How to Measure ROI on Employee Engagement Strategy

From MBOs in Personal goals in the early 60s, HR processes have evolved their accountability to independently function as a profit center. Robust processes that allowed calcultaling the return on HR investment became crucial to this evolution. Employee engagement processes also need to fit the ROI feasibility and soundness to be able to measure its outcomes. In this article, we discuss how to ensure an engagement strategy can be built to be robust and measure the effectiveness of employee engagement strategy. Such a results- based approach for engagement program accountability helps HR align themselves to business needs, enhance program design effectiveness and increase support for strategies.

Google is a stark example of how a successful company has effective engagement in place. They use an employee engagement program to retain their top talents and according to PayScale, 86% of employees at Google are satisfied with their job. Google analyzes their engagement processes and ensures that they produce results that have helped Google to achieve its business goals so far.

 |Read the complete blog on world’s  engagement strategies: Google|

Why is “enough” not enough? Organizations are making multiple attempts in updating their  engagement program, but it is still not quite hitting the mark. A report by Aberdeen, found out the organizations with a high level of engaged employees outperform companies with poor engagement by 202%. A solid engagement program is an investment, if you play your cards right,yields great results fast. However, this road to returns is not the one without obstacles.

Measuring employee engagement strategy effectiveness

If you have been running an engagement program, the business owners would be interested to know the ROI on such programs. Putting it the other way round, business owners would like their HR’s to prove the effectiveness of the engagement program and the way it contributes to the bottom line.

Advancements in technology have helped us to gather data which can provide us return on investment metrics for engaging, rewarding, recognizing and incenting employees.

Best practices while measuring employee engagement 

Today, organizations face a lot of challenges like shortage of best talents, changing workforce are a few to name. Hence it’s imperative for organizations to get on their toes and strategize a plan to immediately enhance their engagement program. Here are five best practices to follow that amplify the effectiveness of engagement programs.

Track Engagement Program Metrics:

‍Begin with tracking your engagement program metrics. Initially, you may face challenges such as which performance indicators should be considered and monitored. 

Program metrics generally  address basic information such as usage, adoption, frequency, reach of the engagement program which can help HR analyze what is happening with the engagement program across the firm.

These programmetrcis measure the satisfaction and engagement of the employees and Business metrics uncovers the program results on key business indicators as in profits and productivity.The data at program grade is genuine, simple and easy to understand. It also provides valuable information which is required to propel engagement program implementation and usage amongst the employees as well as their team leads.

Assimilate Culture and Business Metrics that have been Tracked in Other Zones of the Business:

‍Once the engagement program is implemented it is about to grow, hence HR professionals must start to integrate more data points that gauge a company’s culture as well as business performance into their analytics. 

Strut suggests that companies use metrics that are and have been traced by HR professionals such as employee engagement, employee retention, customer satisfaction, productivity etc.

 He further adds on that by using these metrics the organization can go way far they wish in order to prove the impact, worth, value and influence of the engagement program on their organization.

Align the Your engagement Program with Business Goals:

‍Once you have the program, culture and business performance data then HR professionals of the organization can ascertain the ways that individual behaviors affect business result by starting the task of running correlations. Such information helps organizations to leverage their engagement program as a tool to enhance the performance and meet the desired goals of the organization. 

According to Costello, by aligning engagement program with the company’s goals one gets a better understanding of the behavior that should be rewarded and recognized. 

Companies can utilize engagement strategies to shape their workforce culture and thereby fortify positive behavior.

Make Sure that engagement Platforms are Accessible:

‍In order to avail ample data that would let you know about the return on investment on engagement program companies need to make sure that the engagement program that they implement in their firm is easy to use and frequently used. The engagement program should be open to all the employees including managers across the firm. 

Technological advancements have made engagement platforms easily accessible through actual time dashboards, on-demand reporting, contextual analytics etc. 

Such tools have helped the managers a lot as they keep the managers aligned and in constant touch with the performance of their teams. An easy access to engagement platform enables managers to develop appropriate strategies that not only enhance the staff’s performance but also the business performance too. A right engagement program offers a platform that shares, celebrates and instills the intranet with amazing success stories. It displays a record of an employee’s greatest achievements till date

• Continue to Re-evaluate the Data:
  Today organizations are constantly juggling between reorganization, restructuring, growth and frequently changing workforce. This calls for the need to constantly re-evaluate between the firms' engagement program and the desired business results on regular basis.When quarterly reviews are performed, organizations can challenge the existing hypothesis about which strategy works best, when and where this is a need to formulate new hypothesis as well as make suggestion to constantly enhance their engagement program.
• Roll out employee surveys:
  ‍Perhaps the easiest way to find out if your rewards and engagement program works with your workforce is simply just to ask them. You can send round paper surveys after the program has finished or - preferably - set up an online survey. You can glean quite a lot of useful information this way.
• Set up some focus groups:
  ‍If you think that a few ‘yes/no’ questions are not going to be sufficient, you can always get a select few of your employees in for a quick focus group. You can then grill them about their thoughts on how the program went.
• Define your goals:
  ‍Set a target for the scheme. The metric and the number is dealer’s choice, but stick to it and use it as a barometer for success.
• Look at staff turnover levels:
  ‍If your program is in line with an increase in staff retention levels, it’s a pretty good indicator that they’re doing something.
• Check the bottom line:
  It may seem slightly simplistic, but you could just check basic numbers like profit or ROI. This may not be a hugely accurate metric, but it may well give you something of an indication.
• Tracking Employee engagement Patterns:
  ‍All HR heads and team leads agree to the fact that a good employee engagement system goes a long way in motivating employees and sustaining a positive office culture. So isn’t it natural to find out if your attempts are actually working out?

Here are a few examples of questions that Xoxoday’s engagement pattern and analysis tool will help you find answers to -

1. Who is getting recognized often?
2. Who is not recognized at all?
3. Is there a potential underlying performance issue resulting in little to no engagement? (Is there a need of training session?)
4. Are there employees who are not getting recognized but their own team?
5. Are there any managers or employees who are not rewarding and recognizing their peers/team at all?

• Break Out of The Mold:
  ‍Does your company give out basic year-end bonuses? While extra cash around the holidays may always be welcome, it’s not incentivizing anyone. Traditional cash bonuses can lead to entitlement among employees, as they are expected each year and not tied to measurable actions. 

Even if cash bonuses are tied to results, according to Willis Towers Watson research, only 20% of employers in North America say merit pay is effective at driving higher levels of individual performance.

It’s time to break the habit! Instead, focus on smaller rewards and incentives throughout the year. By instituting a year-round rewards program, you can drive productivity and engagement.

• Have a Clear Mission:
  First things first, if your staff doesn’t understand your organization or team’s overall goals, incentivizing them is useless. 

Ask your team members — Do you understand our company’s vision? Do you know your specific objectives and goals? 

Even if they have an idea, it’s always smart to brush up on goals before starting or revamping your rewards program.

Start from the top, delineate your corporate mission, move on to specific department’s objectives. Finish with the team and individual goals. By outlining the company’s mission and how that trickles down to each individual employee, your staff will understand the impact of their work.

If your team feels aligned with your corporate vision, you’ll be ahead of the game as recent reports show that only 40% of millennials feel strongly connected to their company's mission.

• Align Your Strategy to Goals: Once you’ve outlined your goals, it’s time to align your rewards program to your overall objectives. Engagement and incentives need to strategically interest employees to achieve better results in conjunction with your team goals. We’ll use a product sales environment for a couple of examples.
• If product knowledge is required to increase sales, your salespeople need to be product experts in their space. Run contests or quizzes on product information with smaller incentives to ensure your team is staying up-to-date and knowledgeable.
• If you want to increase overall sales volume, consider a tiered reward program, where incentives grow as higher milestones are met.
• Make Sure Your Rewards Program is Straight Forward: Engagement programs can become complex in large office ecosystems. You’ll waste time and effort if employees don’t understand the structure. Avoid ambiguity, make sure milestones are clear and concise. Once implemented, check in with employees to ensure they understand the process of the program and how to achieve rewards. Once employees reach their incentives, get feedback on their experiences.

If you use an automated rewards program, such as Xoxoday empuls, not only will you avoid the manual headache of managing incentives, you’ll gain valuable data on the performance of your rewards program. Analytics and dashboards will give you real-time results on how employees are interacting with the program, and measure effectiveness.

Engagement Program Value Chain

According to the ROI institute, a engagement program or any HR initiative for that matter has 5 levels of evaluation, during implementation.:

Level 1 | Reaction & Planned Action

Measures employee’s reaction to the program and captures planned actions. The data for this level can be collected using program adoption rates which is the number employees who have engaged with the program. Sources for this data could be:

• Implementation report
• System usage reports

Level 2 | Learning 

Measures changes in knowledge and attitudes. The data for this level can be collected using:

• Quizzes 
• Short opinion surveys

Level 3 | Application ‍

Measures changes in on-the-job behavior or actions. This level data can be collected using: 

• Surveys/Questionnaires 
• Observation on the Job 
• Interviews
• Follow-Up Focus Group 
• Action Planning 

Level 4.

Business Impact

Captures changes in business impact measures. This level data can be collected using Performance Monitoring. 

Level 5 | ROI

Compares program benefits to the costs. ROI Calculation is done with the following formula.

ROI = ( Net Project Benefits Project Costs / Project Costs ) *100

Program Value Chain

The above discussed different levels of evaluation is done at the various points in the Engagement Program Value chain as given below:

• Develop/ Review Objective of Solutions
  The first stage of implementing an engagement program needs to clearly define the strategic objective of the implementation obejctively. For instance, it could be to ‘reduce attrition by 2%’ and ‘improve employee NPS by 10%’.

• Develop evaluation plans and baseline data
  Right from the conceptualization, the program needs to have built in mechanisms to evaluate it. Including checkpoints that have baseline data already available- like an annual engagement survey, etc. is a great way to ensure that these engagement efforts are measurable.

• Collect Data during solution implementation
  Both Level 1 and Level 2 data needs to be collected in this stage to keep track of implementation efficiencies.

• Collect data after solution implementation
  Level 3 and Level 4 data needs to be collected to measure direct efficiencies of post-implementation.

• Isolate the effect of Solution
  There are various methods to clearly identify the impact of engagement program implementation:
  The best method to isolate the effects of the program is to consider 2 pilot groups during implementation of the program - one with the solution implemented and one without. This method is called the ‘Comparison group Analysis’. For instance, implement a peer reward system one group amongst two similar groups and compare data differences of both groups over a time period like ‘productivity improvement’ or ‘turnover’ (metrics that directly relate to returns). Other methods include Trend line analysis, Forecasting methods, Estimations and Previous studies.

• Converting Data into Monetary value
  Once the data is collected from step 5, for instance, a  ‘peer to peer rewards implementation has increased productivity by 5%’, this data needs to be converted into monetary benefits. Productivity management systems would have the factor ready, which translates every unit of productivity increase into a fixed monetary value. Use this factor for calculating the monetary value of the data collected.
  These standard values can be applied to Output, Quality, and Employee’s time. These conversion values can also be done by relying on historical costs and records, with the help of internal and external experts or data from external databases. Sometimes, even the employees or managers themselves might be directly calculating the monetary results of their functions. These estimates can go a long way in calculating the total benefits of the implementation.

• Calculate ROI
  ROI of an engagement program is calculated using the below formula:
  ‍ROI = Net Project Benefits / Project Costs 
  ‍For example, if cost of implementation is $300,000 and benefits (sum of step 6) of project is $400,000, ROI = ($400,000-$300,000)/$300,000* 100 = 0.3334 x 100 = 33.34%

• Investment
  It’s the dream of every organizational leader to keep his/her employees motivated, productive and consistent at work. A properly designed Employee Engagement program makes for an effective way to boost employees’ morale. 

Talent Acquisition via Employee Referrals:

‍Companies acquire talent in the company via various sources such as consultants, hiring portals, employee referrals and even social media. Employee referrals are considered to be the most efficient medium of hiring as employees understand the company culture and the referred people are likely to fit in better. Typically, an organization sees 35 new faces in the company out of 100 every year. The usual spend for every successful referral ranges from INR 5,000 to INR 50,000. This is calculated as 5000*0.3X = 1500X (where X is the number of employees).

Performance-based:

‍Employees with a track record of good performance attract both rewards and engagement from their leaders. Good performers are recognized on a spot, weekly, monthly, quarterly or annual basis. If the organization has implemented a rewards point system, these winners are awarded points which can be redeemed against rewards such as experiences, activities and vouchers. Typical average spends are INR 300 per employee per month and are calculated as 300X*12 months = 3600X.

Peer-to-peer rewards:

‍In addition to the manager-to-employee engagement, good organizations encourage employees to appreciate, reward or gift their peers who have helped them on multiple occasions or performed well on a consistent basis. Such organizations often own a culture of genuine appreciation. Such small but important gestures help organizations in building employee engagement and increasing productivity.

Rewards for personal occasions:

‍Every employee has personal milestones such as Birthday, Marriage, Anniversary and Parenthood. They feel special when their moments of happiness are complemented by congratulatory messages and personalized gifts at work. Such rewards often comprise experiences, activities and vouchers that not only engage employees, but also give their family members reasons to cheer about. These rewards are usually calculated as 100X*12 months = 1200X.

Team awards and bonding activities:

‍New and existing employees are often involved in ice-breaking experiences and activities along with their teammates and other employees. These activities are tailor-made for employees to connect with their colleagues and get in depth knowledge about the business and the people. They get acquainted with key people in the organization, and get better aligned with the structure and the culture of the company. Spends on overall team awards and bonding activities are typically calculated as 200X*12 months = 2400X.

Employee Wellness Spends:

‍Good organizations extend wellness programs to their employees in a planned manner. They let their employees know that their contribution means a lot and that their wellness is valued. These spends could include the setup of a health app for employees as a part of the existing HRMS, or giving the employees incentives to join wellness or a fitness program at a gym or a fitness center. Spends on overall employee wellness are calculated as 100X*12 months = 1200X.

Long Service Anniversary (LSA) Awards:

‍It’s not a small achievement when an employee completes 5 or 10 years with an organization. These years of work reflect an employee’s loyalty and commitment towards the company, and implies that he/she understands the company culture well and is an asset for the organization. Organizations thus recognize long service by rewarding and recognizing their employees via cash rewards, vouchers and/or experiences and activities. In general, 10% of the employees complete 3+ years in a company and so, appreciating them and recognizing them becomes crucial. Typical spend on LSA is INR 10,000 and is calculated as 10,000X*0.1 = 1000X.

Summing up the reward spends across the stages of an employee lifecycle, the total reward spend comes out to be $ 10,900X per year. The nature of these spends varies according to the stage at which the employee is, however the intent remains the same – to appreciate and motivate. Well thought out rewards make for a perfect way to communicate this appreciation and engage employees better throughout the lifecycle.

Subjective Benefits

In addition to a few benefits discussed in Level 5, following are a few of the critical benefits of an employee engagement program:

1. ‍Reduced Employee Turnover:
   ‍According to Employee engagement Survey by SHRM enterprises with the strategized employee engagement program have 23.4% less turnover than organizations without an engagement program. This itself is an indicator that indicates how engagement programs impact your ROI.
   Your company has gone through a huge expense of hiring and training the employees. It comes as a massive blow when these top talents decide to leave your company. An email that mentions the achievements of your employees is one of the best ways that still works well. It boosts employee morale and infuses the trust factor in your employee towards you.
   A reduced turnover means saving cost on recruitment, training and having more productive employees. This has a direct positive impact on your ROI. An evaluation of the turnover rate before and after the implementation of the engagement program will give you gaugeable outcomes.
2. ‍Increased Engagement:
   ‍When does an employee remain engaged with an organization? Well, when he is aligned with the company’s goals and is loyal towards the success of the company. An employee who is engaged performs at their best level with passion in what they do which lead to innovative practices.
   According to Gallup highly engaged employees out-perform disengaged employees by 21%. Businesses, where employees are highly engaged, acquire a 10% increase in their customer ratings and 20% increase in their sales.
3. ‍Better Business Results:
   ‍Your product or services that you offer becomes the main focal point of your business. For this purpose, various departments within your organization strive hard to enhance your product and services in order to increase sales and bring about brand awareness of your business presence in the markets.
   Employee engagement leads to building a connection between the employee and the organization. When their efforts are recognized they put in more efforts to deliver the best to the clients which lead to an increase in customer satisfaction. They are motivated to remain loyal to contributing effectively to attain the desired business goals. This brings about and increases in sales and strengthens the bottom line too.
   With the best engagement practices, your business can grow tremendously, make great profits by selling your services and products and develops a huge customer base too which is the main goal of any business. Isn’t it?
4. ‍Innovation and Productivity:
   ‍In this challenging economy, in order to stay updated with the market and stand apart from the crowd, you need to be innovative and enhance and try out new strategies.
   A research by O.C. Tanner found that employees who receive strong engagement are 33% likely to be proactively creative and that they generate twice as many creative ideas per month than those employees who are not recognized. From companies point of view, the employee who is effectively recognized for their performance is more than twice as likely to be more creative.
   The research states that when employees were asked for which benefits would encourage creativity and efficiency in their work the following was the answers:
   
   -27% of employees stated that they want to be recognized for their ongoing continuous efforts
   -41% needed engagement for going above and beyond their usual work
   -32% of employees stated that a bonus of about say 5% would also make them feel recognized and rewarded for their hard efforts at work‍
5. Brand Worth:
   ‍What does your brand represent? Well, it represents people’s perception about an organization, the customer services that they provide the brand reputation and the employees. Employees who are happy and highly engaged will portray a positive image of an organization. It doesn’t end here they also concentrate and ponder on how to get high brand value.
   For any organizations first come the employees and then the customers. Hence every firm should think about how to increase their brand value from inside first i.e. their employees first and then go ahead and think for their customers. A performance-based employee engagement program positively infuses a sense of belonging in the employees towards the organization.
   Brand value can be enforced byways like merchandise that bears the company logo or certificate of appreciation are a few to name that show engaging with employees make them feel connected and belonged to the organization.

Wrap Up

Engagement programs only work after a period and trial and error. They’re not just copy and paste efforts, each organization needs to develop and establish their own. Each business is different and attempting to shoehorn in a templated program is clumsy and most likely going to be ineffective. So schemes need to be tried and tested and amended where necessary. It’s a refinement process. You keep what works and you ditch what doesn’t. Simple.

The continual improvement of your rewards and engagement program comes by measurement, it’s the only way. You have to track the success of every scheme you run. Otherwise, it’s efficacy is basically unknown.

Somewhat incredibly, less than a third of employers worldwide actually bother to measure the effectiveness of their employee rewards and engagement programs in terms of their impact. So how can they tell they’re working? Or whether their staff is engaged or not? The simple answer is this - they can’t.