Neil Crawford of Aon Hewitt
Most business leaders know, abstractly, that it makes good business sense to be a great employer. But too often efforts to engage and motivate employees are relegated to “frill” status, viewed as a nice-to-have perk against the seemingly far more pressing tasks of getting things done.
The reality is that companies that put their prime focus on becoming great places to work deliver stronger results in the key business metrics that matter, including profitability and sales growth.
To mark the release of the 2017 Aon Best Employers in Canada list, Canadian Business senior editor Deborah Aarts spoke with Neil Crawford, partner and Canada talent leader at Aon Hewitt, about the relationship between employee engagement and growth, profitability, HR costs and productivity.
Aon’s research has found that Best Employers report four percentage points more incremental operating profit than average organizations. Can you explain the relationship between engaged employees and a better bottom line?
In organizations that are Best Employers, employees generally have a better understanding of the company direction and what’s important. That’s because leaders do a better job of communicating. They take more time to explain what the business is about, and that means they take more time to explain what drives its profitability.
Here’s an example: There’s one organization whose key statistics related to customer satisfaction. So they spent a lot of time educating employees about what drives a customer’s likelihood to recommend their work. Because of that, employees were able to better connect with what their job was in driving a higher likelihood to recommend among customers.
Another thing to note is that Best Employer organizations tend to have employees who take more personal accountability. They have performance cultures where people are motivated to do the right things. Employees are focused not just on driving higher revenue, but on questions like, ‘Where can we save money?’ and ‘Where can we work more productively and be more efficient?’ not just about earning higher revenue.
Can you give an example of what those kinds of cultures look like?
It brings to mind a retail organization that examined its employee engagement at a store-by-store level. What its leaders noticed was that in high-engagement stores, inventory shrinkage—stuff lost because employees lost track of it or, sometimes, stole it themselves—was much lower than in stores with low engagement. So, for that company, high engagement equals lower shrinkage. That drops right to the bottom line in terms of profitability.
Here’s another great example, this time with a services company: When its employees in accounts receivable understood that getting stuff paid quickly was going to contribute to the bottom line, they almost made a contest of it. They had a bell they’d ring when an invoice got paid. These very visceral, front-line examples are the things that add up to higher profitability.
How does such a culture of accountability fuel top-line growth? Your research suggests that Best Employers report six percent more incremental revenue growth than their peers.
We just finished a study looking at both how to organize people for growth and what is characteristic of organizations that are growing. The really critical element of growth is that people have collective ambition. That means the organization is really clear about where it’s going. Its leaders are very good at telling the story and helping individuals understand what their role is in it. They are very open and transparent.
Organizations that grow successfully work to build a broad consensus within the organization about what’s needed to grow. And they tend to empower individuals and parts of the organization to do what’s necessary to make that growth happen. These are characteristics that are very much aided by engagement in the organization.
How does that agency translate to higher sales?
True customer-centricity is, I think, a distinctive element of both Best Employers and high-growth companies. Interestingly, I was just debriefing one of our large clients. They’re not a Best Employer. They measure Net Promoter Score among their employees, which asks people to answer two things: One, would I recommend this organization as a place to work? And two, would I recommend this company’s products and services to my friends and family? When we actually looked at what employees were saying, their promotion of the company’s products and services were quite low. Probably the most pervasive comment from employees was, ‘I don’t even know what our products and services are.’
Best Employers are educating employees all the time about what the company is trying to do to be successful. If you want to move to customer-centricity, you have to be very focused on educating employees, and also building pride in the products and services you offer.
Just in terms of statistics, high-growth companies have 10-point higher NPS among employees than others. That translates to better retention, better loyalty and higher sales per customer.
You mention loyalty and retention. Aon’s research has found that Best Employers experience 33% less employee turnover than average organizations. What factors keep turnover low?
Our data tells us that when people are disengaged, they’re twice as likely to leave their jobs as their engaged counterparts.
Why is turnover important? Turnover costs money. It takes anywhere from half a year to a year’s salary—depending on the skill and the market demand for that individual—to replace someone and get the new hire up to speed. There’s a recruiting cost, a training cost and, often, a gap in terms of that person not being there. So there are certainly short-term savings to having less turnover.
I think having an engaged workplace affects more than the raw turnover rate, though. It’s what turnover is happening. You want to make sure you’re retaining your top performers, and exit the people who aren’t a good fit for the organization, or who are not performing up to standard. This is where Best Employers are quite different.
Best Employers are very focused on identifying and making sure high performers are appreciated, perhaps at a greater rate than other organizations. And they’re much better at telling their top performers why they should stay. And at the same time, they’re breeding a culture in the organization in which people take accountability, and those who don’t are managed out.
Are there any other tangible, measurable benefits companies can attain by focusing on engaging their employees?
We did some research a few years ago looking at absenteeism among Best Employers versus those that aren’t. We found, broadly, about half the absenteeism among Best Employers than among other companies. Among all the companies we were studying, the average absenteeism was about the Canadian average: eight or nine days per year. Low-engagement organizations had more like 16 to 17 days per employee, per year of absenteeism. That number was more like four among Best Employers.
Why was that the case?
People have better accountability, so they’re more likely to step up and say, ‘I need to deal with my health in an effective way.’ The organizations are more focused on, and perhaps more proactive about, ensuring employees are as healthy as possible.
Also, in this day and age, our measures of health, and the way we think of health, is not just physical: It’s about mental health, wellbeing and financial wellbeing too. Best Employers are just more cognizant of that broader definition, more focused and proactive in dealing with it.