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1. Presenter's Name The Theory and Practice of Employee Engagement California State Automobile Association
2. 1 Topics for Discussion Background Engagement at CSAA
Who we are
Why the interest in engagement
Results from our surveys
ROI Context for engagement ROI analysis
What Towers Perrins research shows
What other organizations have found
How (and why) CSAA analyzed the ROI of engagement
Data Collected and Analysis Performed
Actions taken and lessons learned
3. Background Engagement at CSAA
4. 3 California State Automobile Association (CSAA) AAA was established in 1900 and offers an array of automotive, insurance, travel and financial services.
AAA is a not-for-profit, tax-paying federation of 77 motor clubs with more than 1,100 offices, serving 46 million members throughout the United States and Canada.
CSAA (AAA of Northern California, Nevada and Utah) serves more than four million members and is the second-largest member organization of the national AAA organization.
We have almost 7,000 employees working out of more than 125 locations across five states.
CSAA is headquartered in San Francisco.
5. 4 CSAAs 2006 Employee Engagement Survey
The 2006 Employee Engagement Survey was designed to meet the following key objectives:
Learn how employees view the organization overall and understand how they feel about their experiences in specific work groups
Understand employee perspectives regarding CSAAs business effectiveness and the organization as a place to work
Assess how well the organization is delivering on its vision, values and behaviors from an employee perspective
Identify any important differences of opinion across CSAA
The survey was administered from December 5 through December 16, 2005 (with paper surveys accepted through December 20)
Of the 6,762 employees invited, 4,325 completed the survey this response (64%) is a strong response rate for an employee engagement survey*
6. 5 CSAAs 2006 Employee Engagement Survey
Six questions form an engagement index that is:
Consistent with Towers Perrins research on employee engagement
Statistically reliable (the items form a cohesive index)
The engagement index includes the following questions:
1. I would recommend CSAA to a friend as a good place to work.
2. I am proud to tell others I work for CSAA.
3. My job provides me with a sense of personal accomplishment.
4. I am willing to put in a great deal of effort beyond what is normally expected to help CSAA succeed.
5. I understand how my role in CSAA is related to CSAA's overall goals, objectives and direction.
6. I understand how my unit/department contributes to the success of CSAA.
7. 6 In the 2005 survey, CSAAs scores were above Towers Perrins normative benchmarks on the employee engagement index This year, CSAAs engagement index score was similar to last years -- and still notably higher than Towers Perrin norms
8. 7 CSAAs diversity index score is also above the comparable index figure for last year Six questions form a diversity index that CSAA has identified as the best survey measure regarding diversity and is statistically reliable.
The diversity index includes the following questions:
1. How would you rate your immediate supervisor/manager on:
Consulting employees before making decisions that affect them
2. How would you rate your immediate supervisor/manager on:
Acting in ways that support a diverse and inclusive environment
3. I can be myself around here.
4. Its safe to say what you think around here.
5. At CSAA, employee input and different opinions are actively encouraged.
6. Employees at CSAA are able to contribute to their fullest potential regardless of their age, race, ethnic background, gender, religion, disability, sexual orientation, or family status.
9. 8 CSAAs empowerment index score is also above the comparable index score from 2005 The empowerment index includes the following questions:
1. How would you rate your immediate supervisor/manager on: Encouraging/empowering people to take initiative in their work
2. CSAA empowers employees to make appropriate decisions that are in the best interests of the company and customers.
3. CSAA provides me with opportunities to learn new skills and develop myself.
4. I have the appropriate amount of decision-making authority to do my job well.
5. At CSAA, employees are supported in taking appropriate work-related risks.
10. 9 . . . And we have many opportunities for improvement Engagement surveys point out these key areas for improvement:
I have excellent career opportunities at CSAA -- 55% favorable
CSAAs senior management acts in ways that are consistent with what they say -- 47% favorable
Managers consult employees before making decisions that affect them -- 54% favorable
CSAA cares as much for employees as for members -- 41% favorable
11. 10 Results by Survey Category Employee views are generally positive, with views regarding senior management receiving the lowest scores (as they did in last years survey)
Scores in all categories either rose slightly or stayed the same as last year
12. 11 CSAA conducted a culture scan to give us even more information Background: CSAAs territory is extremely diverse. In general, our employees reflect that diversity except at the senior level.
Goal of culture scan: To understand what basic beliefs drive organizational practices and behaviors and how those beliefs impact the ability of CSAA to leverage diversity
Components of scan: Interviews, focus groups, analysis of employee engagement survey, historical review
13. 12 CSAA conducted a culture scan to give us even more information (contd) Findings:
Strategic -- AAA brand is key to our success
Governance Service-driven family
Operational -- Individual effort
Critical targets for leveraging diversity:
Fear of retaliation
Reluctance to speak up
Requirements for fitting in
Business case for diversity
14. ROI Context for Engagement ROI Analysis
15. 14 Towers Perrins Global Workforce Study reinforces why engagement matters: Highly engaged employees believe they contribute directly to results
16. 15 The National Bank of Canada found strong relationships among employee engagement, client satisfaction and shareholder returns
17. 16 Sears developed its employee-customer-profit chain to help in the turnaround of the mid-1990s
18. 17 Towers Perrins work with a major hospitality company elaborated on the relationships among employee behaviors, customer loyalty and financial results
19. 18 Becker, Huselid and Ulrich found a relationship between HR systems and firms market value per employee
20. How (and Why) CSAA Analyzed the ROI of Engagement
21. 20 The Lay of the Land CSAA leadership realizes that employee engagement is important but that the ROI is difficult to quantify
If the ROI cant be quantified, its difficult to justify requests for resources to improve engagement
But without a resource investment, engagement isnt likely to increase
And the (difficult to quantify but nevertheless real) benefits of engagement wont be realized
Hence the challenge:
Figure out where and how engagement really matters in a business sense
Determine which investments in building engagement are likely to produce the highest ROI
Define the investment strategy
Track the ROI produced by increased engagement, partly as proof and partly to direct future investment
22. 21 Our analysis focused on determining the strength and the financial implications of relationships between: Employee engagement and perceived customer service focus
Engagement and financial outcomes
Engagement and employee turnover
Turnover and financial outcomes
Engagement, perceived customer focus and other operational results
23. 22 With this as backdrop, we undertook a six-step process Project planning and kickoff Launched the project by confirming goals and desired results of the effort
Compiled current CSAA data Obtained financial, customer satisfaction measurement and HR data to analyze for linkage relationships
Developed value driver models Identified statistical relationships between engagement and operational outcomes
Mapped employee behavior/attitude elements to customer behavior elements We delved further into engagement data to understand the nuances of engagement at CSAA
Defined overall investment strategy We completed the project by recommending a directional investment strategy for improving engagement and the financial outcomes it influences; focus for CSAA:
- Leadership development
- Creating a diverse and inclusive environment
- Hiring, promotion and talent management processes and policies
Executed Check for progress (pulse surveys)
24. 23 We conducted a range of analyses using both Towers Perrin and CSAA data Using the Towers Perrin Global Workforce Study (GWS) database, we analyzed the relationship between employee engagement and combined ratio for a population of 16 insurance companies
Using these data we developed a structural equation model
We applied this model to CSAA insurance product data
We also performed a series of analyses on the CSAA Employee Engagement Survey data (supplemented by analysis of the engagement findings from our GWS database) to deepen our understanding of engagement drivers
We collected and analyzed a variety of other CSAA data:
Financial data for each product area
Comprehensive file of human resource data
Performance and customer satisfaction metrics from all of CSAA's businesses
25. 24 To understand the financial value of engagement in CSAAs insurance business, we examined data on the financial value of engagement in the insurance industry
For this analysis, we integrated two sources of data:
2005 financial data from AM Best (combined ratio, loss ratio, expense ratio, net premiums written (NPW) growth rate) for US insurance companies*
2005 engagement and customer satisfaction** data from Towers Perrins Global Workforce Study for the same insurance companies
We looked at relationship among engagement, customer satisfaction and the financial measures across companies
Based on the nature of the measures, we would expect:
Negative relationships between engagement/customer satisfaction and combined ratio, loss ratio, and expense ratio (since lower numbers mean better performance for the these ratios)
Positive relationships between engagement/customer satisfaction and NPW growth
27. 26 The Bottom Line: For CSAA overall, a 5% increase in engagement is associated with a possible financial gain of $47.4 million, comprising:
$44.2 million in the insurance product area (net underwriting gain)
$3.2 million in membership and travel (operating income)
Improving engagement also has implications for turnover cost:
A 1% improvement in key turnover drivers is associated with potential cost savings from $185,000 (if the cost of each termination is 50% of annual pay) to $554,000 (if each termination costs 1.5 times annual pay)
These cost reductions are embedded within the broader financial calculations for improved engagement
Engagement is not a stand-alone activity. Relationships are not guaranteed but the direction is clear. It is also a powerful way to galvanize leadership commitment to employee issues.
28. 27 The relative strength of engagement drivers suggests targets for HR investment
29. 28 Engagement Index and Customer Index Percent Favorable by Location
30. 29 As the preceding chart suggests, CSAA locations high on the engagement index are also high on the customer service index The correlation between the engagement index and the customer service index is high (.69)
31. 30 Insurance companies that score high on engagement also score high on customer satisfaction
32. 31 We found a strong relationship between engagement, customer satisfaction, and expense ratio; in turn, expense ratio drives combined ratio
33. Actions Taken and Lessons Learned
34. 33 Actions Taken -- Division action planning
35. 34 Actions Taken -- Division action planning (contd)
36. 35 Actions Taken -- Enterprise
37. 36 Looking Ahead
38. 37 Lessons Learned
39. 38 Contact Information