Pressing engagement

Research shows that employee engagement with an organisation’s aims is more than a fad, increasing client satisfaction and helping win business. Firms need to give it careful consideration to ensure a sustainable way of working.

By Jim Crawley, Principal, Towers Perrin

What comes to mind when you think of the word ‘engagement’? The romantically inclined may think of the first step towards a long and happy relationship with the partner of their dreams. More practically, and in the legal world, it would be natural if you were to think in terms of client engagements; in other words, the assignments you and your colleagues are currently working on.

But increasingly, engagement is becoming recognised as the way to improve productivity, innovation and service through people management. Effectively, engagement sums up a state of mind in which employees are prepared to invest their discretionary effort in their work beyond the minimum expected of them; to go the extra mile for the good of the business.

The more cynical might be inclined to dismiss this as just another HR ‘fad’. After all, HR has never been short of big, new ideas – witness the learning organisation; culture change; total quality management (TQM); quality circles; and so on. And anything that concerns itself primarily with the qualitative attitudes people hold towards their work can smack of another ‘soft’ people initiative. Engagement is different, however, because there is an increasing body of evidence to demonstrate that employee engagement is a lead indicator of company performance.

Impact of attitudes

The connection was first worked through by Sears, the US retail company, in the early 1990s. Their analysis identified the causal link between employee attitudes, customer service and profit. In other words, they demonstrated that if they were able to improve employee attitudes, customer service would improve, and this would in turn flow through into profits. When they put this theory into practice, the results were dramatic. Merchandising (the biggest loss-making Sears business unit), transformed a $3bn deficit into a net profit of $752m.

Since then, the same cause-and-effect relationship has been demonstrated over and over again. For instance, Towers Perrin-ISR has measured levels of employee engagement in 40 of its major global clients over a three-year period, tracking their financial performance over the same timescale. The companies with high levels of employee engagement achieved significant increases in both operating margin (3.74 per cent) and net-profit margin (2.06 per cent). Conversely, companies with low levels of employee engagement experienced significant reductions in these key indicators of business performance.

Engagement is therefore different from other ‘new ideas’. There is now a body of evidence that shows it can lead to an improvement in company performance – an effect that is particularly pronounced in organisations that rely on the performance of their people for business success. Not surprisingly, the concept has found most traction in sectors such as retail (where John Lewis would be an example of a company focused on employee engagement). Financial services would also be an example, where RBS and Nationwide are both known for the effort they put into measuring and managing employee engagement as a way to drive business performance. By extension, we would argue that the professional-services sector, and especially law firms, are equally, if not more, reliant on people, potentially making employee engagement a key factor in differentiating your firm from the competition and in driving high performance.

Understanding engagement

So the next consideration is how to go about increasing engagement in your firm. The first step is to understand the concept better. We see engagement as being a function of three areas. To be engaged, employees must have:

Emotional attachment to the organisation and their work;
Rational understanding of the firm’s goals, values and how they can contribute;
Motivation and willingness to perform better.

All three are necessary for high engagement. For instance, an organisation with high emotional engagement without corresponding levels of rational engagement would be a chaotic place – staffed by ‘headless chickens’, as one of our clients recently put it. Equally, having low emotional engagement and high rational engagement would lead to an inert, compliant culture staffed by ‘tin soldiers’. The goal is therefore to combine high emotional and rational engagement with the willingness to act on this in order to help the firm be successful.

The next step is to understand what drives engagement in your firm. In the legal sector, we know that the general drivers of employee engagement are those listed in Table 1.

No simple answer

However, experience of working in the sector has also taught us two other lessons; first that the drivers of engagement vary firm by firm, and second that the actions required to improve performance on each driver need to be specific to each firm. In other words, there are no off-the-shelf solutions in this area, and no substitute for careful research and analysis before forming action plans to improve engagement levels.

While generally true, this last point is especially important for law firms. After all, legal experience and expertise are easily transferable between firms. The challenge is to think through how you will make your firm unique as a place to work.

By definition, this entails some hard thinking about the total employment deal on offer to professionals and business-support staff. Hard thinking is done best when supported by hard data. Increasingly, law firms are using staff surveys, not only to assess employee satisfaction and general morale, but also to generate empirical insight into the engagement drivers among different employee populations, benchmark these results against sector norms, and create an empirical platform for strategic debate and decisions on these ‘soft’ people issues.

But there is another specific dimension to engagement that is especially important to the legal sector. For example, it might be argued that rather than being a sector known for low employee engagement, the opposite might be true; that the response of employees to the demands of the sector leads to over-engagement, and (potentially) to burn-out. This is where a further development, ‘sustainable engagement’, has particular relevance. This view argues that high employee engagement needs to be aligned with employee wellbeing in order for high levels of performance to be sustained over time. Other combinations lead to suboptimal results (Table 2).

Our general research shows employee wellbeing is a function of factors such as positive working relationships; autonomy and self-determination; achievement of personal growth and development; and a sense of purpose. In addition to understanding the drivers of engagement, it is also therefore important to assess the quality of employee wellbeing in your firm, specifically in order to be able to build an environment in which sustainable engagement flourishes.

Taking action

Then, having evaluated the drivers of employee engagement and the level of wellbeing, you can proceed to build an action plan to improve engagement with confidence. This will need to be very specific to your firm, but will almost certainly include the quality of leadership provided. While this is an area in which law firms typically struggle, it is crucial to the improvement of employee engagement that your people are clear on the strategic direction of the firm; have confidence in the leadership to execute the strategy; and feel a personal connection to the leadership team. Equally, it will be important to provide career-development opportunities and support these with reward-management processes that fairly reflect performance and which align pay with career progression. Finally, the qualitative aspects of job flexibility and work-life balance are important to both engagement and employee wellbeing, and contribute significantly to sustainable engagement.

Finally, here is an example from the professional-services sector. A global organisation wanted to build a consistent picture of employee engagement across all its offices. The initial phase of work revealed both significant local strengths and significant challenges. The results led to the development of national employee-engagement models that identified the drivers of engagement specific to each office. In turn, these formed the basis for local action plans to focus improvement efforts on the key drivers that would provide most leverage in increasing employee engagement. The global organisation supported these initiatives by sharing best practice across the regions and providing national, regional and sectoral ‘norms’ against which each office tracked their progress. What is clear from the firm’s experience was that the profile of ‘people’ issues was raised significantly by the initiative across the whole organisation, but in a data-driven, business-oriented way. Specific action plans were also put in place to improve employee engagement in each location; thereby enhancing accountability for people issues among partners and managers.

All the evidence, both from research and client examples such as this, indicates that employee engagement is not a fad, but a powerful lead indicator of performance. If you can improve engagement, client satisfaction will also be likely to rise, and an increase in firm profitability will follow. For organisations like law firms – hugely dependant on the quality of their people – this makes engagement an essential component of creating and sustaining high performance.

Jim Crawley is Principal at Towers Perrin. He can be contacted at jim.crawley@towersperrin.com