Above & Beyond

When employees go the extra mile, does the bottom line benefit?

Like other members of Axa’s executive crew, CFO Denis Duverne reckons he spends half of his time on human resources. That includes using a raft of surveys, seminars and financial incentive schemes to ensure every staff member at the €79 billion French financial services firm is “engaged,” that is, is going the extra mile for the organisation.

Does this make a difference to the company’s performance? The analyst community doesn’t seem to think so. “Very few analysts ask questions during this part of [presentations to them] but they are listening politely when we say it is important,” says Duverne. “It’s probably a function of the very short-term focus that most analysts have. What we are doing on employee engagement is a very long-term action plan.”

Such analyst apathy might change soon. HR experts are coming up with hard data that proves a link between employee engagement and financial performance and Duverne, like other CFOs, says he finds the growing body of evidence compelling. Why? “In financial services, you don’t have any patents, you don’t have anything other than the quality and engagement of your workforce to make you succeed,” he explains. “It’s the most fundamental driver of financial performance.”

But attaining workforce engagement doesn’t happen with a snap of the fingers. CFOs and HR experts agree that high levels of engagement depend on three factors: a robust strategy that galvanises employees; clear leadership from the top team, which is then adopted by every manager; and regular, two-way communication between managers and their staff.

If all three of those are achieved, a company will reap financial rewards, asserts Towers Perrin-ISR, the employee-relations arm of consultancy Towers Perrin. Along with a survey of 664,000 employees at 50 global companies, Towers Perrin-ISR compared the financial performance of companies with varying levels of employee engagement over a 12-month period. It found that three financial indicators — operating income, net income and earnings per share (EPS) — rose when engagement was high and fell when engagement was low. (See “People Power” at the end of this article.) Nick Tatchell, senior projects director at Towers Perrin-ISR, acknowledges that other factors — such as a merger or acquisition — can influence a company’s financial performance but he claims the sheer size of the study factors out such influences. “Were nothing to change in your business and were you to focus on getting closer to your business as a senior management team, being open and honest in communication with your staff and showing an interest in issues that mattered to them, you could expect to see engagement — and financial performance — rising,” says Tatchell.

Towers Perrin-ISR isn’t alone in its pursuit of a link between engagement and financial performance. Gallup, a research company, says it has found a way to link employee engagement and EPS. In a 2006 study of 4.5m respondents at 332 companies, researchers found that the EPS growth rate of top-quartile organisations (those with the most highly engaged employees) was 2.6 times that of organisations with engagement levels in the third and fourth quartiles.

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