Employee engagement. Chartered Institute of Internal Auditors

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1 26 October 2017 Employee engagement Chartered Institute of Internal Auditors This is an introduction to some of the principles and ideas surrounding employee engagement to help you plan a review. What is employee engagement Why is employee engagement important Key drivers and core values How can organisations approach employee engagement Risks and responses What can internal audit do? Examples of employee engagement What is employee engagement? Employee engagement is about the way people behave at work and how the employer and management influence that. An 'engaged employee' is someone who sees their job as worthwhile or interesting and is therefore more likely to be fully involved in and enthusiastic about the things they do. This goes beyond commitment and job satisfaction as it is refers to the additional effort an employee puts into his or her work that delivers high performance, often referred to as 'going the extra mile'. An engaged employee will: Take pride in their job showing loyalty towards not only to their team/line manager but also the organisation. Keep up-to-date with changes and developments, to enable them to do the job better. Be adaptable and responsive. Take the opportunity to discuss improvements in the work they or the team do with colleagues and line managers. Go the extra mile! Employee engagement is also about the way an organisation listens to, builds trust and improves relationships with its staff. It's about sharing a common purpose through a culture of communication and involvement that enables improvements in staff morale, retention and performance. Employee engagement starts with the organisation and management showing a clear commitment to making employee engagement part of its business ethics and culture: Sharing information on business plans and performance. Living the business values. Seeking views and ideas from employees on how to improve the organisation. 1

2 It's a matter of listening, learning and leading by example. Here are a few definitions that encapsulate the essence of employee engagement: The Work Foundation definition: 'Employee engagement describes employees' emotional and intellectual commitment to their organisation and its success. Engaged employees experience a compelling purpose and meaning in their work and give of their discrete effort to advance the organisation's objectives'. The Institute of Employment Studies definition: A positive attitude held by the employee towards the organisation and its values. An engaged employee is aware of business context, and works with colleagues to improve performance within the job for the benefit of the organisation. The organisation must work to develop and nurture engagement, which requires a two-way relationship between employer and employee. Why is employee engagement important? When employees are motivated, customers are more likely to be happy and stakeholders will benefit from the organisation's success. In other words engaged employees improve performance: for businesses this means profit. The Training Foundation has called this the 'Virtuous circle' and it is of strategic importance to most organisations, public and private. Realising such an ambition is difficult because it requires time, effort and continuous development. For some it remains elusive and out of reach. The 2009 MacLeod Report (Engaging for Success), commissioned by the Department for Business, Innovation and Skills (BIS), found evidence that employee engagement levels across UK organisations were generally low and companies who are unwilling to address the issue do not perform as well in financial terms as those that do. 2

3 A white paper by the Training Foundation in 2010 entitled Employee Engagement: The Rules of Engagement suggests that many organisations are confused about employee engagement and what it can deliver. They have tried to clarify the key messages by summarising the benefits, the main drivers and the core values that organisations can promote and implement. It's a matter of listening, learning and leading by example. Benefits of employee engagement 1. Delivery of improved performance. 2. Facilitating change. 3. Staff retention. 4. Revenue growth. 5. Customer satisfaction/loyalty, profitability, productivity and lower employee turnover. 6. Better employer/employee relations based on mutual trust and co-operation. 7. Higher levels of innovation. 8. Lower rates of sickness or absenteeism. 9. Improved health and safety performance. Key drivers and core values Key employee drivers: Feeling valued. Feeling fairly treated. Health and wellbeing. Feeling of being 'in the know' and listened to. Sense of involvement. Sense of personal growth and development. Belief in the employers honesty and integrity. Employer core values: Caring for people - handling conflict and problems. Honesty and fairness. Open and clear communication, advice and guidance. Involving people - building and sustaining relationships. Coaching and assisting. Ethical practice. The Chartered Institute of Personnel Management (CIPD) periodically publishes an Employee Outlook Survey that incorporates job satisfaction and engagement. The following tables provide an overview of engagement levels between Autumn 2013 and 2014 and how they vary between sectors and the size of the business. The extent to which employees are engaged at work Autumn 2104, % Spring 2014, % Autumn 2013, % Engaged

4 Neutral Disengaged Employee net satisfaction by sector and size of organisation Autumn 2014 Spring 2014 Autumn 2013 Overall Private Public Voluntary Micro business Small business Medium business Large business How can organisations approach employee engagement The economic downturn has put a severe strain on the relationship between organisations and their employees. Employees are enduring pay freezes, pension reductions and job cuts, while in many cases bonuses still roll in at the top. All of which make employee engagement difficult to achieve. It therefore requires a long term commitment linked to the organisation's vision of social responsibility. To begin with, engaging employees needs support from the top and have high visibility. Board members and senior managers must believe in it and what it can achieve. Policies help to explain the intentions and procedures can provide the mechanics but it must be an expression of the organisation's values and be part of the pervading culture and climate - the way things are done. To establish the right climate some organisations formulate a separate staff engagement strategy with specific objectives, actions and a review process. Regular exchange of views with employees is essential within any strategy or plan to obtain support and commitment: Interviews, surveys, employee liaison groups, intranet discussions, listening and seeing, appreciative enquiry, storytelling are all useful tools that can be employed but all these activities need to translate into some form of meaningful action plan so that employees can see it is being taken seriously. A report to the UK Government by David MacLeod and Nita Clarke entitled 'Engaging for Success: enhancing performance through employee engagement' offers several employee engagement case studies in the private, public and charity sector. 4

5 The report considers the different ways organisations can sustain employee engagement during a time of change and severe financial pressure, this includes a number of scenarios: Setting up a new business unit. Financial crises with budget deficit. Fierce competition for service contracts and talent. Company running at a loss. Business transformation. Not operating to full potential with negative affect on service levels. Furthermore, some organisation publish data to explain how they are developing from one year to the next and an increasing number of companies explain how they engage with staff in their annual report. While this is a good thing there is a risk that employee engagement becomes a public relations exercise that is seen as the latest initiative and is lacking in substance. Risks and responses 1. The current economic climate is forcing management to place additional pressures upon employees for the organisation to survive. Potential impact Some employees may disengage with increasing levels of absenteeism, sickness and some of our best people may leave. The business fails to retain engaged employees. Possible responses Senior managers to reiterate their commitment to employee engagement, communicate and reinforce polices with action. Additional and detailed analysis of sickness and absenteeism to identify and understand the reasons for any increases/decreases. Alternative benefit and reward models to help employees feel valued while still managing expenditure. Exit interviews with analysis of data to identify issues that can be addressed. 2. Managers regard employee engagement as the latest HR fad and PR exercise and only pay lip service to its value. Potential impact Employer/employee relations begin to break down through a lack of trust. Reduced performance and revenue/profits. Increase in customer complaints. Change projects delayed or not achieved. 5

6 Possible responses Seminars and training by managers who are committed to employee engagement. Management surveys are carried out to gauge employee engagement. Structured and focused appraisals focusing on personal and career aspirations and objectives as well as job related objectives and goals. Agenda items on management and board meetings. 3. The organisations commits to employee engagement but makes a series of false promises to employees. Potential impact A reduction is staff morale and motivation. Staff leave the organisation as they do not see any improvements. Possible responses An implementation plan is put in place with responsibilities allocated to individuals along with timescales for completion with regular monitoring and reporting of progress. Appreciative enquiry - identifying what works in the organisation with support and recognition of what is working well. Employee engagement issues, plans and progress form part of board agendas. Informally listening and seeing - the atmosphere of the organisation e.g. areas of high energy and areas of low morale and identifying the reasons behind this with appropriate reaction. What can internal audit do? Employee engagement may not be an obvious addition to or a priority for the internal audit plan. It is therefore important to understand the organisation's stance and attitude on the matter. For instance, how does employee engagement feature in the organisations core values and how much attention does it receive at the highest level - what do the business plan, annual reports, strategic risk register and human resources department say about employee engagement? For some organisations employee engagement will be critical and for others it may be an aspiration or have little prominence. This will influence internal audit's response. In addition, discussions will need to be held with stakeholders such as senior managers, other assurance providers, audit committee members etc, to obtain their views on what assurances are needed in relation to employee engagement and how they can be provided. Where employee engagement is more of an aspiration internal audit can provide support by drawing attention to useful information and tools. This is more of an educational and advisory role. If employee engagement has little prominence in the organisation it may be useful to look at it in conjunction with other human resource risks in areas such as recruitment, sickness and absence, staff turnover, grievances and customer complaints to determine whether it should feature within a wider internal audit review of human resources. Alternatively, employee engagement could equally form part of internal audit review of business 6

7 ethics as it relates to the organisation's values and culture. As employee engagement is related to behaviour - the things that people do to make the organisation a success - it may be difficult to envisage how internal audit can provide assurance. However, there are a number of specific assurance activities that internal audit can perform that relate to the principles of 'listening, learning and leading'. Internal audit can provide independent and objective assurance by considering challenging: 1. Identification and review of risks in this area Has employee engagement been included on risk registers, particular the strategic risk register? If so is it seen as a central risk i.e. human resources or cascaded across departmental/business unit risk registers? Where departmental/business units are including risks does this mean it is a fragmented problem lacking in coordination? Is there a comprehensive record and analysis of risks based on available data e.g. from surveys, focus groups, etc? Do the responses appear appropriate to the risks identified? Are risk responses implemented in a timely manner or has there been slippage? Where there is slippage is it being reported upwards for review and corrective action? 2. A culture of employee engagement is established and methods are working Can leadership from the top be clearly seen? How have executives and the board articulated and responded to the CHOICE values? What are senior managers doing to turn commitment into reality are they creating a culture of employee engagement through their actions and participation in engagement activities? Do they discuss such matters at management meetings and review impact? Are policies, plans and procedures in place, if so to what extent are they reviewed and updated, are they communicated effectively and how are employees involved in their formulation? Are there criteria and measures, both quantative and qualitative, to judge the success of employee engagement and is progress analysed and reviewed against these? Can information contained in reports and financial statements be substantiated? Where changes and improvements have been made is this reflected in more positive customer feedback, increased profitability, reduction in sickness, staff turnover? Do managers and employees believe that the methods adopted are working and have a positive impact? 3. Good practice on employee engagement is being shared across the organisation How is learning shared and what improvements can be seen as a result? Is innovation and creativity publicised and rewarded? Do rewards conform to policy and procedures? 4. Coaching and mentoring is being used at all levels in the organisation to prepare employees to move to the next level in the organisation How is this demonstrated? Is it recorded in personal development plans? 7

8 5. Employee appraisals incorporate agreed actions from employee surveys. Is it possible to track from the survey action plan back to individual appraisal documentation or alternatively is the survey action plan periodically updated and circulated to show the completion of an action? 6. Mechanism set up to obtain employee views and feedback are operating and senior managers are listening to employee requests by backing them with appropriate review and action. Are there action plans, with ownership and timetables? Are ideas given sufficient attention with prompt action? 7. Reviewing the content of employee surveys to ensure that it covers the key employee engagement drivers. Are surveys reaching all employees within the business with sufficient time being provided to enable its completion and return? Consider survey response rates, dependent on the percentage further work may be required to understand any low return rates or the reasons e.g. time lines, communication and method of distribution of survey for example. Review of survey results to ensure they have been collated and analysed appropriately with communication back to employees on the outcome and the action to be taken and the monitoring and reporting processes in place. Can the data be reconciled back to the total number of surveys returned? 8. Ensuring a range of standard data, where appropriate is also being used to identify employee engagement issues, e.g. sickness levels, staff leavers, etc. What action is being taken from the regular collection of data? Is there other data that could be collected to support employee engagement issues? Is there some overview of all of this data that might identify or highlight further issues or areas where employment engagement levels are high which can be shared across the organisation? 9. Carrying out workshops or interviews with a cross section of employees to obtain their opinions first hand. This may elicit some further issues. Consideration also needs to be given to the fact that employees may not wish to share their views in a workshop format. How employees are chosen to attend the workshop may also be a barrier to how and what responses are received. Examples of employee engagement Here are a few ways in which organisations engage with their employees. They may not be appropriate or suitable for all organisations or employees but may provide some food for thought. 1. Using workshops to involve employees in a discussion about the organisation's vision and values. The debate around values focused on empowering people and supporting individual personal development. 8

9 2. A learning project to improve literacy and numeracy skills to build the confidence of staff and widen participation in learning. 3. Implementing flexible working practices such as flexi-time, job sharing, job rotation and offering annual leave as an alternative to pay increases. 4. Introducing the same terms and conditions for both blue and white collar staff with similar incentivised good performance. 5. Creating employee forums to involve staff in the development of policies, including those surrounding performance and attendance management. 6. Establishing 'Quality circles' so staff can express their views about how improvements can be made and how teams should be managed. Resulting in new ways of working. 7. Writing and committing to a 'Staff and Management' Charter. 8. Setting up a network of 'Change Agents' to represent staff and provide a route for views and ideas so that they could be taken into account. The network also provides a means for information and updates from the management teams to be cascaded to staff. 9. Rewarding new ideas through the use of 'suggestion boxes'. 10. Allowing employees time off to take part in community projects, charitable events and activities related to social responsibility. One organisation allowed employees to nominate their preferred schemes and charities for the organisation to support. 11. Senior management visiting departments to make presentations on the strategic plan inviting comment and ideas. 12. Coaching and mentoring activities to give staff honest feedback and support. 13. The CEO and senior executives using the intranet and blogs to sustain an active and ongoing dialogue with employees on the corporate goals and direction. 14. Encouraging employees to take up stock ownership and creating profit sharing schemes. Further reading from our HR series Performance management Recruitment and selection Reward and recognition Talent management Training and development Practice advisories 9

10 Practice advisory provides detailed guidance on how to rely on the work of other assurance providers. External resources Chartered Institute of Personnel and Development (CIPD) The professional body for those involved in the management and development of people. Their website includes specific fact sheets on employee engagement. Advisory, Conciliation and Arbitration Service (ACAS) Aims to improve organisations and working life through better employment relations provides information and templates on various aspects of human resources, including employee engagement. NHS Employers Represent trusts in England on workforce issues and helps employers to ensure the NHS is a place where people want to work. Improvement and Development Agency (Idea) Local government agency that has developed a range of resources to provide councils with information, advice, practical tips and good practice examples on engaging better with employees. Institute of Employment Studies (IES) An independent centre for research and evidence-based consultancy in employment, labour market and human resource policy and practice. 10