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New York Human Resource Planning Society

New York Human Resource Planning Society. The Financial Case for Making a Commitment to Employees Judith M. Bardwick, Ph.D. Wednesday, October 26, 2005 The Sony Corporation 550 Madison Avenue at 55 th Street New York. American Workers Not Happy With Jobs.

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New York Human Resource Planning Society

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  1. New York Human ResourcePlanning Society The Financial Case for Making a Commitment to Employees Judith M. Bardwick, Ph.D. Wednesday, October 26, 2005 The Sony Corporation 550 Madison Avenue at 55th Street New York

  2. American Workers Not Happy With Jobs • Yahoo survey reveals that 47% of US workers are ready to jump ship at next opportunity or plan to change jobs within 12 months. • In another study 52% of workers are interested in leaving their jobs, 75% of those within 12 months. • 34% of those workers would not recommend their employer to others • 45% cited a lack of potential for career growth • 36% were in search of a better benefits package.

  3. Take care of your workers now or you’ll lose them • Employees are bound only as long as employers provide them skills and training to improve their job situations • Survey of 3,350 workers shows that 2/3 are disenchanted with their job situation and ready to leave • 31% of workers feel trapped, unable to leave because they don’t feel they can find replacement jobs

  4. 2003 Towers Perrin Study: • Disgruntled employees either quit and leave – or they quit and stay. • The more positively employees felt over 5 years, the higher the companies profits and the greater the share price.

  5. SAS Institute is a software company • The industry turnover average is 20 percent • SAS’s turnover in 2003 was 3 percent. • That saved SAS $60-80 million. • Low turnover is also key to their 98 percent customer retention rate.

  6. Employee retention is key driver of customer retention • MBNA’s credit card business showed that a 5% increase in customer retention translates into a 125% increase in per-customer profits. • A 7% decrease in employee turnover led to increases of more than $27,000 sales per employee and almost $4,000 in profits per employee in another study

  7. If you invested the same amount of money from 1998 through 2002 in: • The S&P 500, • The Russell 3000, and • The 100 Best Companies You would have had an annual return of -0.71% for the S&P 500 -0.56% for the Russell 3000 9.86% for the 100 Best.

  8. Training & Development • Top corporate spenders on training and development earned 16.2% in 1996 – 2001 • That was 6.5% more than the Wilshire 5000

  9. Counter to Wall Street’s view -- Higher Wages mean Higher Profits • Costco’s high-wage strategy beats Wal-Mart…

  10. …But Gets More Out of Its Workers

  11. Commitment and Engagement • A level of passion and reciprocity • Not morale and satisfaction

  12. COMMITMENT: • This organization is an important part of my life. “What do you do?” “I’m with – IBM HP U of Michigan” Instead of – “I’m a software engineer.” “I’m in finance.” “I’m a professor.”

  13. ENGAGEMENT • I’m in! What we do matters! Let’s go!

  14. Employee commitment is associated with job performance • Employees who are committed to an organization work harder and are more productive in their jobs than employees with weak commitment, as measured by - sales figures, - control of operational costs, - supervisors’ ratings of work performance

  15. Company profits tied to employee commitment • Nationwide survey of 7,500 employees found employers whose workers had low commitment had a 36% lower three-year total return to shareholders than did companies with high employee commitment

  16. Relationship of ECI and Shareholder Value (Employee Commitment Index) 3-Year Total Return to Shareholders (TRS) Low Employee Commitment 76% Average Employee Commitment 90% High Employee Commitment 112%

  17. High commitment and engagement- lead to • High employee retention – which leads to • High customer satisfaction – which leads to • High customer retention –which leads to high profits and share price.

  18. Getting Commitment and Engagement requires Yes!, to each of these questions: • Do you need me? • Respect me? • Recognize me? • Trust me? • Invest in me? • Reward me? • Support me? • Expect more from me?

  19. What Should Organizations Do? • Create significant relationships between bosses and subordinates • Customize outcomes and working conditions • Achieve a Best Fit

  20. A Boss’s Performance is Directly Tied to Retention • Only 11% of workers who rated their boss’s performance “excellent” said they were likely to look for a new job in the next year, but • 40% of those who rated their boss’s performance “poor” said they were likely to jump ship.

  21. Key Drivers of Employee Commitment(% Impact of Each Factor) • Trust in Senior Leadership 14% • Chance to Use Skills on Job 14% • Competitiveness of Rewards 11% • Job Security 11% • Quality of Co. Products/Services 10% • Absence of Work-Related Stress 7% • Honesty & Integrity of Company’s Business Conduct 7% • All Other Factors 26%

  22. Gaining Employee Trust Relies on Seven Key Factors • Explaining reasons behind major decisions 10% • Gaining Support for the business direction 10% • Motivating Workforce to high performance 10% • Promoting the most qualified employees 10% • Acting on employee suggestions 9% • Providing job security 9% • Encouraging employee involvement 8% • All other factors 34%

  23. People want to: • Keep learning. • Achieve reasonable security. • Be successful. • Have both their work and their family flourish. • Like and respect their colleagues and bosses. • Find meaning in their life and their work.

  24. Thisorganization is: • (Score 1 – 3) 1 = Not very 2 = Pretty much 3 = Very much so • CharacteristicScore • Today In 2 years • Calm and deliberate • Fast and decisive • Very high risk • Low to medium risk • Entrepreneurial • Slow. People wait for orders. Polite • Polite and not forthcoming

  25. Thisorganization is: (Cont.) • (Score 1 – 3) 1 = Not very 2 = Pretty much 3 = Very much so • CharacteristicScore • Today In 2 years • Characterized by forthright challenges • Filled with an intense hum • Filled with people who think like employees • Dominated by seniority • One where only results count • Filled with high risk/high return excitement • People are expected to be super-heroes

  26. Thisorganization is: (Cont.) • (Score 1 – 3) 1 = Not very 2 = Pretty much 3 = Very much so • CharacteristicScore • Today In 2 years • Exceeding personal expectations is vital • Achieving success is immensely important • One in which people don’t play together • One where fun with colleagues is valued • Individualism is a core value • One where everyone is treated same • One where loyalty is expected

  27. Thisorganization is: (Cont.) • (Score 1 – 3) 1 = Not very 2 = Pretty much 3 = Very much so • CharacteristicScore • Today In 2 years • Quiet, comfortable and few surprises • Focused on business outcomes • Dominated by staff and professionals • Internally competitive • Characterized by collegial relationships • One in which results outweigh status • Assumes work comes first • Input welcomed from empl w/ideas & knowledge • Expects to hear the truth

  28. Thisorganization is: (Cont.) • (Score 1 – 3) 1 = Not very 2 = Pretty much 3 = Very much so • CharacteristicScore • Today In 2 years • One in which status outweighs results • One in which people tolerate boring work • Learning and challenge are ongoing • Exceeding personal expectations is vital • Achieving success is immensely important • One in which people don’t play together • Is changing rapidly in basic ways • Wants empl to feel part of the family

  29. Thisorganization is: (Cont.) • (Score 1 – 3) 1 = Not very 2 = Pretty much 3 = Very much so • CharacteristicScore • Today In 2 years • One where having fun with colleagues is valued • One where individualism is a core value • One where people expect everyone to be • treated the same regardless of contribution

  30. I Want: • (Score 1 – 3) 1 = Not very 2 = Pretty much 3 = Very much so • CharacteristicScore • My work assignments customized • More flexible work arrangements • Reasonable work hours • Choice about benefits • Choice about forms of compensation • Opportunities to work on my ideas • Options and a chance to get rich • More autonomy • Opportunities to make decisions and lead • Clear distinction between work/personal time

  31. I Want: (Cont.) • (Score 1 – 3) 1 = Not very 2 = Pretty much 3 = Very much so • CharacteristicScore • Work to be an exciting place • Very clear goals and deadlines • Training/education • Predictability and some job security • The latest tools • To work with the smartest people • Fun colleagues • To do important, cutting-edge work • Opportunities to initiate • Freedom to innovate • An org. whose values fit with mine

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