HR Connect Asia Pacific

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1 Employee Engagement Trends in Hong Kong and its Impact on Employers By Andy Leung, Senior Consultant, Aon Hewitt Hong Kong The economic recession that started in 2008 dramatically changed the landscape of human capital challenges. Severe financial constraints forced organizations to make tough decisions on how to invest their financial resources on critical people programs such as development, compensation, and benefits. While the economic situation has stabilized in recent years, and predictions for 2014 are marginally optimistic for many regions, human capital challenges have not eased. With one out of two CEOs in Hong Kong still citing People Issues as their top business challenge 1, engaging the right employees in the right behaviors remains a critical ingredient for how companies can improve their competitiveness and business performance in this volatile market. Volatile Hong Kong Employee Engagement In the past five years, two dominant trends have existed in the engagement levels of Hong Kong employees: enhanced volatility and lower levels than Asia Pacific and Greater China. While there are no simple explanations for these trends, two emerging hypotheses exist. First, Hong Kong s economy and its employee engagement rates are highly sensitive to local, regional, and global economic movements (e.g., Hong Kong s GDP levels, economic conditions in Mainland China, European sovereign debt issues, etc.), where these macroeconomic factors have a direct impact on business decisions. 1 Aon Hewitt Best Employers 2013 Hong Kong Study Aon Hewitt Singapore Pte. Ltd. Co. Reg. No.: D 1

2 Comparing the engagement evolution and the GDP changes in Hong Kong for the last five years shows a one-year lagging relationship between the two factors. When GDP levels decline or don t grow as much as the previous year, engagement levels the following year also decline. However, when GDP levels increase, engagement levels improve the following year. This may suggest that people-related investments in critical engagement areas, such as rewards, career development, and people managers, serve as discretionary investments that have a direct relationship to economic conditions. The second hypothesis to explain the Hong Kong engagement trend is the high expectations held by employees. With a mature business environment and a high number of regional headquarters for multinational corporations, employees in Hong Kong are familiar with many world-class talent management practices. Such familiarity has raised their understanding and expectations for their own work experience in areas such as performance management, career development, training & development, rewards communication, high potentials, and leadership programs. In contrast, Best Employers 2 offer continuous or even higher investment on people during economic slow-downs, as a strong differentiator in keeping their best talent and preparing to rebound in more prosperous times. This approach has benefitted Best Employers with a consistently improving trend in average employee engagement from 76% in the 2007 study to 85% in the 2013 study. 2 As defined by Aon Hewitt, Best Employers are companies that record higher levels of employee engagement, leadership effectiveness, and a high performance culture. Aon Hewitt Singapore Pte. Ltd. Co. Reg. No.: D 2

3 What drives engagement in Hong Kong? Aon Hewitt s engagement model clearly highlights the behaviors and drivers 3 that exert the greatest impact on employee engagement. In Hong Kong, Career Opportunities and Managing Performance are the top two engagement drivers list, closely followed by Pay as the third driver. The presence of Pay as a key engagement driver is a notable change. A deeper look at these drivers reveals some interesting findings. First, Career Opportunities, Managing Performance, and Pay are not equally valued by all employee groups. 3 Engagement drivers represent the levers that organizations can change to steer or precipitate the right behaviors to improve engagement. Drivers are identified through analysis that prioritizes them according to their statistical relationship with employee engagement and size of opportunity for improvement. Aon Hewitt Singapore Pte. Ltd. Co. Reg. No.: D 3

4 Engagement Drivers of Hong Kong Employees (By Employee Group) Engagement Drivers Gen Y Female Middle Management Career Opportunities Managing Performance 2 5 Work Processes Organization Reputation 2 Innovation Benefits 4 6 Pay 6 Work Tasks 3 Senior Leadership 3 Brand Alignment 3 4 Source: Aon Hewitt Best Employers 2013 Hong Kong Study Second, employees are looking for enhanced understanding and communication on these factors. For example, Pay as a key engagement driver does not necessarily mean that organizations need to increase salary levels to improve engagement. Many employees are looking for increased clarity on (a) the process underlying pay decisions (e.g., which companies are used in the benchmark, how annual salary adjustments are decided); (b) salary levels versus peers internally and externally; and (c) total rewards they receive from the company (e.g., base pay, incentives, retirement benefits, medical benefits, etc.) Tips for Hong Kong Employers As resources are scarce and expectations from employees continue to grow, successful organizations need to be clear about how to improve employee engagement by focusing on a small number of highimpact initiatives. In addition to focusing on the key drivers of engagement, such as providing clear career development programs and a leadership pipeline, there are a few pivotal leading practices that Best Employers have implemented that other organizations can leverage to more actively engage their own employees: Aon Hewitt Singapore Pte. Ltd. Co. Reg. No.: D 4

5 1. Develop Effective People Managers Designing the right people programs to implement is only part of the solution to improve engagement. Long-term success rests on having effective people managers who have the accountability, skills, and incentives to engage their teams. Leading organizations develop effective people managers through a holistic approach. To implement such an approach in your own organization, we recommend the following steps be taken: First, design the role of people managers to manage people. Often times, people managers don t have the time to coach, develop, and manage teams because their roles exclude these activities. Second, establish goals for all people managers on engaging, developing and retaining employees and link achievement of those goals to meaningful rewards and recognition. Next, create long-term development programs for people managers that cover the core knowledge, skills and behaviors essential to people managers and link these to career development and succession management programs. Effective people management needs to be an important criteria when evaluating people for promotions. Finally, communicate and recognize people managers who have excelled in enhancing engagement to build a culture that recognizes people managers as the critical lynchpin to successful engagement. It is important to note that these practices are not mutually exclusive. Weak programs in one or more of these areas will result in mixed messages to people managers about engagement and failure to sustain ongoing engagement improvements. 2. Define and Deliver a Unique and Compelling Employee Value Proposition Organizations often find that when they invest in various engagement initiatives independently, the impact on engagement levels often lacks cohesiveness. Initiatives such as training & development, career development, rewards, and communication should be closely linked together to maximally impact employee engagement. Best Employers ensure that a strong value proposition is clearly communicated and internally marketed so their employees truly understand and appreciate the overall work experience being offered to them. 3. Tailor Talent Management Practices to Engage Specific Employee Groups and Demographics Beyond the economic and geographic conditions surrounding employees and organizations, numerous individual factors influence employee engagement. Understanding the different values that specific employee groups (by job level, function, generation, and gender) place on individual factors allows Best Employers to identify critical gaps where they need to invest their resources. Targeting and tailoring people programs are an important step towards achieving optimum business outcomes. As demonstrated by recent research, Best Employers achieve a 40% higher growth in profit than market average. To win the talent war and improve employee engagement levels, Aon Hewitt Singapore Pte. Ltd. Co. Reg. No.: D 5

6 employers need to devise robust practices that strike a balance between supporting the business and engaging employees. Contact Andy Leung, is Senior Consultant with Aon Hewitt s Performance, Rewards & Talent Practice in Hong Kong. He can be reached at andy.leung@aonhewitt.com. With contribution from Kelvin Lam, Principal, Performance, Reward & Talent, Hong Kong Aon Hewitt Singapore Pte. Ltd. Co. Reg. No.: D 6