Can you put a price on employee engagement, or rather, a lack of it? Absolutely, says Anders Wikström, innovation researcher at Swedish research institute RISE, who also believes that innovation and engagement go hand in hand.
In this post, Anders Wikström shares tips on the success factors that create the conditions for innovation and provide high levels of employee engagement.
According to Wikström, employee engagement should be built by the organization by creating the right conditions for employees to feel good and reach their potential. Once the conditions are created, engagement and innovation flourish and lay the foundation for a long-term sustainable organization.
The Cost of Disengaged Employees
When Anders Wikström tells business leaders that the cost of disengaged employees is estimated at SEK 100,000 (approx. $11,500 / £8,800) per employee, per year, he is met with different reactions - from "Oh! That much?" to "For us, it’s three times as much as that" - depending on the organization's situation.
According to Wikström, interest in so-called "soft values" like engagement has increased within management circles as a result of improved methods for measuring engagement and that make it easier to show the effects of engagement in actual business results. The development has also given HR a more strategic role than before.
“Today, organizations are a lot more ready to listen compared to just five years ago. Employee engagement has become such an obvious subject and has been taken up by magazines such as the Harvard Business Review.”
But if we back up a step: what does disengaged employees really mean? In brief, it’s the cost of the untapped potential of employees who are not motivated or engaged in their work.
A formula often used to calculate the cost of disengaged employees looks like this:
Proportion of disengaged employees x cost of half an annual salary x number of employees = the cost of disengaged employees
Put simply, employees who are disengaged and unmotivated are not as productive as they could be. To determine the proportion of your employees, you can use employee surveys or other measurement tools.
Measuring the Right Things
"What I do in my research is measure the conditions for innovation, productivity, and well-being in organizations. Just measuring and giving feedback on a result can make a big difference to engagement, and we know that this will have a clear impact on profitability in the long run."
Wikström means that many organizations use outdated metrics that focus on the results of activities already carried out, so-called "lagging indicators", such as how much money has been spent over a certain period of time. These metrics have been easy to measure and been given high priority in organizations but are not seen as particularly motivating or relevant to individual employees. According to Wikström, traditional KPIs need to be combined with "leading indicators".
“We need to ask the right questions to find out what prerequisites employees need to feel good, perform, and be innovative. Then we get completely new metrics that can be analyzed to find correlating factors. Based on that, we can work with the right things to get the results, instead of trying to control things afterward as we do with 'lagging indicators'. However, it’s not about removing the old metrics completely, but about balancing them with new ones to get a better overall picture.”
Conditions for innovation = conditions for engagement
According to Wikström, if you create the conditions for innovation within the organization, you get increased engagement in return.
"There is a lot of research that shows the connection between healthy employees and the ability to innovate. I usually say the worst thing we can get if we invest in the right innovation conditions in organizations is that we get healthy employees. And the best we can get is healthy and engaged employees, together with a lot of power and innovation that the organization can work with in the future. So, it's a win-win."
“To measure and talk about engagement is actually quite boring, I think. For me, creating conditions for engagement is fun. It's a bit like the chicken or the egg scenario - which comes first? I think the conditions come before engagement. If we create the right conditions, we will also create engagement. It is very difficult to be disengaged in an organization that creates the conditions for success. The engagement comes automatically.”
So how do you create the conditions for innovation, thus engagement? Wikström explains the importance of finding the right balance:
A prerequisite for innovation is creating a balance between the three different modes: the delivery mode, a mode where we need to recover, and a mode where we need to learn new things. All three modes need to be accommodated in our working day.
Exercise and health - a smart investment
Traditionally, employers have mainly focused on the delivery part, and to some extent, learning, while recovery has been the employee's personal responsibility. However, today, this is on its way out, as evidenced in organizations’ increased commitment to employee health and well-being. And investing in employee health is a smart investment, according to Wikström:
"In the future, the question won’t be whether employers can afford to let employees go to the gym during working hours, but whether they can afford not to. I recently spoke with a company that has introduced one hour of working out each workday for its employees as a form of recovery. Employees aren't allowed to work out alone; they need to work out at least in pairs, to create more conversation and community. Their plan is to have the delivery mode in the morning, recovery in the middle of the day, and then delivery and learning in the afternoon. The aim is to become more innovative. I am convinced that this is the right way to go, and I try to manage my calendar similarly."
Employee benefits with a focus on health and wellness benefits are a popular way for employers to support employee health and contribute to a better work-life balance. Can benefits contribute to increased engagement?
"I absolutely believe that employee benefits can be a prerequisite for increased engagement. If I am an employee and I am offered a range of benefits to choose from, it’s more likely that I will find something meaningful to me. This becomes especially clear when it comes to health and well-being. If I feel good, I perform well. As an individual, if I see that my employer offers benefits that help me feel good, and, in turn, help me perform better, I should be able to make the connection that better performance makes the company more successful. That, of course, also makes it more motivating and meaningful for me to go to work."
More success factors for engagement
In addition to finding the right balance, training during work hours, and offering a range of attractive employee benefits, what other success factors are there for achieving high levels of employee engagement?
"On an individual level, it is very much about seeing that you make progress in a job that you feel is meaningful. On an organizational level, involving leadership and having a high level of psychological security are important. Managers need to provide positive feedback to make employees feel seen and involved with clear goals and a clear vision. Of course, the conditions differ depending on the context. Therefore, there is no "secret recipe"; it is about creating the right conditions based on the important parameters in your role. Leadership is crucial to this."
Wikström means that management needs to continuously support employees in putting their work tasks in a context that makes them meaningful:
"For example, if you work in food production, you can either see it as 'I pack food into containers, which is then put on the conveyor belt over there.' Or you can see it as 'I provide people with produce that makes them feel good and perform well in their work, and if I do my job well, it creates greater value for our customers."
Start-ups and the balance that leads to a strong employer brand
When it comes to the connection between employee engagement and a strong employer brand, it is difficult to know which comes first, according to Wikström:
“If you have a strong employer brand, there are often good reasons for it, such as how previous employees talk about their experiences, or that you have been noticed for offering great conditions to your employees. Things that create engagement also contribute to a strong employer brand.”
"If you look at our tech start-ups, they are often good at attracting employees through their exciting and innovative culture. Later, these companies face challenges as they grow and when they need to move into a more administrative structure. Then it's about finding the balance between delivering today and the exploration required for tomorrow. It's important never to lose the exploratory side, because then you lose many of the employees who like this element, and who have been involved in building the brand. It is a balancing act, and the better you get at it, the better you become at creating engagement and building a strong employer brand."
What can different parts of the organization do to increase employee engagement?
Nearest manager: listen actively
As a manager, you need to practice the ability to actively listen to your employees, which, today, is often neglected. It is very involving but builds a lot of trust to actively listen to employees and ask the right kind of open and exploratory questions when they come up with something. We can more easily see what the individual really needs an answer for and arrive at the right solution or change for the individual and for the entire organization more quickly.
HR: support leadership
HR must support the leadership in the organization and provide them with the right tools and methods to perform as leaders. Support managers in active listening, as well as in how to give feedback and how to involve their employees. Assist in finding underlying root causes for any employee challenges, beyond simple answers one can get through surveys or via the intranet. HR has a vital role in building long-term sustainable organizations.
I know organizations that have combined HR and innovation roles. I think that is fantastic as the conditions for a sustainable organization are connected with the well-being of employees, and the ability to be innovative. And that is precisely what the research shows: that there is a very clear correlation.
CEO: update the metrics
The CEO and management have a great responsibility to point out the direction for the entire organization so that everyone feels involved in meaningful work with a clear and common goal. People must also learn to ask for the right things. I usually talk about three different truths in an organization: the perceived truth, the real truth, and the insight-driven truth.
The perceived truth seldom matches the real one when we begin to measure. For example, nine out of ten organizations say they have a big workload, but when you look closer, it is rarely the workload that is the real problem. Instead, it’s the unclear expectations, lack of support, or high fragmentation that are the issues.
Often people don't work proactively but instead work on everything that pops up in front of them. By asking the right questions and measuring the right things, you can identify which measures have the greatest effect, and then reach the insight-driven truth. However, this places great demand on management, who need to challenge the perceived truth, which can be very strong in organizations.
So, now that we can see employee benefits play an important role in increasing employee engagement, exactly what employee benefits are most important to employees? To find out the answer, we ran a survey of approximately 5,000 participants aged 18 and older in Europe. The results can be found in The Benefits and Engagement Report, download today!