Employee Engagement Themes from the Raddon Conference
A significant factor in building an institution’s brand is the culture generated by its employees. Managing employees was a key element in several popular breakout sessions at this year’s Raddon Conference. Here are six key takeaways on the topic.
1. Employee engagement leads to financial success
Now that unemployment is at 3.7 percent, the lowest rate in nearly 50 years, recruiting and retaining top talent will be extremely difficult. Understanding and delivering on the factors that motivate employees to stay with your organization as well as give their best effort to their jobs are critical to ensuring your productivity and financial success. For the average organization, approximately 44 percent of employees are considered engaged. Organizations whose levels of employee engagement are higher than those of their peers tend to perform about 20 percent better (based on average Raddon Performance Index ranking). Critical to increasing levels of engagement are the employees’ understanding of the organization’s vision and their role in achieving the overall goals as well as management’s coaching skills. Research from Raddon shows that organizations that focus on and continually measure employee engagement demonstrate positive correlations to overall retention (employees as well as customers), financial performance and customer intimacy (advocacy).
2. Employees are motivated by understanding the vision of the company and their role in that vision
It’s no surprise that organizations with engaged employees perform at higher levels than their peers do. Many factors drive that engagement, including rewards and incentives. Structuring employee incentives that align with the vision and goals of the organization is key to boosting company profitability and employee engagement. Effective incentives link directly to appropriate goals – the employer reaps the benefit of reaching the goals, and employees feel more confident in their connection to the company and the vision.
Other than money, employers may want to offer incentives such as career advancement, work-life balance, praise and recognition, team accomplishment, and opportunities to make a difference and learn new things. Best practices for developing incentives include:
- Aligning incentives with the organization’s vision and mission
- Driving individual and team efforts toward prioritized business goals
- Making them easy to understand (e.g., one referral goal and payout vs. five)
- Calculating them frequently, such as daily or weekly
- Ensuring they are sufficient to motivate employees (e.g., 10–25 percent of salary)
- Issuing timely payouts (e.g., monthly minimum)
- Recognizing that everyone appreciates cash
3. Training new as well as tenured managers is critical for an organization to achieve higher levels of management performance
Leadership skill motivates employees and drives organizational success. Raddon research shows that institutions exhibiting strong management performance have several advantages:
- Their employees are about 30 percent more engaged than those of other organzations
- They demonstrate a 20 percent gain in financial performance (Raddon Performance Index percentile ranking)
- They score better in new household growth and return on assets (ROA)
The key drivers of management performance include communication (through openly discussing issues and coaching) and leadership (by demonstrating confidence and positive attitude). Through training, managers learn coaching skills that not only boost performance of the organization as a whole, but also increase employee engagement. Gone are the days of one-way management; the manager/employee dynamic is much more collaborative, and managers must be trained to better coach employees to perform at their best through open dialogue and more interaction.
4. Your employees should be the best advocates for your organization
Advocacy, defined as support or recommendation for a certain cause, can be a powerful tool: It can not only get the word out about your business but also boost the overall financial performance of your organization. Strong employee advocates are much more confident in their skills and are more passionate about the products and services that they are selling. (Sixty percent of employee advocates report that they strongly agree, “Our products and services create value” for customers compared with only 19 percent for other employees.) This passion for delivering value translates to more sales for your organization.
Some key drivers of engagement for all employees are their connection to the company and their feelings about their employer. Employee advocates are nearly three times more likely to tell others that they are proud to work for the company and almost two times more likely to understand the vision of the organization than are less-engaged employees. Comparing the financial performance of institutions that have high employee advocacy with those that have low employee advocacy yields amazing results:
- An increase in overall institution financial performance of 44 percent
- An increase in household profitability of 11 percent
- More than double the overall household growth (actual rating) (from 3 percent on average to 7 percent)
- An increase in the number of new households of 35 percent
- An increase in the number of cross-sold households of 45 percent
- ROA increase of 50 percent
Best practices for increasing employee advocacy are as follows:
- Onboarding and reboarding tenured employees
- Offering leadership training to increase coaching skills
- Continually measuring to identify gaps in skills
- Continually focusing on employee training to boost skills and engagement
- Implementing an employee referral program for both customers and new hires
5. Retaining millennial talent requires an authentic culture
Millennials represent the largest segment of a typical institution’s workforce, yet they are the least engaged. Nearly 40 percent of those working in community financial institutions are actively disengaged, either looking to move elsewhere or disrupting current business. To find good candidates and retain existing talent, an authentic culture is critical, as is providing opportunities for advancement, constant feedback and challenging project work.
6. High-performing institutions cross-sell more efficiently and engage with customers more deeply than others do
High-performing organizations achieve both significantly stronger growth and higher earnings than the typical institution, and they do so with no significant demographic advantage. Efficiency is driven by revenue generation, not cost cutting. They have stronger and more diverse sources of non-interest income, and their customers are greater adopters of checking accounts and technology. They also clearly have more loyalty in the customer base, measured by net promoter score (NPS), satisfaction or the Raddon Loyalty Index. We note the following characteristics of high performers:
- They are data-driven organizations, both in understanding customers and in analyzing their own performance
- They focus on brand in the customer base, in the market and, most important, among employees
- They believe “revenue is king” and focus on growing revenue rather than cutting costs
- They have built or are building an integrated delivery strategy, moving aggressively away from the bolt-on approach that has been so widely adopted in the industry
- They embrace market discipline, listening and responding to feedback from the marketplace
- They are entrepreneurial in their basic DNA