Henk van Dalen has been busy on the M&A front. The CFO of TNT, a €10 billion Dutch logistics company, has overseen the acquisitions of ARC India—one of the countries major road express companies—in 2006 as well Brazil’s Mercúrio of Brazil and Hoau of China in 2007. These deals are part of TNT’s plan to become the number-one logistics company in emerging markets.
But along the way, the acquisitions present van Dalen with a challenge. Now that TNT operates across more than 200 countries and in 37 languages, how can he persuade a diverse group of employees to work towards a common strategic goal?
As the CFO sees it, part of the solution lies in “employee engagement,” getting employees to go the extra mile for the company. At TNT, this now includes an annual online survey to measure engagement levels, external benchmarking and making engagement levels a component of management bonuses.
Giving the programme’s acceptance among TNT’s rank and file a boost are studies from the likes of Towers Perrin-ISR—an employee-relations research firm—that draw a link between employee engagement and financial performance. Van Dalen concedes he needs a bit more time to see that link with TNT’s programme—which was launched a few years ago—but recently discussed with CFO Europe why he believes the initial results are encouraging.
Why did TNT decide to focus on employee engagement?
Employee motivation and engagement have always been important to the kind of work that TNT does. An enormous commitment is required from people to do their job effectively and efficiently with a focus on service and the right attitude.
At the same time, we recognised that it is important to work on this subject more precisely by having indicators available that enable management to target actions to get the best possible engagement. This more formal part started two to three years ago. It’s part of a wider focus on corporate social responsibility and sustainability, which focuses on three elements: people, planet and profits.
How does TNT measure employee engagement?
We measure engagement in three areas: employees’ perception of the group, such as the principles they believe it adheres; their views on the quality of leadership at TNT, and their views on various elements of the working relationship—for example, learning and development or reward and performance evaluations.
These areas are covered in an anonymous online survey, which is conducted by an external company. This allows us to benchmark ourselves against our sector and against the leading 10% in the world in terms of employee engagement.
How would you describe the current level of engagement at TNT?
We started the online survey in 2006 so I think it’s still too early to identify real trends. What we can clearly see is a lot of interest in the survey—the participation rate is high. Management is picking up on the outcomes and developing action plans for the next year. The outcomes are also being discussed with employees within each department.
How do you score in the benchmarking exercise?
We’re not able to share our benchmarking figures now. We will, however, give a little bit more detail for the first time in our annual report this year. I can say that the latest survey—conducted in 2007—found that our employees are more engaged than the average in the postal, transport and logistics industry, which makes me proud. Engagement figures appear particularly high in areas such as customer focus, social responsibility and diversity.
The benchmarking exercise has highlighted areas where we can improve. A case in point: the enormous focus required in terms of communicating with employees about the future. And that means not only telling but also listening.
Continuous and consistent efforts to promote engagement are also important. If you focus on engagement only once a year or once every two years, people think, “Oh no, here it comes again.”
Have you identified a link between employee engagement and financial performance?
It will always be difficult to establish an exact correlation but already, over the past two years, we can see that where engagement is high, performance is also very strong. Of course, there is more to performance than pure financials, such as Ebit or revenue growth. There are also non-financial objectives such as implementing strong internal control frameworks. In achieving those non-financial goals, you always find objectives that have to do with instilling pride in our people—and they in turn have objectives that relate back to customer relations and improving efficiency of operations, which feeds into financial performance.
How do analysts and investors respond to your focus on employee engagement?
We talk to analysts and investors every quarter and our focus on employee engagement will always be part of the discussions. There is also one group of investors that wants to talk about sustainability. We have had contact with them over the past year to understand more about the reasons for their interest.
Do they ask specifically about your work on employee engagement?
They ask us about our bonus systems and the targets we have set. We decided to make employee engagement part of management incentive schemes so that comes up in the discussions.
Employee engagement is a matter of doing good business. Whenever you have a better-engaged group of employees who bring the best of their capabilities to the business—and we are able to bring them the best opportunities to develop and grow—there is, I think, enormous potential for success.