ofthe employment relationship• breakdown of consistency of earlyintervention in any problem areas• lack of clear records and audit trails in theevent of disputes• estimated increase in employment tribunalclaims to 3 per yearEstimatedfinancial value tothe organisation(an example)• For timesheetreconciliations:our figuresshow an averagepotential loss tothe organisation of320 3 £130Total saving 5£41,600• Our sicknessabsence is 3%below sectoraverage. 3% ofpayroll gives:Total saving 5£195,000• Estimated savingon ET insurancepremium throughlow rate 5£5,000 perannum• Estimated savingson managementtime in dealingwith 3 ETsper year 5 4managers per case@ 10 days each at£130 per day.Total saving 5£15,600an example of using meTrics in your hr communicaTions31This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 31 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTKey tasks/activities• employeerelations adviceand guidance tomanagers• attending andminuting formalinvestigationsand hearingsAdministration ofthe recruitmentprocess, testcentres andpre-employmentscreeningImpact if taken away/put on hold• inability to administer the recruitment processafter the point of response-handling – thatis, distribution of packs, co-ordination oftest and interview schedules, pre- andpost-recruitment correspondence andtelephone query-handling with candidates,referencing• either inability to carry out test centres, withhuge increase in wrong appointments (up to30%, or 14 wrong appointments each year)or need to contract out test centres• inability to meet legal and best practicerequirements in relation to criminal recordchecking and confirmation of right to work inUK (with £5,000 fine for each failure againstthe latter)• failure to pick up current 10% of applicantscurrently turned down on references peryearEstimatedfinancial value tothe organisation(an example)• Total savings 580 for in-housetest centres peryear at £600per centre 5£48,000• Savings on wrongappointments:costs of conflictalready accountedfor above, but addto this the costsof training andunder-productivityof 14 wrongappointments peryear.Estimated saving5 £6,000 3 14employeesTotal saving 5£84,00032This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 32 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Key tasks/activitiesDesign anddelivery of theorganisation’smanagementdevelopmenttrainingCo-ordination andmanagement ofservice deliverytrainee schemeImpact if taken away/put on hold100% of our people management training isdelivered internally and 75% of our strategiclevelmanagement training is delivered internally.Postponing the delivery of the programme orrunning on a less regular basis would result in:• lack of skilled managers and reduction inleadership capability• more reliance from managers on HR supportas they will not be trained to effectivelyoperate• potential increase in staff absence• inability to deal with performance issues –lack of morale within staff teams• decline in staff satisfaction and impact onfuture syndicate surveys and Sunday TimesTop 100 survey, and so on• decline in the organisation’s reputation withinthe sector as an ‘employer of choice’• lack of succession planning, inability to ‘growour own’, decline in our internal talent pool• increase in staff costs – external recruitmentcosts – filling project worker posts by goinginto the external market or by using moreagency staff• potential lack of quality staff – potentialapplicants may go to work for ourcompetitors who do run trainee schemes; useof more agency staff/locums may also result inless quality and a poor service for our clients• increased knowledge gap in new starters(through external recruitment) and greaterneed for training and development/supportfrom managers and colleagues• unable to continue to run the mentoringscheme for trainee mentors – this would beone less route for aspiring managers to gainskills and knowledge to be able to apply formanagement roles in the futureEstimatedfinancial value tothe organisation(an example)Savings ondeliveringmanagement traininginternally 5 £9,775Re-recruitment costsat £2,000 per postfor 5 unfilled servicedelivery posts peryear 5 £10,000an example of using meTrics in your hr communicaTions33This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 33 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46

Building Block 1 – exploring The Business case for engagemenTKey tasks/activitiesCo-ordination ofthe organisation’strainingprogramme forservice deliverystaffImpact if taken away/put on hold• potentially unable to move forward withthe development of our client employmentoptions programme• dip in the organisation’s profile within thesector and the external labour market• co-ordination of the scheme passes to areamanagers (AMs): breakdown of consistencyand continuous improvement in running ofthe scheme; AMs distracted from main dutiesand new bids• learning and development considered to bepart of an employee’s total reward packageand in this organisation L&D forms a verylarge part of this package; lack of opportunityfor training will inhibit us from recruitingand retaining good staff, particularly whenreducing other terms; failure to be able todeliver on our revised employee propositionwhen market is dictating that, superiordevelopment opportunities will be our mainsource of competitive advantage in still beingable to recruit and retain good people• staff unable to reach their potential and fulfilthe duties of their role – consequent costs ofunderperformance against potential• dip in employee morale and engagement• increased turnover – staff leaving within 12months• unable to provide a good-quality service –audits, unable to remain competitive withbids/tenders• one-third of our core service delivery trainingcurrently delivered internally by front-linestaff; this saves approximately £3,000 per yearEstimatedfinancial value tothe organisation(an example)Saving onco-ordination ofdelivery of training byfront-line staff5 £3,00034This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright © CIPD. Please use oradapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.CD24949 section1.indd 34 A sample from Employee Engagement by Rita McGee and Ann Rennie. Published by the CIPD.Copyright CIPD © 2010. All rights reserved. No part of this excerpt may be reproduced, storedin a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording, or otherwise. www.cipd.co.uk/Bookstore02/11/2010 13:46