HR COACH AUSTRALASIA2020

Overview

Many HR professionals and business advisorsmaintain that high levels of employeesatisfaction are core to business success andperformance. They live and breathe the mantrathat ‘happy employees drive business success’and encourage and direct managers and ownersto ‘make employees happier… and your businesswill succeed’.

We have struggled with this concept for manyyears, as we have thought that this simplisticview appears inconsistent with bothinternational research and our own Australasianresearch. We have finally focused our researchefforts on determining the significance orotherwise of employee satisfaction on companyperformance and profit.

The key finding is that employee satisfaction is not the driver of business profit. Theresearch is overwhelming – employee engagement and alignment drives businessperformance and profit. Employee satisfaction is simply a necessary component ofemployee engagement – and alignment is actually core to business success.

This white paper is ideal if:

• You are a business owner keen to maximise your business performance and profitability

• You are responsible for the people aspects in your business and you want to improve the business outcomes

• You have invested heavily in employee satisfaction initiatives and now want to generate a greater return for the business

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Engagement and Alignment drive Business Performance (not

Employee Satisfaction)

We need to be clear about what we mean byengagement and alignment.

Employee engagement can be defined as anemotional commitment an employee has totheir work and organisation. An engagedemployee cares about their work and theirrole in the organisation – and they will goabove and beyond to meet businessobjectives. Employee happiness or satisfactionin the workplace does not equate toemployee engagement. Employees can behappy and satisfied in their role, but notproductive. An engaged (and aligned)employee is one who aligns their behavioursand actions in the workplace, to meet theirrole requirements, as well as wider team andbusiness goals and strategy. An engagedemployee wants the organisation to succeed.AHRI research indicates that 23% of theAustralian workforce are engaged.

The inference from the AHRI research is thatthe remaining 77% of the Australianworkforce are either disengaged or activelydisengaged. In terms of companyperformance and profit this also suggests thatbusinesses are potentially paying 77% of theirworkforce to be present, and at worst, toactively work against the interests of thebusiness. These are labour costs that are notsustainable for any business.

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https://www.ahri.com.au/resources/ahriassist/remuneration-and-rewards/motivation-and-engagement/

Our own research of Australasian businesses over the last 10 yearsshows that employee satisfaction results are skewed morepositively than business performance or employer satisfactionresults, and are less relevant or aligned when businesses are notperforming to expectations or not achieving their business goals.

The research suggests that business owners may not actually becommunicating effectively with employees when businesses arelow or average performing. The risk in these circumstances is thatemployees will be enjoying working with their work mates,potentially at the expense of being focussed on what could deliverthe best performance results for the business.

When businesses become high performing, employee satisfactionappears to marginally lag the company alignment andperformance numbers.

International Research

Research released by Harvard Business School identified theimportance of employee engagement, while also finding that lessthan 50% of companies actually measured engagement againstperformance.

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https://hbr.org/sponsored/2013/06/the-impact-of-employee-engagement-on-performance

Once you accept that employee engagement(rather than satisfaction) counts, you need tounderstand what to actually count. Thisresearch also identified the following mostimpactful engagement drivers that businessesneed to focus on to improve businessperformance:• Alignment across all levels of the business

and between departments in the business• Communication across and between all

levels of the business• Recognition for High Performers• Jobs Linked to Strategy• Assessments and Reviews Aligned with

Corporate Goals• Pay Linked to Corporate Goal

Achievement• Training focused on Corporate Goals

You now have a better idea on employeeengagement and alignment, and their drivers.

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Research by MIT/Sloan Management Reviewidentified 5 dimensions that all count towardssecuring or maintaining high levels ofengagement and alignment within a business.Employee satisfaction contributed only 25% ofthese results. The other 75% of engagementresults relate to alignment and performancemeasures, which have often been overlookedor not measured by businesses.

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https://sloanreview.mit.edu/article/measuring-the-benefits-of-employee-engagement/

How engagement ties to performance

Repeated studies over the past 10 years have shown that the business performance oforganizations in the highest quartile of employee engagement scores outpace that ofcompetitors. High employee engagement correlates with higher average revenuegrowth, net profit margin, customer satisfaction and earnings per share.

HR Coach has been researching the significance of alignment for businessperformance and profitability since 2003. Our strategic action model, underpins ourongoing methodology and assessment tools and focusses specifically on the need forbusinesses to ensure that their ongoing activity and energy is aligned to their strategy.

We have measured over 850 Australasian businesses against this model since 2008and consistently found that over 50% of businesses have alignment rates below 67%.This means that half of the businesses in Australasia are potentially spending a third oftheir labour budget for a nil or negative return. Ie. If they could improve theiremployee engagement / alignment rates it would flow directly to their bottom line.

When margins are tight, market competition is fierce and employee loyalty ischallenging, the time is right to focus on improving the engagement and alignment ofthe workforce in every business. It is the only way in these times to ensure improvedperformance and profitability – as people are both the ‘engine room’ and a significantcost to every business.

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If you want to stay or become a high performing business, you need to measure the rightthings.

Employee satisfaction counts for 25% of your business’s performance, but it is not enough– and if that is your only focus it is unlikely to maximise your profit performance. Ofcourse, many businesses are not even measuring employee satisfaction – so thesebusinesses really have a great opportunity to measure and focus on the items that willgenuinely make a difference to both their business and their future profit.

The evidence is overwhelming. Business owners really need to be thinking aboutmeasuring engagement and alignment (and culture), as these are core to understandingwhere their business is, and what the potential for improvement could mean for thebusiness. They also need to implement positive engagement and alignment strategies,tactics and activities into their business to close any gaps and strengthen areas of successon an ongoing basis. These initiatives could take some time to materially impact thebusiness, particularly as they need to be led by the leaders, managers and supervisors inthe business.

Measure Where You Are

The starting point has to be measure where youalready are. Ensure that your measurement processis anonymous (otherwise employees may notrespond honestly, which makes the resultsmeaningless) and that you are measuring EmployeeAlignment, Employee Commitment/Loyalty,Employee Satisfaction and Employee Performance.Your assessment tool needs to be valid and reliableand should be benchmarked against other businessesin your country (you are all competing for the samelabour, so you need to see how your business actuallycompares to others).

It is brave for employees to say how they feel andpropose solutions for improvement. It is also a bravebusiness owner who accepts that feedback and leadsand embraces change to improve their businessperformance. These days it is impossible for abusiness owner to know everything about everything,and getting input from people who are more familiarwith specific tasks and processes can only lead tobusiness improvement. Update all employees on thesurvey results and work with them to build andimplement an annual HR Plan to address any keyitems for improvement that surface.

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Conversely, if you are not prepared to share the results withemployees and work with them to implement strategies topositively address any areas of concern, we would encourageyou not to start. Where owners and/or managers choose notto share all the results with employees and/or decide todevelop their own plan in isolation and/or ignore the resultsbecause they don’t agree with them, any actions are likely tobe less effective and any future survey would normally havemuch poorer results.

Once you have measured where your business is, work withmanagers, supervisors and employees and build a plan to closeout the agreed and prioritized gaps. This HR Plan should formpart of your Business Plan, and would normally extend acrossat least a period of 12 months. Be assured, Rome wasn’t builtin a day, and building employee engagement and alignmentalso takes time, structure and process.

Employee Alignment

Involve at least a cross-section of employees in developingyour Business Growth Plan. Don’t forget to also develop theVision, Mission and Values for your business, so that everyoneknows what page they are supposed to be on. Regularlyupdate employees on the progress against the Business Plan/HR Plan and positively reinforce behaviour that is consistentwith the agreed Vision, Mission and Values of the business.Assess Employer Satisfaction with Strategy at least annually,and share those results with the employees in the business.

Employee Commitment/Loyalty

Assess management and employee culture at least annuallyusing a validated, benchmarked and anonymous survey. Ourresearch results are consistent with lots of other internationalresearch. Most employees (and Managers) leave a businessdue to a poor or broken relationship with their immediatesupervisor or Manager. High employee turnover (anythingabove 7% in any year) substantially reduces the profitability ofthe business, so focus on the Managers who have highemployee turnover in their teams. Many managers (andowners) are very good at justifying why people have left,without ever acknowledging that they are likely to be a big partof the reason. Review your resignation rates on an least anannual basis by department and this lag indicator will give youa good idea on where to focus your efforts.

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If you want to be proactive in this area, ie. before theemployees vote with their feet and leave, measure wherepeople are and use the results to focus and direct specificaction to improve management and employee culture. HRCoach Australasia completed research in 2019 specifically onmanagement culture in businesses, and found a significantalignment between management culture, employee cultureand business performance. High performing businesses had allthree areas aligned and operating at a high level. Lowperforming businesses had the opposite result.

Where employees do leave, have them complete an exit surveyon key measures and graph and report the results on at leastan annual basis.

Employee Satisfaction

Assess the level of satisfaction of your employees andmanagers, on at least an annual basis. For the results to bemeaningful and useful the assessment process should beanonymous, valid and reliable, and benchmarked to otherbusinesses in your country. Implement any agreed solutions toimprove future results in a transparent/participative processon schedule and to a budget. Pulse check any significantissues/ improvement items on a 6 monthly schedule, to assesswhether solutions are actually having a positive impact.

Employee Performance

Implement a regular (at least annual) formal performancecoaching process for all employees and managers. Trainmanagers/supervisors/employees on performance coachingprocesses. Ensure that all participants realise that the processis designed to recognize good work and identify growth ordevelopment opportunities so that employees can enhancetheir career and improve the performance of the business.Use the data from the performance coachingassessments/reports to map business capability and identifyareas for business-wide improvement.

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Strategic Alignment Measures

Solutions that work

Employee Alignment

1 Day Business Growth Workshop.Work with Employee to build a HR Plan.Assess Employer Satisfaction with Strategy at least annually, using STAR Workplace or similar.

Employee Commitment /

Loyalty

Assess management and employee culture at least annually using STAR Workplace, or similar.Assess management and employee culture using the Fusion Culture Program, or similar.Complete Career Monitor assessments on your key performers, to get ahead of their disengagement curveExit Survey all employees who leave the business and review the results.

Employee Satisfaction

Assess employee satisfaction at least annually using STAR Workplace, or similar.Pulse check any issues/iems on a 6 monthly schedule using STAR Pulse, or similar.

Employee Performance

Implement a regular (at least annual) performance coaching process for all employeesTrain managers/supervisors/employees on performance coaching processesEnsure managers and supervisors have completed Everything DiSC Management, or similarReport Business Capability using the data from the performance coaching assessments and reports.

The research shows that there are 4 key areas that make up Strategic Alignment.

Here are the keys to improving Strategic Alignment:

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About HR Coach

Australasia

HR Coach Australasia consists of anIndependent Member Network deliveringhuman resource and strategic alignmentsolutions to businesses.

HR Coaches work with businesses to establish and maintain the link between People andBusiness Strategy to improve performance and profitability. HR Coach has researched theAustralasian small to medium business sector for the last 20 years and Coaches use thisresearch, patented tools and methodologies to deliver solutions for businesses that arepractical, timely and effective, every time.

Like what you have read? Why not check out some of our other research papers:

Cultivating Management CultureIdentified the link between management culture and business performance.

Unlocking the Workplace Generational CodeIdentified the similarities and differences between the five generations now at work

Unlocking the Code for High Performing BusinessesIdentified what separates high performing businesses from their low flying competitors.

5 Effective ConversationsIdentified the ways to ensure that every conversation at work is effective

For more information, get in touch:1300 550 674

hrcoach.com.au© HR Coach Australasia 2020

This policy and all of its components are protected by copyright. No part may be reproduced or copied without the prior written consent of HR Coach Australasia

Building the Bridge to (Post COVID-19) TomorrowIdentified the pathway for businesses to recover from the impact of COVID-19