Friday, June 4, 2010

Proof: Higher employee engagement results in better financial performance.



Yesterday I sat down with an executive in transition over coffee and in the course of our conversation he described a study he’d participated in at a former employer -- a national fast-food chain. This well known chain maintains great data on the financial performance of each of its stores across the nation. It also tracks all kinds of other performance indicators having to do with road traffic patterns, demographics surrounding the stores, competition in the immediate area, foot traffic in the stores etc.,. Finally the chain performs regular employee engagement and satisfaction surveys at the individual store level.

But, as with many large organization these data sets were tracked by different departments on different systems -- the finance guys tracked financial performance, the marketing guys tracked demographic data, and HR tracked the engagement data. The systems were independent of one another and the HR piece was mostly held in the systems of the external vendor who executed the surveys. Eventually, some wise guy thought it might be informative to combine the data to see what patterns emerged. Using the marketing information to create grouping of similar businesses they compared financial result to employee engagement. It turned out that within every marketing group the pattern repeated that above average financial results correlated with above average employee engagement results.

Now you could claim the correlation was purely coincidental. Or you could claim that better financial results drove higher employee engagement. Or you could claim that higher employee engagement drove stronger financial results.

To sort out these claim, they went back and looked at historical trends within the marketing segments. It turned out that where employee engagement went up, stronger financial result followed. Those of us who deal with innovation and competitive advantage already know this is true. But it’s nice to know that someone out there has good data proving the case.
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