In today’s challenging economic conditions, the ability to attract and retain talent is obviously an important factor for any business. And an increasing number of industry leaders now believe that talent, not cash, is king. These industry leaders believe that we are witnessing a paradigmatic shift where human capital is more important than financial capital. For them, the world is entering a new era, one requiring the redesign of business models, a redefinition of value propositions and the reinvention of social systems, where it matters less if countries and companies can access the capital they need and more if they can attract the talent they need to win.
Klaus Schwab, founder and executive chairman of the World Economic Forum, believes that the old model of Capitalism is being replaced by the new model of ‘Talentism’. This new model centres on human talent that encourages creativity, entrepreneurship and innovation-driven economic development and social progress. Schwab argues that capital is losing its status as the most important factor of production in our economic system and is being superseded by creativity and the ability to innovate. Just as capital replaced manual trades during the process of industrialisation, so capital is now giving way to human talent.
Similarly, Manpower Group, a global leader in workforce solutions, believes that the world is now entering a Human Age, where employers will be awakened to the power of humans as future drivers of economic growth. And in this Human Age access to key talent will become the key competitive differentiator.
Attracting and retaining talent, therefore, is now seen as the key to economic success. In line with this, many commentators are recognising the importance of employee engagement in retaining this talent. Research by Gallup has shown that engaged employees are more productive and increases in employee engagement results in lower staff turnover, reduced costs and higher productivity. Engaged employees work harder, are more willing to take on extra responsibilities and are a positive influence on other employees. Deloitte has found that passionate employees are two times as likely (72%) to become inspired and energised by unexpected challenges as the disengaged (36%).
At the same time, attracting and retaining talent by offering more financial incentives is not necessarily working anymore. Job satisfaction and creative autonomy it seems are more important than salary in attracting and retaining talent in many cases. Daniel Pink, author of the forthcoming book Drive: The Surprising Truth About What Motivates Us believes that people are increasingly driven by intrinsic motivations such as the desire to do engaging work rather than the desire to receive a bigger pay cheque.
There is now a lot of evidence to show that having engaged employees leads to better business outcomes. Towers Perrin found that companies with engaged workers have 6% higher net profit margins, and Kenexa research found that engaged companies have five times higher shareholder returns over five years. Companies with high levels of employee engagement improved 19.2% in operating income while companies with low levels of employee engagement declined 32.7% according to Towers Watson. And research by the Corporate Leadership Council found that engaged organizations grew profits as much as three times faster than their competitors. They report that highly engaged organizations have the potential to reduce staff turnover by 87% and improve performance by 20%.
The ROI of employee engagement comes from what NY Times bestselling author Kevin Kruse calls the Engagement-Profit Chain. For Kruse, Engaged Employees lead to higher service, quality, and productivity, which leads to higher customer satisfaction, which leads to increased sales (repeat business and referrals), which leads to higher levels of profit, which leads to higher shareholder returns. Employee Engagement has proven that it has a major impact on revenue and profitability and as such employee engagement should be the Number One priority for any organisation.
2013 looks to be an exciting year for a focus on employee engagement. The challenge is for CIOs, HR Directors and CMOs to work together to create a truly engaging social business that puts talent at the centre of the organisation. And as IBM has noted, a social business isn’t just about having a Facebook page or a Twitter account. It’s about cultivating a spirit of collaboration and community throughout the organization – both internally and externally. IBM has identified three distinct characteristics of a Social Business:
- A Social Business is engaged—deeply connecting people, including customers, employees, and partners, to be involved in productive, efficient ways.
- A Social Business is transparent—removing boundaries to information, experts and assets, helping people align every action to drive business results.
- A Social Business is nimble—speeding up business with information and insight to anticipate and address evolving opportunities.
A social business should allow people to connect with each other and provide a variety of ways for employee engagement such as discussion forums, comment sections in blogs and online polls. It should allow forums to spring up to connect people in similar job functions or expertise areas, peers to brainstorm ideas and post useful reference material and allow employees to share their expertise via blog posts and forums. It should be enterprise wide not based on fiefdoms and silos, essential to work not something extra and integrated with existing collaboration tools and platforms. Some of the key things for becoming a social business include having everyone on the same system with a corporate directory; allowing employees to personalise and customise user profiles and ensuring you have rich and varied analytics to measure how well you are engaging employees.
In successful social businesses, social and business functions intertwine and CIOs can play a pivotal role in this by providing platforms that enable this process. There are many tools available on the market. For example, Microsoft has acquired Yammer and will be including Yammer technology alongside Office 2013. Analysts expect it to be integrated within the SharePoint on-premises and cloud-based products very soon. Other leading social platforms include Salesforce.com Chatter, work.com and Socialcast. The McKinsey Global Institute (MGI) estimates that by fully implementing social technologies such as these, companies have an opportunity to raise the productivity of high-skill knowledge workers including managers and professionals by 25%.
However according to separate research by both Microsoft and McKinsey, 71% of employees are not engaged in their work and 36% of the work carried out in the workplace is wasted. In addition, a study conducted by ACCOR found that although 90% of leaders say employee engagement impacts on business success, 75% have no engagement plan or strategy in place. This needs to be urgently addressed because organisations that embrace the notion of a social business have the opportunity to gain loyal employees and find a competitive edge in recruiting, retention, talent development, and business performance. And that’s definitely something to aspire to in 2013.
This article was first published in Marketing NZ (January 2013)