This blog is a series of three that we are running on staff engagement within the SME sector. Over the coming weeks, we will be examining the many benefits to be derived from creating a more engaged workforce, as well as sharing practical, cost-effective tips and advice on how you can enhance the worker experience and increase engagement levels within your own organisation.
The UK's productivity levels are static, having fallen well behind Germany, the US, France and Italy, according to recent ONS figures. Whilst it is thought that poor trade, growth of low-level service jobs with low-level pay, and a lack of investment partly explains the country's performance, productivity is a complex puzzle with many contributing factors, not least of which being employee engagement. Over decades, research has proven that staff engagement has a strong correlation with a company's productivity levels and therefore raising engagement could be one of the major keys to tackling the UK's productivity gap. With little over 30% of staff in UK firms claiming to be highly engaged, 50% describing themselves as moderately engaged, and the remainder stating they are actively disengaged, there is much work to be done.
So, what does this have to do with UK SMEs? Well, quite simply, as SMEs we make up more than 60% of all UK private sector employment so represent a significant part of the country's economy. In fact, we are often described as the "backbone of the UK economy", and it is little wonder when you consider we account for 99.3% of all private sector businesses, and have a combined annual turnover of £1.8 trillion.
However, despite the prevalence and importance of SMEs to the UK's economy and productivity levels, staff engagement priorities, initiatives and improvements remain low within our organisations. It is widely thought that this is a ‘capacity' issue, we are more sensitive to time and resource pressures, often needing to prioritise and progress what are considered to be more business-critical issues. It has been suggested that some SMEs may perceive engagement as being more of a concern for their larger corporate counterparts, and have little to no relevance to their size of operation. It could also be a case that when business is good, engagement is less of a concern, however when customer churn, turnover, profitability, productivity, absenteeism, attrition and similar metrics begin to signal that there are problems, engagement is often the root cause as well as the cure.
Frustratingly, engagement is not something you can "command" from staff, nor is it an overnight result; so in the world of SMEs where decisions can be made and actions brought about swiftly with little bureaucracy, truly transformational engagement can seem like too long a project.
Adding a further layer of complexity perhaps is economic instability, whether caused by the downturn of a few years back or more recently by the EU referendum result, a snap General election, and plans to remove ourselves from the EU. In unpredictable or tough economic climates, there is an understandable tendency for smaller firms to switch to "survival" mode and deliver tactical efficiency goals, where focus is more on simply retaining staff than on raising productivity and engagement.
Skills shortage and competing for talent
Most companies, large and small, will admit that employees are their greatest asset, however, at a time of skills shortage across the UK, SMEs in particular have a tough time acquiring and retaining the right talent. If you imagine a company of 250 employees losing a single staff member, it is a situation that is largely recoverable and you could argue that the company has more than sufficient resource to cover the workload until a suitable replacement can be recruited. However, apply that same scenario to a 10 or even 50-employee strong company and the impact can be huge.
High attrition in SMEs is a big problem, it is often thought that less shiny coffers contributing to lower salaries and fewer benefits than those perhaps offered by larger organisations, must be the primary reason for this. In fact, quite the opposite is true. We are most definitely constrained when competing for talent at a purely salary and benefit level, however whilst all employees have a basic expectation of a fair and industry-comparable salary, research shows that remuneration rarely, if ever, emerges as a prominent engagement ‘driver'.
Contrary to widespread belief, high salaries and expensive staff benefits are not a prerequisite of high engagement. In organisations with high staff engagement, you will instead typically find excellent manager-employee relations, a clear understanding amongst employees of their value and how their work contributes to company success, a culture of recognition and reward, and a management commitment to the personal and professional development of its employees. If attrition is high in your organisation, it is likely that you are underperforming in one or more of these areas, and no amount of benefits or salary increases will yield higher staff engagement and productivity. When considered on these terms, high employee engagement is no less achievable for SMEs than it is for larger corporates with more funds and resource at their disposal, in fact in some ways SMEs have many advantages.
What do higher levels of engagement look like?
Much research has been conducted over the years to determine the benefits of employee engagement. The consensus is that most quantifiable improvements are found in the following areas with quite impressive statistics (source: Gallup):
• 22% higher profitability
• 65% lower attrition (in low-turnover organisations)
• 48% fewer safety incidents
• 41% fewer quality incidents of product/service defects
• 10% higher customer metrics
• 21% higher productivity
Given the benefits and improvements to be derived from increased engagement, it really should be a consideration and focus for all companies, micro to corporate. It is something that must be fully integrated into the business, embedded within the culture and management philosophy. It isn't a one-off project, it is ongoing, and if done correctly, highly sustainable. It isn't something that requires a Human Resource or Communications function, in fact many SMEs are already at an advantage over larger corporates in so much as their business leaders are not so removed from their staff, indeed they're often found working alongside them.
Over the coming weeks we'll be further exploring the benefits to be derived from increasing your focus on engagement measures and initiatives, as well as sharing some practical, low investment strategies designed to help increase staff engagement within your own operation.
About SME Resource: We are a small consultancy practice providing a broad range of exporting, sales, marketing, customer, and staff related support services designed to help small business owners rapidly and successfully develop their business. Contact us for further details of how we could support you to achieve your business objectives.