CFO Guide to Employee Engagement

03 Sep CFO Guide to Employee Engagement

Many companies operate within functional silos where the CFO is responsible for all things finance and the CHRO is responsible for all things employee. This often leads to conflicting efforts that can prove detrimental to the organization. CFOs often focus on hard metrics like ROI, profit margin, and inventory shrinkage.   These types of metrics are often more comfortable for finance executives because they are lagging indicators that definitively show what has already happened using objective information that can be verified.

CFO types tend to be uncomfortable with the softer metrics that surround employees, particularly employee engagement levels. These numbers are based on how employees feel, making them more subjective. Feelings can fluctuate and change frequently and cannot be reconciled to prove their validity, which causes angst for many CFOs.

Progressive CFOs, however, are increasingly stepping out of their comfort zone to take a much larger interest in employee engagement because they understand that this leading indicator is critical to the financial success of their organization.

Employee Engagement – What Is It?

Employee engagement is defined by the employee’s commitment to the company. Couples get engaged because they are committed to one other. The same concept applies to employee / employer relationship. In order for employees to be engaged at work and therefore, committed to the organization, they must believe that the company is committed to them also.

Employee engagement is demonstrated through behavior. Engaged employees believe in their company and will do what is best to help move the company forward, even when nobody is looking. They will go above and beyond, not just for personal financial gain or recognition, but to help the company succeed. They have a personal stake in their company’s success and will proudly tout their employer to others in their everyday lives.

Employee Engagement – Why Is It Important?

The importance of employee engagement is explained by the psychological theory of cognitive dissonance. When an individual’s attitudes and beliefs conflict with their behavior, a feeling of discomfort results. We instinctively seek to restore harmony and rid ourselves of the discomfort by changing either our beliefs or behaviors when the two are not congruent.

For example, let’s assume that you are a highly engaged employee consistently exhibiting productive behavior that supports the company’s success. If you suddenly discover that the company is acting in a way that you believe is unethical, subconsciously you have two choices. You can rationalize and convince yourself that the actions of the company are not that bad, thus altering your ethical beliefs. Or, you can change your behavior by quitting or exposing the unethical actions.

Behaviors are inherently much easier to adjust than beliefs. That means that in the long run if an employee’s attitude towards a company declines resulting in their disengagement from the company, it is their behavior, not their beliefs, that will most likely change.

Employee engagement is important because it drives employee behavior, which has been proven to drive organization results.

Study after study shows a direct correlation between a company’s financial results and how employees feel about, and therefore interact with, the company.

SourceReportFinding
Hewitt ResearchEmployee Engagement Higher at Double-Digit Growth CompaniesCompanies with double digit growth have employee engagement percentages averaging 63%, which is over 20% greater than that of companies achieving single digit growth
GallupHow Employee Engagement Drives GrowthCompanies with an average of 9.3 engaged employees for every actively disengaged employee in 2010-2011 experienced 147% higher EPS compared with their competitors
McLean & CompanyMake the Case for Employee EngagementDisengaged employees cost an organization approximately $3,400 for every $10,000 of salary
Towers Watson2012 Global Workforce StudyHigh engagement companies had a 27.4% average operating margin, while low engagement companies had an average operating margin of 9.9%

Based on these, and many other, research studies, those who are charged with the financial health and prosperity of an organization should view employee engagement as one of their top priorities.

Employee Engagement: How Do You Get It?

  1. Commit to employees. In other words, ask not what your employees can do for you, but what you can do for your employees.

Consider abandoning traditional performance reviews that typically involve pages of standard forms to grade employees on their accomplishments and failures over the past year in an effort to recap past performance. In reality, most performance reviews are based on recent performance and ignore most of the accomplishments and struggles throughout the entire review period. It’s no secret that most people do not enjoy the process of giving or receiving an annual performance review. Managers typically aren’t comfortable in the role of judge. And, the whole process often demoralizes employees.

Consider a coaching program in place of annual performance reviews. Coaching is an interactive process that helps another person improve, learn something, and/or take their performance to the next level. Advantages to the employee include

  • Building valuable skills that can be used to further their careers
  • Increased self-confidence
  • Feeling empowered, supported, and encouraged

But that’s not all. Employers also benefit immensely from coaching by

  • Getting the most out of employees
  • Building the next generation of leaders
  • Retaining talent

If you break it down, the primary element of coaching is simply talking to employees. Actually, it’s more about listening to employees. Find out what employees want to do, how they want to contribute to the success of the company, and how you can help them knock down roadblocks.

  1. Show employees their contribution to the company’s success

People want to be a part of something bigger than themselves. Most people aren’t in it just for a paycheck. They want to know that the work they are doing provides value and has a positive impact all around them. Employees are instantly demotivated when they perceive that the work that they are doing has no meaning and doesn’t provide value. It is imperative that business leaders align the work that employees are doing day to day with the important things that drive success.

  1. Seek input from all levels

In order for employees to truly understand their contribution to the company’s success, they must first know what success looks like. After business leaders define success and what it means to the company, employees across the organization should participate in creating the strategy for achieving success. Once the strategy is solidified, it should be continuously communicated to every employee. Employee involvement in strategy execution should become a part of the fabric of the organization. Because strategies must evolve and change as business environments transform, changes to the objectives and/or initiatives that make up the strategy need to be broadcast quickly and effectively throughout the company.

  1. Foster positivity

Dale Carnegie Training and MSW●ARS Research conducted a study to determine the drivers of employee engagement. According to the study, emotions drive engagement. Employees who have high levels of enthusiasm, inspiration, empowerment, and confidence are 5 times more engaged than employees who have negative emotions.

In order to foster positive emotions, leaders should project optimism in their interactions with employees at all levels. Negativity breeds negativity.   There is nothing more demotivating than a boss who complains about everyone and everything around him or her.

Leaders should also build a climate of trust. They should exhibit transparency and consistency in their actions and should never, ever gossip about employees to their co-workers.   Gossip has negative consequences in any situation, but especially when it is perpetrated by someone an employee is supposed to respect and follow. Trust is immediately diminished and relationships are weakened when an employee is forced to participate, even if they are just listening, in unconstructive conversations about their colleagues.

Employee Engagement: How Do You Measure It?

An obvious way to measure employee engagement is periodic employee engagement surveys. In other words, simply ask the employees through a series of questions how they feel about the company. Employee engagement surveys are a valuable tool if given in the right environment, one where the employees trust the leaders. Without trust you are not likely to get honest results, especially in smaller companies where employees may fear that they will be “found out” if they are critical towards the company.

Other potential pitfalls of measuring engagement through surveys include bias from recent events and the potential for gaming, i.e. employees telling you what you want to hear rather than what they really think.

And, because engagement is about attitudes and feelings that can change frequently, the survey results will only tell you about a point in time and doesn’t necessarily reflect an employee’s overarching attitude towards the company. So, while it is certainly helpful to find out what employees perceive their level of engagement to be, there is more straightforward data that companies can gather to ascertain the engagement level of employees.

Engagement drives behavior. It naturally follows that behavior is a more accurate indicator to use in measuring an employee’s engagement level. A few behaviors to measure are:

  1. Discretionary effort. This is the amount of time spent working outside of normal working hours. Engaged employees are passionate about their work and will often gladly spend their own time to help the company succeed.

This does not mean that employees should be expected to work long hours, or sacrifice their personal life for the sake of the company. Employees should be recognized for quality of work over quantity. For this purpose, you are simply using past information about the amount of extra effort employees chose to put forth so that you can make an assessment about their engagement level.

  1. Volunteering for projects. Employees who are engaged will view opportunities to work on projects outside of their normal job duties as a privilege that they can look forward to, even if it means putting in extra time.

 

  1. Suggestions.  Employees who believe that their opinions matter will look for better ways to do things and bring those suggestions to their managers. And to take it a step further, the number of suggestions that are accepted is an indication of alignment of employees and the company.

 

  1. Training Opportunities. Do employees seek out training opportunities? Engaged employees want to learn more so that they can grow professionally and further the company’s success.

As we all know, actions speak louder than words. While it is important to seek feedback from employees through surveys, studying employee behavior gives leaders quantifiable insight into how employees feel about the company.

Summary

Forward thinking CFOs understand the importance of stepping outside of their functional area to focus on employee engagement, a critical factor driving success. The importance of employee engagement has been studied at length and the benefits have been proven by real data time and again. Employee engagement should be an objective at every organization supported by initiatives that are supported by the entire executive team. As with any initiative, executives should take the time to find the right metrics to measure success.

Jennifer Eversole
Jennifer Eversole
jeversole@managementstack.com
1Comment
  • Avatar
    Robert Lehrer
    Posted at 11:21h, 27 July

    This is a tremendously valuable article that “connects the dots” so that executives understand the value to their organizations of employee engagement.