The Financial Impact of Employee Loyalty

1. The Financial Impact of Employee Loyalty Presented By: Cathy Martin Co-Founder & Senior Vice President of Sales & Marketing Intellectual Capital Consulting, LLC cathymartin@intellectual-capital.net

2. Our Objectives • Identify the difference between employee satisfaction, engagement, and loyalty • Demonstrate the impact of loyalty on organizational revenues and costs • Describe the four employee loyalty strategies

3. Satisfied Employee: One whose expectations have been met / exceeded by the performance of an employment experience Satisfaction = transactional process (rational) Definitions • Employee Engagement: • The degree to which employees engage with their business has a direct effect on business performance • Engagement = Connectivity to organization (2 types rational and emotional) • Employee Loyalty: • Proven metric applied to any employee, providing management with a point-in-time measure of the health of its current employee relationships. • Loyalty = heart + mind

4. Why Employees Leave The Saratoga Institute conducted a survey and it revealed that 89% of managers believe employees leave for more money. (rational) But, in fact, the survey found that 88% of employees leave for reasons other than money. (Emotional and rational) What a disconnect!

5. Why Employees Leave • The 10 most frequently mentioned issues that employees say companies do poorly are: • Poor management (EMOTIONAL) • Lack of recognition (EMOTIONAL) • Poor senior leadership (EMOTIONAL) • Lack of teamwork (EMOTIONAL) • Lack of career growth and advancement opportunities • Poor communications • Pay • Lack of training • Excessive workload • Lack of tools and resources The following information is taken from the book, The 7 Hidden Reasons Employees Leave: How To Recognize The Subtle Signs and Act Before It’s Too Late, by Leigh Branham, 2005, AMACOM publishers.

6. Characteristics of Employee Loyalty • Loyalty does not equal longevity • Referrals to Colleagues & Friends • Emotional and Rational Commitment to the Relationship • High Employee Satisfaction • Trust Based on delivery of agreed upon employee experience

7. Loyal Employees: Is There a Positive Financial Impact? YES

8. Direct Revenue Impact  Retain high performing employees Attract new ones Indirect Revenue Impact  Increase employee satisfaction Increase employee loyalty, leading to increased customer loyalty Employee Impact on Profitability: Increasing Revenues

9. Direct Cost Reduction  Eliminate unproductive employees Improve productivity Reduce recruiting costs Improve employee efficiency Decrease turnover “The annual cost for a disengaged workforce of a 1000-employee company is $1.8 million” -Sheppell FG1 Research Group. “Employee Engagement and Health” “68% of the highly engaged believe they can positively impact costs in their job or unit, versus 19% of the disengaged. “ -Towers Perrin, “Reconnecting with employees” Employee Impact on profitability: Reduce Costs

10. “Those employees who are most committed perform 20% better and are 87% less likely to leave the organization.” Source: Corporate :Leadership Council Research, “Driving Performance and Retention Through Employee Engagement.” Now, That is a Financial Impact…… Why Retain High Performing Employees?

11. Emotional Engagement is four times more valuable than rational engagement in driving employee effort (performance) Source: Corporate :Leadership Council Research, “Driving Performance and Retention Through Employee Engagement.” It is the heart over the mind…… Further…..what type of commitment are we talking about? Emotional or Rational?

12. How Do You Identify the Highly Engaged and High Performing?

13. Employee Loyalty Strategy: Loyalty + Performance Butterflies True Loyalists High Performance Low Performance Change Seekers Morale Busters Engagement

14. Employee Loyalty Strategy True Loyalist • Good fit company’s offerings & needs • Highest profit potential • Have their heart and mind Actions: • Communicate consistently but not too often • Must be challenged, engaged and constantly learning • Delight these employees nurture, defend & retain them • They will delight your customers Butterflies True Loyalist Performance Change Seekers Morale Busters Engagement

15. Employee Loyalty Strategy Butterflies • Good fit between company strategic direction and employee values • High “profit potential” • Can “move” anywhere on grid depending on engagement drivers Actions: • Aim for short term satisfaction, building to increased loyalty • Check in frequently to determine level of engagement • Need clear tie in with job and company direction Butterflies True Friends performance Change Seekers Morale Busters Engagement

16. Employee Loyalty Strategy Morale Busters • Probable fit between company strategic direction and employee values • Undermine teams with low performance Actions: • Performance management and coaching are key to drive performance up • Training may be required • Assess job fit and skill set Butterflies True Friends Performance Change Seekers Morale Busters Engagement

17. Employee Loyalty Strategy Change Seekers • Little fit between company strategic direction and employee values • This group hardest to move • Most companies spend most of their time with this group • Can cause negativity within groups Actions: • Determine gaps in performance and address consistently • If no change determine exit strategy quickly Butterflies True Friends Performance Change Seekers Morale Busters Engagement

18. Employee Loyalty Strategy: Loyalty + Performance Mind Butterflies True Loyalists Heart and Mind High Performance Low Performance Neither Change Seekers Morale Busters Heart Engagement

19. Emotional Engagement I am proud to tell others I work for my company The work I have to do is reasonable I am unlikely to look for a job in another company in the next 12 months I would recommend my company to a close friend as a good place to work My company inspires me to do my best work Rational Engagement I am willing to put in a great deal of effort beyond what is normally expected to help my company be successful I understand how my work group contributes to the success of my company I understand how my role is related to my company’s overall goals, objectives, and direction I am personally motivated to help my company be successful. Rational Engagement Emotional Engagement Drivers of Emotional and Rational Engagement Towers Perrin, “Reconnecting with Employees”

20. What’s Next? • What is your employee loyalty strategy? • Start determining who your high performing and loyal employees are. Do you have their heart and minds? • What are your current employee metrics? Should they be changed? • As OD professionals, you have a new way of measuring the ROI of potential interventions. Does it increase engagement? Does it increase productivity…because those are directly linked to financial results.

21. To Increase Engagement Provide employee orientation to establish: The employee-employer relationship Understanding how the job contributes to the organization's mission Offer skill development to enhance: Performance Satisfaction Self-efficacy Provide training to encourage prescribed and voluntary performance. To Enhance Commitment Signal commitment reciprocity by: Your investments in training Training delivery that accommodates employee Example: Business Case for OD: Training and Development • Increasing • knowledge • Skills • Experience • Expertise • Increasing • Self-efficacy • Self-esteem • Employer • commitment Builds Increasing Source: SHRM Foundation, “Employee engagement and commitment” Robert j. Vance

22. Employee Loyalty is a Key Metric in Your Metrics that Matter

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