Largest Single Study of the Workforce Worldwide Shows That Employee Engagement Levels Pose a Threat to Corporate Performance Globally

Nov. 15, 2005-- Engagement Levels in the United States Have Not Increased Since 2003, Creating Retention Risks in Healthier Labor Markets

At a time when companies are focused on growth -- and looking to their workforces to achieve that growth -- a major new study of employees worldwide offers disturbing news: just 14% of people are fully engaged on the job and willing to go the extra mile for their companies.

The study, the largest of its kind today, was conducted by Towers Perrin's HR Services business in August 2005 among more than 85,000 people working for large and midsize companies in 16 countries on four continents. It shows that there is a vast reserve of untapped "employee performance potential" that can drive better financial results -- if companies can successfully tap into this reserve.

"For the first time ever, we've given a voice to the workforce worldwide," noted Donald Lowman, a Managing Director of Towers Perrin HR Services business and a member of the firm's Executive Council. "What we're hearing is that people want to contribute more. But they say their leaders and supervisors unintentionally put obstacles in their paths. The insights from our study give management a very clear road map on how to remove these obstacles and unleash the full potential of the workforce to deliver superior performance."

According to the survey, employee engagement -- the measure of people's willingness and ability to give discretionary effort at work -- varies dramatically worldwide. The highest recorded levels are in Brazil (31%) and Mexico (40%). The lowest recorded levels -- in the low single digits -- are in the four Asian countries in the study. Across Europe and North America, engagement levels fall in between these extremes.

"The vast majority of the people we surveyed are moderately engaged at best, and a quarter of them are actively disengaged," Lowman noted. "This creates serious risks for companies since our research shows that companies with fewer engaged workers are far less likely to deliver on their growth agendas or achieve the kind of performance that shareholders demand."

The study shows that highly engaged workers believe they can and do contribute more directly to business results than do less engaged employees. For instance:

• 84% of highly engaged employees believe they can positively impact the quality of their company's products, compared with 31% of the disengaged.
• 72% of the highly engaged believe they can positively affect customer service, versus 27% of the disengaged.
• 68% of the highly engaged believe they can positively impact costs in their job or unit, versus 19% of the disengaged.

Highly engaged employees are also far less likely to leave for another job than their less engaged peers. Worldwide, 59% of the highly engaged survey respondents planned to stay with their current employer, compared with just 24% of the disengaged group.

"Not surprisingly, workforce engagement is increasingly a boardroom issue," Lowman continued. "We are seeing the notion of a 'war for talent' give way to a quest for employees' discretionary effort. In my work, I see more and more boards holding senior management accountable for taking steps to attract, retain and engage the people needed to carry out the company's strategy. It's viewed as a critical part of overall leadership effectiveness, as well as an element of business risk that needs to be managed through the corporate governance process."

U.S. Employees Skeptical About Their "Deal" With Employers

In the U.S., engagement levels held fairly steady since 2003, with 21% of workers fully engaged, compared with 22% in 2003. Generally, employees remain frustrated and skeptical about both their senior leadership and how well their company is delivering on their "employment deal" (defined as the implied working contract between employer and employee). Both of these elements have a major influence on engagement in the U.S.

"Employees in the United States feel they've hung in during the tough years," noted Julie Gebauer, Managing Director and leader of the firm's Workforce Effectiveness practice. "They don't think they've seen enough in terms of pay raises, incentives or other rewards for their contributions -- despite hearing lots of talk about 'pay for performance.' And this view appears to be intensifying as the economy regains steam.

"What's more, this perception is also creating retention risks," Gebauer continued. "More than half of our U.S. respondents (55%) are what we call 'passive job seekers' -- open and vulnerable to other job offers. With competition for top talent starting to increase, companies need to understand how to create a winning employment proposition that will help them find and keep the necessary talent.

"Our research underscores that an effective employment proposition goes well beyond pay and benefits," Gebauer pointed out. "Elements like career opportunities, fairness and work/life balance are often more important than pay and benefits when people are making decisions about whether to stay with or leave a company."

Engage Globally, Influence Locally

The survey draws on a common set of workplace elements that define engagement across the globe. These include emotional aspects, like taking pride in working for a company, and rational aspects, like understanding how your job fits into the bigger picture at your company. But how a company establishes these emotional and rational connections with employees differs considerably, depending on where it operates.

Engagement also has little to do with economic conditions in the country where an employee works. Only 8% of Chinese employees in our survey are highly engaged, despite -- or because of -- China's fast-growth economy and the stress it puts on people. In Germany's slowing economy, by contrast, almost twice as many employees (15%) are highly engaged.

"We now know that engagement transcends geographic, economic and even cultural differences," noted Lowman. "Highly engaged people -- regardless of where they work -- have a similar set of emotional and rational connections to their jobs. Where differences do come into play, however, is in the relative importance and focus both employees and employers put on these elements.

"This presents two challenges for employers," Lowman continued. "One is understanding, in concrete terms, the nature of the work experience needed to achieve higher levels of engagement. The second is identifying the unique people practices and programs required to shape that experience -- from management style and behavior to communication and culture; from career and performance management to rewards."

"The people practices that matter most to employees in one country won't necessarily be as important to employees in another country," Gebauer noted. "For example, training and development programs appear to be critical in Brazil, but less so in Germany or the Netherlands. Benefits play an important role in engaging employees in Ireland, but not in most other countries.

"These differences are particularly important to understand as demographic shifts and differing business and labor cost structures force more companies to relocate operations, export jobs and/or import workers. Most will do all three. This means most employers, not just the huge multinationals, will have to manage a global workforce. Their success in doing that will depend on their ability to engage people locally. Our data suggest big challenges loom."

Low Confidence in Management's Ability to Inspire and Lead

The survey also shows that employees don't have strong confidence in senior management's ability to inspire and lead. For instance:

• Just 41% think their senior management supports new ideas and new ways of doing things.
• Only 40% think their senior management acts in a way that's consistent with their values.
• Just 37% think senior management tries to be visible and accessible to employees.
• Only 36% think senior management effectively communicates the reasons for important business decisions.
• And a mere third believe senior management communicates openly and honestly to employees.

"These findings are particularly worrisome because leadership in the workplace is one of the key drivers of employee engagement. Employees are looking for guidance, direction, vision and clarity -- from both top management and their direct supervisors -- and they don't believe either are delivering to the extent they would like," Gebauer said.

"Equally disturbing, we've seen findings like these in our studies for a number of years now. This isn't because companies don't care about the issue or recognize how important it is. Rather, it speaks to the complexity of the challenge it presents. The fact is that it's hard to create a work environment that encourages people to give their all on a sustained basis," Gebauer continued. "Every day we learn more about what it takes to do that and the level of commitment required from senior leaders."

About Towers Perrin and HR Services

Towers Perrin is a global professional services firm that helps organizations improve their performance through effective people, risk and financial management. Through its HR Services business, Towers Perrin provides global human resource consulting that helps organizations effectively manage their investment in people. Areas of focus include employee benefits, compensation, communication, change management, employee research and the delivery of HR services. The firm's other businesses are Reinsurance, which provides reinsurance intermediary services, and Tillinghast, which provides management and actuarial consulting to the financial services industry. Together, these businesses have offices and business partner locations in 25 countries. More information about HR Services is available at http://www.towersperrin.com/hrservices".