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Thought Leadership Whitepaper IBM Software Incorporating employee engagement into the business strategy of employee retention Why it is a top priority for organizations

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Incorporating employee engagement into the business strategy of employee retention 2 Employee retention continues to remain a top priority at many organizations and one that companies increasingly view as a driver of business strategy. Business-critical knowledge can walk out the door when an employee leaves the company. While employee retention fgures have long been used by companies as a measure of their performance in developing an efective organization this view of employee retention is not only outdated but these fgures may not be detailed enough to truly determine the organization’s efectiveness. The concept of employee retention is more complex than simply evaluating employee turnover from one year to the next. These fgures of employee retention can be somewhat misleading – it is not necessarily the number of employees an organization loses it is the number of top-performing employees that leave the company that should be of concern. For example management is one of the key reasons employees decide to stay or leave an organization. If there is high turnover among the management ranks employees may also feel unstable in this ever-changing environment. Yet on the other hand it may not be the best business strategy to retain a manager that is disliked by employees. The business strategy of employee retention actually lies with employee engagement retention is an outcome of engagement. What most organizations fail to realize is that employee engagement is one of the biggest retention factors they have control over. Engaged employees not only stay longer with the organization they tend to be more productive more conscientious make fewer errors and take better care of customers. The business strategy of employee retention must incorporate methods that achieve a high level of employee engagement among the organization’s top performers not necessarily the entire workforce. The importance of retaining top performers Many organizations ponder the questions “What should the goal be for retention” and “What is an appropriate level for employee turnover” Y et in asking these questions many organizations do not realize that there are no set answers. If for example an organization loses fve percent of its top performers each year the results from this turnover could be potentially devastating to the company. On the other hand if the company is losing 20 percent of its least productive employees this could actually be very benefcial for the organization and an opportunity to increase the strength of its workforce each year. In other words it is not just about retention anymore – it is about retaining the very best people at each level within the organization. The key to efective retention of top performers is to determine the factors that currently do and will keep them engaged. The starting point An organization must frst determine who the top performers and high potentials are within their workforce. Of the many ways this can be accomplished some include involving management at each level to create a list of those employees who are performing at levels that exceed expectations and those who exhibit the potential to become top performers or utilizing the results from employee performance reviews to separate those who scored the highest from those who scored the lowest. This method of gaining a clear understanding of who the top performers are within an organization is called employee segmentation. Once an organization has segmented its workforce it can then start to measure retention among its

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2 3 highest potential and highest rated or most productive employees. By viewing each segment separately organizations are creating a more appropriate benchmark to measure employee retention i.e. is the organization retaining or losing a high percentage of its best people Employee engagement at each level In addition employee segmentation is an important method to utilize when evaluating employee engagement at each level. For instance the factors that engage the most productive employees in an organization may not be the same as the factors that engage the least productive employees. Those employees who receive the highest rankings on their performance reviews may tend to express higher levels of job satisfaction when they are presented with challenging opportunities that enable them to grow and learn. Those that receive the lowest rankings might be more focused on issues surrounding work/life balance and job security. While some factors such as good communication are important among employees the attempt to focus on the full spectrum of factors that engage the entire workforce may cause an organization to omit some of the factors that can be the most important to the company’s most productive people. In other words by honing in on the factors that engage an organization’s top performers the company is likely to beneft from the increased longevity of these employees at the organization. Employee satisfaction does not equal engagement While organizations may be aware “through the grapevine” that employees are unsatisfed it is the reasons for the dissatisfaction that elude them. While employee satisfaction is important it is not the end game – it is only one piece of employee engagement. Satisfaction is imperative in that for those individuals who are top performers satisfaction may be derived from their achievement orientation their ambition or their sense of responsibility. On the other hand the attempt to satisfy an under-performer who will only be content with a lightened workload may not be a worthy cause. Again the focus is on confrming that those individuals who have been identifed as top performers and high potentials are engaged in the organization. As stated employee engagement incorporates employee satisfaction but also includes the essential elements of pride commitment and loyalty in the organization. Engaged employees are not concerned with meeting the minimum requirements to complete a task they are focused on what they can do to better the company. Essentially they take ownership in the company despite whether or not they actually own a share of stock. The role of employee engagement surveys It is here that employee engagement surveys come into play to help determine the factors that make and keep the workforce engaged. With engagement surveys the issues that are driving morale up or down can be pinpointed because the surveys provide an equal opportunity for the entire population of the organization to have a voice. For example an organization may have created an entire program around work/life balance. Yet after receiving the results of the company’s employee engagement survey discover that this program is only representative of the needs of a small segment of the organization when in fact the top-performers are actually seeking more opportunities and challenges in their daily work. Regardless of organization size or number of locations an employee engagement survey provider can assist the organization with project management from start to fnish. The provider’s team of experts works alongside the organization to design the survey and provide administration whether it is via the web or paper-based. For many

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organizations it is important to have a third-party administrator to provide a solid sense that individual results will be kept confdential. Survey providers can also tabulate the results to ofer dynamic reporting and analysis in addition to action-planning assistance. The employee engagement survey process Before the employee engagement survey process begins the organization needs to make sure it has the buy-in of management at each level. This can mean providing management with demonstrations that show the survey will be objective legitimate measurable and statistically valid. A lack of enthusiasm at any level can hurt the process as well as the efective use of the survey results. An organization can also determine who the infuencers are in their company and get these people excited about driving the survey process. They can help spread the word before and during survey administration as well as assist in making sure that each employee has the opportunity to participate in follow-up meetings to hear results and also in the action planning process. Once survey administration is complete an experienced employee engagement survey provider is able to analyze the survey results to provide the top areas that are driving engagement in the organization’s workforce. Although they vary industry to industry and organization to organization and may even change year to year there are six elements that are the most common drivers of employee engagement: involvement and belonging recognition growth and development opportunities optimism about the vision and future of the organization leadership trust and open two-way communication. There are also a number of other important areas such as issues around diversity policies and procedures safety and compensation and benefts which should be examined as they can be drivers of engagement in some instances. Taking action with results Once the factors that are driving engagement in the organization have been determined the company can then narrow down the list to focus on two or three areas. It is important for the organization to begin with a concentration on the factors that will make the most diference to the employees and put energy around improving these areas. The employee engagement survey process also must conclude with an appropriate follow-up procedure. An employee engagement survey is not a worthy endeavor for the organization if only the top management is allowed to view the results. The results should be shared throughout the organization accompanied with expectations of how the information should be leveraged to create and enact development plans. Once results are shared with managers it is important that managers in turn share the results with each of their employees and allow them the opportunity to participate in the follow-up process asking questions and suggesting solutions. An employee engagement survey provider can also help these managers to get behind the results and develop action-oriented plans that are specifc measurable accountable and time- bound. Linking the results As previously mentioned employee engagement is linked to retention and the results from an employee engagement survey can actually show an organization the specifc components of engagement that are having the most infuence on retention. For example many employees are not as likely to leave a company as they are to leave a manager and in other instances leadership issues could highly infuence employee engagement as well as retention. Incorporating employee engagement into the business strategy of employee retention 4

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Employee engagement survey providers are also able to help an organization link survey results back to customer satisfaction. For example an organization can determine how satisfed its customers are going to be six months from now by tracking the engagement level of its employees right now. In other words it is likely that a current event in an organization that causes morale or engagement to go up or down will afect the way customers feel about the organization within a six month time period. For more information T o learn how to build a smarter workforce visit: ibm.com/social-business 4 5

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LOW14084-USEN-01 Please Recycle © Copyright IBM Corporation 2014 IBM Corporation Software Group Route 100 Somers NY 10589 Produced in the United States of America January 2014 IBM the IBM logo and ibm.com are trademarks of International Business Machines Corporation in the United States other countries or both. If these and other IBM trademarked terms are marked on their first occurrence in this information with a trademark symbol ® or TM these symbols indicate U.S. registered or common law trademarks owned by IBM at the time this information was published. Such trademarks may also be registered or common law trademarks in other countries. Other product company or service names may be trademarks or service marks of others. A current list of IBM trademarks is available at “Copyright and trademark information” at: ibm.com/legal/copytrade.shtml The content in this document including currency OR pricing references which exclude applicable taxes is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. The performance data discussed herein is presented as derived under specific operating conditions. Actual results may vary. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY EXPRESS OR IMPLIED INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NONINFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided .