An engaged workforce is far more critical to profitability than many businesses realise.
Big Company Limited has been around for 105 years. In 2013, Big Company was feeling rather small in the market. For the sixth consecutive quarter, the executive team was struggling to turn the business around. On the back of another negative
trading update, investors bailed out and the share price dropped by 40%. The company braced itself for a weaker rand and looming strike action. The winter
of discontent had arrived.
Management was running out of ideas. They sold off non-performing assets at a loss. After several bouts of restructuring, any mention of the words “flat and lean” was likely to send employees into cardiac arrest. They doubled their marketing efforts and aggressively pushed sales. The numbers remained weak. Having
invested a fortune in A-grade systems, management was at a loss to explain why the cost savings had not materialised. In the absence of drastic action, the
business was likely to post a substantial operating loss by the end of the year.
The finance director had attended a business conference and dropped a bombshell in the boardroom: “Why don’t we look at increasing employee engagement?” The HR director quietly smiled. He had been talking about employee engagement for years, and at last, somebody noticed.
When you get to the bottom of why Big Company Limited and hundreds of similar companies are floundering, you will find a recurring issue being played out. The company is stubbornly using the same Industrial Age toolbox to solve Information Age challenges.
There is hope. These days it is not unusual to find a CA(SA) responsible for the softer side of the business. They are likely to be leading and managing a team, joining the interview panel and conducting performance appraisals. Mentoring new recruits, training employees and drafting career development plans are part of the job.
However, the really big shift for Big Company Limited is for their CAs(SA) to update their toolboxes. While employee engagement has been around for the past decade, it is still relatively new in the boardrooms of South African companies.
By nature, finance professionals are hung up on definitions. Try searching for a definition of employee engagement and you will be forgiven for walking away disengaged. I came across a study by David MacLeod and Nita Clarke in the UK, going back to 2009 called “Engaging for success: enhancing performance through
employee engagement”. If you are in the market for definitions, their study found fifty different definitions of employee engagement. In the end, you are probably
better off scanning the definitions and creating one to fit your organisation.
Why does engagement matter?
The reason employee engagement matters, ironically, has less to do with HR and more to do with financial considerations. The success of any business change is
disproportionately influenced by the employees behind it. A lean business sounds great until you count the costs of disengaged employees. When one employee
is doing the work of four people, the hidden costs of higher absenteeism and customer complaints are hardly worth it. Try running A-grade systems with
Z-level engaged employees and the latter always win.
Remember that operating loss I mentioned in the case of Big Company Limited? Well, management ought to take a page out of the 2012 Towers Watson Global Workforce study. In their analysis of 50 global companies, they found that companies with high sustainable engagement had an operating margin of 27.4%, just over three times higher than companies with low traditional engagement. ❐
Author: Yusuf Mahomedy CA(SA), AdvTax, is the founder of Worksucks – Make Work, Work and the Social HR Lab.