Employee engagement on the rocks

Decline in employee engagement points to big turnover trend to come as prolonged economic problems undermines employee loyalty.

While the economy is slowly recovering, a fresh analysis by Hewitt Associates, the human resources consulting and outsourcing company, shows employee engagement and morale in the workplace are not.

Almost half of organisations around the world saw a significant drop in employee engagement levels at the end of the June 2010 quarter, the largest decline Hewitt has observed since it began conducting employee engagement research 15 years ago.

This highlights the growing tension between employers and employees, who are showing fatigue in response to a lengthy period of stress, uncertainty and confusion brought about by the recession and their company’s actions.

Since July 2008, at the onset of the economic downturn, Hewitt began closely analysing changes in employee engagement levels by quarter for more than 900 organisations globally that conducted annual engagement studies.

These studies covered topics such as employee morale, confidence in the organisation, career opportunities, rewards and recognition programmes and trust in leadership. Historically, Hewitt’s research shows that about half of these organisations improved their engagement levels in a one- or two-year period, while only 15% had experienced a decline.

However, the past two years have been more challenging: the percent of organisations with declining engagement has been steadily growing. This trend is particularly notable in 2010. Hewitt’s research shows that 46% of organizations experienced a decline in engagement levels in the quarter ending June 2010, while just 30% saw an improvement.

Hewitt’s analysis suggests a clear link between employee engagement levels and financial performance. Organisations with high levels of engagement (where 65% or more of employees are engaged) outperformed the total stock market index even in volatile economic conditions. During 2009, total shareholder return for these companies was 19% higher than the average total shareholder return.
Conversely, companies with low engagement (where less than 40% of employees are engaged) had a total shareholder return that was 44% lower than the average.

As the economic downturn begins to intersect with the recovery, Deloitte announced a new report about talent trends in the changing economy based on a full year of in-depth research.

This latest report captures ways executives and talent managers have adjusted their workforce and talent strategies to deal with the shifting economic forces. Further, the report identifies six key guideposts for executives to consider as they map out their talent strategies to address the challenges of the changing economy.

Here are a couple of examples: Companies using the economic downturn as their retention strategy are taking a big risk. Among employees surveyed, nearly 30% are actively working the job market and nearly half are at least considering leaving their current jobs. And more than three out of four (76%) who intend to leave their current jobs cited lower morale at their companies.

Understanding your people is as critical as understanding your customers. In ranking the top three retention tactics, in every instance employees chose different (and non-financial) incentives than executives. And while 62% of employees cited a lack of communication from executives during the recession, only 35% percent of execs felt the need to increase the frequency of employee communication.

Show me the money - but show me the love too! Among the reasons for leaving current employers, employees ranked two non-financial factors among the top three: job security (36%), lack of career progress (27%) and lack of compensation increases (27%).