How to Measure the ROI and Effectiveness of your Employee Engagement Strategy
With the fact that human capital is the most essential element in an organization, employee engagement takes the utmost importance for HR. However, getting a proper read on employee engagement ROI must take precedence to improve strategic implementation.
From MBOs in Personal goals in the early 60s, HR processes have evolved their accountability to function independently as a profit center. Robust methods that allowed calculating the return on HR investment became crucial to this evolution. Therefore, employee engagement processes must also fit the ROI feasibility and soundness to measure its outcomes.
By measuring the ROI and implementing a robust employee engagement strategy, an organization can see a substantial 81% reduction in absenteeism and a notable 14% upswing in productivity.
Why is “enough” not enough? Organizations are making multiple attempts to update their engagement program. However, it is still not quite hitting the mark. Aberdeen found out that organizations with a high level of engaged employees outperform companies with poor engagement by 202%.
A solid engagement program is an investment. If you play your cards right, it yields excellent results fast. However, this road to return is not the one without obstacles.
Therefore, in this article, we discuss how to measure employee engagement, ensure an engagement strategy can be built to be robust, and measure the success of employee engagement strategy.
Such a results-based approach for engagement program accountability helps HR align itself to business needs, enhance program design effectiveness, and increase support for the strategy.
Best practices while measuring the success of employee engagement strategy
If you have been running an engagement program, the business owners would be interested to know the impact of measuring ROI on employee engagement programs. Putting it the other way round, business owners would like their HRs to prove the effectiveness of the engagement program and the way it contributes to the bottom line. When assessing the ROI and effectiveness of an employee engagement strategy, employing data replication tools becomes crucial. These tools play a pivotal role in consolidating, governing, and analyzing diverse sets of employee data within the data warehouse, facilitating comprehensive insights for informed decision-making.
Advancements in technology have helped us gather data that can provide us return on investment metrics for engaging, rewarding, recognizing and incenting employees.
Today, organizations face many challenges like a shortage of best talents. Changing the workforce are a few to name. Hence, organizations must get on their toes and strategize a plan to enhance their engagement program immediately. Here are five best practices to follow that amplify the effectiveness of engagement programs.
1. Define your program goals
First, if your staff doesn't understand your organization or team's overall goals, incentivizing them is useless.
Ask your team members: Do you understand our company's vision? Do you know your specific objectives and goals?
Even if they have an idea, it's always wise to brush up on goals before starting or revamping your rewards program.
Start from the top, delineate your corporate mission, move on to specific department's objectives. Finish with the team and individual goals. By outlining the company's mission and how that trickles down to each employee, your staff will understand the impact of their work.
2. Set up some focus groups
If you think that a few 'yes/no' questions are not going to be sufficient, you can always get a select few of your employees in for a quick focus group. You can then grill them about their thoughts on how the program went.
3. Align your engagement program with business goals
Once you have the program, culture, and business performance data, then the organization's HR professionals can ascertain how individual behaviors affect business results by starting the task of running correlations.
Such information helps organizations leverage their engagement program as a tool to enhance performance and meet the organization's desired goals. Companies can utilize engagement strategies to shape their workforce culture and fortify positive behavior.
Once you've outlined your goals, it's time to align your rewards program to your overall objectives. Engagement and incentives need to strategically interest employees to achieve better results with your team goals. We'll use a product sales environment for a couple of examples.
- If product knowledge is required to increase sales, your salespeople need to be product experts in their space. Run contests or quizzes on product information with smaller incentives to ensure your team stays up-to-date and knowledgeable.
- Consider a tiered reward program to increase overall sales volume, where incentives grow as higher milestones are met.
4. Break out of the mold
Does your company give out basic year-end bonuses? While extra cash around the holidays may always be welcome, it's not incentivizing anyone. Traditional cash bonuses can lead to entitlement among employees, as they are expected each year and not tied to measurable actions.
5. Assimilate culture and business metrics
Once the engagement program is implemented, it is about to grow. Hence HR professionals must start integrating more data points that gauge a company's culture and business performance into their analytics.
Strut suggests that companies use metrics that have been traced by HR professionals, such as employee engagement, employee retention, customer satisfaction, productivity, etc.
He further adds that the organization can go as far as they wish to prove the engagement program's impact, worth, value, and influence on their organization by using these metrics.
Program metrics generally address basic information such as usage, adoption, frequency, reach of the engagement program, which can help HR analyze what is happening with the engagement program across the firm.
These program metrics measure the satisfaction and engagement of the employees, and Business metrics uncover the program results on key business indicators as profits and productivity.
The data at program grade is genuine, simple, and easy to understand. It also provides valuable information to propel engagement program implementation and usage amongst the employees and their team leads.
6. Tracking employee engagement patterns
All HR heads and team leads agree that a good employee engagement system goes a long way in motivating employees and sustaining a positive office culture. So isn't it natural to find out if your attempts are working out?
Here are a few examples of questions that Empuls, an employee engagement platform and analysis tool, will help you find answers to:
- Who is getting recognized often?
- Who is not recognized at all?
- Is there a potential underlying performance issue resulting in little to no engagement? (Is there a need for a training session?)
- Are there employees who are not getting recognized but their team?
- Are there any managers or employees who are not rewarding and recognizing their peers/team at all?
7. Look at staff turnover levels
If your program is in line with increased staff retention levels, it's a pretty good indicator that they're doing something.
8. Check the bottom line
It may seem slightly simplistic, but you could check raw numbers like profit or ROI. This may not be a hugely accurate metric, but it may well give you something of an indication.
9. Use surveys to track engagement
Perhaps the easiest way to find out if your rewards and engagement program works with your workforce is simply to ask them. You can send round paper surveys after the program has finished or preferably set up an online survey. You can glean quite a lot of helpful information this way.
10. Continue to re-evaluate the data
Today organizations are constantly juggling between reorganization, restructuring, growth, and frequently changing workforce. This calls for regularly re-evaluating the firms' engagement program and the desired business results.
When quarterly reviews are performed, organizations can challenge the existing hypothesis about which strategy works best and when and where there is a need to formulate new ideas and make suggestions to enhance their engagement program constantly.
11. Work to simplify program workflows
To provide comprehensive data that would let you know about the ROI on employee engagement programs, companies need to ensure that the engagement program they implement in their firm is easy to use and frequently used. The engagement program should be open to all the employees, including managers.
Technological advancements have made engagement platforms easily accessible through actual-time dashboards, on-demand reporting, contextual analytics, etc.
Such employee engagement measurement tools have helped the managers a lot as they keep the managers aligned and in constant touch with the performance of their teams.
Easy access to engagement platforms enables managers to develop appropriate strategies that enhance the staff's performance and the business's performance. The right engagement program offers a platform that shares, celebrates, and instills the intranet with fantastic success stories. It displays a record of an employee's most outstanding achievements to date.
Engagement program value chain
Let's now understand how to measure employee engagement. According to the ROI institute, an engagement program or any HR initiative for that matter has five levels of evaluation during implementation:
Level 1: Reaction & planned action
Measures employees' reactions to the program and captures planned actions. The data for this level can be collected using program adoption rates the number of employees who have engaged with the program. Sources for this data could be:
- Implementation report
- System usage reports
Level 2: Learning
Measures changes in knowledge and attitudes. The data for this level can be collected using:
- Quizzes
- Short opinion surveys
Level 3: Application
Measures changes in on-the-job behavior or actions. This level of data can be collected using:
- Surveys/Questionnaires
- Observation on the Job
- Interviews
- Follow-Up Focus Group
- Action Planning
Level 4: Business Impact
Captures changes in business impact measures. This level of data can be collected using Performance Monitoring.
Level 5: ROI
Compares program benefits to the costs. ROI Calculation is done with the following formula.
Program Value Chain
The above discussed different levels of evaluation are done at the various points in the Engagement Program Value chain as given below:
1. Develop/review objective of solutions
The first stage of implementing an engagement program needs to define the implementation's strategic objective clearly. For instance, it could be to 'reduce attrition by 2%' and 'improve employee NPS by 10%'.
2. Develop evaluation plans and baseline data
Right from the conceptualization, the program needs built-in mechanisms to evaluate it. Including checkpoints with baseline data already available- like an annual engagement survey, etc.- is a great way to ensure that these engagement efforts are measurable.
3. Collect data during solution implementation
Both Level 1 and Level 2 data need to be collected in this stage to keep track of implementation efficiencies. Use Implementation reports, System usage reports, Quizzes, and Short opinion surveys for collecting data during solution implementation.
4. Collect data after solution implementation
Level 3 and Level 4 data needs to be collected to measure direct efficiencies of post-implementation. Use Surveys/Questionnaires, Observation on the Job, Interviews, Follow-Up Focus Groups, and Action Planning for collection data after solution implementation.
5. Isolate the effect of the solution
There are various methods to identify the impact of engagement program implementation:
The best way to isolate the program's effects is to consider two pilot groups during the program's execution - one with the solution implemented and one without. This method is called the 'Comparison group Analysis.'
For instance, implement a peer reward system in one group amongst two similar groups and compare data differences of both groups over some time like 'productivity improvement' or 'turnover' (metrics that directly relate to returns).
Other methods include Trend line analysis, Forecasting methods, Estimations, and Previous studies.
6. Converting data into monetary value
Once the data is collected from step 5, for instance, a 'peer to peer rewards implementation has increased productivity by 5%', this data needs to be converted into monetary benefits.
Productivity management systems would have the factor ready, which translates every productivity increase into a fixed monetary value. Use this factor for calculating the monetary value of the data collected.
These standard values can be applied to
- Output
- Quality
- Employee's time.
These conversion values can also be done by relying on historical costs and records with the help of internal and external experts or data from external databases.
Sometimes, even the employees or managers themselves might be directly calculating the monetary results of their functions. These estimates can go a long way in calculating the total benefits of the implementation.
7. Calculate ROI
ROI on employee engagement program is calculated using the below formula:
For example, if cost of implementation is $300,000 and benefits (sum of step 6) of project is $400,000,
ROI = ($400,000-$300,000)/$300,000* 100 = 0.3334 x 100 = 33.34%
8. Investment
It's the dream of every organizational leader to keep their employees motivated, productive and consistent at work. An adequately designed Employee Engagement program makes for an effective way to boost employees' morale.
How to calculate the ROI on various rewards and recognition programs?
Here are the ways to calculate the ROI on various types of rewards and recognition programs of different budgets:
1. Talent acquisition via employee referrals
Companies acquire talent via various sources such as consultants, hiring portals, employee referrals, and even social media. Employee referrals are considered the most efficient hiring medium as employees understand the company culture, and the referred people are likely to fit in better.
2. Performance-based rewards
Employees with a track record of good performance attract rewards and engagement from their leaders. Good performers are recognized on a spot, weekly, monthly, quarterly or annual basis. If the organization has implemented a rewards point system, these winners are awarded points redeemed against rewards such as experiences, activities, and vouchers.
3. Peer-to-peer rewards
In addition to the manager-to-employee engagement, good organizations encourage employees to appreciate, reward or gift their peers who have helped them on multiple occasions or performed well consistently. Such organizations often own a culture of genuine appreciation. Such small but essential gestures help organizations build employee engagement and increase productivity.
4. Rewards for personal occasions
Every employee has personal milestones such as birthdays, marriage, anniversaries, and parenthood. They feel special when their moments of happiness are complemented by congratulatory messages and personalized gifts at work.
Such rewards often comprise experiences, activities, and vouchers that engage employees and give their family members reasons to cheer about.
5. Team awards and bonding activities
New and existing employees are often involved in ice-breaking experiences and activities with their teammates and other employees. These activities are tailor-made for employees to connect with their colleagues and get in-depth knowledge about the business and the people.
They get acquainted with key people in the organization and get better aligned with the company's structure and culture.
6. Employee wellness spends
Good organizations extend wellness programs to their employees in a planned manner. They let their employees know that their contribution means a lot and value their wellness.
These expenditures could include setting up a health app for employees as a part of the existing HRMS or giving the employees incentives to join wellness or a fitness program at a gym or a fitness center.
7. Long service anniversary awards
It's not a small achievement when an employee completes 5 or 10 years with an organization. These years of work reflect an employee's loyalty and commitment towards the company and imply that they understand the company culture well and are an asset.
Organizations thus recognize long service by rewarding and recognizing their employees via cash rewards, vouchers, and experiences and activities.
Summing up the reward spent across the stages of an employee lifecycle, the total reward spend comes out to be $ 10,900X per year.
The nature of this spending varies according to the employee's stage; however, the intent remains the same–to appreciate and motivate. Well, thought-out rewards make for a perfect way to communicate this appreciation and engage employees throughout life.
Benefits of an employee engagement program
In addition to a few benefits discussed in Level 5, the following are a few of the critical benefits of an employee engagement program:
1. Reduced employee turnover
This itself is an indicator that indicates how engagement programs impact your ROI. Your company has gone through a huge expense of hiring and training the employees. It comes as a massive blow when these top talents decide to leave your company.
An email that mentions the achievements of your employees is one of the best ways that still works well. It boosts employee morale and infuses the trust factor in your employee towards you. A reduced turnover means saving costs on recruitment training and having more productive employees.
This has a direct positive impact on your ROI. An evaluation of the turnover rate before and after the implementation of the engagement program will give you gaugeable outcomes.
2. Increased engagement
When does an employee remain engaged with an organization? Well, when he is aligned with the company's goals and is loyal towards the company's success. Engaged employee performs at their best level with passion in what they do, leading to innovative practices.
3. Better business results
Your product or services that you offer becomes the main focal point of your business. For this purpose, various departments within your organization strive hard to enhance your product and services to increase sales and bring about brand awareness of your business presence in the markets.
Employee engagement leads to building a connection between the employee and the organization. When their efforts are recognized, they put in more effort to deliver the best to the clients, leading to increased customer satisfaction.
They are motivated to remain loyal to contributing effectively to attain the desired business goals. This brings about an increase in sales and strengthens the bottom line too.
With the best engagement practices, your business can grow tremendously, make significant profits by selling your services and products and develop a huge customer base, which is any business's primary goal. Isn't it?
4. Innovation and productivity
In this challenging economy, to stay updated with the market and stand apart from the crowd, you need to be innovative and enhance and try new strategies.
Research by Gallup found that employees who receive strong engagement are 33% likely to be proactively creative. They generate twice as many creative ideas per month as those employees who are not recognized.
From companies point of view, the employee who is effectively recognized for their performance is more than twice as likely to be more creative.
↠ 27% of employees said that they want to be recognized for their ongoing continuous efforts.
↠ 41% needed engagement for going above and beyond their usual work.
↠ 32% of employees stated that a bonus of about say.
↠ 5% would also make them feel recognized and rewarded for their strenuous efforts at work.
5. Brand worth
What does your brand represent? Well, it means people's perception of an organization, the customer services they provide, the brand reputation, and the employees.
Happy and highly engaged employees will portray an organization's positive image. It doesn't end here. They also concentrate and ponder on how to get high brand value. For any organization, first, come the employees and then the customers. Hence every firm should think about how to increase their brand value from the inside first, i.e., their employees first, and then go ahead and feel for their customers.
A performance-based employee engagement program positively infuses a sense of belonging to the organization. Brand value can be enforced byways like merchandise that bears the company logo rather than the text logo, or certificates of appreciation are a few to name that show engaging with employees to make them feel connected and belong to the organization.
Employee engagement measurement tools
Empuls is one of the best employee engagement measurement tools built to suit organizations of all sizes. The all-in-one employee engagement and motivation platform that offers rewards & recognition, pulse surveys, eNPS surveys, 1-on-1 feedback, social intranet, and people analytics in one powerful solution is trusted by 1000+ brands across the globe.
Empuls helps organizations increase ROI on employee engagement programs by building high-performing teams aligned to organizational culture and values. Empuls also makes it simple to connect and engage your workforce, wherever they are.
Conclusion
Engagement programs only work after a period and trial and error. They do not just copy and paste efforts. Each organization needs to develop and establish its own. Each business is different, and attempting to shoehorn in a templated program is clumsy and will most likely be ineffective.
So schemes need to be tried and tested and amended where necessary. It's a refinement process. You keep what works, and you ditch what doesn't. Simple.
The continual improvement of your rewards and engagement program comes by measurement. It's the only way. You have to track the success of every scheme you run. Otherwise, its efficacy is unknown.
Somewhat incredibly, less than a third of employers worldwide actually bother measuring ROI on employee engagement programs and the effectiveness of their employee rewards programs in terms of their impact. So how can they tell they're working? Or whether their staff is engaged or not? The simple answer is this - they can't.