Employee Engagement Benchmark Report

1. Employee Engagement Benchmark Report Benchmark Report Employee Engagement: Sponsored By: © 2013 Demand Metric Research Corporation. All Rights Reserved.

2. TABLE OF CONTENTS 3 16 4 20 6 23 7 25 9 26 11 27 13 TABLE OF CONTENTS 3 16 4 20 6 23 7 25 9 26 11 27 13

3. INTRODUCTION Review any organization that has earned a “best place to work” designation, or one that perennially earns “favorite company” status with a strong base of loyal customers, and you’ll discover a common thread: employees who are highly engaged. The purpose of this study is to measure employee engagement, understand the impact it is having, and how it is measured and managed so as to derive some best practices to guide all organizations. Today’s employees desire a relationship with their employers that enable them to perform work that has purpose and builds their skills while doing it as autonomously as possible. A workforce of highly engaged employees is the product of company culture, which begins at the top of the organization. Achieving it requires investment, leadership, commitment and time. It does not come about because of the right words on the mission statement poster in the break room. 3 INTRODUCTION Review any organization that has earned a “best place to work” designation, or one that perennially earns “favorite company” status with a strong base of loyal customers, and you’ll discover a common thread: employees who are highly engaged. The purpose of this study is to measure employee engagement, understand the impact it is having, and how it is measured and managed so as to derive some best practices to guide all organizations. Today’s employees desire a relationship with their employers that enable them to perform work that has purpose and builds their skills while doing it as autonomously as possible. A workforce of highly engaged employees is the product of company culture, which begins at the top of the organization. Achieving it requires investment, leadership, commitment and time. It does not come about because of the right words on the mission statement poster in the break room. 3

4. EXECUTIVE SUMMARY       4

5. EXECUTIVE SUMMARY     5

6. RESEARCH METHODOLOGY Annual Revenues: Primary Role of Respondent:               Type of Organization:    6 RESEARCH METHODOLOGY Annual Revenues: Primary Role of Respondent:               Type of Organization:    6

7. EMPLOYEE ENGAGEMENT BASELINE “For the purposes of this survey, ‘employee engagement’ is defined as the measurable degree of an employee’s positive or negative emotional attachment to their job, colleagues and organization that profoundly influences their willingness to learn and perform at work.” Employee Engagement Benchmark Report, Demand Metric, December 2013, n=291 7 EMPLOYEE ENGAGEMENT BASELINE “For the purposes of this survey, ‘employee engagement’ is defined as the measurable degree of an employee’s positive or negative emotional attachment to their job, colleagues and organization that profoundly influences their willingness to learn and perform at work.” Employee Engagement Benchmark Report, Demand Metric, December 2013, n=291 7

8. EMPLOYEE ENGAGEMENT BASELINE There is a clear divide at the 50% engagement level, with almost half of the sample in this study falling on either side of this divide. Small companies (less than $25 million in annual revenues) reported the highest level of engagement, with 57% of employees engaged at the 50% level or above. It is the medium-sized companies (annual revenues between $26 and $500 million) that report the lowest level of employee engagement: only 40% of them report engagement levels of 50% or above. As small companies grow, they often lose some of the advantages that facilitate strong engagement, but do so gradually without realizing it. 8 EMPLOYEE ENGAGEMENT BASELINE There is a clear divide at the 50% engagement level, with almost half of the sample in this study falling on either side of this divide. Small companies (less than $25 million in annual revenues) reported the highest level of engagement, with 57% of employees engaged at the 50% level or above. It is the medium-sized companies (annual revenues between $26 and $500 million) that report the lowest level of employee engagement: only 40% of them report engagement levels of 50% or above. As small companies grow, they often lose some of the advantages that facilitate strong engagement, but do so gradually without realizing it. 8

9. THE CORE OF EMPLOYEE ENGAGEMENT Employee engagement is not the fortunate consequence of some random set of forces. It springs from an organization’s culture; and that culture is always a function of leadership. Employee Engagement Benchmark Report, Demand Metric, December 2013, n=291 9 THE CORE OF EMPLOYEE ENGAGEMENT Employee engagement is not the fortunate consequence of some random set of forces. It springs from an organization’s culture; and that culture is always a function of leadership. Employee Engagement Benchmark Report, Demand Metric, December 2013, n=291 9

10. . THE CORE OF EMPLOYEE ENGAGEMENT In stark contrast are the organizations reporting an employee engagement level of more than 50%, represented by the green bars, with 81% of leaders in those organizations exhibiting a high or very high level of commitment. Without a high or very high level of commitment, leadership is essentially conceding on the issue, either willfully or ignorantly counting on employee self-motivation to drive engagement. 10

11. . CHARACTERISTICS OF ENGAGED EMPLOYEES   (Revenue) (Employee Retention)      11 (Productivity) (Morale) (Creative) (Customer Loyalty) (Competitive Advantage)

12. . CHARACTERISTICS OF ENGAGED EMPLOYEES Δ Δ Δ Improved morale contributes to employee retention; employee retention influences customer loyalty; and customer loyalty directly enhances revenue. a competitive advantage. Employee Engagement Benchmark Report, Demand Metric, December 2013, n=291 12 Most managers intuitively understand that the characteristics on the list above all contribute, to some degree, to facilitating the success of an organization, and this data certainly supports that view.

13. . THE IMPACT OF ENGAGED EMPLOYEES Employee Engagement Benchmark Report, Demand Metric, December 2013, n=291 13

14. . THE IMPACT OF ENGAGED EMPLOYEES In fact, the biggest delta is arguably in the category most executives perceive as the most important one: profit margin. Of study participants with employee engagement at 50% or less, only 13% report significant impact of engagement on profit margins. For the group where employee engagement is greater than 50%, 33% report a significant impact of engagement on profit margins. However, the financial benefit of extending customer retention beyond the average relationship duration has exponential value. 14

15. . THE IMPACT OF ENGAGED EMPLOYEES making loyalists out of just 5% more customers would lead, on average, to an increase in profit per customer of between 25-100%. Both Reichheld and Hughes’ figures suggest that the benefit of retention is substantial. Employee Engagement Benchmark Report, Demand Metric, December 2013, n=291 15

16. . PROMOTING EMPLOYEE ENGAGEMENT Some level of nurturing is required to establish and grow an engaged workforce. Employee Engagement Benchmark Report, Demand Metric, December 2013, n=291 16 As a driver of engagement, the performance review is the most popular instrument, but the way it is played determines how effective it is.

17. . PROMOTING EMPLOYEE ENGAGEMENT It is a fundamental truth that when organizations attempt to change the culture and/or produce certain behaviors, it requires both the powerful expression of a vision and training.

18. . PROMOTING EMPLOYEE ENGAGEMENT To have effectiveness, initiatives to nurture employee engagement must first have genuine leadership backing. To know if initiatives to nurture engagement are effective, the measurement must occur from the employee side of the equation, not the management side. They are all designed around an understanding of what motivates the workforce, not around what management can or is willing to do. 18

19. . PROMOTING EMPLOYEE ENGAGEMENT                 19

20. . MEASURING AND MANAGING ENGAGEMENT Organizations with more meaningful levels of employee engagement are far more likely to have measurements associated with it. First, from a practical standpoint, the metrics are a management tool. Employee Engagement Benchmark Report, Demand Metric, December 2013, n=291 20 . The fact that a measurement exists lets everyone in the organization know that what’s being measured is important. The caveat here is that the measurement must have meaning.

21. . MEASURING AND MANAGING ENGAGEMENT Measurements, therefore, are both tools and affirmations of importance. Regarding the specific set of measurements examined in this study, all but one – the employee survey – are indirect indicators of engagement. For this reason, organizations that wish to make a serious attempt at measuring and managing employee engagement will need a series of measures or some sort of composite index. Any organization that is serious about employee engagement should consider an employee survey, which provides the most direct means of assessing not only engagement, but also a number of other critical workforce attitudes. 21

22. . MEASURING AND MANAGING ENGAGEMENT Human Resources is a logical candidate, and indeed is most often identified as having ownership in this study. Employee Engagement Benchmark Report, Demand Metric, December 2013, n=291 22 What matters most is for employee engagement to have the oversight of any department that takes the mission seriously, and one that has full executive support.

23. . THE CULTURE OF ENGAGEMENT Employee Engagement Benchmark Report, Demand Metric, December 2013, n=291 23

24. . THE CULTURE OF ENGAGEMENT The critical missing ingredient in a total customer-centric culture is the workforce, which is the delivery mechanism for service to the customer. These study results now further reveal that organizations with higher engagement levels have a different culture, one that is not solely customer-centric, but more often customer and employee-centric. In fact, the path to producing world-class customer outcomes starts with the capacity to produce those outcomes: the employees. 24

25. . ANALYST BOTTOM LINE Employee engagement has long been viewed like diet and exercise: everyone agrees that it’s a smart thing to focus on, but it’s not always a top priority. This study confirms the intuition of most savvy business leaders: higher levels of employee engagement have a measureable impact The benefits of higher levels of employee engagement are clear and articulated in this study. The formula for creating and nurturing employee engagement is also simple, but the execution not always so easy. But when an organization is able to orchestrate the mutual achievement of employee and business goals, it unleashes a tsunami of energy unified around a shared purpose. 25

26. . ACKNOWLEDGEMENTS About Cvent 26

27. . ABOUT DEMAND METRIC 27

28. . Benchmark Report © 2013 Demand Metric Research © 2013 Demand Metric Research Corporation. All Rights Reserved. Corporation. All Rights Reserved.