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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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4

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