The concept of employee engagement as a core human capital management goal has been echoed repeatedly, but one of the main challenges is how to measure it.


Traditionally it has been treated as a very subjective practice where nothing more than a simple 1 to 5 rating (where 1 is poor and 5 is excellent) can be used to measure employee engagement. Based on this arbitrary rating, companies look at "5" companies and see how much more they have accomplished compared to "1" companies.

Rather than simply use ratings, companies have the opportunity to take a much more data-driven approach to employee engagement. As analytic capabilities have continued to advance and the amount of data collected for each employee continues to increase, companies potentially have a wealth of information to determine how engaged an employee truly is within the organization. 

What is Employee Engagement?

Before defining the types of metrics associated with employee engagement, it is first necessary to define employee engagement.

In this case, engagement is not a standalone concept based on collaboration and feedback. It is not sufficient to simply interact with co-workers regularly and be well-liked. True engagement depends on a number of factors: two-way communications with management, co-workers and direct reports; appropriate compensation; career development; clearly defined performance parameters; and corporate loyalty (if that still exists anywhere!) also are factors.

At the end of the day, engagement leads to optimal performance and, ideally, to serendipitous and extraordinary opportunities for corporate improvement.

Points of Engagement

So, how can companies measure the value of high engagement? First, companies can start by identifying the key work tasks that employees conduct that are most related to revenue and production. (Although profit is technically more accurate for corporate productivity, only employees who can directly affect their cost structure and have true P/L responsibility should be goaled on profit.)

Look at the employees who are top producers. From a sales perspective, this may be a very easy task based solely on seeing who has overachieved based on quota. For a line worker, this may be based on the number of recalls associated with that station. For service, this may be associated with direct upselling or the future purchasing behavior of that customer. This initial metric should be based on performance. 

However, individual performance cannot be a pure measure of engagement. The employee's work context matters, so an underpaid and inefficiently managed employee will always be less engaged than a similar employee paid at full market value who is well managed. By tracking salary, manager and whether an employee has been promoted in the last two to three years, companies can place employees in risk categories associated with what their engagement should be expected to be.

The ability to work with other employees also matters. Although tracking email and calls may both challenging and illegal, depending on your geography and infrastructure, companies can look at three different categories of activities: core employee responsibilities, individual ideation and innovation, and group innovation.

By tracking these activities in conjunction with a core performance metric, companies can gain a better idea of whether an employee is actively contributing new and interesting perspectives or may actually be harming the company despite superficially impressive performance metrics. 

This starts leading to an analytic approach that combines core HR, enterprise applications, social activity and business outcomes. To track core responsibilities, companies can look at ticket requests, sales or service opportunities, project plans or other basic work efforts handled in full compliance and with every step completed.

If steps are regularly being skipped, either the employee isn't engaged or the step needs to be reviewed and eliminated. Either way, specific behaviors and processes can be red-flagged quickly through a structured analysis of core work. Engaged employees may also work more hours, although this trend must be watched very closely to make sure that after-hours work is just as good as any other. If longer hours lead to quality issues, these extended hours are worsening employee engagement with corporate goals.

Individual suggestions and contributions to corporate change can be tracked through policy or training changes made as a result of improvements. The goal here is not to stuff the suggestion box and game the system, but to create meaningful and substantial change that actually makes the company leaner and more productive.

Managers should keep track of substantial changes that increase productivity and reduce errors. Ideally, if every employee identifies opportunities that the company can execute on, everyone is engaged in their work.

Collaboration's Role

From a team perspective, cross-departmental collaboration is often lauded as the perfect intersection of engagement and talent, but the efficacy of these teams must be judged by corporate results, such as improved safety or increased revenues.

Camaraderie may improve morale, but morale without productivity creates a risky and irresponsible employment environment where employees may be unaware that they are underproducing or behind schedule. By measuring any benefits that occur as a result of team performance, companies can divide these benefits into the team and quantify the value of collaboration and engagement. 

Metrics that companies can use to measure value include increased productivity, reduced defects, reduced churn, reduced abandonment within a process, increase in opportunities, change in documentation and change in revenue. The importance is to choose metrics that can be measured and represent a positive or negative change in the organization.

In effect, this is a performance-based employee engagement model where a combination of quality work, desired corporate behavior and value-added outcomes are used to judge engagement. 

What to Avoid

In putting such a model in place, businesses must avoid the following challenges: external benchmarking, overlapping metrics that double-count results and metrics that lack relevance to business success. 

Avoiding external benchmarking seems counterintuitive, but the goal is to improve your own organization with its specific operational challenges. (If your company is only trying to do the exact same things as another competitor, it lacks a competitive advantage or is fully commoditized, which results in problems much greater than trying to maintain employee engagement.)

If your organization is in a competitive market where differentiation matters, benchmarking yourself to your competition makes the assumption that your organization should become your competition. Engagement metrics should be based on the internal goals of the company, not the external expectations of the market. However, the top goal is continuous improvement, not continuous comparison with irrelevant organizations.

Avoid overlapping metrics that double-count success. If you are counting sales productivity and increased revenue, you double-count sales since a 10 percent gain in sales productivity should be the same as 10 percent increased revenue. In this double-counting world, this duplication magnifies a single metric while ignoring other metrics that may be associated with success, such as time spent speaking to key clients or researching client needs.

Avoid metrics that lack relevance to business success. Yahoo's measure of VPN activity as a metric to justify on-campus work is bizarre when the VPN has become increasingly irrelevant to accessing corporate assets.

In a world that is mobile, cloud-based and social, there are a myriad of options for collaborating and accessing corporate resources. Yahoo could have looked at bug fixing metrics, the sources for new product development, traffic associated with key applications and services, or other business relevant metrics to identify holes and gaps, but VPN activity is a non-performance driven way of identifying employee engagement, which is one reason why this is a mistake.

Whether a company decides to drive employee engagement through enforced on-campus work or not should be decided on a case-by-case basis. But employee engagement and productivity should be measured accurately to do so.

By taking a quantitative, data-driven approach to employee engagement, your organization will be able to identify employees who are engaged in a meaningful way. Rather than simply try to get 4's and 5's on your next employee engagement survey, work on pre-qualifying employees based on their current work environment, judging their ability to conduct key responsibilities well, and ability to make contributions that improve both their individual productivity and team efforts. 

Image courtesy of alexscopje (Shutterstock)

Editor's Note: Read Hyoun's take on gamification in Gamifying the Intranet