Good leadership, career development opportunities, and work-life balance critical for long-term success
It used to be that whenever people talked about how successful a company was in minimising turnover and retaining staff, the key question was: How loyal are their employees?
For those people who have slept through the past few years, loyalty is now officially out of vogue. The new buzzword is employee engagement. It is a concept that has taken off in the United States and Europe in the past decade, but it is only in the past couple of years that it has begun to make an impact in Asia.
So what is employee engagement? Precise definitions vary. Most centre on the key issues of employees being inspired by and proud of the work they do, committed to the company they work for, and, importantly, prepared to put in discretionary effort for the betterment of the firm. Its exact origins are also unclear.
Theresa Welbourne, an adjunct professor of executive education at the University of Michigan, wrote in a paper last year that it appears to have sprung up in the 1980s as a reaction to increasing globalisation. Unlike the former model, whereby workers offered their loyalty to the company in exchange for lifetime employment, global competition forced businesses to be more flexible in their control over wages and benefits, according to Ms Welbourne.
Long-term employment became a thing of the past, and career ladders turned into spirals. As a result, turnover rose, skilled workers became unwilling to put in overtime and extra effort, and productivity suffered. Employee engagement, which is linked to variables such as how employees view the perception of their work and the company, career opportunities, feedback, quality of office relationships, became a way for companies to regain some of the lost productivity.
Ted Marusarz, principal for global knowledge management and development, for HR consultancy Hewitt Associates, offers a similar take.
'Hewitt was one of the organisations that started the focus on employee engagement in the '90s,' he said. 'Prior to that employee surveys were focused on employee satisfaction. We found, however, that satisfied employees did not necessarily produce the type of performance that helped organisations to succeed.
'We therefore set out to identify the key employee behaviour that drove retention, customer service and ultimately business success. We defined these as 'stay, say and strive' and the engaged employee as having an emotional and intellectual involvement in the organisation and its success.'
According to Brenda Wilson, business leader at HR consultancy firm Mercer, being engaged is about more than being loyal to a company. 'Loyalty is a thing of the past, when there was a strong psychological contract between employees and an organisation that would give you a lifetime guarantee of employment,' she said. 'In Asia, many organisations still practise the 'iron rice bowl' concept, but loyalty doesn't mean the employee will give you discretionary effort above and beyond the average requirements of a job. They may just never quit - but that doesn't necessarily mean they are providing engaged levels of productivity.'
But in Hong Kong, where work attitudes are becoming more fluid and the past decade's financial crises are fading from memory, employees have more choice, and turnover rates are soaring. If employees are not afraid of being out of work, they will demand more from their working lives. The message from industry experts is repeatedly that if companies do not want to lose their talented staff in this competitive climate, they must offer conditions in which employees feel engaged.
A fully engaged staff saves firms a substantial amount each year in attracting and recruiting new talent. HR consultancy firm Towers Perrin, which recently conducted a global survey, has shown that if a company raises its engagement level by 10 per cent, it can lower its employee turnover by 4.9 per cent; with the costs associated with the loss of one member of staff multiplied by 1,000 employees in a large organisation, figures can escalate into millions of dollars.
'The engagement factor is critical,' said Michael Chan, senior consultant at Towers Perrin. 'If you have high engagement, you have high productivity, and that of course has a positive direct correlation to your business results.
'You can have short-term success without employee engagement but in the long term you must have engaged employees. Top line, bottom line - all aspects of a business are affected by how engaged the employees are.'
The Towers Perrin study, in which 1,000 Hong Kong employees were interviewed, also found that only 5 per cent of workers in the SAR are fully engaged and willing to go the extra mile at work, which puts Hong Kong as having some of the lowest figures of employee engagement in the world.
Contrary to what many might think, it's not all about the money. According to the study, the key elements in choosing an employer, staying with the company, and putting in extra discretionary effort are good leadership, career development opportunities, and an appropriate work-life balance.
Another study, by HR consultancy Watson Wyatt, found higher employee engagement figures in Hong Kong of close to 70 per cent among the sample it surveyed, although this higher percentage could be due to its less strict definition of employee engagement.
The report also found what drives engagement in Hong Kong is customer focus (feeling that a company delivers a high service level and quality products to its customers), compensation and benefits, and communication within the company. Compensation comes in at number two, but it is not limited only to monetary rewards - a company's work environment, culture, development opportunities and training can also be considered benefits.
'These results conveyed how important meaning is to a person's work,' said Ilene Gochman, national practice leader of organisation effectiveness at Watson Wyatt. 'We were expecting rewards to come up higher, especially in the Asia-Pacific part of the study.'
While many employers in Hong Kong are aware of high turnover rates and low engagement levels, many do not do enough to combat it. Many still rely on compensation, but this is a vicious cycle, said Mr Chan.
'When the economy improves, the employee turnover increases,' he says. 'This is because the employee doesn't have the engagement with their employers.'
Watson Wyatt highlights communication as vital in developing engagement - that's both effectively communicating the company's future strategy and goals (what Watson Wyatt calls 'line of sight'), and daily communication and coaching by managers. 'Communication is key,' said Dr Gochman. 'And the more often it happens, the better it is. In our study it was like a textbook example. The method of communication didn't matter as much as the frequency. It didn't even matter if the news was good or bad.'
Delivering on promises is also vital. 'The companies that don't say they empower and then don't, fare better with this consistency, rather than saying something and then not delivering on it,' said Dr Gochman.
Towers Perrin highlights building strong leadership as a way of improving employee engagement. The firm recommends that employers follow the lead set by US and European firms, which are looking at how their leaders perform in terms of coaching and managing employees. 'Employees are waiting for their leaders to lead them. The companies that offer strong leadership to their employees sooner than others can get ahead of their competitors,' said Mr Chan.
Mercer, whose recent study found that respect in the workplace is an important engagement driver in Asia, also recommends equipping managers with skills and knowledge needed to become more effective people managers. This is especially crucial to multinational companies or local firms with a multicultural staff.
'The drivers of engagement may cluster around certain key needs, but there are differences on a country, culture and company basis,' said Ms Wilson. 'Don't go for a one-size-fits-all approach. Organisations should create a multinational environment that is productive. Research each location and when you know you have pockets of certain nationals, equip managers to be more sensitive to the individual needs of team members.'