Measuring the ROI of Employee Engagement. Patti P. Phillips, Ph.D

Transcription

1 Measuring the ROI of Employee Engagement Patti P. Phillips, Ph.D

2 Objectives Show value of employee engagement Enhance the value of engagement programs Develop a plan to make engagement more effective and results-focused 2

3 How do you define employee engagement? 3

4 A heightened emotional and intellectual connection that an employee has for his/her job, organization, manager, or coworkers that, in turn, influences him/her to apply additional discretionary effort to his/her work. -- The Conference Board A heightened connection between employees and their work, their organization, or the people they work for or with. -- The U.S. Merit Systems Protection Board A mindset in which employees take personal stakeholder responsibility for the success of the organization and apply discretionary efforts aligned with its goals. -- Korn Ferry 4

5 Engagement means employees are in alignment with the organization and are willing to expend discretionary effort to their work.

6 Investment in Engagement is Increasing In 2012, investment in employee engagement was reported to be $720 million; it is approaching $1 billion.

7 Yet, in 2016 only 33% of US employees were engaged a 3-point increase over Gallup State of the American Workplace,

8 Alabama No. 1 in Engagement 37% Gallup. February 20,

9 If employee engagement is not increasing, how do we demonstrate value for this investment? ROI Analysis (Micro Studies) Relationships between Variables (Macro Analysis) Intangibles (Logic and Intuition) 9

10 March Madness Leads to Engagement 89% agree office pools help build better team camaraderie 84% of workers agree office pools go a long way to make their jobs more enjoyable 79% of employees agree participating in office pools greatly improves their levels of engagement at work 73% of workers agree they look forward to going to work more when they participate in office pools 50% of employees meet up with coworkers after work to watch a college basketball game in March 39% became closer with a coworker after participating in an office pool OmniPulse survey fielded by Research Now on behalf of Randstad USA N=1200 balanced on age, gender, and region. 10

11 However 76% of employees check scores during work hours 53% watched or followed games on computers at work Organizations lose approximately $4 billion in productivity OmniPulse survey fielded by Research Now on behalf of Randstad USA N=1200 balanced on age, gender, and region March Madness Report. Challenger, Gray, and Christmas. 11

12 Engagement leads to improvement in Customer loyalty Profitability Turnover Safety incidents Shrinkage Absenteeism Patient safety incidents Earnings per share Operating margins 12

13 ROI Analysis Studies such as Engagement Plus Gainsharing p. 113 Process Change Initiative p. 1350% Selection Process p. 163 Retention Improvement p

14 What do we mean by ROI? BCR = Program Benefits Program Costs ROI = Net Program Benefits Program Costs X 100

15 Try it! BCR = $750,000 $425,000 $750,000 - $425,000 ROI = X 100 $425,000

16 Try it! BCR = $750,000 $425,000 = 1.76 $750,000 - $425,000 ROI = X 100 $425,000 = 76%

17 Levels of Evaluation Measurement Focus Typical Measures 0. Inputs and Indicators The input into the project in terms of scope, volume, efficiencies, costs Participants, Hours, Costs, Timing 1. Reaction & Perceived Value Reaction to the project or program, including the perceived value Relevance, Importance, Usefulness, Appropriateness, Intent to use, Motivation to take action 2. Learning & Confidence Learning to use the content and materials, including the confidence to use what was learned Skills, Knowledge, Capacity, Competencies, Confidence, Contacts 3. Application & Implementation Use of content and materials in the work environment, including progress with actual items and implementation Extent of use, Task completion, Frequency of use, Involvement, Actions completed, Success with use, Barriers to use, Enablers to use 4. Impact and Consequences The consequences of the use of the content and materials expressed as business impact measures Productivity, Revenue, Quality, Time, Efficiency, Customer Satisfaction, Employee Engagement 5. ROI Comparison of monetary benefits from program to program costs Benefit-Cost Ratio (BCR), ROI%, Payback Period

18 Start Here Alignment Model End Here Payoff Needs 5 ROI Objectives 5 ROI Business Needs 4 Impact Objectives 4 Impact Performance Needs 3 Application Objectives 3 Application Initial Analysis Learning Needs 2 Learning Objectives 2 Learning Evaluation Preference Needs 1 Reaction Objectives 1 Reaction Input Needs 0 Input Objectives 0 Input Business Alignment and Forecasting Program The ROI Methodology

19 ROI Methodology Evaluation Planning Data Collection Data Analysis Capture Costs of Solution Reporting Develop Objectives of Solution(s) Develop Evaluation Plans and Baseline Data Collect Data During Solution Implementation Collect Data After Solution Implementation Isolate the Effects of Solution Convert Data to Monetary Values Calculating the Return on Investment Develop, Report, and Communicate Results Input/Indicat ors Reaction and Planned Action Learning and Confidence Application and Implementati on Business Impact ROI Identify Intangibles 19

20 12 Guiding Principles ensure reliability. 1. Report the complete story 2. Conserve evaluation resources 3. Use the most credible sources of data 4. Choose the most conservative alternatives 5. Isolate the effects of the program 6. Assume no data, no improvement 7. Adjust estimates for error 8. Throw out the extreme and unsupported claims 9. Use first year benefits for short-term programs 10. Include fully-loaded costs 11. Report intangible benefits 12. Communicate results to all stakeholders

21 Inputs Reaction & Planned Action Learning Application & Implementation Isolate the Effects of the Program Impact Intangible Benefits

22 Data Collection Method Level Surveys Questionnaires Observation Interviews Focus Groups Tests/Quizzes Demonstrations Simulations Action planning/improvement plans Performance contracting Performance monitoring

23 Isolation Techniques Use of a control group arrangement Trend line analysis of performance data Use of forecasting methods of performance data Participant s estimate of program impact (percent) Supervisor s estimate of program impact (percent) Manager s estimate of program impact Use of expert/previous studies Calculate/estimate the impact of other factors Customer input

24 Control Group Total Employees Annual Production (Millions) Variable Cost per Ton Voluntary Turnover Unplanned Absenteeism Before After Before After Before After Before After Before After Plants with New System Plants Without New System $3.19 $ % 12% 7.4% 4.2% $3.22 $ % 18% 7.8% 7.7% Measuring Success of Employee Engagement page 121

25 Trend Line Analysis 28% 16% Measuring Success of Employee Engagement page 178

26 Estimations Preceding Year One Year After Actual Difference Contribution Factor Confidence Estimate Adj Amount Turnover 271 (57%) 162 (35%) % 82% 75 Staffing Levels 480 (average) 463 (end of year) % 100% 17 Measuring Success of Employee Engagement page

27 Data Conversion Converting output to contribution standard value Converting the cost of quality standard value Converting employee s time standard value Using historical costs Using internal and external experts Using data from external databases Linking with other measures Using participants estimates Using supervisors and managers estimates Using staff estimates

28 Fully-Loaded Cost Assessment Costs (Prorated) Development Costs (Prorated) Program Materials Instructor/Facilitator Costs Facilities Costs Travel/Lodging/Meals Participant Salaries and Benefits Administrative/Overhead Costs Evaluation Costs

29 What do we mean by ROI? BCR = Program Benefits Program Costs ROI = Net Program Benefits Program Costs X 100

30 Intangible Benefits Adaptability Awards Brand awareness Career minded Caring Collaboration Decisiveness Engagement Leadership Networking Partnering Reputation Resiliance Stress Teamwork Customer satisfaction

31 Measuring Success of Employee Engagement, p. 13 Engagement Ecosystem

32 Measuring the ROI of Employee Engagement Patti P. Phillips, Ph.D