Investors should look at an organisation’s employee engagement activity when considering its investment value, according to the Local Authority Pension Fund Forum (LAPFF).
Its People and investment value guide encourages pension fund trustees and asset managers to consider the employee value proposition a business uses to engage staff beyond monetary rewards when looking at whether to invest in an organisation.
According to the guide, employees who are engaged with their employer are more likely to choose to stay and will work harder for the organisation.
The guide includes a set of questions that pension fund trustees and asset managers can use to appraise the link between people and the investment value, including:
- What is the ratio of engaged to disengaged employees in your organisation?
- What hard evidence can you share with us that a link exists in your organisation between pay and staff performance?
- How do you ensure the people who work for you share the organisation’s values in a way that enables them to connect with each other?
Ian Greenwood, chair at the LAPFF, said: “By publishing this guide, the forum hopes to broaden the debate investors have about reward and motivation, and change the nature of their discussions with organisations.
“Too much time is spent talking about the pay packets of a handful of people on each board, while what is going on inside the business is left unexplored. This report will inform LAPFF’s future engagement. We hope other shareholders take up these questions too.”
There has been a growing interest in these types of metrics within organisations themselves in the last few years, but less so amongst investors, who still tend to look at the financials and the skills of the senior management team when they are considering potential investment.
Some quick thoughts occur to me here:
First, that these are 3 great basic questions to ask of any company – even if it’s a relatively small one – as these are important at every level.
Second, how well do most organisations measure engagement, and if they do, how well do they understand how engagement works at an everyday level, where it’s most critical?
Thirdly, how do you measure the understanding of shared values, and importantly, how those values are reflected in how people behave: how they interact with each other, how managers run their teams, how leaders lead, and how conflicts and challenges are resolved? After all, that’s what values are all about…
Whilst the employee satisfaction provides a broad indication of general positivity towards the employer, there’s also a more fundamental analysis required of how employees are engaging with each other on a day to day basis. We know that one of the most important relationships for an employee is their relationship with their manager – how their manager supports, develops and manages them. Yet this is not something that can be picked up or diagnosed from the typical employee survey – at least not at any meaningful level of detail. It’s also impossible to specify to managers and leaders what they need to do, individually and as a team, to increase engagement on a behavioural level. That’s why we recommend that if they can, organisations should analyse their overall 360 Degree Feedback results as an additional indication of employee engagement and motivation. There is even research showing that employee engagement can be predicted from positive 360 Degree Feedback results.
360 is also a very useful way of explaining and measuring the shared values that the organisation wants to promote – 360s often refer to specific behaviours that demonstrate those values.
Overall there’s a need to put all the available data together to really understand employee engagement – not just use one measure to the exclusion of others.