Commitment @Work 2002

Aon ConsultingExecutive Report

www.aon.com.auCopyright © 2002 by Aon Consulting

he search forcost-effective,innovative ways

of doing business in anincreasingly competitiveenvironment presents anenormous challenge fortoday’s business leaders.

For most companies, the solution is to attract, developand retain key talent – those employees committed tothe success of the organisation who can quickly andeffectively respond to change. This will only happenif senior management understands what drives andmotivates staff. But too often, the needs of keyemployees are neglected, overlooked or misunderstood.

This inaugural Commitment @Work national study isdesigned to give business leaders the information theyneed to survive and thrive in a constantly changingmarket place. The research defines and establishes theWorkforce Commitment Index as the first nationalmeasure of employees’ commitment to theirorganisations.

The study also introducesthe Performance Pyramid, ahierarchical model of employeeworkplace needs. By ranking theseneeds and demonstrating how theyrelate to employee commitment,the study gives business leadersvaluable information about theworkplace practices under theircontrol that drive employeecommitment and organisationalperformance.

Together, the Workforce Commitment Index andPerformance Pyramid give employers a mechanism for defining and measuring what it means to be anemployer of choice. Further, by identifying thoseworkplace practices that are prime drivers ofcommitment, the study provides a general frameworkthat employers can use to improve commitment levels.

Our goal is for organisations to use Commitment@Work as a blueprint for creating a committedworkforce that will respond to challenge and prosper ina changing work environment.

Stewart M. FotheringhamManaging DirectorAon ConsultingAustralia

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Foreword

COMMITMENT@WORK

Workforce research linkingpeople strategies with

business strategies

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EXECUTIVE SUMMARY 1

THE @WORK RESEARCH MODEL METHODOLOGY 3Workforce commitment 3

Employee confidence 4

The Performance Pyramid 4

Commitment drivers 5

Summary of the @Work research model 5

KEY FINDINGS OF COMMITMENT @WORK 2002 6Workforce commitment 6

Employee confidence 9

The Performance Pyramid 10

Commitment drivers 12

CONCLUSION – THE WAY FORWARD 13

ABOUT AON CONSULTING INSIDE BACK COVER

Contents

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BACKGROUNDThe @Work research model is a long-term initiativedeveloped by Aon Consulting’s Loyalty Institute inMichigan. The model was established to investigate thenature of employee commitment in the new economy.It also examines the factors and conditions – or ‘drivers’– that organisations can use to increase thecommitment levels of their employees. The LoyaltyInstitute has conducted annual national studies in theUS from 1997, in Canada from 1999 and in the UKfrom 2000. This is the first year that the study has beenrun in Australia.

A committed workforce offers tangible, measurable andfar-reaching benefits to an organisation. It means muchlower recruitment, training and development costs.Further, it means the organisation tends to retain theintellectual properties, skills and abilities critical to itslong-term success and profitability. It also has a positiveinfluence on customer loyalty and enhances theorganisation’s profile within the wider community.

Lifelong loyalty to a single employer is a rarecommodity in today’s dynamic market. Nevertheless,organisations still need employees who are committedto making a positive contribution, even if this is for a comparatively short period of time. The Commitment @Work study is a valuable tool forany organisation seeking to improve the commitmentlevels of their employees.

Executive summary

METHODOLOGYThe purpose of Commitment @Work is to provideinformation on employee commitment and confidence.It also examines the effectiveness of variousorganisational practices from the perspective ofemployees. The study is based on the Americanresearch model but has been adapted to the Australianmarket following extensive review through focusgroups across Australia.

The inaugural Australian study canvassed 1,207randomly selected respondents aged 18 or over,working at least 20 hours per week and notself-employed or employed by the military. A localresearch firm conducted the study, which comprisedaround 80 individual questions. The results werecollated and analysed by the Loyalty Institute.

The study is designed to answer four questions:

1. How committed are Australian employees totheir organisation? (Workforce commitment.)

2. How confident are employees about the currentand future success of their organisations?(Employee confidence.)

3. How well do employees believe theirorganisation’s current workplace practices aremeeting their workplace needs? (The PerformancePyramid.)

4. Which workplace practices are the primeinfluencers of workforce commitment?(Commitment drivers.)

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E x e c u t i v e s u m m a r y

SUMMARY OF RESULTSBusiness leaders have many challenges ahead of themif they wish to make their organisation the preferredchoice of employees.

While leaders are doing a good job representing theirorganisation externally, they are neglecting their mostvaluable asset – their employees. As a result, mostAustralian workers are not committed to theiremployers, and organisations are vulnerable to losingstaff to competitors who offer only a slight pay increase.

By and large, workers do not feel a strong sense ofloyalty to their organisations because they do not seethe link between their success and the success of theorganisation. The solution is to build a sense of spiritand pride that will rekindle confidence in, andcommitment to, the organisation.

Workplace benefits are key factors for buildingemployee loyalty. Superannuation is the most importantbenefit, followed by flexible workplace schedules.

Job security, manageable stress levels, and a pay andbenefits package that encourages a sense of ownershipand loyalty to the organisation are also very important.Equally important is a culture that:

■ Values employees and makes them part of a winning, growing team.

■ Demonstrates the importance of retaining currentemployees.

■ Provides the training to support and encouragepersonal growth.

■ Helps balance personal and job needs.

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he Commitment @Work2002 study investigates thelevel of commitment within

Australia’s workforce and alsoexplores the factors and conditionswithin the control of theorganisation that can be used toincrease this level of commitment.

During June 2002, Aon Consulting conducted 1,207phone studies from a randomly selected nationalsample. The study was made up of approximately 80 individual questions. The results were weighted toaccurately reflect gender distributions within each state.Results should be accurate within six percentage points.

Respondents had to be over 18 years of age, work atleast 20 hours per week, and not be self-employed oremployed by the military.

The responses to the 80-question study were collated,analysed and used to build a profile of employeecommitment, employee confidence, organisationperformance and key commitment drivers.

WORKFORCE COMMITMENTThe study defines and establishes the WorkforceCommitment Index (WCI) as the first national measureof employees’ commitment to their organisations.Workforce commitment is defined in terms ofemployee behaviour in three areas:

■ Productivity – the extent to which employeesbelieve co-workers strive to improve themselvesand make personal sacrifices to ensure theemployer’s success.

■ Pride – the extent to which employees willrecommend their organisation as a good place towork, and their willingness to recommend theiremployer’s products and services to others.

■ Retention – the extent to which employeesintend to stay with the organisation for the nextseveral years, even if offered a similar job withslightly higher pay.

As this is the inaugural year of the study, theWorkforce Commitment Index (WCI ) is beingestablished at a baseline of 100 and a standarddeviation of 25. Scores above 100 represent a higherlevel of commitment, while scores below 100 indicatea lower level. Annual measurement of the WCI willallow us to track and record trends in the national levelof commitment.

It is important to note that a WCI of 100 is not a goalfor organisations to achieve, but an average score foremployees in Australia. It is a benchmark by whichto measure each organisation’s workforce commitment.

The @Work researchmodel methodology

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EMPLOYEE CONFIDENCEA defining aspect of the employer/employeerelationship is the confidence that workers have in theirorganisation. The Employee Confidence Index (ECI)measures this confidence level by evaluating theresponses to two questions:

1. How confident are employees about the currentperformance of their organisation relative to ayear ago?

2. How confident are employees about the futureperformance of their organisation over the nextyear?

The ECI is calculated by comparing ratios of positiveand negative responses to the two questions. The ECIis plotted on a scale that runs from -100 to +100.On this scale, a score of zero would indicate neutrality.

Study participants were also asked seven additionalquestions about the future performance of theirorganisations to help explain the reasons for theirindividual confidence levels.

THE PERFORMANCE PYRAMID The Performance Pyramid was first developed in 2000by Aon Consulting’s Loyalty Institute. It is based onan analysis of @Work response patterns of over 60,000employees. (This analysis draws on research into themotivational influence of workplace practices carriedout by Abraham Maslow during the 1950s). ThePerformance Pyramid model suggests that employerscan maximise employee commitment by addressing themost fundamental needs of safety/security and rewardsfirst, then tackling issues in the areas of affiliation,growth and work/life harmony.

Safety/securityAlong with a physical sense of well-being,employees need to know that the workplace is safe fromenvironmental and other hazards, fear, intimidation orthreatening interpersonal treatment. Though change is commonplace in the work environment, individualsshould feel that their job security is not at risk becauseof organisational change.

RewardsCompensation and benefits are the main reasons whypeople take jobs. Even though their motivational value tends to diminish once a candidate becomes an employee, the Performance Pyramid tells us thatrewards are highly valued by employees and will alwaysplay a critical role in building employee commitment.

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AffiliationAffiliation refers to a sense of belonging or mateshipthat includes being ‘in the know’ and ‘part of the team’.Successful corporate cultures strengthen this naturalneed to belong and thus encourage the individual tocontribute to the organisation’s success. Leaders whodemonstrate a strong sense of mission, vision andstrategy will meet their employees’ need for affiliation.

GrowthEmployees want opportunities to grow, learn and havenew experiences on the job. The @Work studies haveshown that this Performance Pyramid level is not only about individual growth, but a desire for theorganisation to grow and improve in its work processes, products, and ability to satisfy customers.

Work/life harmonyIn an organisational context, work/life harmony meansemployees want to reach their potential both on the joband in other aspects of their lives. The @Work studieshave shown that when management recognises thisneed by delivering the appropriate programs andpolicies, commitment to the organisation increases.

COMMITMENT DRIVERSThe final part of the study considers the relationshipbetween the WCI and the workplace practiceshighlighted in the Performance Pyramid. The objectiveis to identify workplace practices that have the greatestinfluence on workforce commitment. We call them thecommitment drivers.

SUMMARY OF THE @WORK RESEARCH MODEL

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his section presents the keyfindings of this year’s studyon workforce commitment,

employee confidence, workplacepractices and organisationalcommitment drivers.

WORKFORCE COMMITMENTThe Workforce Commitment Index shows thatAustralian workers are only moderately committedto their organisations. To put this in perspective, weasked respondents how much money it would take forthem to leave their current organisation. Over half(57%) would leave for a 20% pay increase. In fact, overa quarter (26%) would leave for a 10% pay increase.This suggests that Australian organisations arevulnerable to opportunity knocking.

Organisations need to re-examine their efforts to buildcommitment. They should pay particular attention tocritical risk areas including workers in their 30s, recenthires and those in production and clerical job functions.

ProductivityGenerally, respondents feel that their co-workers are notproductive at work.

■ Only 37% of employees agree that co-workersmake efforts to improve their skills so they canbetter contribute to their jobs.

■ Only 40% agree that co-workers make personalsacrifices to help the group succeed.

Key findings ofCommitment @Work2002

THE PEOPLE I WORK WITH MAKE PERSONAL EFFORTS TOIMPROVE THEIR SKILLS SO THAT THEY CAN MAKE A BETTERCONTRIBUTION TO THEIR JOBS

THE PEOPLE I WORK WITH MAKE PERSONAL SACRIFICESWHEN REQUIRED HELP OUR WORK GROUP SUCCEED

PrideRespondents show only moderate pride in the productsand services that their organisation provides, and evenless so in the organisation itself.

■ 48% of employees would recommend theirorganisation’s products and services to customers.

■ Only 33% said they would recommend theirorganisation as the best place to work in theircommunity.

I WOULD RECOMMEND MY COMPANY’S PRODUCTS ANDSERVICES AS THE BEST THAT A CUSTOMER COULD BUY

I WOULD RECOMMEND MY COMPANY AS ONE OF THE BESTPLACES TO WORK IN MY COMMUNITY

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RetentionAlthough more than half the respondents are notactively looking for another job, most are unlikelyto stay if offered a better paying job.

■ 54% intend to stay with their currentorganisation for the next several years.

■ Only 36% agreed that they would stay if offereda similar job with slightly higher pay.

I INTEND TO STAY WITH MY COMPANY FOR THE NEXTSEVERAL YEARS

I WOULD STAY WITH MY COMPANY EVEN IF OFFERED ASIMILAR JOB WITH SLIGHTLY HIGHER PAY

To better understand the nature and pattern ofcommitment, the research considered the influenceof demographic factors on commitment.

Organisational sizeEmployees of organisations with fewer than 20employees have the greatest level of commitment(102.6), while mid-size companies with between101-499 employees have the lowest commitmentlevel (97.1).

WCI BY NUMBER OF EMPLOYEES

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WCI BY JOB DESCRIPTION

WCI BY TENURE

WCI BY AGE

Job descriptionGeneral management (102.8), supervisors/team leaders(102.8) and qualified tradespeople (102.7) have thehighest WCI scores. Production/operations workers(92.8) and customer service employees (95.5) reportthe lowest levels of commitment.

TenureRespondents who have been with their organisationbetween 6 and 10 years report the highest level ofcommitment (103.5). New employees, or those whohave been with the organisation for less than a year,have the lowest WCI (94.7).

AgeRespondents nearing retirement age experience thehighest levels of commitment, employees 60 to 69 havea commitment score of 105.6, and those between theages of 50 and 59 have a commitment score of 103.5.Respondents between the ages of 30 and 39 have thelowest WCI (98.0).

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EMPLOYEE CONFIDENCE The 2002 baseline Employee Confidence Index forAustralia is 45.2 showing cautious optimism aboutorganisations’ success. Job security seems strong for halfof the respondents. Few believe that their organisationswill be able to increase pay and benefits for employeesover the next year.

Only 14% of respondents felt their organisations wereworse off than a year ago and even fewer felt theirorganisation would be worse off next year.

HOW WOULD YOU RATE YOUR COMPANY’S SUCCESS NOWCOMPARED TO A YEAR AGO?

HOW WOULD YOU RATE YOUR COMPANY’S CHANCES OFSUCCESS A YEAR FROM NOW?

50% believe to a great or very great extent that theirorganisation will be able to ensure job security.

TO WHAT EXTENT OVER THE NEXT YEAR WILL YOURCOMPANY BE ABLE TO ENSURE JOB SECURITY FOR ITS WORKFORCE?

39% believe that their organisation will be able toimprove its financial performance.

TO WHAT EXTENT OVER THE NEXT YEAR WILL YOURCOMPANY BE ABLE TO IMPROVE ITS FINANCIALPERFORMANCE?

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THE PERFORMANCE PYRAMIDThe diagram shows the percentage of respondentswhose organisations are meeting or exceeding theirexpectations on each level of the pyramid.

Overall, organisations are stronger at the base and toplevels of the pyramid (safety/security 80%, work/lifeharmony 85%), but are weaker in the middle levels(rewards 63%, affiliation 67% and growth 67%).

Safety/securityOrganisations generally are not doing a very good jobof ensuring short-term job security, with 23% ofrespondents feeling that their jobs could be cut.

YOUR COMPANY’S CONCERN ABOUT YOUR JOB SECURITY

While some stress goes with the job, organisations arenot doing a good job of trying to create a stress-freeenvironment, with 37% of responses below expectations.

YOUR COMPANY’S EFFORTS TO CREATE A STRESS-FREEWORKPLACE

RewardsPay33% of respondents do not see their remunerationpackage encouraging performance.

THE PAY AND BENEFITS PACKAGE’S ENCOURAGEMENT OFPERFORMANCE

Benefits82% of respondents say benefits are a factor in keepingthem from looking for a job elsewhere.

OVERALL, HOW IMPORTANT IS YOUR COMPANY’S BENEFITPACKAGE TO YOU AS A FACTOR IN KEEPING YOU FROMLOOKING FOR A JOB ELSEWHERE?

Superannuation (91%) and flexible work schedules(88%) are the most highly valued workplace benefits.

HOW IMPORTANT IS YOUR EMPLOYER-PROVIDEDSUPERANNUATION PLAN TO YOU?

28% of respondents are not satisfied with the qualityof their benefits communications.

THE COMMUNICATIONS YOU RECEIVE ABOUT YOURBENEFITS

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Affiliation■ 25% of respondents do not believe their

organisation is creating an environmentconducive to open, candid communications.

YOUR COMPANY CREATING AN ENVIRONMENT OF OPEN,CANDID COMMUNICATIONS

■ 33% of respondents do not believe theirorganisation is including employees in planningchanges as much as they should.

YOUR COMPANY HAVING EMPLOYEES PARTICIPATE INPLANNING CHANGES

■ 30% of respondents are concerned about theirorganisation’s demonstration of the importanceof retaining employees.

YOUR COMPANY’S DEMONSTRATION OF THE IMPORTANCEOF RETAINING EMPLOYEES

GrowthAlmost all respondents (92%) believe their organisationis competitive with other companies.

YOUR COMPANY’S COMPETITIVENESS WITH OTHERAUSTRALIAN COMPANIES

88% of respondents believe that their organisation isdoing a good job with its social responsibility.

YOUR COMPANY’S SOCIAL RESPONSIBILITY

33% of respondents see a problem with the way thatchanges are managed and communicated.

THE WAY CHANGES ARE MANAGED AND COMMUNICATED

32% of respondents aren’t satisfied with thecommunication of career opportunities.

THE COMMUNICATION OF CAREER OPPORTUNITIES WITHINTHE COMPANY

Work/life harmonyNine out of 10 respondents see their co-workers aspositive support networks. On the other hand,managers generally are not recognising the importanceof employees’ personal life (23% not satisfied).

MANAGEMENT’S RECOGNITION OF THE IMPORTANCE OFYOUR PERSONAL LIFE

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COMMITMENT DRIVERSThe Commitment @Work 2002 study raises a veryimportant question: Which workplace practices shouldan organisation focus on to improve the commitmentlevels of employees?

The simple answer is all of them, but clearly this is notpractical. Statistical analysis of core workplace practicesshows that there are significant influencers or key driversof commitment across all five levels of the PerformancePyramid. These drivers are the main leverage points fororganisational improvement.

The diagram lists the key commitment driversaccording to where they fit on the PerformancePyramid. The figures in brackets are the percentage

of respondents who rated the item unfavourably.In other words, the percentage of employees who saidtheir organisation was not meeting their expectationsfor this particular item.

The highest ‘failure rates’ are in the middle levels –rewards, affiliation and growth. So while thePerformance Pyramid asserts that organisations needto begin at the bottom to build commitmenteffectively, most Australian organisations are alreadydoing a good job in the area of safety/security. Thefocus for Australian organisations should be on themiddle levels of the Performance Pyramid beginningwith rewards.

Concern about job security (23%)Efforts to create a safe and secure work environment (10%)

Efforts to create an environment free from fear,intimidation and harassment (15%)

Organisation’s success in reducing timeoff due to injury or illness (12%)

The pay and benefits package encouraging a sense ofownership and loyalty to the organisation (32%)

Organisation’s efforts to build asense of spirit and pride (22%)

People taking responsibilityfor their actions (20%)

Providing the necessary training (25%)Organisation’s social responsibility (13%)

Opportunities for personal growth (23%)

Co-workers supporting needs as aperson and not just a worker (11%)

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his inaugural Commitment@Work national studyprovides the business

intelligence that organisations needto attract, develop and retain keytalent to help them survive, thrive,and become employers of choice intoday’s dynamic global economy.

To this end, this research sought the answer to fourbasic questions:

How committed are workers to theirorganisations? Workers in 2002 are only moderately committedto their organisations, with fewer than half willingto recommend their organisation or its products andservices and even fewer feeling that their co-workersare productive. Although over half intend to stay withtheir current organisation for the next several years,organisations are not immune from opportunityknocking, since only one-third of employees wouldturn down a similar job with slightly higher pay.In fact, 57% would leave for a 20% pay increase.

How confident are employees in the currentand future success of their organisations?Employees report cautious optimism about theirorganisations’ success now and over the next year.This optimism seems to be based not so much on thebelief that their organisations will execute successfulbusiness strategies, but rather on the belief that theyhave job security where they are. Of course, not allshare this belief.

Conclusion -the way forward

What is the employee perception of howwell current workplace practices meet theirworkplace needs?Looking at the current state of their organisations,employees give their organisations both positive andnegative marks in five workplace needs listed in thePerformance Pyramid. Key improvement opportunitiesinclude job security, stress, the link between pay andperformance, employee involvement, opportunities forgrowth, and management’s recognition of theimportance of employees’ personal lives.

Overall, Australian workers tend to see theirorganisations as being stronger in work/life harmonyand safety/security – the top and bottom sections ofthe Performance Pyramid – than in rewards, affiliationand growth.

Organisation leaders are performing well externally.They excel at projecting a positive image to externalstakeholders, and at placing significant value on theirshareholders and customers. Organisations are seen tobe competitive with other Australian organisations andto be maintaining a high degree of social responsibility.

But while organisations put their best footforward publicly, employees have concerns abouttheir organisation’s internal human resources strategies.They do not feel that they are cared for to the sameextent as shareholders and customers.

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C o n c l u s i o n – t h e w a y f o r w a r d

Which workplace practices are the primeinfluencers of workforce commitment? The analysis showed that there were eleven driversof commitment at all five levels of the PerformancePyramid. However, consistent with the overall ratings,those driver items identified in the three middle levelsof the Performance Pyramid – rewards, affiliation andgrowth – were the weakest and provide the greatestleverage opportunities. Key items include buildingspirit and pride, linking pay and performance andproviding opportunities for personal growth.

Building a workforce performance planBusiness leaders must understand that employees are the critical link to maximising shareholder value.Organisations need employees committed to the successof the organisation. They need to implement bestpractice human capital strategies that attract, developand retain high-performing employees.

The results of the Commitment @Work study indicate that organisations are facing several challenges.

The body of research that established the PerformancePyramid model indicates that, in general, organisationsneed to start at the bottom and ensure that thefoundation levels of the Performance Pyramid –safety/security and rewards – are strong before theytackle issues at higher levels.

However, Australian organisations are generally doingwell in safety/security, though it must be rememberedthat job security and stress are still issues for many.

These results show that for most organisations, theprimary concern in building workforce commitment ispay and its link to performance. An effectively designedrewards system – a system where the compensationplan encourages performance and a sense of ownershipand loyalty – can be the difference between being themarket leader or the follower.

Business leaders must also understand that it is notjust about money. Once there is an effective pay system,organisations must then focus on other factors. Trainingand growth opportunities are also key drivers ofcommitment. It is clear that there is no ‘one sizefits all’, quick and easy solution.

Successful organisations begin with the basics andthen continue up the Performance Pyramid to buildan energising, involving work environment that givesemployees a chance to grow with a winning team.

Successful organisations build a sense of spirit and pridethat ties organisational success to employees’ success.

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Aon Consulting is part of the global Aon Group,one of the largest professional insurance and consultingorganisations in the world. The Aon Group operates inmore than 120 countries with over 53,000 employeesin more than 550 offices.

Aon Consulting provides a fully integrated range ofconsulting services.

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For more information about theCommitment @Work 2002 study:Tel: 1300 659 266Email: caw@aon.com.auWebsite: www.aon.com.au/caw

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