Most organisations acknowledge the link between engaged employees, customer loyalty and financial success. But despite this, almost half of UK of FTSE 500 companies do not measure levels of employee motivation, morale and engagement.
A survey of HR directors at 124 companies carried out by consultancy Empower Group found that 47 per cent are achieving only limited insights into their performance by overlooking this critical leading indicator of financial success.
According to The Empower Group's Dr Andy Brown: "While all organisations regularly measure their financial performance, profitability is actually an outcome - a time-lagged indicator of business success,"
"The survey suggests that many UK companies are only looking at the end product and not the leading drivers of that success: employee engagement, return-on-investment."
Last year, the Department of Trade and Industry’s “Accounting for People” Task Force found that the most successful companies measure the management of their people. It also recommended that such data should be published in companies' annual reports.
But the Empower report suggests that even where companies do measure employee engagement, they are failing to link it to business aims. In many companies, organisational research and analysis remains fragmented, without strategy and unlinked to bottom-line performance measures.
One in five do not link the data they gather to financial measures, such as profitability and revenue growth, and only one in ten linked such measures to business processes such as productivity.
Indeed overall, only a quarter of companies even link employee survey data to other HR metrics.
Without coherent information strategies, the report says, a fragmented approach to data gathering, analysis and reporting tends to be the norm. Employee data is held in HR departments, customer data in the Marketing department, and financial data remaining the preserve of the Finance department.
Exacerbating this lack of strategic vision is a lack of confidence in human capital reporting itself. A quarter of HR directors said they had "serious doubts" about their ability to report employee opinion data in annual reports and a further four out of ten had "some doubts".
"Major efforts need to be made to close the HR metric credibility gap," Dr Brown concluded. "Companies need improved metrics, better consistency and greater linkages made between employee measures and the bottom line.
"Integrated analysis, where HR combines its own findings with those in the Marketing and the Finance function is the only way the metrics component of HR will ever be taken seriously in the Boardroom”.
