HR Leaders

Employees Over Shareholders: Engaged Employees Drive Long-Term Success

Many executives today feel responsible for acting in the best interest of shareholders, placing their needs above the other stakeholders in the company—employees, customers, suppliers, and the community. It wasn’t always this way. But over the past 30 years, shareholders began to take precedence as organizations become hyper-focused on the financial markets.

SEE ALSO: How to Transition Annual Reviews to Real-Time Feedback

In our globalized world, there are more stakeholders than ever, and their interconnectedness creates a delicate balancing act. But too often, this balance shifts towards the shareholders and sacrifices the people that make a company what it is, whether that results in layoffs or a high-pressure work environment that leaves employees feeling like cogs in a machine.

Making money for shareholders isn’t the sort of goal that inspires a workforce. And without inspiration, workers rarely feel motivated to innovate, grow, or perform at their highest levels. Stagnation takes over and low productivity and high turnover often result. However, there is a way to fight this stagnation and keep employees engaged long-term: Put employees first.

Keep employees engaged long-term by putting them first. Click To Tweet

Wells Fargo recently stopped paying branch workers based on aggressive sales targets and instead increased the minimum pay rate to between $13.50 and $17 per hour. In the wake of the change, CEO Tim Sloan says, “Turnover now in our retail bank is the lowest it’s been, that I can recall, in my 30 years at the company.”

The new policies are based on Sloan’s belief that “when you put your shareholders first…then you’re going to make mistakes. Because you’re going to make short-term decisions that aren’t focused on creating a long-term, successful company.”

Richard Branson, founder of the Virgin Group, shares a similar belief, “So, my philosophy has always been, if you can put staff first, your customer second and shareholders third, effectively, in the end, the shareholders do well, the customers do better, and [your staff] are happy.”

Why is so important that employees are happy? Because Branson considers his nearly 70,000 worldwide employees to be potential brand ambassadors. “If the person who works at your company is 100% proud of the job they’re doing, if you give them the tools to do a good job, they’re proud of the brand. If they’re looked after, if they’re treated well, then they’re going to be smiling, they’re going to be happy, and therefore the customer will have a nice experience.”

Branson also points out that employees can provide management with a roadmap for happiness and engagement. “The people out on the front line, they know when things are not going right, and they know when things need to be improved.” All leaders have to do is pay attention. Branson says, “One of the key attributes to a good leader is listening, making sure that you write down the feedback that you get. And very importantly, make sure that you act on that feedback when you get back to base.”

One of the key attributes to a good leader is listening. Click To Tweet

The State of Engagement

Unfortunately, the vast majority of companies don’t live by these values. According to Gallup’s recent State of the Global Workplace report, 67% of employees around the world are “not engaged”—which means that they’re essentially just going through the motions. An additional 18% of employees are actively disengaged at work—making few contributions, hurting productivity, and creating a potentially toxic environment. Combined, these 85% of global employees are costing $7 trillion in lost productivity.

But how does employee engagement affect the “long-term” success that Sloan mentioned? Gallup researchers studied the difference between engaged and actively disengaged work units. The study included nearly 1.4 million employees across hundreds of organizations and a variety of industries.

Researchers found that the work units that rated in the top quartile for employee engagement experienced 17% higher productivity, 10% higher customer metrics, 20% higher sales, and 21% higher profitability than those units in the bottom quartile for engagement.

In addition, research also showed that companies with an engaged workforce also realized higher earnings per share (EPS). Companies with an average ratio of 9.3 engaged employees to one actively disengaged employee experienced 147% higher EPS than their competition. And companies with a less engaged workforce—an average ratio of 2.6 engaged employees to one actively disengaged employee—experienced a 2% lower EPS than their competition.

These numbers suggest that Branson’s philosophy—that an engaged, happy staff still allows shareholders to do well—rings true.

The Strength of Strengths

One of the best ways to boost employee engagement is to focus on employees’ strengths. What does “focusing on strengths” entail? It means that managers recognize the talents and abilities that come naturally to their employees. They put employees in position to utilize and maximize what they do best. They build teams around these strengths, fitting complementary skill sets together like puzzle pieces. And they focus on strengths-based coaching to develop and enhance already inherent strengths.

Gallup studied companies that use these management practices. The research included 1.2 million employees in 45 countries and a range of industries. Companies that used a strengths assessment along with strengths-based development coaching saw improvements in six categories: sales, profit, customer engagement, turnover, engagement, and safety.

90% of the groups that implemented a strengths intervention saw improvements in the following ranges:

  • 10% to 19% increase in sales
  • 14% to 29% increase in profit
  • 3% to 7% higher customer engagement
  • 9% to 15% higher employee engagement
  • 6% to 16% lower turnover (for low-turnover organizations)
  • 26% to 72% lower turnover (for high-turnover organizations)
  • 22% to 59% fewer safety incidents

What’s the correlation between employee strengths and engagement? Two out of three employees who strongly agree that their manager focuses on their strengths are engaged professionally. Among employees who strongly disagree with this statement, only 2% are engaged. And the employees who responded that they get to use their strengths every day are 15% less likely to quit their jobs.

Increasing employee engagement doesn’t happen overnight, but recognizing achievements, nurturing a culture of feedback, coaching for long-term growth and development, building relationships with regular manager-employee check-ins, and relating individual goals to the company’s big-picture vision are all key steps on the road to an engaged workforce.

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