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Earlier this year, David Johnson, principal analyst for Forrester, joined Cecile Alper-Leroux, Ultimate’s VP of human capital management innovation, for a comprehensive webcast detailing some of the disruptive trends reshaping the future of work. Today on the blog, he’s offering a deep dive into one of the most significant issues facing employers today — the employee experience — including common pitfalls and suggestions backed by the most up-to-date analyst research.
1. How does employee engagement/employee experience have an impact on business success?
In Forrester’s view, the engagement is an outcome of the employee experience. And employee experience is a combination of what each employee brings with them to work each day (emotions, perceptions, motivations, etc.) and what they experience while there. Our research has identified four outcomes of a better employee experience that significantly improve business results, including financial performance and growth.
- Better work performance. A 2016 IBM study showed that 96% of employees in the top quartile of employee experience report high levels of work performance, as opposed to 73% for employees in the bottom quartile. Positive employee experience leads to higher job performance and productivity. Several other studies prove the links between EX and objective performance measures as well.
- Higher discretionary effort. The IBM study also showed that 95% of employees reporting a positive experience with their company say they engage in activities that are beneficial to their organization but aren’t necessarily part of their job. The number drops to 55% for employees reporting a poor employee experience. And discretionary effort makes the difference between typical and extraordinary business results. An academic study summarized in the Harvard Business Review found that when employees are willing to go beyond their formal roles and engage in “extra-role behaviors,” companies are more efficient and effective.
- Lower employee turnover. The factors that affect employee turnover vary by industry and job role, but excessive workload is a top culprit across the board. Conversely, several studies show that when employers pay close attention to employee workload and help employees balance the demands of their jobs with key resources such as technology and training, they can sharply reduce burnout and employee turnover. When Starbucks rolled out mobile ordering, it analyzed how the initiative affected employee workload. Starbucks enjoys an annual employee turnover of only 65%, in an industry that averages 150% to 400%. Industry data pegs the cost of replacing store employees at 16% of annual pay, so the company saves $3,000 for every employee it retains. With 162,000 store employees, every 1% increase in retention saves the company $1.7 million.
- Improved customer experience. Dell found that the customer Net Promoter Score (NPS) was twice as high for experiences delivered by highly engaged employees.* Similarly, a 2016 Yale study with a large rental car company showed that employee engagement has a positive and statistically significant effect on NPS: “Going from low employee engagement to high employee engagement will increase the likelihood of a customer being highly satisfied by 2.5 percentage points.” In addition, the study found that satisfied customers are more likely to keep doing business with the company and that employee engagement programs should focus on building customer centricity.
2. How is employee experience linked to customer experience?
As far back as the service-profit chain theory in 1994, firms have understood that happier employees correlate with happier customers — and happier shareholders. Research by Aon Hewitt reveals a statistical correlation between employee engagement and revenue growth: a 5% improvement in employee engagement leads to a 3% increase in revenue. And many firms, like Maersk Line and Mercedes-Benz, quantify the impact of engaged employees on their own customer experience (CX) delivery and business outcomes and use the insights to guide investments in technology.
And there are many other studies that show these links. Insights from Forrester’s Customer Experience Index (CX Index™) prove that, with few exceptions, CX leaders outperform CX laggards in revenue growth because customers find it more effective, easy, and enjoyable to do business with them. Studies show that that this is most likely to happen when employees feel that they can get their work done, their companies do a good job of facilitating their success, and they have a strong personal connection to their work.
3. What are the key factors that drive employee engagement?
Recent studies show that the single most important factor in a positive employee experience is employees’ ability to make progress, every day, toward the work that they believe is most important. There are many reasons for this, but from a psychological perspective, it’s tied to safety. It’s also tied strongly to intrinsic motivation, which stems from the love of the work itself, and not necessarily pay or benefits. Adequate pay and good benefits matter, of course, but they are not the source of engagement. Intrinsic motivation is, and that is driven most by being able to make daily progress toward it.
Most companies fail by not thinking about the employee experience at the daily journey level. Thus, they’re not aware of what’s inhibiting their ability to make progress. If they’re not aware of those factors, it’s difficult to target them for improvement. This is why it’s so important for companies to be listening carefully to their employees about what they are experiencing and what they need to be successful. Gathering employee feedback, interpreting it correctly, and taking it seriously is vital.
4.Why do many employee engagement initiatives fail?
Part of the problem is that HR often leads efforts to improve employee engagement without the help of key groups like tech leaders, who significantly influence the tools and resources that help employees be more engaged (or not). Studies find that:
- Employers usually analyze engagement at only the organizational level. Researchers now distinguish between organizational engagement and job engagement because people often report feeling engaged with their companies but not with their daily work. In other words, employees can be happy with the company but still not productive because something is wrong at the job level. Accordingly, employee engagement efforts that focus only on the organization as a whole will fall short.
- Companies don’t listen to employees or remove obstacles. In a Medallia Institute survey of 1,000 frontline employees, 78% report that their leaders claim customer experience as a top priority, but nearly 60% feel that their ideas for improving customer satisfaction often go unheard. And fewer than half believe they can count on leadership to remove obstacles to delighting customers. Net-net: Employees are frustrated by work environments where they feel prevented from doing more to deliver better CX. For example, call center employees who are measured on call resolution times will feel more stress if the applications they rely on are running slowly.
- Employees don’t believe that their employers appreciate their work. A recent study conducted by the Cicero Group asked 9,600 people on six continents what one thing their employer could do to help them do great work. The top response (37%) was “recognize me.” That insight about the importance of recognition inspired B2B accounting services firm Crowe Horwath to create a new program called Pay It Forward on top of its existing client experience survey process. Now, employees mentioned by name in client surveys get an automated alert to highlight which other colleagues, particularly behind the scenes, contributed to good client experience. In the year after Crowe Horwath implemented Pay It Forward, it recognized 50% more employees for their efforts in delivering an exceptional client experience. Unfortunately, too few firms provide this type of consistent recognition to employees.
- Leaders recognize the problem but don’t think they can solve it. Deloitte’s Global Human Capital Trends Report 2015 offers another reason for persistently low engagement scores: Most business and HR leaders believe that they lack the capabilities to meet the challenge of engaging employees. This skills gap is even more alarming because executives cite culture and engagement as two of the most important challenges facing their organizations.What can HR and business leaders do to improve employee experience and foster employee engagement in their organizations?
5. What can HR and business leaders do to improve employee experience and foster employee engagement in their organizations?
In Forrester’s view, the most important thing they can do is become more attuned to the factors that affect employees’ daily journeys. That requires gathering a lot more feedback from employees not only through surveys and discussions but also through structured exercises like employee journey mapping. These exercises can help them find not just obvious factors but also systemic factors outside of any employee’s individual control, like how the wrong metrics may have unintended consequences that make it harder for employees to succeed in their daily work.
This level of attunement requires not only listening but also building powers of analysis to strip away the noise and accurately identify the most important factor.
6. What tools and methods can HR and business leaders use to establish an employee experience benchmark and continue to improve?
The timing for this is excellent, as vendors are now able to use technologies like artificial intelligence (AI) and natural language processing (NLP) to analyze employee feedback from surveys, voice of the employee program interviews, and even email and verbal communications to gain more insight into how employees perceive their organizations and what can be done to improve their experience with their organizations.
But even without advanced AI and NLP technologies, gathering employee feedback through surveys, interviews, and journey mapping exercises — and using it to improve employees’ experience in their daily journeys — will pay significant dividends.
* Net Promoter and NPS are registered service marks, and Net Promoter Score is a service mark, of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.
“The Employee Experience Imperative” Forrester report, December 15, 2017.
“Engineer Your Technology Environment To Improve Employee Productivity And Flow” Forrester report, December 15, 2017.