watsonwyatt.

com

Employee Engagement and Talent Management

The evolution of Employee Engagement

1990
Employee Employee Satisfaction Satisfaction
Are employees happy?

2000
Employee Employee Commitment Commitment
Are employees motivated?

2007
Employee Employee Engagement Engagement
Are employees motivated? Do they know what to do?
2
Copyright Watson Wyatt Worldwide. All rights reserved.
Copyright Watson Wyatt Worldwide. All rights reserved.

Why should we be interested in Engagement?

Proven relationship to bottom-line HR now requires more sophisticated metrics

Employee Employee Engagement Engagement

Human Capital Practices Employee Attitudes & Behaviors

Customer Satisfaction Financial Performance Productivity

3
Copyright Watson Wyatt Worldwide. All rights reserved.
Copyright Watson Wyatt Worldwide. All rights reserved.

Higher Line of Sight creates higher financial returns

Line of sight: when employees know what to do to make their organizations successful.

High Line of Sight Low Line of Sight

18%

6%

Scores are for Economic Surplus Value WorkUSA 2004-2005 Surplus Value is measured by Tobins Q, an economists ratio. A score of 18% means the firm would expect to earn 18% more profits than would be required to replace its assets. 4 Source: Watson Wyatt WorkUSA 2004/2005
Copyright Watson Wyatt Worldwide. All rights reserved.
Copyright Watson Wyatt Worldwide. All rights reserved.

Employee engagement is linked to business performance Top 25%

Line of sight (Alignment) Index
Middle 50% 14.6% 14.1%

27.6%

15.8%

21.0%

Bottom 25% of companies

6.7%

Three year Total Return to Shareholders from companies with each predominant cluster type (eg 21% for those with high commitment and medium alignment)

2.4%

Bottom 25%

Middle 50%

Commitment Index

Top 25% of companies

Source: Watson Wyatt's Work database

5
Copyright Watson Wyatt Worldwide. All rights reserved.
Copyright Watson Wyatt Worldwide. All rights reserved.

Companies are now focusing on engaging their top-performing employees

What high-performing organisations are doing high-performing

Is
What top-performing employees are asking for top-performing

And it
Helps reduce turnover of top performers

And this
Leads to better performance

6
Copyright Watson Wyatt Worldwide. All rights reserved.
Copyright Watson Wyatt Worldwide. All rights reserved.

What motivates top performers?

MOTIVATIONS % RESPONDING VERY SIGNIFICANT

Desire to maintain good work reputation Importance of the work Appreciation of others Opportunity to prove capability to others Interesting work Opportunity to prove capability to self Enjoyable co-workers

81% 76% 66% 57% 51% 51% 35%

Expectation of improved chances for promotion Personal desire to please supervisor Expectation of financial reward Fear of negative consequences

31% 30% 15% 9%

0%

20%

40%

60%

80%

100%
7

Copyright Watson Wyatt Worldwide. All rights reserved.

Copyright Watson Wyatt Worldwide. All rights reserved.

The organisations talent strategy needs to be incorporated in individuals career strategies

Free Agent Moving quickly between/within companies where your skills are in highest demand Experimenter Trying many things, building a portfolio of skills
42% 6% 12% 12%

Fast Tracker High involvement, high reward, quick advancement Company Dedicated Careerist Long-term skill development
28%

Balanced Careerist Work/life balance is a priority

Source: Talent Management Study (Manpower 21)
8
Copyright Watson Wyatt Worldwide. All rights reserved.
Copyright Watson Wyatt Worldwide. All rights reserved.

What can be done to increase Engagement levels?

Primary drivers
Belief that management explains reasons for major decisions

Increased engagement Increased engagement

Satisfactory opportunities for development and advancement Belief that the company encourages independent thinking Clear link between performance and pay

Secondary drivers
Manageable stress levels Culture of mutual respect Opportunities for teamworking

9
Copyright Watson Wyatt Worldwide. All rights reserved.
Copyright Watson Wyatt Worldwide. All rights reserved.

Performance Management Most Effective When Integrated with Other HR Systems

Performance Management
Recruiting and Selection

Integrated HR Accountability Platform

Staffing

Orientation, Coaching & Development

Rewards & Recognition Career & Succession Planning

10
Copyright Watson Wyatt Worldwide. All rights reserved.
Copyright Watson Wyatt Worldwide. All rights reserved.

Performance management overview

Strategy, Vision, and Values

Whats expected of me?

Performance Management

Whats in it for me? Whats next?

How am I doing? How can I grow and do better?

Results and Rewards

Leadership and Growth

11
Copyright Watson Wyatt Worldwide. All rights reserved.