Thursday, 11 October 2012

Amid Falling Employee Engagement, New Approaches Emerge

Pay increases remain the prominent engagement tool, but potential employee turnover and lingering economic uncertainty call for better communication and targeted rewards, a new survey finds.

Despite an improving economic picture, low levels of employee engagement remain a persistent problem for many employers.
When compared to two years ago, nearly twice as many organizations are reporting reduced engagement, according to a recent survey conducted by Mercer, a consulting firm.
The survey of HR practitioners at 470 North American companies showed that 24 percent reported a drop in their employees’ engagement this year, compared to 13 percent in the same survey conducted in 2010.
Given the deep recession and succeeding sluggish recovery, it shouldn’t be a surprise. After an initial boost in engagement and productivity during the early stages of the recession, lower staffing levels and increased work have eroded engagement. Layoffs, pay freezes and limited development opportunities take their toll.
“With all the cuts that have been going on, it’s finally catching up to what employees are feeling,” said Loree Griffith, principal in Mercer’s rewards consulting business.

The Dark Side of the Bright Side

The news isn’t all bad. According to Mercer’s study, more than 40 percent of organizations plan to expand their workforce this year, compared to 27 percent in 2010, and fewer plan to make reductions this year, 16 percent compared to 25 percent two years ago.
But even that good news comes with a potential dark cloud. Growing businesses now face a retention and talent shortage, in part of their own creation. Almost 60 percent of organizations indicated that they anticipate an increase in voluntary turnover this year, particularly in high-demand roles such as information technology, engineering and executive management.
The combination of sinking engagement and rising turnover calls for a multifaceted talent management approach that sources external talent to fill in-demand positions but also focuses on developing and engaging internal talent to plug gaps.
“One obvious way is to enhance the career experience so employees can get the right kinds of skills and experience to build their skills to close those gaps,” Griffith said.
That means providing access to management-type experiences through project-based work that will deepen and broaden their experience, and potentially boost engagement in the process.

Communication Is Key

In addition to expanding development options, employers should also focus on communicating better with employees to stave off potential retention problems.
“Communication is about creating that understanding and awareness and appreciation for what the employee deal will be for an employee,” Griffith said. “Looking at one aspect of what they are getting, like their base salary, may not tell the whole picture.”
Griffith recommended communicating a broader picture of total employee rewards that includes salaries as well as benefits, work-life and flexibility programs as well as career development opportunities.
Younger workers in particular might not even be aware of the benefits their employers offer, let alone the value of them. A recent study conducted by The Hartford, a financial services firm, found less than half of millennials have signed up for employer-offered disability insurance, despite approximately 90 percent saying they would have to change their lifestyle if they lost income for three to six months.
“When you look at the broader, more holistic view of their rewards packages … that can start to have a bigger impact on the employee, particularly when they may be thinking about leaving and assessing other firms,” she said.
HR portals that calculate and demonstrate the complete value of a total rewards package are one way to paint the bigger picture. So are career pathing and planning tools that demonstrate the skills and competencies employees need to move, either laterally or vertically. Here is where social networking technology can play a pivotal role.
“Being able to reach out to someone in your company who may be in a position that you aspire to, social media can make that a bit easier to connect with the right people to explore how they might be able to develop their career,” Griffith said.

Pay Is Important, But It’s Not Everything

When asked what practices will have the greatest impact on employee engagement, base pay increases remained No. 1 among survey respondents. 

“They did come up the highest in terms of having the greatest impact, but closely followed by that was the vertical career progression: Allowing employees those opportunities to gain those broader experiences to grow to bigger jobs in the company,” Griffith said.
Other potentially impactful reward elements include variable pay, such as short- and long-term incentive programs, health care and non-monetary benefits such as work-life programs, performance management programs, vacations and training.
“Firms are really trying to look at a number of these things,” Griffith said. “What’s happening is that firms are building in their arsenal a number of these other perhaps non-cash things like career development, work-life [programs] and training. And when economic times are down, they may tend to really use those types of things more.”
In addition to communicating better about the many elements on offer, organizations are also doing a better job of segmenting the workforce to identify where to place their bets based on how critical job functions are and where skill sets may be scarce.
“It’s really about trying to ensure that you’re appropriately allocating the pay increases in the right way, perhaps geared to your top performers so there is more of distinction and effect on ability to retain and engage,” Griffith said.

by Mike Prokopeak

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