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"Employee Engagement uplifts the Revenue: An Evidence study"

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“Employee Engagement uplifts the Revenue: An Evidence study"
Anindita & Radha Yadav
Introduction
The concept of employee engagement and its importance to a business’ success has now become
the buzz word. It is a strong need to create a virtuous cycle of employee engagement and revenue
generation. Highly engaged employees lead to positive outcomes on the key performance
indicators such as: increased retention, customer loyalty, safety, productivity and overall revenue
growth within an organization. Today’s scenario, employee engagement is the leading factor for
the business growth. Revenue of the organization is strongly connected with the employee
engagement. Employee engagement is of three types: disengaged, Actively High engaged and
non- engaged. These types of engagement define the variation in the organization growth in
terms of revenue and employee growth. Revenue is the amount of money that a company
actually receives during a specific period, including discounts and deductions for returned
merchandise. It is the top line or gross income figure from which costs are subtracted to
determine net income.
According to the report from Society for Human Resource Management “Employee Engagement
and Commitmen t a s s i g n s a f e w u n i v e r s a l s i g n s t h at d emonstrate employee
engagement: employees are more likely to participate in work initiatives with enthusiasm, bring
more brainpower and creativity to their daily tasks, and “go the extra mile” for large projects and
initiatives. Engaged employees are also five times less likely to voluntarily leave the company.
These engagement indicators have an obvious surface-level value in the workplace, but their
long-term effects are even more powerful. (Vance, 2006)
Everything in this pragmatic world should be measurable. Organisations focus on the cost suffer
due to the disengaged employee and revenue earn due to the engaged employee at the workplace.
In acute financial terms, performance of the employees should be measured on the basic
parameters i.e. Financial, Revenue/sales growth, operating income/margin and total shareholder
return (Kutucuoglu, Hamali, Irani & Sharp, 2001)
The goal of any organization is to earn profit so as to sustain long in the business. The goal of the
financial managers is to maximize profit (Carroll,1991). The goal of marketing manager is to
ensure that the produced goods and services reach the masses so as to increase the sale and meet
their sale target (Nagle & Muller, 2017). In the end, the goal of the every supervisor from each
department to find the engagement level of the employees to analyse the problem. Finally, and it
may sound obvious, but it’s important that organizations check in with their employees to ensure
that the company mission aligns with the ways that they currently work and the ways that they
want to work. According to a survey conducted by the Society for Human Resource
Management, 61% of the respondents said that trust between employees and senior management
was a major contributor to overall job satisfaction. By regularly checking up with the employees,
an organization can assure them that their efforts are making the most impact by asking
employees what they want and need out of their workspace (Aguanza & Som, 2018). Not only
will this provide direction, but it will also make employees feel valued, which leads to higher
engagement
In order to build employee engagement and productivity, organization needs to make sure that
their workplace is designed as per their values. For instance, if a company values collaboration, it
should provide employees with space and the technology to collaborate.
The second thing that the organization can do to ensure their employees are engaged and
productive is by offering them the time and place to build inters personal relationships. Research
shows that 72% of the adults report feeling lonely. It’s very simple to understand, no one wants
to go to work and work round the clock without any human interaction. With technology like
room reservation tools, hostelling, hot-decking, visitor management and more, it's now easier
than ever for employees to find each other so they can more efficiently work together.
The goal of production manager is to produce goods optimally and produce quality goods such
that there is a minimal rejection by the customers. The ultimate goal is to make revenue. HR
managers manage human resource. Their main goal is to keep the employees motivated and
happy in order to retain them increase their productivity. Increased productivity has direct impact
on growth in revenue generation. The various departments of the organizations are ultimately
one when it comes to profit maximization. Directly or indirectly their goal is to generate revenue.
It is widely seen that growth in revenue is the key goal as it has the direct impact on gross profit
margin and ultimately the profit.
Literature Review
Employee engagement is the trust, commitment and integrity between the organizations and
members. According to the Harvard Business Review, employee engagement is related to the
productivity; it decreases absenteeism and increases production effectively. Research shows that
percentage of disengaged workers is 37% in India who commits 60% more error than other
employees. Due to this company suffer 18% less productivity. Overall, these findings suggest
that both employee engagement and manager self efficacy are important antecedents that
together may more positively influence manager effectiveness than either predictor by itself.
Implications for effective management development and practice are discussed ( Luthans &
Peterson). One study shows that increase employee satisfaction may increase business-unit
outcomes, including profit ( Harmet, Schmidt & Haynes, 2002). One study is done on 104 HR
officers working at the Inland revenue Board of Malaysia to analyse the individual factors and
work outcomes of employee engagement. The results of the study shows that peer & superior
relationship plays a vital role in developing the employee engagement and work outcomes
(Andrew & Sofian, 2012).
Disengagement of any employee towards his work and organization directly leads to employees’
lack of commitment to work and lack of motivation. Hence, engagement becomes very important
factor for the organization profit. According to the Corporate Leadership Council (2004) highly
engaged employees perform 20% more than those employees with average engagement levels
(Mone & London, 2018). In addition to this, ISR (2003) also shown that companies having
higher levels of engagement noticed an increase of 3.74 percent in operating margin and 2.06
percent of increase in profits for one year period, whereas, companies with lower levels of
engagement noticed a fall of 2 percent and 1.38 percent in the respective groups. On the other
hand, Towers Perrin (2005) found that there is a 5 percent increase in operating margin with 7
percent increase in employee engagement.
Various authors affirmed that it is employee engagement that forecasts the results of any
organisation’s success, be it financial, the satisfaction of the employees and their productivity
(Richman, 2006; Baumruk, 2004). Conjointly, Saks (2006) gave another perspective on the
forebears and the emanation of employee engagement by separating an employee’s engagement
into their level of engagement towards their job and towards their organization. On the other
hand, Vance (2006) observed that to stand in this very competitive market many organizations
have revamped themselves to thrive in the market and have also cut out staff to minimize the
high labour costs and the scarce costly resources. Due to this, the employees lose their
connectivity with the organization as they feel that they can no longer continue in the
organization until they retire and thereby they are less engaged to the organization.!
According to the statistical report from Gallup’s, “State of the American Workplace” report, in
US only 30% of the workforce is engaged in their work. Gallup estimates that active
disengagement costs the U.S. $450 billion to $550 billion per year. Another interesting find is
companies that are in the top-quartile of high engagement levels are 21% more productive and
have 22% higher profitability than those at the bottom.
According to the article from Towers Perrin 2005 in which Global Workforce Survey involved
about 85,000 people working full-time for large and midsized firms. Findings revealed that only
14 percent of all employees worldwide were highly engaged in their job. The number of
Canadians that reported being highly engaged was 17 percent. Sixty-two percent of the
employees surveyed indicated they were moderately engaged at best; 66 percent of employees in
Canada were moderately engaged. And 24 percent reported that they are actively disengaged; the
corresponding number in Canada was 17 percent. Other research is done on examining the
relationship at the business-unit level between employee satisfaction-engagement and the
business-unit outcomes of customer satisfaction, productivity, profit, employee turnover, and
accidents. The findings of the study show that activities and techniques are useful to make
engaged employees and it increases the employee satisfaction that reflects in increasing business-
unit outcomes, including profit ( Harter, Schmidt & Hayes, 2002). In the same context, another
study on the relationship of employee engagement and performance at workplace revealed the
results that engaged and actively involved employees affects the performance of the organization
(Eldor, 2016).
One study expressed the relation between the performance, management and employee
engagement in an attractive way. This study is related to four variables i.e. Performance
measurement and management; and employee engagement and performance. Findings of the
study say that intervention on the social controls by the management helps in improvement in
employee engagement and performance.
Cases
Any firm’s core business is selling goods and services, and sales revenue stands at the top of the
income statement. For each accounting period, bottom of every income statement has profit
which remains after adding a revenues and subtracting a expenses.
To meet the goal means to increase profit, and hence, earnings per share for its shareholders. A
company can increase its revenues and/or reduce expenses, to have a positive impact on EPS
which has a direct bearing on the growth of the company. Investors will often consider a
company's revenue and net income to determine the health of a business.
!
(tutorsonnet, 2018)
This table can be seen in the perspective of as how revenue affects net profit and ultimately the
EPS. And if there is increase in revenue there is increase in EBIT and quantum increase in EPS.
When there is 100% increase in EBIT there is 200% increase in EPS. Now this is not magic. The
story goes like this. There is a plant with some capacity. There are fixed operating and financial
cost which has already been borne by the company. Now there is a question of how it has to be
utilized. Under utilization of the capacity leads to less profit and optimum utilization leads to
leap in profit and EPS as exemplified by the table. Here every number can be seen changing
except a few. These are fixed costs which the company has already borne no matter what the
production scale is. This needs to be leveraged to the optimum to increase the scale. Question is
who will do it. Obviously the people engaged in this project. The result show that more profit
comes from more revenue. Now machine and money cannot move itself on its own to get itself
utilized optimally. It is the employees who are going to drive it further. This resource of the
organization can actually do wonders if their capacity is harnessed beautifully as their capacity
can touch sky.
Role of employee engagement and revenue generation
Employee engagement and revenue generation have a direct relation. The more engrossing and
motivating the employee engagement program the more revenue the company generates (Ali,
2013). Engaged employees are satisfied, loyal committed and productive. All the attributes of an
engaged employee gets converted into revenue generation and ultimately profitability. The
author discusses the programs related to employee engagement, about the quality of relationships
inside the organization between the top and the bottom management. There are some key
indicators for employee engagement such as creativity, energy and enthusiasm which may seem
optional to the leadership at the helm but sometimes they fail to understand that these are only
the key translators that can maximize productivity, efficiency and profitability. Here there is one
thing to understand as what is the main goal of an organization and it obviously is the revenue
generation. The onus for revenue generation does not lie on only finance department. HR and
marketing are also working towards this goal.
HR professionals understand the power of people but it becomes very difficult for them to
translate that power into a clear growth in revenue and consequently high return on investment.
This area has been identified by the directors and managers that above money and machine,
manpower is of utmost importance and they are struggling to make some investment on this
aspect. It has largely been identified that if manpower is kept happy organization becomes
happier. Employee engagement has enjoyed the utmost popularity among the thought leaders.
This understanding has developed due to the concept that there is a profound impact of employee
engagement on company success. It has become the top organizational priority.
Before understanding the head start over other in case of employee engagement, it is first better
to understand the concept of employee engagement. When employees are given brightly lit
offices and fun zones to chill and some fringe benefits then it wrongly conjured connotation of
employee engagement. It is not the tangible benefit but the culmination of value signals that the
company sends to each employee.
Role of HR in enhancing employee engagement & increasing revenue.
HR has bigger role to play. This upturn from less revenue generation can be done by them only.
They are the one who can convert the less engaged employee into more engaged employee
without costing their lives. Every organization has a goal to grow which definitely translates into
generating revenue every year. It is the role of the HR heads to connect every employee to
revenue growth. The employees are generally focused on their immediate job and they have a
disconnect with the organisation’s goal. This is why the grand growth plan is reduced to a dismal
failure. The HR managers should coordinate with the employees KPIs to align business
objectives and increase profit. The KPIs are - Revenue, Operating profit, Net profit and EPS.
Empoyees can’t be left on their own to determine what contribution to whole they can make. The
tasks and activities that bear a little relationship to building revenue should be avoided.
Sometimes employees have great ideas for generating revenue, which should be harnessed. And
these activities will create a new and happy environment for employee’s engagement.
Every organization when coming up with a new project is coming up with a plan to be executed
well. Articulation of plans in an organization is an integral part of decision making. These plans
need to be implemented properly to have a sustainable growth. For this it is necessary to align all
the resources in a particular fashion so as to gain a maximum advantage and hence good revenue
generation. These resources are simply man, machine and money. Machine and money can be
managed but what about man who has brain to think and he is the one who is going to manage
the rest. Sustained competitive advantage can only be achieved through positive employee
engagement who effectively serves as an intangible and enduring asset.
The term employee engagement is related to the commitment that employee shows towards
organization and how well they are connected to it. High levels of engagement are a driving
force to foster improved organizational performance and stakeholder value.
Companies with high engagement rates have an increased revenue growth, increased shareholder
value and display strong company cultures. These companies outperform their counterparts by
6% in revenues, 4% in operating margin and 6% in shareholder return. (article, 2017)
Few cases from the growing companies can cited to prove that employee engagement actually
works.
Role of Employee engagement in current scenario towards generation of revenue
Following is an excerpt from the interview of Shraddhanjali Rao, Head of Human Resources -
SAP India by a magazine:
SAP in India has been ranked among top companies to work by Great Place to Work Institute.
What has been the strategy?
Trust and engagement at the workplace have been critical factors to our success. We have seen a
strong correlation between employee engagement and business outcomes. As a matter of fact, we
saw that 1 percent increase in our employee engagement globally resulted in an increase of
40-50 million to our operating profit.
Our people strategy is aimed at building a future ready innovative organization while providing
a great experience to our employees. This strategy is focused on 4 pillars ‘Grow our Talent’,
‘Simplify our Organization’, ‘Lead our People’, and ‘People Sustainability & Relations’.
(interview, 2017)
The above example from SAP clearly bears a testimony to the fact that how engaged employee
matters more for the organization. There are various companies in the world which has shown a
remarkable increase in their revenue and also sustenance in revenue generation. They are on the
list of FORTUNE World’s Most Admired Companies List
FedEx is honored to have been recognized again among the world’s most admired companies,”
said Frederick W. Smith, chairman and CEO, FedEx Corp. “This honor reflects the dedication
of more than 400,000 FedEx team members worldwide.”… FedEx Corp. (NYSE: FDX) provides
customers and businesses worldwide with a broad portfolio of transportation, e-commerce and
business services. With annual revenues of $58 billion, the company offers integrated business
applications through operating companies competing collectively and managed collaboratively,
under the respected FedEx brand. Consistently ranked among the world’s most admired and
trusted employers, FedEx inspires its more than 400,000 team members to remain “absolutely,
positively” focused on safety, the highest ethical and professional standards and the needs of
their customers and community
Zappos is one company which takes care of its employees in such a way that it has direct impact
on customer satisfaction and hence raking revenue. “Zappos takes its corporate culture
seriously. They have weekly office parades and institutionalized random acts of kindness to
celebrate their corporate values, and their employees call their company “a family.” The
website states: “We've been asked by a lot of people how we've grown so quickly, and the
answer is actually really simple... We've aligned the entire organization around one mission: to
provide the best customer service possible. Internally, we call this our WOW philosophy.”
Zappos believes that their fun traditions, their mission, and their attitude towards customers
create a culture that is a key driver of their growth. It could be true.”(Kotter, 2011)
If the employees are satisfied then they will exude satisfaction vehemently. JetBlue Airways
ranks first in J.D. Power and Associates North America Airline Satisfaction Study for the low-
cost carrier category, with high levels of customer loyalty and advocacy? The key ingredient:
JetBlue employees treat customers’ problems as their own.Running late for a flight? You might
be escorted by a JetBlue counter agent to an “employees only” security line, right through to the
gate. Putting together a complicated multistop trip? The call center agent will work with you to
arrive at a satisfactory solution, not rush you off the phone. JetBlue staff members focus
intensely on making the customer’s life easier, and customers repay the courtesy by spreading
the word to others (Maisona, 2012).
It is observed that the top Indian Companies which have featured in Fortune India 500 lists are
raking in revenue through very engrossing and motivating employee engagement program, 2017.
IOCL and Reliance Industries are top two companies with the highest revenue and also voted as
the great company to work with.
IOCL has showcased that talent management and employee engagement begets better revenue.
In the article on Indian Oil Corporation: Portraying The new Age Developing India wherein
The Chairman and Managing Director (planning and Business development) IOCL stated that
this company portrays the true new age developing India. The company which tops the Fortune
India 500 lists in 2017.
There are various Indian companies which are generating big revenue just because they are
having good employee engagement program for example Reliance industries, Tata Motors, State
Bank of India etc.
Organizations throughout the word have understood the sure shot way to revenue generation
through employees engagement and have been trying for years to cultivate employee
engagement. The way to make customers a powerful factor in advocating for a company is
employees’ positive behavior and attitude. Engaged employees are the happy employees and they
go extra mile to deliver. Their enthusiasm and zeal to work rubs off on other employees and on
customers. They provide better experiences for customers, approach the job with energy—which
enhances productivity—and come up with creative product, process and service improvements.
They remain with their employer for longer tenures, which reduces turnover and its related costs.
In turn, they create passionate customers who buy more, stay longer and tell their friends—
generating sustainable growth.
One reason for this superior performance is that engaged employees direct their energy toward
the right tasks and outcomes. Compensation and benefits still matter to employees, of course.
But when it comes to engagement, other characteristics of the workplace matter even more: a
strong sense of purpose, ample autonomy, opportunity for growth and a sense of affiliation. As
one employee of online retailer Zappos put it, “The golden rule is the way of life here.”
Highly engaged employees of an organization often seem to be powered by an inner force, a
mantra that fixes and works as catalyst for the company’s progress. The mantra shapes how
employees carry out their tasks and gives them confidence to use their judgment. And when the
true source of job satisfaction, happiness and recognition derives from enriching customers’
experiences, good things happen.
All these companies have proved the point that happy employee can generate good revenue.
They know that cost of disengaged employees. Gallup’s “State of the American Workplace
report shows that up to 70 percent of employees are disengaged in the workplace, costing
companies $450-550 billion every year from the following profitability drains:
Lack of productivity slows down the delivery of internal and external products and services.
High turnover rates increase the costs of recruitment and training.
Employee theft– both of objects and of time spent on non-work activities performed during
working hours– eats away at budgets and productivity.
Unhappy employees spread dissatisfaction to other employees and negatively influence
clients. (O’Boyle, 2013)
Some companies fail to understand what actually can be invested on employees so as to gain
maximum profit. What is ROI of employee engagement? It is difficult for them to actually
calculate the ROI. May be investing 10% more on employees can bring a quantum leap in
revenue generation.
Techniques of employee engagement
Make them feel great about the company-the leaders and managers of the company should
make sure that they are being listened by the seniors. If they are doing any wrong they should not
be reprimanded and demotivated. Demotivated employees are highly disengaged employee
either by themselves or by disengaging other employees. Every employee counts and money
invested on them should have a proper return on investment.
Taking care of their family issues- Employees engagement is not only about employees but
also about their family members. If any policy of the company assist the family members in
times of heath emergency then the employees are less tensed.
Every employee should be considered as an entrepreneur for the organization-There should
be a system of incorporating employees’ ideas on growth into the growth of the company. It is
widely seen that nowadays more and more young employees are getting into the new successful
entrepreneurial ventures.
Respecting the employees- Most of the employees don’t leave their jobs for salary but for the
disrespect they get for their jobs.
Career growth opportunities should be well delineated- The employees should know “what next
in growth”. This would create a positive environment and they will achieve more. Moreover they
can be funded for more advanced education, their enrichment can in turn enrich the organization.
The investment done on them will have a better productivity and further more better profitability.
Conclusion
If the organisations are keeping their employees engaged and doing all these things then they are
not oozing on their profit and productivity. The whole idea can be summed up as that the
organisations are invariably people led and when they are engaged and happy they deliver
desired result.
“Integrity is the key among the values external job candidates are shown to hold dear in a
prospective employer,” says Forbes writer Meghan M. Biro. “That’s what happens when the
mission statement is clear, authentic, and transparent. Make sure your employees are part of the
mission statement, so it aligns their engagement with the company goals — they are the
embodiment of your employer brand.” ( Biro, 2018)
For any business person there is no denying fact about the power of an engaged employee. .
“When employees are engaged, they give discretionary effort, and that’s the secret sauce that
turns average companies into great companies,” said Kevin Kruse, serial entrepreneur and New
Yo r k T i m es bestselling author. Great Companies always means great in terms of maximized
shareholders’ and stakeholders’ wealth.
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... However, company net profit and profits per employee have direct impact on employee branding and employee engagement. The more employees are loyal and committed, the more company generate profit (Yadav & Anindita, 2018). ...
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I present a structural empirical model of collective household labour supply that includes the non-participation decision. I specify a simultaneous model for hours, participation and wages of husband and wife. I discuss the problems of identification and statistical coherency that arise in the application of the collective household labour supply model. The model includes random effects and it is estimated using a panel data set of Dutch couples. The estimates allow me to check the underlying regularity conditions on individual preferences and to obtain estimates of the sharing rule that governs the division of household income between husband and wife. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009.
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Scholars have largely focused on the negative consequences of organisational politics for employees' performance. In contrast, we maintain that organisational politics has positive aspects and moderates the relationship between employee engagement and behaviors at work such as knowledge sharing, creativity, proactivity, and adaptivity. Using data from 253 high-tech employees and their supervisors in Israel, our findings demonstrate that perceptions of organisational politics strengthen the relationship between employee engagement and these behaviors. When engaged employees perceive their workplace to be political, they are more proactive, creative, and adaptive, and more likely to share their knowledge with their peers. These findings confirm the challenge/opportunity stressor theory regarding perceptions of organisational politics and suggest that whether politics is viewed as positive or negative depends on the employees' point of view. For those who are engaged and more actively involved in their jobs, politics can be regarded as a challenge and even an opportunity for obtaining more resources to improve their performance. Implications for the development of theory and practice in this area are discussed.
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Although technology still dominates, human resources and how they are managed is receiving increased attention in the analysis of gaining competitive advantage. Yet, many complex questions remain. This study first examines the theoretical understanding of employee engagement. Then an empirical investigation is made of the role that a wide variety of managers’ (n = 170) psychological state of self-efficacy plays in the relationship between their employees’ (average of about 16 per manager) measured engagement and a multiple measure (self, subordinates and peers) of the managers’ effectiveness. Results of the statistical analysis indicate that the manager’s self-efficacy is a partial mediator of the relationship between his or her employees’ engagement and the manager’s rated effectiveness. Overall, these findings suggest that both employee engagement and manager self-efficacy are important antecedents that together may more positively influence manager effectiveness than either predictor by itself. Implications for effective management development and practice are discussed.
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