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Patti P. Phillips, Ph.D.205-678-8101www.roiinstitute.net
Measuring the ROI of Employee Engagement
Objectives
Show value of employee engagementEnhance the value of engagement programsDevelop a plan to make engagement more effective
and results-focused
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How do you define employee engagement?
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A heightened emotional and intellectual connection that an employee has for his/her job, organization, manager, or coworkers that, in turn, influences him/her to apply additional discretionary effort to his/her work.
-- The Conference Board
A heightened connection between employees and their work, their organization, or the people they work for or with.
-- The U.S. Merit Systems Protection Board
A mindset in which employees take personal stakeholder responsibility for the success of the organization and apply discretionary efforts aligned with its goals.
-- Korn Ferry
Engagement means employees are in alignment with the organization
and are willing to expend discretionary effort to their work.
Investment in Engagement is IncreasingIn 2012, investment in employee engagement was reported to be
$720 million; it is approaching $1 billion.
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Yet, in 2016 only 33% of US employees were engaged –
a 3-point increase over 2012.
Gallup State of the American Workplace, 2017.
Alabama No. 1 in Engagement
Gallup. February 20, 20178
37%
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ROI Analysis(Micro Studies)
Relationships between Variables(Macro Analysis)
Intangibles(Logic and Intuition)
If employee engagement is not increasing, how do we demonstrate value for this investment?
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• 89% agree office pools help build better team camaraderie• 84% of workers agree office pools go a long way to make
their jobs more enjoyable • 79% of employees agree participating in office pools greatly
improves their levels of engagement at work• 73% of workers agree they look forward to going to work
more when they participate in office pools• 50% of employees meet up with coworkers after work to
watch a college basketball game in March• 39% became closer with a coworker after participating in an
office pool
March Madness Leads to Engagement
OmniPulse survey fielded by Research Now on behalf of Randstad USA 2017. N=1200 balanced on age, gender, and region.
However• 76% of employees check scores during work
hours• 53% watched or followed games on computers
at work• Organizations lose approximately $4 billion in
productivity
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OmniPulse survey fielded by Research Now on behalf of Randstad USA 2017. N=1200 balanced on age, gender, and region. 2016 March Madness Report. Challenger, Gray, and Christmas.
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Engagement leads to improvement in
• Customer loyalty• Profitability• Turnover• Safety incidents• Shrinkage• Absenteeism• Patient safety incidents• Earnings per share• Operating margins
ROI AnalysisStudies such as
Engagement Plus Gainsharing p. 113Process Change Initiative p. 1350%Selection Process p. 163Retention Improvement p. 185
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What do we mean by ROI?
BCR =Program BenefitsProgram Costs
ROI =Net Program Benefits
Program CostsX 100
BCR =$750,000$425,000
ROI = X 100$750,000 - $425,000$425,000
Try it!
BCR =$750,000$425,000
= 1.76
ROI = X 100$750,000 - $425,000$425,000
= 76%
Try it!
Levels of Evaluation Measurement Focus
0. Inputs and Indicators The input into the project in terms of scope, volume, efficiencies, costs Participants, Hours, Costs, Timing
1. Reaction & Perceived Value
Reaction to the project or program, including the perceived value
Relevance, Importance, Usefulness, Appropriateness, Intent to use, Motivation to take action
2. Learning & Confidence
Learning to use the content and materials, including the confidence to use what was learned
Skills, Knowledge, Capacity, Competencies, Confidence, Contacts
3. Application & Implementation
Use of content and materials in the work environment, including progress with actual items and implementation
Extent of use, Task completion, Frequency of use, Involvement, Actions completed, Success with use, Barriers to use, Enablers to use
4. Impact and Consequences
The consequences of the use of the content and materials expressed as business impact measures
Productivity, Revenue, Quality, Time, Efficiency, Customer Satisfaction, Employee Engagement
Typical Measures
5. ROI Comparison of monetary benefits from program to program costs
Benefit-Cost Ratio (BCR), ROI%, Payback Period
Business Alignment and Forecasting The ROI Methodology
Learning Needs
Preference Needs
Evaluation
Reaction
Learning
Application
Impact
ROI
Reaction Objectives
Learning Objectives
Application ObjectivesPerformance Needs
Impact Objectives Business Needs
Payoff Needs ROI Objectives
End HereStart Here
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3
2
5
4
3
2
1 1Initial Analysis
Input Needs 0 Input Objectives Input0
Program
Alignment Model
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ROI Methodology
Evaluation Planning
Develop Objectives
of Solution(s)
Data Collection Reporting
Develop Evaluation Plans and Baseline
Data
Collect Data During Solution Implementation
Collect Data After Solution
Implementation
CaptureCosts
of Solution
Calculating the Return on
Investment
IdentifyIntangibles
Develop, Report, and
Communicate Results
• Reaction and Planned Action
• Learning and Confidence
• Application and Implementation
• Business Impact
• ROI• Input/Indicators
Data Analysis
Isolate the Effects of Solution
Convert Data to
MonetaryValues
1. Report the complete story2. Conserve evaluation resources3. Use the most credible sources of data4. Choose the most conservative alternatives5. Isolate the effects of the program6. Assume no data, no improvement7. Adjust estimates for error8. Throw out the extreme and unsupported claims9. Use first year benefits for short-term programs10. Include fully-loaded costs11.Report intangible benefits12.Communicate results to all stakeholders
12 Guiding Principles ensure reliability.
Reaction & Planned ActionLearning
Application & Implementation
Isolate the Effects of the Program
Intangible Benefits
Impact
Inputs
Method Level1 2 3 4
• Surveys
• Questionnaires
• Observation
• Interviews
• Focus Groups
• Tests/Quizzes
• Demonstrations
• Simulations
• Action planning/improvement plans
• Performance contracting
• Performance monitoring
Data Collection
Use of a control group arrangement Trend line analysis of performance data Use of forecasting methods of performance data Participant’s estimate of program impact (percent) Supervisor’s estimate of program impact (percent) Manager’s estimate of program impact Use of expert/previous studies Calculate/estimate the impact of other factors Customer input
Isolation Techniques
Total Employees
Annual Production (Millions)
Variable Cost per Ton
Voluntary Turnover
Unplanned Absenteeism
Before After Before After Before After Before After Before After
Plants with New System
126 125 8.5 8.6 $3.19 $2.88 18% 12% 7.4% 4.2%
Plants Without New System
132 130 8.9 8.9 $3.22 $3.17 19% 18% 7.8% 7.7%
Control Group
Measuring Success of Employee Engagement page 121
Measuring Success of Employee Engagement page 178
28%
16%
Trend Line Analysis
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Estimations
Preceding Year
One Year After
Actual Difference
Contribution Factor
Confidence Estimate
AdjAmount
Turnover 271(57%)
162 (35%) 109 84% 82% 75
Staffing Levels
480(average)
463(end of year)
17 100% 100% 17
Measuring Success of Employee Engagement page 199.
Converting output to contribution – standard value Converting the cost of quality – standard value Converting employee’s time – standard value Using historical costs Using internal and external experts Using data from external databases Linking with other measures Using participants’ estimates Using supervisors’ and managers’ estimates Using staff estimates
Data Conversion
Assessment Costs (Prorated) Development Costs (Prorated) Program Materials Instructor/Facilitator Costs Facilities Costs Travel/Lodging/Meals Participant Salaries and Benefits Administrative/Overhead Costs Evaluation Costs
Fully-Loaded Cost
What do we mean by ROI?
BCR =Program BenefitsProgram Costs
ROI =Net Program Benefits
Program CostsX 100
Adaptability Awards Brand awareness Career minded Caring Collaboration Decisiveness Engagement
Leadership Networking Partnering Reputation Resiliance Stress Teamwork Customer satisfaction
Intangible Benefits
Engagement Ecosystem
Measuring Success of Employee Engagement, p. 13
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Patti P. Phillips, Ph.D.205-678-8101www.roiinstitute.net
Measuring the ROI of Employee Engagement
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