Why Engagement Matters—More than Ever

By Mark Royal and Tom Agnew

Engagement Is Essential
Researchers have long recognized that organizations couldn’t function through purely contractual relationships with employees. In the early twentieth century, for example, Chester Barnard, Elton Mayo, and others emphasized that organizations require cooperation from employees, not just compliance. Simple adherence to minimal role requirements is likely to have dysfunctional consequences in most settings. For example, unionized employees who “work to the rule” during contract disputes can quickly bring organizations to their knees.

In our view, “engagement” has captured the attention of managers insofar as it raises the notion of cooperation to a higher level. While cooperation is required and, to some extent, expected of all employees, engagement involves performing above and beyond what’s expected. In that sense, engagement holds out to organizational leaders the prospect of increasing productivity (i.e., getting more output from a finite set of human capital resources).

In an environment of increasing competition and a challenging global economy where organizations are running “leaner” and forced to do more with less, tapping into the discretionary effort offered by engaged employees becomes all the more imperative for success in the marketplace.

The ever-increasing pace of change in modern organizations also fosters interest in engagement. In fast-changing environments, it becomes all the more difficult to precisely specify roles and responsibilities across a diverse set of jobs. To the extent that employees at all levels are likely to be faced more frequently with unanticipated and ambiguous problem-solving and decision-making situations, employers must count on them to act on their own in ways that are consistent with company objectives based on their understanding of, and alignment with, organizational standards, cultures, and values.

A final push for today’s emphasis on employee engagement comes from employees themselves. The redefinition of the social contract surrounding the employment relationship across all industries makes engagement a more pressing concern for many individuals. As the old loyalty-for-security bargain has eroded, the connections between individuals and organizations have grown more tenuous. Whereas a career was once defined as the steady movement over a period of time through a hierarchy of jobs in a single organization, individuals today are increasingly building careers from a series of patchwork moves across organizational boundaries. In charge of their own work paths, and with their own definitions of career success, more and more employees are looking for work environments where they can be engaged and feel that they are contributing in a positive way to something larger than themselves.

Though frameworks for understanding engagement vary, the concept is commonly understood to capture levels of commitment and discretionary effort exhibited by employees. Engaged employees can be expected to display high levels of attachment to an organization and a strong desire to remain a part of it. Consequently, engaged employees are more likely to be willing to go above and beyond the formal requirements of the job, contribute organizational citizenship behaviors, pour extra effort into their work, and deliver superior performance.

But Engagement Alone Is Not Enough
Hay Group research suggests that engaging employees, while important, is not sufficient to sustain maximum levels of performance over time. To get the most from employees, leaders must also ensure that organizational systems and work environments support personal and organizational effectiveness. They need not only to motivate their employees, but also to enable them to channel their extra efforts productively. Engaged employees need to have confidence that the organization is doing all it can to promote their success, rather than introducing barriers to getting their jobs done.

Employee enablement refers to the ability of individuals and teams that are already engaged to make maximum contributions.

Enablement has two key components:
1. Optimized roles means that employees are effectively aligned with their positions, such that their skills and abilities are effectively put to good use. In deploying talent, leaders need to consider not only the requirements of the job and an employee’s ability to meet them, but also the extent to which the job will draw upon and fully leverage the employee’s distinctive competencies and aptitudes.

2. A supportive environment involves structuring work arrangements such that they facilitate, rather than hinder, individual productivity. In a supportive environment, employees have the essential resources (e.g., information, technology, tools and equipment, and financial support) required to get the job done. And they are able to focus on their most important accountabilities without having to work around obstacles in the form of nonessential tasks or procedural red tape.

 “Where there is a will, there is a way,” goes the old saying. But our research confirms that employee engagement and employee enablement do not always go hand in hand. As we have seen, in many of today’s organizations employees are highly committed to goals and objectives and are sincere in their desire to do the best job possible. Yet they are confronted with significant barriers to executing their job responsibilities efficiently and with high quality.

To the extent that their employees are presented with this frustration, organizations fail to harness the potential energy represented by employees who are engaged in their work. In most organizations, we can identify a group of “Effective” employees who are both highly engaged and well enabled for success. In these happy instances, where motivation to contribute is matched with the ability to be successful, employees are likely to be high ­performers. Unfortunately, however, we also regularly find a set of employees lacking on both dimensions. Where both engagement and enablement are missing, (“Ineffective”) employees are understandably likely to struggle in their job roles.

We also find a sizeable percentage of the population that falls into the “Detached” group. These employees are in roles that suit them reasonably well, and they find themselves in work environments that are generally supportive. But for various reasons, their levels of engagement with organizational objectives and task requirements are insufficient to make them optimally effective.

The real power of our framework comes in calling attention to the “Frustrated” employees. Based on our research, we believe that many organizations employ a significant number of people who are aligned with the direction of the organization and enthusiastic about making a difference, but are nonetheless held back by roles that do not suit them or work environments that get in their way. These employees represent a lost opportunity for organizations. From a motivational perspective, organizational leaders have these employees where they want them. But when it comes to getting the most from them in terms of productivity, employers have yet to leverage their full potential.

In fact, a lack of enablement for the employee who is engaged may be a bigger problem than the lack of engagement for the enabled employee. Professor Thomas Britt of Clemson University and his colleagues have explored, in the context of military roles, the negative consequences of high levels of engagement when individuals face significant challenges to getting their jobs done effectively. In a survey of 1,200 U.S. Army rangers, Britt and his colleagues found, not surprisingly, that obstacles to high performance such as work overload resulted in lower levels of morale and job satisfaction. Notably, however, these effects were greatest for the most highly engaged soldiers. Indeed, “the most committed and personally invested rangers, the ones who ranked work-relevant values as the most important, ranked morale and job satisfaction lower in the face of insurmountable impediments. Simply put, the rangers who cared most about their work were the most demoralized when they were thwarted from doing their best.”

Along with the negative consequences of a lack of employee enablement for the motivation of highly engaged individuals, Britt also points to the likelihood of increased turnover. “For these high performers,” he argues, “factors they can’t control—role ambiguity, inadequate resources, and overwork itself—can hinder their best work and drive them to seek jobs elsewhere. The ones who stay behind may well be the ones who just don’t care.”1

The Right Balance
Our research with hundreds of companies shows just how critical employee engagement can be to an organization’s success when combined with appropriate levels of employee enablement:

• Companies in the top quartile on engagement demonstrate revenue growth two and a half times that of organizations in the bottom quartile. But companies in the top quartile on both engagement and enablement achieve revenue growth four and a half times greater. To quantify the impact, consider an industry with average revenue growth of 8%. A typical company with $5 billion in revenues would see revenues increase by $400 million. A company with top quartile levels of employee engagement could expect an increase of $1 billion. And a company in the top quartile on both engagement and enablement could anticipate an increase of a full $1.8 billion!
• Companies in the top quartile on both engagement and enablement also exceed, by 40% to 60%, industry averages on five-year return on assets, return on investment, and return on equity.
• Companies with high levels of engagement show turn­over rates 40% lower than companies with low levels of engagement. But companies that both engage and enable employees demonstrate a total reduction in voluntary turnover of 54%. Hay Group studies estimate the cost of replacing employees to be between 50% and 150% of salary. For an organization with 20,000 employees and an annual voluntary turnover rate of 8%, the cost of turnover is approximately $56 million (assuming an average salary of $35,000 and an average replacement cost of 100%  of salary). Reducing the voluntary turnover rate by 40% would yield annual savings of $22.4 million. But reductions in turnover through higher levels of engagement and enablement would yield savings of more than $30 million annually—a difference of more than $7.5 million.
• Our research linking employee survey data to performance ratings shows that highly engaged employees are 10% more likely to exceed performance expectations. But highly engaged and enabled employees are 50% more likely to outperform expectations. Past studies have shown that the difference in productivity between superior and typical performers is 35% on average, depending on job complexity. For an organization producing $10 billion of product with 20% of employees exceeding performance expectations, increasing the percentage of high performers by one and a half times (by transforming average performers into superior ones) would increase output by $350 million.

The bottom line: Highly engaged and enabled workers create dramatically better business outputs, more loyal customers, and better financial performance during good times and bad. And organizations are likely to retain these employees and sustain these results.

1 Thomas W. Britt, “Black Hawk Down at Work,” Harvard Business Review, January 2003.

©2012 Hay Group, Inc.
Excerpted and adapted with permission of the publisher, from The Enemy of Engagement: Put an End to Workplace Frustration—and Get the Most from your Employees, by Mark Royal and Tom Agnew (AMACOM, 2012).

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