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Most companies assume they are doing well when sales and profits are up, moreover, but these are trailing indicators, versus the leading indicators that should be monitored: management and employees.

So how many financial directors know that having loyal and satisfied employees could make their company and their shareholders more money?

Critical mass 

Employee engagement also leads to improved recruitment and retention of staff, reduced absenteeism, sickness and stress and a healthier, happier and more motivated workforce.

A critical mass of engaged business units, each influencing numerous outcomes, produces a cumulative effect on the overall enterprise.

The cumulative effect of many engaged teams serves as a competitive advantage that helps the organisation sustain itself during poor macroeconomic conditions and flourish during rising economies.

Simply stated: engagement predicts Earnings Per Share (EPS).

In 2007 Gallup analysed data from 332 organisations, representing a total of more than 4.5 million people, to calculate the link between employee engagement and EPS.

The research shows that public companies ranking in the top quartile of employee engagement had EPS growth of 2.6 times the rate of those that were below average.

Improve productivity 

Standard Chartered Bank has been actively measuring, managing and improving its employee engagement since 2001 over which period the company’s value has increased by a factor of 2.5.

Tim Miller, director of people, property and assurance at the bank is clear how employee engagement drives value creation.

He says that the best way to drive overall business performance is to improve productivity in every individual team. Having measurement and reporting of engagement at team level is vital, in his view, to create the right conversations on issues that matter at the local level.

“Using this focus, we have seen spectacular results, with our most engaged bank branches having significantly higher deposit growth, better cost income ratios, and lower employee attrition than less engaged branches,” Miller adds.

He says that this translates into real profit with Standard Chartered’s most engaged teams producing over 20 per cent more returns than less engaged groups.

Mentally absent 

After 40 years research, Gallup has identified 12 key elements that measure employee engagement according to a framework of basic needs, individual contribution, teamwork and growth.

Employees who are not engaged may be productive, but they are not emotionally connected to their company.

Actively disengaged employees are physically present but are mentally absent and will proactively work against the company.

Peter Flade is managing partner at Gallup.

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Related links

• Gallup