employee engagement capabilities report 2011

2 Employee Engagement Capability Report 2011

CONTENTS

INTRODUCTION > 3

KEY FINDINGS > 4

ENGAGEMENT CAPABILITY EXPLAINED > 5

REPORT FINDINGS IN DETAIL > 6

• Employee Engagement – Measured Up > 6

• What do highly capable and highly engaged organisations have in common? > 7

• The more capable the better > 8

• Where are the skills gaps in capability? > 9

• The most popular activities for driving engagement > 10

• Employee Engagement Spend > 11

• What do organisations with 80%+ engagement scores do differently? > 11

• Invest in developing people > 12

• Measuring the ROI on employee engagement spend > 12

• What do companies that don’t measure engagement do? > 13

CONCLUSION > 14

APPENDIX > 16

• The 20 Core Capabilities Descriptions > 16

• About Us > 17

• Research Methodology > 17

• Contact Us > 18

3 © Shirlaws and RedBalloon 2011

The employee engagement

landscape 2010 saw the largest decline in employee engagement in

15 years, according to Hewitt, for the first time the

number of organisations experiencing a decrease in

levels of engagement out-weighed the number of

organisations achieving an increase.

This shift is unprecedented.

The turbulent global economic situation has brought the

relationship between employer and employee to the

fore and engagement is now one of the hottest topics

for CEOs and business owners.

According to Scarlett Surveys International 70% of CEOs

are not satisfied with employee engagement surveys

whereas 80% of HR Managers are.

This obvious disparity needs to change.

INTRODUCTION

Employee Engagement is widely agreed by business leaders and HR practitioners as one of the

major drivers of business performance and with the turbulent economic climate has ensured it

is one of the hottest topics for debate and action.

Rightly so, because as research by Gallup demonstrated that organisations with high levels of engagement

routinely outperform their competitors; they are 27% more profitable, they have 38% above average productivity

and have 50% higher customer loyalty.

The findings from our research uncovers the indicators that give organisations a clear framework to become

proactive rather than reactive to employee engagement and proves the hypothesis that the higher the capability

within organisations and with management, the higher the level of engagement companies can achieve.

The results clearly show that capability in the highly engaged organisations is significantly higher than the

capability in the average group. This correlation means that Engagement Capability can be used as a predictive

tool to give organisations clarity in to the areas they invest time, effort and money to have the greatest positive

impact on their engagement score.

Why conduct this research?

RedBalloon and Shirlaws have partnered on the

Engagement Capability survey to build on the

wealth of knowledge surrounding employee

engagement in an attempt to develop an

understanding of how ready and capable

organisations are to improving their employee

engagement reality.

Our intent was to develop a predictive tool that

would allow an organisation to have some clarity in

regards to what investments in employee

engagement would give them the biggest uplift in

the engagement score (even if they currently don’t

measure it). We wanted to create a tool that would

appeal to both HR Managers and CEOs alike

because it would be underpinned by a measurable

system for improvement that can deliver cultural

and commercial results.

Contributors

Participation in the survey was made available to any organisation in Australia; we specifically targeted senior HR

professionals, General Managers, CEOs/Owners. The majority of respondents were self-identified as HR Manager

or equivalent with 21% the CEO, HR Director or business owner (12%).

Over 320 organisations completed the online survey with varying employee group size. Almost 70% of responses

came from organisations with employee populations of 51 to over 1000. The industry sectors where also broadly

represented with: Professional Services, Technology, Banks, Manufacturing, Recruitments, Health and

Pharmaceuticals, FMCG.


KEY FINDINGS

• Get back to basics with culture and a purpose Organisations with a highly engaged workforce have the

highest capability scores around Culture and Purpose.

Employees are seeking more meaning in their work and a

greater sense of purpose. This is the number one area

where the greatest capability skills gap exists for

organisations with an average engagement score.

• Capture their hearts and minds Highly engaged companies strike a balance between

commercial and cultural aspects of business as

demonstrated by the top 5 capabilities that those

companies are most committed to – Culture, KPI’s,

Commercial Vision, Purpose, Reward & Recognition.

They include Purpose and Culture on the one side and

Commercial Vision and KPIs on the other hand with a

Reward and Recognition Program to support both. When

both the culture and the commercial aspects are aligned

it’s a lot more compelling for an employee to stay with the

organisation for longer and to deliver high levels of discretionary effort.

• The more capable the better Organisations with an engagement score of more than 80% are 30% more capable than those with

average levels of engagement. So the higher the capability the greater cut through, meaning and

effectiveness the engagement activity has.

• Align Reward and Recognition to the organisation’s purpose

Organisations with Reward and Recognition programs that acknowledge their people around Purpose and

other cultural behaviours are 3 times more effective in increasing employee engagement.

• The capability multiplier If an organisation can increase its capability from below 50% to above 70%, the chances of achieving of an

80%+ Engagement score increases by a factor of 11.

• Developing people

Highly engaged organisations are twice as likely to use a coaching program in their employee engagement

spend than companies with low engagement levels. When combined with other Training and

Development activity it results in delivering 22% higher capability and a significant positive shift in

employee engagement.

• The most effective engagement activities are… In order they are Training & Development, Non-cash Rewards & Incentives, Internal Communications

and Flexible Working arrangements.

• Everyone wants a buddy Don’t forget the social personal touch. Buddy Programs to support induction processes along with social

clubs are twice as likely to be in organisations with an Engagement score of 80%+ as they are in the group

scoring 40-60%.

• It’s not just about how much you spend Whilst some spend $3,000 and more per head, most highly engaged companies spend less than $1000 per

head on engaging their staff.


• What gets measured gets managed More than half of respondents currently not measuring the levels of engagement are planning to do so in

the next 12 months.

Capability in the highly engaged organisations is much higher than the capability in the average group.

This correlation means that Engagement Capability can be used as a predictive tool.

Any business, by assessing capability thoroughly, asking every leader and manager and developing the fullest

picture of capability possible would be able to use the results of the survey to identify the ripest areas for

improvement and quickest route to enhancing its Engagement reality.

Employee engagement is a critical business driver and with challenging economic conditions, a hot recruitment

market and skills shortages the more engaged employees are the more productive and less likely to leave.

Now any business can benefit from understanding their engagement capability to identify the ripest areas for

improvement and quickest route to enhancing its engagement reality in a proactive manner, no matter whether

they currently measure engagement or not.

ENGAGEMENT CAPABILITY EXPLAINED

If Employee Engagement can be defined by The Leadership Council as “the extent to which

employees commit—both rationally and emotionally—to something or someone in their

organisation, how hard they work, and how long they stay as a result of that commitment”,

then Engagement Capability can be defined as “an organisations ability and readiness to deliver

in the specific areas that contribute to successful employee engagement.”

Research conducted by The Hays Group suggests that the 70% of employee engagement is determined by the

employee’s direct Manager. So it seemed that to create a predictive tool we needed to look at the capability of the

Organisation and the Manager to engage employees successfully.

During our preliminary research we studied a vast array of surveys and reports on Employee Engagement and

organisational improvement to identify the most common used tools in the market place.

From this research, a Framework was created which included Twenty Core Organisational Capabilities that the

organisations could measure the level of depth, understanding and mastery within their organisation.

To do so, respondents were asked to rate each capability on a scale from 0-5.

• “This capability is non-existent in our firm” (0)

• “We have an idea of what this is about” (1)

• “We have a documented plan in place” (2)

• “We have implemented the plan” (3)

• “Managers are mentoring others in regards to this capability” (4)

• “This capability is fully integrated and leveraged in the organisation” (5)

LOW CAPABILITY

HIGH CAPABILITY


THE 20 CORE ORGANISATIONAL CAPABILITIES

Purpose, Intent, Cause Managing Capacity and

Workload Coaching On Boarding

Culture Functional Structure/

Resource Allocation Managing Expectations

Performance

Management

Commercial Vision KPI Work Life Balance Developing People

Innovation Rewards and

Recognition Program

Compensation and

Benefits Decision Making

Brand Energy Communication Recruitment Effective Meetings

SEE APPENDIX FOR FULL DESCRIPTIONS

Therefore, organisations with a low score rate themselves as least capable and those with a high score rate

themselves as most capable. If an organisation scores themselves a 5 out of 5 on all 20 capabilities, they have

reached the maximum of 100 points which means they have absolute mastery of each of the 20 capabilities.

Mastery of a certain skill or capability requires high levels of commitment and according to the Corporate

Leadership Council employees try harder when they believe the senior executive team has committed to them.

We believe that engagement capability is at the source of what drives engagement.

Understanding the specific capabilities and the level of depth that drive the highest levels of engagement will allow

all organisations regardless of score or indeed those that do not yet measure engagement the opportunity to

improve their reality, proactively.

REPORT FINDINGS IN DETAIL

Employee Engagement – Measured Up

Of the 327 organisations in the study only 48% measure Engagement and

of this group nine out of ten have a formal process in place. When using a

formal process 50% of organisations engage external consultants, with

Hewitt, Gallup and Towers Watson being the most commonly used. Of

those organisations that measure Engagement 65% do so at least annually.

Many of our respondents cited informal measures of engagement as

important in driving their overall understanding and awareness on the

issue. These included team meetings, monthly checklists, reviews, out-of-

office functions, retention statistics and ‘catch-ups’ or huddles.

Out of the organisations who currently don’t measure 61% say they will measure it in the next 12 months.

The bigger the company, the more likely to measure engagement.

Employee Engagement is currently measured by 57% of all organisations with 1000+ employees, 42% of all

organisations with 51-250 staff and 35% of organisations with 250-1000 staff. Companies with less than 50 staff

are less likely to measure employee engagement with only 10% with less than 10 staff currently measuring it.

This is reflected in the reasons given as to why they don’t measure. 22% say they feel that they are too small to

measure it. Only 5% of organisations don’t know why it would be useful to measure it. 21% say they don’t know

how to measure it or they are not aware of the right tools to do it. 10% say either they don’t have enough time or

money or resources to do it. Whilst for others it seems to be a lack of priority or support by management that

stops employee engagement being measured.

It’s one thing to measure

engagement, but it’s crucial

that the weak points are

acted on to show

employees they are heard.


COMPANY SIZE ENGAGEMENT SCORE

No. of Employees 80%+ 60-80% 40-60%

1000+ 21% 33% 44%

250-1000 14% 55% 27%

51-250 33% 43% 23%

11-50 64% 21% 14%

1-10 50% 50% 0%

The current engagement scores of the respondents in this survey were evenly spread across three major brackets.

22% had a score of 80%+, 30% of organisations scored 60-80 another 22% scored 40-60%.

The number of respondents with a score of less than 40 was less than 2% and as the sample size is too small to be

conclusive we will only compare results from the other three categories for the purposes of this report.

The smaller the company, the more engaged

employees.

When we compare the engagement scores achieved by

different sized organisations it seems that companies

with up to 50 staff are engaged at higher levels than

with their larger counterparts.

1/4 of respondents who measured engagement

didn’t know their score.

It’s fascinating though that nearly a quarter of organisations who invest in having an employee engagement survey

done, don’t know their result. The respondents who didn’t know their engagement score were predominantly HR

Managers, General Managers and Practice Mangers, Owners, and even people with engagement in their job title.

Is this another reason why only 70% of CEOs are satisfied with engagement surveys?

What do highly capable and highly engaged organisations have in

common?

Below are all 20 capabilities and the average capability score achieved by respondents (out of five) split by their

organisations engagement levels. This overview matrix allows you to look at the specific capabilities you are

interested in. We will go into more detail on each further on.

CAPABILITIES 80%+ 60-80% 40-60% DON’T

MEASURE

Culture 4.24 3.54 3.14 3.15

KPI 4.03 3.71 3.32 2.91

Commercial vision 3.97 3.51 3.07 2.87

Purpose 3.93 2.90 2.36 2.73

Reward Recognition 3.93 3.20 3.07 2.71

Communication 3.90 3.27 2.61 2.74

Decision Making 3.90 2.93 2.64 2.81

Performance Management 3.86 3.63 3.50 3.07

Develop People 3.86 3.32 3.07 2.97

Recruitment 3.76 3.54 3.39 3.08

Brand Energy 3.48 3.51 2.61 2.84

Compensation & Benefits 3.45 3.24 3.36 2.66

Effective Meetings 3.45 2.66 2.50 2.83

Onboarding 3.41 2.66 2.54 2.22

Expectation Management 3.31 2.39 2.21 2.26

Coaching 3.28 2.83 2.54 2.17

Balance 3.24 2.93 2.50 2.73

Innovation 3.14 2.95 2.32 2.60

Capacity 3.14 2.49 2.32 2.70

Functional Structure 3.10 3.17 2.61 2.83

Total Capability Score 72.38 62.37 55.68 54.87


There are a couple of different ways to look at what sets highly engaged companies apart. One is to look at what

capabilities they have invested most in and have built the most depth around, the second is to look at where there

are the biggest skill gaps that differentiate them. But first let’s look at the depth of capability they have built.

There are 7 Capabilities that stand out as they all scored an average close to or above 4 out of 5. This means that

for each one of these capabilities highly engaged companies have actively engaged managers who have

implemented, live and breathe these capabilities and mentor others to skill them up.

A lot of the big picture capabilities rank very highly for 80%+ companies. Culture for instance is the capability they

have focussed on the most with Commercial Vision and Purpose ranking 3 and 4. Culture in those companies is

not just a few words on a piece of paper, the values are not just pictures in the foyer and can not only be

expressed they are actively lived and managed in the organisation.

The Corporate Leadership Council suggests that emotional commitment is four times as effective in driving

discretionary effort and it is therefore not surprising that Culture features so highly.

Highly engaged companies also have clear Key Performance Indicators in place. The fact that they attract an

average score of 4 would mean that the KPIs are implemented and actively managed, which would indicate a high

level of accountability in the organisation.

Reward and Recognition also scores close to a 4 on average. We know that a highly evolved and effective Reward

and Recognition program acknowledges values driven behaviour, not just outcomes and performance. To achieve

a score of 4 for Reward and Recognition we would also expect to see the autonomy for acknowledgment devolved

to at least a Team Leader level and peer nomination featuring heavily in the mix. The program activity would be

regularly communicated and there would be evidence of informal acknowledgement at all levels in the

organisation.

The more capable the better

In 2009 AON Hewitt found the average engagement score in Australian organisations was 55% with the average

amongst the AON Hewitt Best Employer group being 80%. Our research clearly shows that there is a direct

relationship between the Capabilities defined by our survey and Engagement, and the higher the Capability the

higher Employee Engagement score.

AVERAGE ENGAGEMENT SCORE AVERAGE CAPABILITY SCORE

80%+ 72%

61-80% 64%

41-60% 56%

<40% 55%

Don’t measure 55%

Organisations with 80%+ Engagement scores have a 15% higher capability than companies with engagement

scores of 60-80% and a 30% better capability than organisations with engagement scores of between 40-60%.

Having a 30% higher capability essentially indicates that highly engaged organisations have driven each capability

one or two layers deeper to a point where the capability is fully implemented and where the manager is now

mentoring and influencing others in the business in regards to the capability when other companies haven’t

started the implementation yet.

For those that do not measure engagement it is useful to know where they stand in comparison against the 80%+

organisations. What we are able to determine is that their Engagement score will with a very high likelihood be in

the 40-60% range as they have similar levels of capability.


CAPABILITY DIFFERENCE

Purpose 67%

Communication 49%

Expectation Management 49%

Decision Making 47%

Effective Meetings 38%

We might conclude that rather than start investing resource into measuring Engagement for measurements sake,

they might be better placed to invest in capability enhancing activities and know that if capability is high,

engagement is very likely be higher too.

When looking at the respondents who have a capability score of below 50% we see that half the organisations with

an Engagement score of less than 60% fall into this category whereas, only 3% of organisations with an

Engagement score of 80%+ have a score as low as that.

If your capability is above 70% you are almost three times more likely, and if your capability score is above 80%

you are four times more likely to have an Engagement score of 80%+ compared to companies with low

Engagement scores.

ENGAGEMENT

SCORE

CAPABILITY

BELOW 50%

CAPABILITY

ABOVE 70%

CAPABILITY

ABOVE 80%

80%+ 3% 59% 28%

60-80% 25% 35% 18%

40-60% 50% 21% 7%

Again, if we start with capability and see what the relationship is from organisations with high capability to see

what their engagement scores are like we can see that 80% of all companies with a capability of 60%+ also achieve

engagement scores of 60%+; whereas 90% of companies with skills below 60% only score an equivalent

engagement score.

Where are the skills gaps in capability?

The following chart highlights the skill gap that exists

between highly engaged (80%+) and the average

organisations (40-60%) we surveyed. We can see that highly

engaged organisations have a 67% higher capability in

regards to Purpose.

This means specifically for Purpose that highly engaged

organisations have implemented their purpose across

everything they do. Their managers and leaders live and

breathe their purpose and are able to mentor other people

in the organisation in regards to what it means to be on

purpose; they score an average 3.9, with the vast majority scoring 4+. More than three quarters of all highly

engaged companies have driven Culture and Purpose to a capability level of 4 or 5.

Organisations with low engagement only score an average of 2.3. This means that most businesses in this category

have not implemented and are not living their purpose or have only started to implement in pockets and for some

it might purely be an idea in someone’s head.

Communication and Expectation Management are two skills that highly engaged organisations are close to 50%

better at than average organisations. This would have held them in good stead especially during the recent Global

Financial Crisis as many organisations simply stopped communicating during those tough times.

The learning is that highly engaged organisations have built the most depth re big picture topics like

purpose, culture and vision and have communicated more than the average performers.

Again it seems that during the downturn too many were focussed on the detail and where they could save money

rather than investing in the big picture and communicating with employees where they are going.

What is worthy to note is that the capability with the smallest gap is Compensation and Benefits. This seems to be

one of the standards that everyone who measures engagement is aware of and is able to manage appropriately.


Percentage of organisations achieving

capability scores of 4 or 5:

CAPABILITIES 80%+ 60-80% DIFFERENCE

Purpose, Intent & Cause 76% 18% 322%

Managing Capacity &

Workload 44% 14% 214%

Reward and Recognition 72% 29% 148%

Effective Meetings 59% 25% 136%

Culture 83% 36% 131%

Communication 66% 29% 128%

Functional Structure 45% 21% 114%

Decision Making 72% 36% 100%

Managing Capacity and Workload is the second

biggest difference with three times as many

highly engaged companies driving this capability

to 4 or 5, even though only 44% of highly

engaged companies actually fall into this

category themselves.

Reward and Recognition features high on the list

of differentiated capabilities between the highly

engaged and average organisations too. Whilst a

program of some description is matter of fact

for most organisations the depth and

sophistication of the program and its success or

otherwise is, from the data, a deciding factor for

engagement.

The most popular activities for driving engagement

We are able to conclude from the results that the most common Engagement activities for any organisation are as

follows:

1. Training & Development Program

2. Non-cash Rewards & Incentives

3. Flexible Working arrangements and associated resources

4. Recognition Programs

5. Internal Communications

But again it seems that some of the most popular items to spend on are not necessarily the ones that make the

biggest difference from an engagement score point of view. Training programs for instance are used by 89% of

companies with 80%+ engagement scores and by 91% of companies with engagement scores of 40-60%.

ENGAGEMENT ACTIVITES USED 80%+ 60-80% 40-60% DON’T

MEASURE

Training & Development Program 89% 83% 91% 78%

Non-cash Rewards & Incentives 86% 79% 62% 59%

Flexible Working arrangements and associated resources 83% 74% 71% 56%

Recognition Programs 80% 72% 79% 56%

Internal Communication 80% 79% 68% 52%

Company lunches, Nights out etc… 71% 66% 47% 58%

Health and Welfare Program 63% 49% 55% 31%

Coaching Programs 60% 30% 26% 37%

Social Club 57% 45% 32% 25%

Buddy Program 40% 17% 24% 17%

Time off for Volunteering 37% 34% 32% 27%

Leadership Roadshows or information sessions 34% 43% 41% 20%


ENGAGEMENT ACTIVITY % MORE LIKELY

TO USE

Coaching Programs +127%

Social Club +77%

Buddy Program +70%

Company Lunches & nights out +52%

Non-cash Rewards & Incentives +39%

Annual Employee Engagement Spend per employee:

SPEND DON’T

MEASURE

40-60% 60-80% 80%

<$500 22.2% 24.2% 19.5% 25.8%

$500-1000 27.8% 24.2% 29.3% 25.8%

$1000-2000 13.9% 18.2% 17.1% 9.7%

$2000-3000 16.7% 6.1% 19.5% 12.9%

>$3000 19.4% 27.3% 14.6% 25.8%

Many organisations cited specific initiatives outside of the 12 activities listed in the survey which included;

• Music & Art programs

• Discounts on own products or services

• Subsidised food service and pharmacy

• Company sports activities

• Mentoring programs

• Family days

Employee Engagement Spend

When we compare the reported spend on Engagement activity there is little evidence to support a straight spend

X, get Y result or indeed, that spending more on activities will necessarily ‘buy’ you a higher engagement score.

There is no silver bullet.

In fact, it’s clear that even if an organisation invests heavily in engagement initiatives (>$3,000) there is no

guarantee of a high score. That said, perhaps surprisingly only 26% of highly engaged organisations spend more

than $3000 yet more than 50% of the highly engaged organisations responding to the survey spend less than

$1000 per employee per year.

In short, it does not cost a lot to engage. There are many more complex relationships at play. When you have the

right mix of activities, the money that you do spend goes a lot further and you will get a better return on

investment.

The mix of activities refers not just to the engagement menu, we are not just talking a check list but the way in

which those activities are delivered, the skill and competency that the leaders and managers have to articulate,

implement and leverage.

For example, if you link your Reward and Recognition program into the purpose, and culture of your organisation

then you strengthen and perpetuate your drive for further depth and integration and therefore better results.

The commonalities between all

organisations engagement menu,

regardless of score says that there are

certain minimum standards that

employees expect and if they are not met

you can invest unlimited sums and it will

not increase the engagement score.

Employee Expectations have to be met

before you can start positively impact

engagement above 40%.

What do organisations with 80%+ engagement scores do differently?

So how can we learn for the best? Organisations with

high Engagement scores are more likely to include

provision for a number of key activities than the 40-

60% group. Coaching Programs for instance are used

by more than twice as many.

Overall it would appear that once the core drivers of

Engagement are in place organisations get the most

additional value by focusing additional resource on the

‘softer’ activities such as coaching programs, company

lunches, nights out and social clubs.


METHOD %

Survey Results 34%

Attrition 22%

Retention 19%

Productivity 18%

Turnover 15%

Employee Engagement Scores 14%

Profitability 14%

Even when comparing what highly engaged organisations spend with companies who don’t measure engagement

we can see a similar trend. Buddy Programs, Social Clubs and Health and Welfare programs are used by more than

twice as many times by highly engaged organisations.

Invest in developing people

Interestingly companies that include a coaching program in their mix

have 18% higher engagement scores than those that do not. Couple a

coaching program to company lunches and nights out and the average

capability increases by 31%.

The survey results reveal that once an organisation has defined its

Engagement activities, it can, by increasing capability and channelling

budget and effort into particular areas where the best score highly,

achieve significant increases in levels of engagement in the medium term.

For example, Training & Development is consistently used by close to 90% of respondents yet there does not seem

to be a big impact on what the engagement level is, they are spread evenly across the different engagement score

groups.

There is an impact on the engagement capability when we add a Coaching Program to the Training & Development

program. Companies who invest in both of these initiatives achieve a capability score of 70%+ which is a 22%

higher capability than companies who only have Training & Development in their mix.

When analysing the impact on the engagement scores we can see that 80% of response shifts a whole category up

in terms of engagement scores when coaching is added to a training program. In other words when training only is

in the mix 80% of respondents have an engagement score of 40-80%. When we add a coaching program 80% of

respondents score 60-100% engagement scores.

ENGAGEMENT ACTIVITY 80%+ 60-80% 40-60%

Training only 18% 43% 37%

Training plus Coaching 48% 31% 21%

Apart from the positive impact on the Engagement Scores this combination also lifts capability by 22%, and all

companies who had both training & development and coaching programs in their spend mix had an average

overall capability score of 70%. This is not unsurprising as Training typically focuses on educating which relates to

layers of depth 1 and 2, whereas coaching and then mentoring drives further depth by going up to 5 if required.

Measuring the ROI on employee engagement spend

Only 65% of our respondents measure the ROI that they get

from their investment in Engagement.

34% of respondents use surveys to measure their ROI

capturing a likely increase in the engagement score. What is

interesting to note is that in terms of our understanding of a

highly engaged employee as being someone that applies high

levels of discretionary effort and has a high intent to stay with

their existing employer not one of the respondents uses their

employees’ ‘intention to stay measure’ as means to

demonstrate a return on their engagement spend.

The second observation is that only 1 in 10 organisation who

invest in employee engagement have a commercial measure

such as profitability, increase of turnover, or productivity in

place to track the success of their spend.

Highly engaged organisations

are twice as likely to use a

coaching program


CAPABILITY DIFFERENCE

Onboarding 54%

Coaching 51%

Expectation Management 46%

Reward & Recognition 45%

Purpose 44%

Again, this might be another reason why employee engagement might not be the top priority for the leadership

team – especially if they are commercially minded and dollar driven.

What do companies that don’t measure engagement do?

What about companies who do not measure? We know that capability wise, overall they score similarly to

organisations with a 40-60% engagement score but do they have the same gaps or are they different?

Purpose is still one of the top 5 Capabilities where highly engaged companies shine. However the gap is not as big

as with companies with average engagement scores (40-60%). Expectations Management also makes the top 5 and

the skill gap is nearly identical to companies with average engagement scores. But there are two areas where

highly engaged companies are more than 50% more capable: Onboarding and Coaching.

Onboarding is a key capability, as it constitutes the first experience of someone entering the business. New

employees have expectations of the organisation based on the Brand Promise or the conversations had in the

interview process. They might be expecting a certain structure and process from the business. They might have

heard what the vision and the values are in the interview process – but if they start on day one and their desk and

their computer is not ready or nobody is there to welcome them, those expectations are soon disappointed.

Onboarding is the perfect opportunity to get the new

employee clear in regards to who is who, who does what,

how things work around here, what is expected of the new

employee and how that will contribute to the big picture of

the organisation. Is onboarding a tick box process or is it a

tangible experience delivered by all employees?

Coaching is a key skill in any organisation that wants to drive

further depth into the capability of the organisation. As the

research showed in the earlier section training and

development when combined with a coaching program lifts

capability by and additional 22%. Highly engaged companies have implemented coaching in their organisation and

are getting better at passing this skill on to others. If managers are able to coach their employees rather then tell

them each next step, then employees will be able to work more independently, and feel like they have more

responsibility and ownership which would drive up the level of engagement. Companies who don’t measure on the

other hand have not started with the implementation process yet. This could mean that employees often wait for

the next instruction and are not necessarily proactive in their approach.

Reward and Recognition is not just one of the top 5 strongest capabilities that highly engaged organisations have it

is also one of the biggest differentiators for them compared to companies

who don’t measure engagement.

Reward and Recognition programs are used by 80% of highly engaged

companies and only by 56% of companies who don’t measure. As we have

seen earlier they are one of the most common items companies spend money

on in the name of engagement. The results in terms of impact on the

engagement score are not conclusive at first glance. But when we mix in

specific capabilities that have been driven very deep into the organisation the

picture starts to change. Reward and Recognition programs of companies

with capability scores of 4 or 5 in Reward and Recognition, Purpose and

Culture for instance are three times more successful in achieving an

engagement score of 80%+.

In other words, Reward and Recognition programs that reward traditionally soft topics, like being on purpose and

acting in accordance with the company’s culture and values, have a much higher impact on engagement scores

than when we mix it with high capability scores for commercial vision and KPIs.

Reward & Recognition helps

drive depth into other

capabilities by putting the

spotlight on behaviours and

achievements that

contribute to KPIs are

aligned to the vision.


CONCLUSION

Employee Engagement is becoming more of a priority for businesses. A full recovery in the

economy will create more jobs and opportunities for capable employees. The more engaged

employees are the less likely they are to switch. If they don’t switch they are able to retain

capability, they have spent years building in the business, which is a competitive advantage that

will allow those businesses with highly engaged employees to pick up significant market share

in the years to come.

For SME’s there is the additional challenge of Succession. A large number of business owners want to exit their

businesses in the next five years and they need engaged employees and successors capable to continue to engage

them to be able to do that successfully. For larger organisations where a merger, floatation or sale may be on the

horizon a highly engaged workforce will be a significant contributor to overall value.

More than half of the organisations currently not measuring will do so in the next 12 months. The fact that

companies who don’t measure have the same capability as companies with average to low engagement scores

needs to be a wake-up call for any business currently not measuring.

All organisations, regardless of Engagement score, share some similarities in the

nature of the activities they undertake to drive it. If we conclude that these

commonalties have become the expectation of most employees and therefore will

have limited application to shift upwards to the ‘best employer’ territory of 80%

and above, we are then able to start looking at what it is that the ‘best’ do different.

What we find is that organisations achieving an 80%+ Engagement score are

investing in the softer activities that create opportunities for the development of

social connection and informal learning.

Employee Engagement is a complex topic – no one measure is more effective than

another in isolation. It is always a combination of different initiatives that lead to a

result. But what is clear is that the same mix can be a lot more effective when

supported by the right level of commitment and depth of capability.

Reward and Recognition programs for instance achieve a lot better results if the organisation is highly capable and

committed to purpose and culture. The deeper the skills the higher the commitment and the higher the

commitment of the leadership group, the more engaged and committed employees are.

Highly engaged companies strike a great balance between commercial and cultural aspects of business as

demonstrated by the top 5 capabilities that those companies are most committed to. They include Purpose and

Culture on the one side and Commercial Vision and KPIs on the other hand with a Reward and Recognition

Program to support both. This finding seems to confirm what the Corporate Leadership Council reports in regards

to actively engaged employees being emotionally and rationally committed to an organisation. When both the

culture and the commercial aspects are aligned, it’s a lot more compelling for an employee to stay with the

organisation for longer and to deliver high levels of discretionary effort.

Once the Capability has been assessed a strategy and implementation plan needs to be designed that outlines,

which areas the organisation needs to get more committed to and build more depth in, and how it is going to

deliver this. Highly engaged companies use a combination of training & development and coaching programs to

drive depth as this mix is more effective than using a training & development on its own.

Like any strategic change it will take some time for those changes or the increased capability to take effect, be felt

in the organisation and show the commercial result. If a survey is completed simply to say “we’ve done it” but

management doesn’t care about the result and no implementation plan follows, then results won’t change and

employee engagement as a topic will lose its relevance and priority.

The deeper the skills

the higher the

commitment and the

higher the commitment

of the leadership group,

the more engaged and

committed employees

are.


Organisations need to get better at measuring and articulating the return on investment of all their employee

engagement spend in a commercial way to make it a higher priority for management. If organisations can

articulate what the expected return is going to be for the planned change, budgets are much more easily allocated

for this traditionally “soft” topic.

Engagement capability, as measuring device, provides an easily accessible tool to all organisations wanting to

understand where they are at and what they can do to improve their engagement score. The data derived from

the survey in its first year allows us to broadly predict what should happen to engagement in any organisation if

resources are focused in a particular way.

Perhaps most importantly Engagement Capability bridges a gap between HR and leadership to better

commercialise the engagement opportunity. We have created some white space for organisations to better focus

on and plan the connect with employees to drive performance and profitability.

There is no silver bullet; but we believe that this work has made some significant headway into understanding the

relationship between engagement capabilities, contributors and outcomes and provides a useful tool for

improvement planning.


APPENDIX

The 20 Core Capabilities Descriptions

Purpose, Intent, Cause Why we do what we do – the business has a clear purpose beyond making

money that all employees can engage with.

Culture What is important to the people in the business and what guides their

behaviour - capability to express the culture, manage it and bring it alive

Commercial Vision Describes the 3-5 year vision of the organisation. Understanding the key

drivers that build equity value of the business

Innovation Ability of the organisation to innovate

Brand Energy The perception and reputation of the organisation and the people in it

that attracts clients and staff alike

Managing Capacity and Workload Planning and managing workload and growth of the capacity of the team,

the division, the organisation in accordance with the risk profile

Functional Structure/ Resource Allocation

Organisational structure that is functional, provides clear roles and

responsibilities and leverages the current resources for maximum

profitability. The business has the right resources and right systems and

processes.

KPI Defining and managing meaningful KPIs that help drive the vision and

strategy of the organisation - clear accountability

Rewards and Recognition Program A program that reinforces chosen values and behaviours as well as

commercial KPIs

Communication Ability to communicate effectively with anyone in the business, effective

meetings and communication structures

Coaching Ability to deliver learning’s through coaching to bring out the best in

people

Managing Expectations Setting, managing and resetting expectations proactively to maintain high

standards

Work Life Balance Understanding what work life balance means in the organisation and how

it can be achieved

Compensation and Benefits Fair, transparent remuneration packages

Recruitment Based on values, attitudes and behaviour first and skills and experience

second to create an aligned culture

On Boarding Providing clarity and connection for new employees and raise awareness

re the importance of their role in relation to the vision

Performance Management Proactive performance management and ability to have hard

conversations

Developing People Growth Opportunities for staff, Personalised Development plans and

managers giving opportunities to staff

Decision Making Effective and timely decision making in alignment with the agreed

direction of the business

Effective Meetings Ability to run effective, time efficient and relevant meetings where

everyone has their agenda addressed and clear actions are driven


About Us

Research Methodology

The research was conducted in November and December of 2010. 327 voluntary respondents completed the

online survey, incentivised with a $250 RedBalloon Gift Voucher draw. The opportunity to participate was

promoted to ‘opted in’ business lists held by RedBalloon and Shirlaws by email and pushed through distribution

partners and online social networks.

The overwhelming majority of respondents were self-identified as HR Manager or equivalent. 21.4% of the group

were the CEO or HR Director and 11.9% the business owner. In terms of being a representative sample of the

Australian business landscape 69.2% of the results are from organisations with a workforce of 51+ employees.

Given that survey was self-reported and unchecked it is important to point out that 63% of respondents have been

with their organisation for at least two years and given their roles it is fair to assume that their level of awareness

and understanding around organisational practices and capabilities is sufficient to expect accurate data for

interpretation.

For more information

To request a copy of the report, media enquiries or for more information please contact James Wright

(RedBalloon) on (02) 8755 0020, [email protected] or Oliver Christen (Shirlaws) on (02) 9241 7851,

[email protected]

Shirlaws is an award winning

international firm of business

advisers who create

transformational change in

organisations large and small by

building depth in management and

engagement capability to increase

the value of the organisation for all

stakeholders.

www.shirlaws.com.au

Phone (02) 9241 7851

RedBalloon is Australia's largest

experiential gifting retailer and a

2010 Hewitt Best Employer with an

engagement score of 90%+ for the

last three years. RedBalloon’s

corporate team supports

organisations large and small to

develop reward and recognition

strategies and non-cash incentive

programs that drive engagement.

www.redballoon.com.au/corporate

Phone 1300 850 940

employee engagement capabilities report 2011

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