Downsizing may seem to be productive in the short term, but it fails to give sustainable benefits in the long run.
The success of any company, in the long term, is heavily dependent on the quality of its employees and their loyalty towards the company. However, when it comes to calculating the economics, employee worth is often considered to be intangible and soft, as compared to the tangible figures, such as costs of labour and operations.
However, in difficult times, it gets tougher to gauge the profit–loss ratio of retention or downsizing of employees. It has been substantially and repeatedly experienced that while downsizing proves to be productive in the short term, it fails to give sustainable benefits in the long run.
Downsizing causes an inadvertent pain to the customers, leading to a dip in customer satisfaction levels. Also, the organisational culture gets severely affected by the rumours, paranoia and lack of trust. In such a scenario, motivating employees becomes a challenge, especially as they begin to question several things. No company takes pride in layoffs as it inescapably presents a very wallowing picture of the company.
For organisations to outgrow tough times and move towards betterment, there are two imperatives —loyal customers and improved productivity. This is only possible when the organisation can boast of committed and loyal employees with the management understanding the link between employee loyalty and profit, instead of opting for the easier but dwindling option of downsizing. It is a better strategy to invest in creating a strong defense line than saving up for an unseen holocaust.
Researchers at the University of Pennsylvania have found that spending 10 per cent of a company’s revenue on capital improvements increases productivity only by 3.9 per cent, whereas, investing the same amount in developing human resources more than doubles the amount to an astounding 8.5 per cent.
This clearly indicates the importance of investing rightly in the means of garnering employee loyalty, starting with taking stock of where it stands and then improving it further. The process begins with taking honest and transparent feedback from all employees across levels. This feedback should cover the vital dimensions of the business and measure it in a clear, objective and meticulous manner.
Once the current loyalty index is measured, it needs to be tied to the typical performance drivers of most businesses, that is, productivity, employee turnover, customer loyalty and revenue. This is done by statistically aggregating employee data into groups and linking them to these drivers.
An extensive study by Harter, Schmidt and Hayes showcases these performance drivers as highly dependent on employee loyalty-related attitudes. Having mapped loyalty with these drivers, companies should then look at the ways and methods to engage with the employees. The logic is very simple; an engaged employee is satisfied and loyal. Loyalty, in turn, drives productivity, which in turn, leads to customer satisfaction and ultimately increases profitability.
Satisfaction vs engagement
There is a difference between a satisfied employee and an engaged one. An employee might be satisfied with the compensation, benefits, promotions, work conditions, etc. However, an engaged employee would have the burning desire to go beyond what is expected, be innovative and feel motivated about the company’s goals and growth.
Engaged employees believe in the mission, vision and values of the organisation and feel that what they do makes a difference. Being engaged is a superset of being satisfied. Engaged employees possess the maximum efficiency and chances to truly satisfy customers. They become the ambassadors of the brand. These employee ambassadors, as has also been stated by many others, are committed to the company, to the value proposition and to the customer.
In reality, there are very few engaged employees in most organisations who are ready to be the ambassadors. As per the Gallup’s State of the Global Workplace, only 13 per cent of employees are engaged worldwide. While it is a disheartening number, the greatest opportunity lies in converting the unengaged employees into engaged ones. The greatest challenge, on the other hand, is that they are hard to spot because they are not necessarily unhappy.
Some of the elemental methods to handle disengagement among employees are: extensive trainings, celebration and appreciation of successes, simplification of processes and above all, communication. It is also important to continue measuring the employee loyalty index on a frequent and regular basis to take stock of progress or failures.
Employee engagement is not an exercise that can be left to take care of itself. When crisis strikes, companies tend to put all the engagement measures on the back burner for the better times. As a matter of fact, only when a company has consistently given priority to harnessing employee loyalty in good or bad times, does it reap the benefits during any crisis. Otherwise, sudden and conflicting change of priorities can have a counter-effect on the company’s growth, regardless of the surrounding environment.
The most important facet of engaging employees lies with the leadership. The leadership has the capacity to create almost 20 per cent of the employees as ambassadors, who, in turn, can engage further with the remaining. This can be done through proper, timely, consistent and meaningful communication. Nevertheless, unengaged employees mean neglected customers, reduced customer loyalty and loss of profitability. Therefore, while all the marketing strategies, sales and support models might be remarkable, all would fail if the employees are not engaged enough to deal with it.
(The author is senior vice president, talent management, ITC Infotech.)