Mark Scanlon, Chief Executive of Personal Group discusses the UK productivity puzzle and the impact of engagement
Personal Group has always been curious about the connection between employee engagement and business performance, and today, that connection is more pertinent to the UK economy than ever. Unemployment is the lowest it has been for over a decade and yet productivity remains flat. In 2016, output per hour of work in the UK was a shocking 18% lower than the other members of the G7, making the gap one percentage point wider than the previous year and the widest since records began in 1991. As the UK prepares for an uncertain future outside of the EU, and as cost pressures continue to mount, the challenge is clear: how can businesses become more efficient and productive? To do this, leaders must rethink their business strategies and consider how best to optimise the performance of their workforce to boost productivity, helping to close the UK productivity gap.
So how can businesses improve individual performance, unlock discretionary effort and drive organisational productivity? Is a pay-rise the answer? Should employers offer instant benefits such as cinema or retail discounts, or longer term benefits such as life or medical insurance? And would an employee recognition scheme have any impact?
To answer this, we interviewed leaders from 10 of the UK’s top businesses, to test our hypothesis that happy employees are more engaged employees, and therefore more productive. This culminated in a report titled The Business of Engagement: Improving Productivity through People, which shows that by engaging employees through a culture of recognition, constructive criticism, being supportive of failure, strong leadership and open communication, businesses can unlock discretionary effort, and create a culture of engagement.
Personal Group as a case study
We took this one-step further to see if the theory was reflected within our own business. Over the last five years, we have invested in technology and business improvement projects while our headcount has remained consistent with the growth of our business. By automating certain processes, we were able to remove many repetitive tasks from our employees’ daily lives.
The results were incredible. We regularly measure the engagement of our employees through surveys and we began to notice that engagement was increasing at a higher rate than the wider industry. At the same time, we were seeing improvements in other key areas. Investment in technology meant that our sales team could see more customers in their working day and spend less time completing administrative work. This has led to a 20 percent improvement in productivity over the past five years. We also saw a 30 percent improvement in the cost of new business acquisition. Operationally we became more effective, which led to a better customer experience. Our already low complaint volumes fell by a further two-thirds, the attrition in our field sales team fell by 50 percent, whilst 10 percent of our employee workforce were promoted during the same period.
As a result, our culture has become more one of innovation and growth, with people having more time to be creative and add value to our customers. The outcome of all of this is a highly engaged and more productive team. By identifying and correcting those things that were counter-productive to employee engagement and actively listening to staff we improved our organisational productivity massively, if this could be repeated across all UK business the impact on our national productivity, and therefore our GDP, could be immense.
Employees’ happiness and their influence on productivity and business performance – survey findings
Qualitative research from our ten interviews combined with our own experience, demonstrated that there is a clear link between employee happiness and productivity at work. This link is supported by research from the University of Warwick, which found that when people feel happy; they are 12 percent more productive. But are UK employers aware of this and if so, are they putting processes in place to ensure their employees are positive about coming into work each day?
We surveyed 800 UK employees about their happiness at work. Shockingly, 48 percent said that they often are not happy at work, with almost one in five taking this to ‘rarely or never’.
According to the survey, the more senior you are in a business the more engaged you feel. 70 percent of senior managers and directors, and 76 percent of those who are self-employed were the most enthusiastic to get to work in the mornings. It is perhaps unsurprising that the more senior you are, the more directly invested you feel within the business and therefore more engaged and enthusiastic to do well. The results show that UK businesses still have a long way to go to engage their staff, and this goes some way to explaining the widening productivity gap in the UK. If business leaders can engender the same enthusiasm and passion for the job amongst their frontline staff as they feel themselves, and help staff look forward to and feel happier at work, they will see a tangible impact on business performance.
It is important to note that although the concept of implementing an employee engagement strategy may seem daunting, there are simple steps that every business leader can take to ensure their workplace is delivering its full potential and optimum productivity. The most simple and effective of all is to listen to staff, recognise their contribution and consider their wellbeing – something that often costs nothing. If UK business leaders commit to this, perhaps we could go somewhere to reducing the productivity gap.
It is not just Personal Group who see this link. Alex Edmans, Professor of Finance at London Business School found in his study of the 100 best companies to work for in America, that “firms with high employee satisfaction delivered stock returns that beat their peers by 2.3% to 3.8% per year over a 28-year period – that’s 89% to 184% compounded.” This is a compelling argument that employee engagement can have a direct impact on stock performance and in turn, if enough UK employers commit to engaging their employees, on UK productivity and GDP as a whole.
Click here to read the full Business of Engagement report or to watch the video interviews. https://www.youtube.com/channel/UCXYYe7ZOExdkZNsWQdlH0lQ