Rewards programs offer a chance to build loyalty, productivity, and positive work culture

How your employees feel about their job and your firm has a direct impact on your bottom line. While it may be easy to dismiss employee feelings as unmanageable intangibles, the fact is that firms can influence employee responses to the workplace using strategic rewards programs.

It’s not simply a matter of throwing money or perks at surly workers. Employees of all backgrounds need to be encouraged to be engaged. Once engaged, they will deliver beyond expectations and better satisfy clients, according to the Journal of Applied Psychology. To get more engagement, you need to understand what it is, how it connects to your bottom line, and how your rewards programs can make a real difference.

What is employee engagement?

Employee engagement represents the emotional attachment workers have toward their jobs. It transcends cultural backgrounds and also is relatively immune to pure financial motivations. At its core, employee engagement defines how involved and enthusiastic workers are about what they do each day, and profoundly influences how willing employees are to learn and perform at work.

Employee engagement is oriented around the qualitative aspects of the working relationship. Globally, engagement levels have been dropping, with only 31 percent of workers reporting that they feel engaged in their work in the 2011 Employee Engagement Report by consulting firm BlessingWhite. The primary drivers of this low level are a perceived lack of appreciation at work, gaps between worker expectations and workplace norms, and worker frustration about a lack of clarity at work, according to the Singapore Human Resources Institute. This lack of engagement can be connected back to stalling business performance in a number of ways.

The link between employee engagement and the bottom line

Worker engagement levels impact the bottom line at multiple levels. It’s not just higher costs from missed opportunities or passive aggressive sabotage. Employees who are engaged are more willing to invest discretionary effort to develop the future of the company, and they also have a greater belief in their personal ability to make a difference in aspects of corporate performance, states Towers Perrin.

Half of the variation in customer satisfaction levels can be traced back to employee engagement scores. Some 88 percent of engaged employees believe they can positively impact the quality of their business’s products, while 68 percent believe they have a cost impacts. In contrast, unengaged or apathetic employees are more likely to sabotage corporate improvement efforts, support status quo over change, or fail to develop new innovations. A 2005 study of sales performance teams found that the difference in performance between engaged and non-engaged teams was $2.1 million in revenue.

Safety also comes into play. Engaged workers are more careful in their work and with themselves on the job, being five times less likely to have a safety incident and seven times less likely to have an incident that resulted in time off the job. By raising employee engagement levels in 2002, Molson Coors (a beverage firm) was able to save $1,721,760 in safety costs. All in all, the net difference between firms with engaged staff and firms with disengaged or apathetic staff is a 52 percent difference in net operating income according to the Hay Group.

How Rewards programs boost engagement and your business

With the link between engagement and business results firmly established, how can rewards systems make a difference? It’s not a purely financial system, but improving rewards structures speak directly to employees’ concerns with work clarity, performance appreciation, and gaps between expectations and reality.

Total rewards systems make a particular difference. In this system, rather than focusing just on benefits, perks, or salary, the whole rewards package is shared with employees, giving them clarity about the value of their work. Tied with an effective performance review system, total rewards programs prove to staff that their work is noticed, their efforts make a difference, and that everyone understands the desired work outcomes, according to studies by Watson Wyatt.

In this sense, total rewards systems are more effective than traditional cash bonus systems. Top drivers of employee engagement have feelings of appreciation and value in their work, something being handed a check doesn’t communicate. The greater dialogue with supervisors and the HR department generated under total rewards plans directly addresses workers’ needs and boosts their engagement levels with the firm.

A key issue is clarity on communications. Multiple studies around the globe confirm that workers from all cultural backgrounds react negatively to unclear or cloudy information situations. Total rewards systems reduce confusion about expectations, reward metrics, and company missions, making it easier for workers to connect to their business and boosting overall engagement levels.

Firms who make the investment in a thoughtful total rewards system can reap major benefits over time. Engaged workers are 87 percent less likely to leave their firms, dramatically reducing turnover costs. They give more readily of their time and according to the Hay Group, are up to 43 percent more effective on the job.

Employee feelings about work are not touchy-feeley metrics to be ignored. Instead, by understanding employee engagement and making strides to address engagement with a total rewards system, firms can leverage the power of an engaged workforce. With workers who consistently do more for your business, it won’t be long until the bottom line difference is felt throughout the organization.