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From Resource, December 2007
Learning: A
Key to Profits
A major Towers Perrin
research study finds that learning and development is one of the key factors in
increasing employee engagement, which, in turn, is linked to a company’s
financial performance. The LOMA Education Council was one of the first groups to
hear the results of the study.
By Ron Clark
The insurance industry faces many challenges today. These include changing customer expectations,
aggressive and non-traditional competitors, and rapid technology advances. How
can insurers respond to these challenges? According to a new research study by
Towers Perrin, the people in an organization make the difference. Organizations
need engaged employees to prosper, and one of the keys to producing engaged
employees is providing learning and development, the study emphasized.
Julie
J. Gebauer, managing director of Towers Perrin, said the study confirmed that
organizations with engaged employees deliver higher performance and produce
better financial results.
What
are engaged employees? Gebauer said engaged employees have an emotional
attachment to the organization, their job and their work. They have a rational
understanding of the organization’s goals, values and how they contribute. And
they have the motivation and willingness to invest discretionary effort to
perform better. “They have three connections—I like to think of it as heart,
head and hand—and if you don’t have all three of them, you don’t have
engaged employees, or you have only partly engaged employees,” Gebauer said.
While there are various elements in the workplace that help get employees to
this point, I would say that learning opportunities are one of the most critical
drivers of engagement—second only to a belief that senior leadership has
employees’ best interests at heart.”
Gebauer
discussed the study at the Fall 2007 meeting of the LOMA Education Council,
which was one of the first groups to receive an overview of the research.
Here is a summary of that discussion:
Towers Perrin conducted this
major research study in the summer of 2007. It included a survey of almost
90,000 employees in 18 countries in a variety of industries, including
insurance. The goals were to:
1.
Find the most important factors in driving employee attraction, retention
and engagement for various employee groups
2.
Determine the extent to which personal characteristics, cultural values
and organizational dynamics shape and influence engagement levels
3.
Evaluate how engaged the workforce is and what factors differentiate
fully engaged from less engaged
4.
Determine whether employees view their work environments as engaging
5.
Understand how effective senior leaders and managers are in creating
engaging and high performance cultures
The
findings were supplemented by Towers Perrin-ISR normative data —the most
extensive normative database of employee attitudes and opinions in the world
with over 2,000,000 responses, including data from organizations with both
above- and below-average financial performance.
From
this data source, the study confirms the link between engagement and
performance. Specifically, Towers Perrin-ISR identified 40 global companies for
which it had both financial and engagement data and performed a regression
analysis to understand the connection between the two. It found that firms
with the highest percentage of engaged employees had a 3.74 percent higher
operating margin and 2.06 percent higher net profit margin than average.
Conversely, in companies where employee engagement was low, operating margin was
2.01 percent less and net profit margin was 1.38 percent less than
average.
“It’s
impossible to overstate the importance of an engaged workforce on an insurance
company’s bottom line,” said Gebauer. “The Global Workforce Study
establishes a definitive link between levels of engagement and financial
performance and, for the first time, begins to quantify that link. It
demonstrates that, at a time when insurance companies are looking for every
source of competitive advantage, the workforce itself represents the largest
reservoir of untapped potential.”
In the insurance industry,
1,599 North American industry employees were surveyed. The median tenure at
insurance companies was 5-7 years, median age 40, gender makeup 47/53 percent
male/female, and the percentage of non-management respondents was 76.
The survey produced several insights
about all industries, including insurance:
Insight 1:
The
organization is the most powerful influencer of employee engagement.
The organization, not intrinsic
personal or work experience factors, has the strongest positive impact on
employee engagement, Gebauer emphasized. This finding counters the notions that
employee engagement “is what it is” and that organizations can’t move the
needle on overall engagement levels. The company does, in fact, have the
greatest influence and there is opportunity to improve engagement levels beyond
the current state.
The findings suggest that
people want to be affiliated with an organization that makes a difference. There
is not support for the concept that we will soon live in a world of free agents
focused on “Me Inc.”
While
managers are a key part of the engagement equation, they won’t have any impact
unless there is a whole system in place to deliver an engaging experience.
Leadership, learning, career development, empowerment and reputation are all
important aspects of the equation.
The
factors that drive workforce engagement can be grouped into three dimensions:
the organization, the work experience and an employees’ personal orientation.
While
a number of factors are key, the organization dimension has the greatest impact
on engagement. Elements of this dimension include learning and development,
strategic direction, senior leadership, rewards, image & reputation and
innovation.
Primary Influencers
According to Towers Perrin, the
primary influencers of engagement are learning and development, senior
leadership behavior and actions, and image & reputation. These three have
the greatest impact on workforce engagement, which is linked to business
performance.
On a global basis, the top
engagement drivers (determined through statistical analysis) are:
*Belief that senior management
is sincerely interested in employee well being.
*Ability of employees to
improve their skills and capabilities over the past year. “People don’t want
just the opportunity, they want to actually have done that,” Gebauer said.
*Organizations’ reputation
for social responsibility.
*Input into decision making in
an employee’s area or department
*Organization’s ability to
quickly resolve customer concerns.
*Have excellent career
opportunities. This one is linked to learning, because “for people to move in
an organization, they have to have training,” Gebauer said.
Companies can improve employee
engagement, and business performance, if they execute on the right things. To do
this, companies need to consider these action questions:
*How well are training and
development opportunities aligned with business strategy?
*How effectively are career paths and
training opportunities communicated, understood, and utilized by employees?
T*o what extent are leadership
teams equipped and capable to lead in an engaging way?
*How are managers and
supervisors creating engaging, high-performance work environments for teams of
employees?
*How well do employees
understand and appreciate corporate social responsibility, philosophy and
investments, and do they have the opportunity to get involved?
*Does the employee value
proposition reflect organizational factors including training and development
opportunities?
Insight 2
There
are different approaches to create high performance culture depending on
strategic business priorities.
High performance
companies—those which outperform their peers in areas like revenue growth,
earnings growth and market share—show markedly different cultural
characteristics based on their business strategies. The right drivers of
engagement also need to differ, and need to be shaped and focused to create the
kind of high performance culture that specifically supports the execution of
that unique business strategy. In other words, as Gebauer noted, the right
“engagement recipe” depends on an organization’s unique challenges.
For
instance, in companies that compete on efficiency, quality and customer service,
training and career development are key drivers. By contrast, in companies that
compete on innovation or image, other drivers take precedence, such as
information-sharing and collaboration/teamwork (in the case of innovation) and
shared values and leadership (in the case of company image).
The key is to identify the culture required to deliver on the key
business priorities and then put into place the specific workplace programs that
will drive engagement in that cultural context.
Insight 3:
Employees
are eager to invest more of themselves to help companies succeed—and will do
so if they see a personal ROI.
The study depicts a workforce
that’s motivated by challenging work, learning, career development and
autonomy. It shows that people set high standards for themselves and feel
positive about their jobs and their companies. It also shows they are optimistic
and have a strong learning orientation.
The
survey indicates that insurance industry employees are more interested in
knowledge and skill development than most employees. For example, 87 percent of
the survey respondents in the North American insurance industry indicated “I
look for opportunities to develop new knowledge or skills.” This percentage
was 4 points higher than the average for all industries.
This
view counters the stereotype of cynical, cubicle-bound “Dilberts” who simply
want more pay and to be left alone.
People
also care about corporate social responsibility—a global driver of engagement
and an indication that people want to make (or be part of making) a difference
in the world.
However,
there is a gap between the discretionary effort people want to invest and how
effectively their organizations are tapping into and channeling their commitment
and energy. And if people are not able to make a meaningful difference at their
employer, a large percentage will consider going somewhere else —including
many of your most valuable contributors.
The
survey found there is a stark difference between how the engaged versus the
disconnected believe they can impact the business. For example, 63 percent of
fully engaged employees believe they can impact the profitability of the
company. In comparison, only 20 percent of the least engaged employees believe
they can impact profitability.
The
things that differentiate the “Engaged” employee from the lower categories
such as “Enrolled” (partly engaged) or “Disenchanted” (partly
disengaged) suggest companies should focus on management training and career
development, according to the study.
For
example, engaged employees were far more likely than enrolled employees (by a
margin of 27 percentage points) to say their organization offers competitive
career development opportunities.
The
study also found that there is a real risk organizations will lose the people
they want to retain—and retain the people they want to lose, unless the
employees are engaged.
Insight 4:
Senior
leaders need to make the leap to a more inspirational and engaging style of
leadership.
Senior leaders get low marks in
particular on empathy, communication and are
a significant key to success. Such statements as “our success depends entirely
on our people,” or “An organization is only as good as it people” are
common in mission statements. But significantly, only 54.8 percent of insurance
industry employees believe senior management treats them as valued parts of the
organization. They don’t believe management “walks the talk.”
Managers—a
core part of the work experience and the pool of future leaders –are also
getting low marks on some of the basics. The research points toward specific
behaviors or “abilities” that leaders and managers need to improve to better
engage their people. This suggests greater emphasis on development of leaders.
Insight 5:
Companies
need to understand their employees as well as they understand their
customer.Employees are as diverse and varied a group as customers—just as no
one engagement approach fits every company’s strategy, no one approach meets
the needs of every workforce segment.
Beyond
country and industry differences, there are significantly different attitudes,
opinions and needs by age, job level, level of engagement and other
characteristics (e.g., “top talent”).
Given
an increasingly diverse workforce, and broader spans of managerial control,
it’s more important than ever to gain insight about how best to attract,
retain and engage these various segments.
Interestingly,
among all age groups surveyed, having career advancement opportunities and
learning and development opportunities ranked among the top drivers of
attraction and retention to a company.
Insurance Industry Applications
The study confirmed that
insurance industry employees are focused on developing in their jobs. Fully 80
percent said they improved their skills and capabilities in the past year.
On the
job training and classroom training are the preferred approaches, but variety is
needed to reach all employees, the study said. E-training was favored by 35
percent of those surveyed. (Self-study was not included as a choice).
Blueprint
The presentation concluded with
a discussion of a blueprint to align workforce strategies to drive better
business performance.
NOTE:
For
more information on the research, contact Julie Gebauer, managing director of
Towers Perrin HR Services, at julie.gebauer@towersperrin.com
SIDEBAR
Learning and Development
Important, Industry Leaders Say
We asked some of the LOMA
Education and Training Council members who were present for Julie Gebauer’s
presentation, and other insurance company leaders, for their thoughts on the
findings of the 2007 Towers Perrin Global Workforce Study, especially as it
pertains to learning and development. Here
are their comments:
Lin Ingram, CLU, ChFC, ACS
Vice President, Individual Life Customer Service and Claims
Lincoln
Financial Group:
The development and appropriate
deployment of key talent is a strong strategic driver that is the trademark of
successful companies. Engaging business associates in life-long learning and
developing their talents holistically differentiates companies that thrive
versus those that only survive. Julie Gebauer’s research sustains the
importance of an engaged workforce and how training and development strategies
tied to corporate strategy can positively impact bottom line profitability of
today’s insurance and financial services companies.
Mari M. Koke
Training & Development Officer
Principal Financial Group:
Every organization should be
concerned with employee engagement if it expects to be successful in the future.
If we don’t take into account what employees find valuable as it relates to
their engagement and act on it, we will risk losing our most valuable resource.
Statistics and information shared by Ms. Gebauer validated the value employees
place on learning and development. Survey results showed that some form of
training or manager support of training consistently played a role in employee
engagement.
John W. Wells, CPA, FLMI, CLU,
ACS
Senior Vice President, Long Term Care
Conseco:
Strategies and tactics in the
area of employee learning, development, recruitment and retention…should
receive increased attention as turnover increases as a result of the retirement
of baby boomers. The study results show that profitability can be positively
impacted by improving employee engagement. The importance of employee training
and education in employee engagement makes LOMA uniquely qualified to help
companies improve employee engagement and, thus, the bottom line.
Marguerite Estwick,
Vice President, Human Resources
The Sagicor Group of Companies:
The finding that the
organization is the most powerful influencer of employee engagement—rather
than the employee’s personal motivation and the immediate manager—is of
significant relevance to us. We will continue to work on the development of
leadership skills and on building a corporate culture that motivates employees.
The findings [in Insight 3] are consistent with our own experiences in the
Caribbean
. Bright young graduates flock to those institutions that offer training and
development opportunities and structured career development. In 2008, [Sagicor]
will, as part of our strategic focus, develop structured development paths for
some key roles in the company.
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