AN HR PRO’ S GUIDE TO

Proving the business impact

of employee engagement
Introduction
As an HR leader, you know that employee engagement is invaluable to your
business’ success.

Employee engagement is not just about employee happiness, satisfaction, and well-
being. It’s the strength of the mental and emotional connection employees feel toward
your organization. And it affects just about every important element of your business.

Employees who are connected to their organization tend to have stronger performance,
stay longer, advocate for your company, and positively impact business metrics like sales
and client satisfaction.

Your organization doesn’t just benefit from employee engagement—it depends on it.
But it can be tricky to demonstrate the business impact to your organization’s leaders.

Oftentimes, we find this is why some executives don’t consider employee engagement
as a top measurement of organizational performance. But you know, and we know,
it should be.

You put a lot of work into your employee engagement strategy, including efforts
to ensure that your organization has the right people analytics to drive success.
Your efforts aren’t just about creating a better workplace culture, but leveraging
that culture to help your employees, teams, and organization perform at their best.

It’s time to demonstrate the value of your efforts and show the impact they have
in all areas of the organization.

In order to prove value, you need to connect your employee engagement initiatives
to outcomes and metrics that are universally valued by the organization.

In this guide, we’ll uncover:

• What are KPIs
• The benefits of linking engagement and business success metrics (or KPIs)
• How to determine the metrics that matter to your organization
• How to access and use key business success metrics

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Understanding Business
Success Metrics (or KPIs)

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Understanding Business Success
Metrics (or KPIs)
To begin connecting engagement and business success metrics, you need to identify
key performance indicators (KPIs) that matter to your organization.

What are KPIs?

KPIs are measurable metrics leaders use to evaluate how effectively an organization is
achieving its key business objectives and organizational success. It’s often helpful to
track key business metrics at different levels of analysis—at an individual employee level
or an aggregated level by team, department, or location. For example:

INDIVIDUAL LEVEL: DEPARTMENT LEVEL:

Performance ratings Customer retention rate
from a manager

TEAM LEVEL: LOCATION LEVEL:

Projects completed Profitability
on time or on budget

Who uses KPIs?

Leaders across the organization are typically responsible for setting goals, tracking KPIs,
and reporting on measurements specific to their function. This makes these individuals
instrumental in helping you identify which KPIs are important to monitor. Look to these
leaders to help you identify the metrics important to their function, where the metrics
can be found, how they are tracked, and who can provide the data.

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Examples of KPIs
KPIs vary by industry and job role. Here are some KPIs to use
as a starting point for your organization, broken out by function:

Human Resources Operations

• Absenteeism • Billable hours

• Cost per hire • Employee productivity

• New hire quality • Error rates

• New hire ramp-up time • On-time delivery

• Performance ratings • Quality measures

• Turnover/retention • Safety incidents

Sales Finance
• Average sale size • Expense ratios

• Number of renewals/referrals • Gross profit

• Percentage of cross-sold accounts • Inventory turnover

• Quotas or percent to sales goal • Net income

• Sales activities • Revenue per salesperson/

(calls, meetings, proposals) agent/etc.

• Sales revenue/new business

Customer Service & Support

• Average response time

• Calls/tickets handled per day

• Customer satisfaction or
engagement

• Net promoter score

• Problem resolution rate

For examples specific to industry, see the appendix.

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3 Benefits to Linking Employee
Engagement to KPIs
You put a lot of work into ensuring that the
organization has the right people analytics to drive
success. It’s important for leaders to see the value
and impact of your efforts. Showing the relationship
between employee engagement and business
success metrics will:
1. Elevate HR’s value as an important,
strategic business partner.
It’s not uncommon for HR pros to feel like
they don’t have a seat at the table, which can
be frustrating since employee success drives
business success. Helping leaders make
the connection between engagement and
performance will prove the impact of your talent
initiatives and showcase the breadth and depth
of the HR capabilities.
2. Build engagement champions.
Connecting the dots between employee
engagement and important business outcomes
drives leadership buy-in. This essential support
will turn your employee listening program from
an HR initiative to an organization-wide effort
and build a network of engagement champions.
3. Scale employee performance.
Connecting business metrics to your employee
data can help you answer questions like:
• Who are our high performers
and how can we best retain them?
• How can we improve the employee
experience to maximize performance?
• What is the difference in engagement
between the highest and lowest performers?
• Which interventions and investments are
most effective at improving engagement?
• How can we improve our onboarding
program and decrease the ramp-up
time for new hires?
• What are the development needs
of higher performers vs. low performers?
By exploring these questions, you can start
to evaluate the effectiveness of your policies,
programs, and interventions. You can refine
your approach and help other leaders across the
organization create evidence-based interventions
to boost the performance of your teams.
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How to Determine Which Metrics
Matter to Your Organization
One difficulty your team might face in determining KPIs is honing in on the metrics
and data that provide the most value to the organization. Some of these metrics might
be more universal and obvious such as profitability or productivity. Other key metrics
may only apply to certain industries, roles, or departments.

STEP 1:
Review your organization’s strategic plan and initiatives. These plans and goals often
represent the metrics and outcomes that are most critical to organizational success.

STEP 2:
Ask other organizational leaders. Uncover the KPIs that drive their success by asking:
• What are the most important metrics you track?
• How do you measure success/know if you’ve had a successful year?
• What data would indicate high performance for your teams?
• What are your biggest challenges?

Explain to your leaders that answering these simple questions can help the HR team
provide data regarding how the employee experience is impacting key business metrics.
And, as a result, they will be able to make more informed, data-backed decisions on how
they can maximize performance.

On the next page is an email template to help with your outreach.

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Email Template for Leadership Outreach

SUBJECT:
An easy solution to help you drive team success.

BODY:
Hi [NAME HERE],

We have a wealth of employee data available to us through our annual

engagement survey. While our organization has utilized these analytics
to uncover areas of success and potential growth, I see even more
opportunity for us to leverage this data to impact performance at the
employee, team, and organizational levels.

I want to help uncover the link between engagement and the business
success metrics that help drive your team’s success.

In order to do so, I just need you to answer a few simple questions:

1. What are the most important metrics you track?
Examples: Productivity, turnover, customer satisfaction, etc.
2. Where/how are these metrics tracked?
Examples: Excel file, database, etc.
3. What data would indicate high performance for your teams?
Examples: Customer NPS greater than X, Sales figures over X, etc.
4. What are the biggest challenges you face?

If you can help me answer these questions, I can help ensure that
you’re well equipped to better analyze your employee data and drive
performance where you need it most.

Let me know what else I can do to help,

[Signature]

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How to Access and Leverage
Key Performance Data

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How to Access and Leverage Key
Performance Data
After you’ve identified the meaningful metrics and KPIs you plan to track,
you’ll need to gain access to the right data. It’s important to identify KPIs that are:

• Critical to the organization

• Consistently tracked with quality data

How do we gain access to key performance data?

Tracking down performance data often requires collaborating with different
departments or business units. These could include:

• Data scientists

• HRIS analysts

• Database administrators

• IT professionals

• Other department leads

These team members are often the best sources of information for tracking
metrics and gaining access to this data.

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Making the Data Connection
You’ve identified which KPIs are important to your organization and leaders and have
determined how to access them. Now you can start linking these business success
metrics to your engagement data by following these simple tips:

Connect business success metrics with employee engagement

data using unique identifiers.
The easiest way to start connecting your KPI metrics to your employee engagement data
is by inserting the metrics directly into your employee data file. This will make loading
the KPIs into your engagement analytics dashboard a seamless and efficient process. If
your employee data file has already been loaded into your dashboard, the KPI metrics
can still easily be added to the existing analytics.

The key to successfully linking data from your KPI metrics file to your employee data file
is assigning a unique identifier to each data record in both files.

For employees, the unique identifier may be an employee ID or email address. For locations/departments,
the unique identifier may be a location/department ID.
Department
First Name Last Name Employee ID Email Department Department #
Turnover Rate
Jennifer Adams 586827 jennifer.adams@company.com Information Technology Services 12368 5%

Michael Adamski 634637 michael.adamski@company.com Underwriting Services 21572 12%

Chad Agnetta 955916 chad.agnetta@company.com Employer Sponsored Services 28422 9%

Joel Aguon 955669 joel.aguon@company.com Employer Sponsored Services 28422 9%

Renae Alvarado 717936 renae.alvarado@company.com Client Services 22656 14%

Adam Amaya 829621 adam.amaya@company.com Information Technology Services 12368 5%

Confirm that you have identifiers for all desired levels of data.

It’s important during your data set-up to think about all the different ways you’ll want to
analyze the data. For example, when analyzing productivity, you may want to look at the
data at both a location and team level.

To make sure you can aggregate data for all desired levels, be sure to tag each
employee data record with the appropriate identifier(s) for the desired group(s). For
the productivity example mentioned above, you would make sure that each employee
record is assigned to both a location and team in the data set.

The more time you spend planning for these desired data levels during the initial set-up
of your data, the more streamlined your analysis will be in the end.

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Analyzing the Data for Insights
HR analytics, though widely established, is still a new concept for many organizations.

As you begin to analyze your data, it’s important to understand what your organization can
manage. Don’t let the data overwhelm you—the action you take based on the data is more
important than the data itself.

Three tips for analyzing your data:

1. Create a good analysis plan aligned with research questions that are important to your
organization. Why did we collect this data? What analyses and results will be actionable for
the organization?

2. Always start with descriptive analytics to familiarize yourself with the data (What
happened?). Don’t jump straight into diagnostic (Why did that happen?) or predictive
analytics (What will happen?) — you’ll overlook important insights that could render your
advanced analytics unreliable or useless.

3. Determine which results are meaningful. Ask yourself:

• Which results are noise? (i.e. meaningless or unimportant)

• Which results tell the most relevant or important stories?

• Do the results support your hypotheses or expectations?

• Are any results surprising?

• Did any results spark thoughts for additional analyses or projects?

For more details on how to analyze your data, check out The Beginner’s Guide to HR Analytics.

Communicate Insights to Leaders and

Engagement Champions
After you’ve analyzed the data, now you can share your findings. You might communicate insights:

• Only to your immediate manager

• To individual department and team leads

• To the senior leadership team

This depends entirely on the function and success metric being analyzed.

No matter who you present to, make sure your points are clear, explainable, actionable, and
relevant to the audience. It is also important to tell the story of why you conducted this analysis,
what you found, and what it means for the organization.

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Putting it into Practice

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Examples of connecting employee
engagement to KPIs

By now you should understand:

What are KPIs

The benefits of linking engagement

and business success metrics (or KPIs)

How to determine the metrics

that matter to your organization

How to access and use key

business success metrics

To bring the process full circle, we’ve provided some high-level examples illustrating
how linking employee engagement to key business metrics can help you drive employee
and business success.

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EXAMPLE 1:
Organization
Global leader in third-party logistics
KPI Identification
This organization is committed to having the most
efficient processes and highest operating standards.
To ensure all of its facilities are dedicated to this
quality, the organization uses a unique, lean operating
system to serve as the foundation for all of its facilities
and employees.
Under this operating system, the organization’s
facilities can be designated with a Bronze, Silver,
or Gold certification. A Gold certification means the
facility meets the highest standards, an important
KPI for the organization.
Linking KPIs to Employee Engagement
The organization ties this certification to its employee
engagement data using facility numbers. When it
compared favorability on manager effectiveness
survey items by the Bronze, Silver, and Gold
certifications, it saw substantially higher favorability
for the Gold certified facilities compared to others
(e.g. 74% favorable on Leadership Effectiveness index
compared to 67% for Silver and 63% for Bronze).
Business Impact
The organization’s findings led leaders to believe that
the difference between the Gold certified facilities
and others is having a great manager. Utilizing this
data to impact the business, the organization plans to
invest more into the manager role to make sure they
are hiring and developing the right individuals
to drive success.

Leadership Effectiveness by Certification.

% Favorable
80%

60%

74% 67% 63% 60%

40%

20%
Gold (n=129) Silver (n=261) Bronze (n=1137) Uncertified (n=2248)

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EXAMPLE 2:
Organization
National manufacturing company
KPI Identification
Dedicated to efficiency and high performance,
productivity is a key business success metric for this
organization. Employees are given productivity scores
calculated by measurements of their total output vs.
input, assigned as percentages.
The company knows that there are many different
variables that impact an employee’s productivity—
such as training, development, tools and equipment,
job satisfaction, and employee engagement.
Linking KPIs to Employee Engagement
After measuring employee engagement for a number
of years, leadership decided to incorporate its
employee productivity scores into the data to see
what its employee listening strategy might uncover
as it relates to the metric.
Business Impact
Initially, the data showed that less productive
departments were less engaged, a finding that
seemed obvious to leadership. But when the
company drilled down into the engagement data to
see which items differed most between the different
productivity categories, the less productive groups
were less favorable on “I have the information and
equipment I need to do my job well.” This was a
critical finding because it shifted the conversation to
one from performance (“Your productivity is much
lower than others.”) to one about resources (“The
quicker we can provide the specialized tool, the
quicker this group can become more productive.”)
The organization took this finding a step further by
looking at the costs of lower productivity and how
that might compare to the costs of the tools needed
(“Will the organization become more profitable after
investing in expensive tools?”) It found that investing
in the additional resources should also increase the
company’s profitability.

Favorability by Productivity

% Favorable
“I have the information and equipment I need to do my job well”
80%
70%
60%
50%
40%
30%
20%
10%
0%
66-70% (n=12) 71-75% (n=38) 76-80% (n=34) 81-85% (n=53) Above 85% (n=62)

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EXAMPLE 3:
Organization
National CPA firm
KPI Identification
In an ever-changing industry where talent retention
has become a competitive advantage, this firm
realized that decreasing turnover of top talent was
imperative to its success. Retaining this talent was a
competitive advantage the firm needed to continue
on its growth trajectory and build its employer brand
to recruit other high-performing individuals.
Linking KPIs to Employee Engagement
The firm decided to do an analysis of its recent
engagement data, looking back in time to see responses
of active employees vs. those who left voluntarily. The
firm added a “Termed” demographic to its existing data,
identifying employees who had left voluntarily with a
“voluntary” designation for this property.
When analyzing the data, the firm saw that only 40%
of those who voluntarily left responded favorably
to the survey item “It would take a lot to get me to
leave this firm.” They were essentially giving the firm
a warning about their impending departure. When
looking one step further, it was uncovered that those
who voluntarily left had strong trust in leadership,
but had more concerns with team-level dynamics and
work-life balance.
Business Impact
The firm knew that in order to retain its employees,
employees needed to have a strong relationship
at all levels (work, team, and organization). The firm
utilized the data to pinpoint pockets of the firm
that shared this sentiment so they could implement
proactive (versus reactive) initiatives.

% Favorable
Active Voluntary
Items with largest differences between groups (n=1134) (n=31) Δ
It would take a lot to get me to leave this firm. 59% 40% 19.2%
My work motivates me. 71% 55% 15.8%
The people I work with treat each other with respect. 69% 57% 12.5%
My immediate manager/supervisor cares about me as a person. 74% 62% 12.4%
My job gives me flexibility to meet the needs of both my work and personal life. 65% 53% 11.3%
When my Business Unit makes change, I understand why. 50% 62% 11.8%
Senior leadership at my business is committed to responding to the results of this survey. 61% 72% 11.0%
I understand this firm's plans for future success. 66% 77% 10.2%
The executive team of this firm value people as their most important resource. 61% 69% 8.2%
The executive team of this firm demonstrates integrity. 68% 76% 7.4%

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Resources and
Worksheets

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7 easy steps to help you prove
employee engagement’s impact
on business success
Determine your organization’s most valuable metrics.
• STEP 1: Identify the metrics that matter most to your organization
by reviewing the current organizational strategic plan and initiatives.

• STEP 2: Uncover the business metrics/KPIs that drive success

for your leaders/functions.

Organize and structure the KPI data.

• STEP 3: Determine where to get access to KPI metrics and who can provide it.

• STEP 4: Use unique identifiers to tie KPI metrics to employee engagement data.

• STEP 5: Confirm that you have identifiers for all desired levels of data.

Analyze and Communicate.

• STEP 6: Analyze the data for insights.

• STEP 7: Communicate insights to leaders and engagement champions.

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KPI Tracking Worksheet
Organization KPIs Leader/Function KPIs

Goal #1:
How is success measured?

How can the business success metrics be accessed?

At what levels do we need to analyze this data?

Do I have unique identifiers for all desired levels of data?

Goal #2:
How is success measured?

How can the business success metrics be accessed?

At what levels do we need to analyze this data?

Do I have unique identifiers for all desired levels of data?

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Goal #3:
How is success measured?

How can the business success metrics be accessed?

At what levels do we need to analyze this data?

Do I have unique identifiers for all desired levels of data?

Goal #4:
How is success measured?

How can the business success metrics be accessed?

At what levels do we need to analyze this data?

Do I have unique identifiers for all desired levels of data?

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Industry Examples of KPIs

Financial Healthcare Insurance

• Average time to close issues • Average hospital stay • Average insurance policy size

• Churn rate • Infectious disease transfers • Average time to settle claim

• Customer retention • Patient falls • Client satisfaction

• New customers/accounts • Patient satisfaction • Number of referrals

• Number of transactions • Patient wait time • Quote/quota/contract rate

• Sales per branch • Staff-to-patient ratio • Revenue per policyholder/agent

• Total volume of accounts • Training per department • Underwriting speed

Logistics Manufacturing Professional Services

• Inventory accuracy • Failed audits • Average number of services per client

• Inventory turnover • On standard operating efficiency • Billable hours

• Number of shipments • Overall operating efficiency • Client satisfaction

• Order accuracy • Production volume  • Gross profit ratio

• On-time delivery • Production costs • Project Margin & Project Overrun

• On-time shipping • Total cycle time • Revenue per associate

• Shipping time • Right first time • Utilization (%)

Retail Technology
• Average transaction value • Customer referrals

• Customer retention • Customer retention/churn

• Rate of return • Monthly active users (MAU)

• Sales per category • Revenue growth per customer

• Sales per employee • Ticket resolution time

• Total orders • Unexpected downtime

• Total sales by region • Weekly active users (WAU)

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