Does employee engagement make a difference in the performance of companies? The evidence from a number of studies that correlate findings from employee surveys with financial indicators of company performance suggests that the answer is “yes”. And everything I know about high performing employees tells me that engagement and performance are related. But a high correlation doesn’t mean that this is true in every case. I want to know why some low-engagement companies are highly profitable and produce high shareholder return and why some high-engagement companies are not profitable and do not achieve an increase in share value. What is it about the work environment in some companies that even when employees experience what Towers Watson defines as “…a combination of effective and caring leadership, appealing development opportunities, and a feeling of empowerment that comes with the ability to control one’s work situation”, they are still not successful? And why is it that in other companies, where leaders are uncaring and distant, development opportunities are absent, and employees have little control over their work situations, financial success is achieved?
Living close to their corporate offices, I hear about the fate of Borders Group Inc almost on a daily basis. This once successful giant in the retail book business, with still very loyal employees and customers, is now on the brink of bankruptcy. Employee engagement has been high in that company since it was founded by Tom and Louis Borders 40 years ago, but that has not been enough to save the company.
It’s possible that for companies like Borders evidence of employee engagement was collected at a time when the company was riding a wave of success generated by past practices and it would be just a matter of time before low employee engagement would begin to affect productivity. It’s also very likely that the link between employee engagement and financial performance of a company is not causal. I have addressed the fallacy of the correlation-causation assumption, previously. The relationship of employee engagement to performance is explained by considering other intervening variables. For example, a company that has several niche products and no competition, will, for a limited period of time, be successful in spite of itself. Conversely, a company that has strong employee engagement, but no market for its product and services, will not be successful over time.
Clearly, employee engagement is a key factor in bottom-line success. However, we make a mistake when we assume that employee engagement increases profitability and share value. Many factors contribute to organization performance (e.g., leadership, product/service quality, sales and marketing, financing, economic environment). All of these factors should be considered when attempting to explain or predict long-term success.