Aligned Incentives and Engaged Employees Improve Triple Bottom Line Performance
Despite a slow job market, finding quality employees and bringing them up to speed takes real time and effort. And retaining top employees, as always, remains a strategic priority. A growing body of research shows that workplace sustainability programs are valued by employees, and that such opportunities for employee engagement play a major role in employee retention.
Sustainability in the corporate sector has gained unmistakable momentum. Voluntary greenhouse gas emission (GHG) disclosure to the Carbon Disclosure Project has increased from 235 companies in 2003 to 3,050 companies in 2010. In addition, within the Global 500, over 50% of companies have committed to publicly-tracked GHG emission reduction targets in 2010.
And related to employee engagement, engaged employees not only stay with a company longer, but they are also likely to be more productive and innovative, be sick less often, and have higher morale. They can help reduce healthcare costs; boost revenues from increased productivity and innovation and can be contagious spreading their enthusiasm to their peers. Conversely, disengaged employees can have the opposite effect, and spread their negativity to their peers.
- Regarding retention- Companies with a large amount of disengaged employees have 30 to 50% more turnover than their peers
- Regarding productivity- Gallup estimates that in the U.S. the cost of disengaged employees is more than $300 billion and includes 20.6 million workers or 15% of the U.S. workforce
- Regarding profit- A Towers Perrin study has found that companies with highly engaged employees have operating income increases up to 19% whereas companies with the lowest amount of engaged employees saw operating income fall by 33%.
Now you might be asking yourself, “Okay, I understand the business case, but how do we actually engage our employees?” Employees can be engaged in a variety of ways, but one increasingly popular channel is through corporate sustainability activities. This is especially valuable in organizations that have committed to big, hairy, audacious sustainability goals. Many employees are genuinely interested in understanding and contributing to corporate sustainability goals, as are potential new-hires you’re looking to attract.
Data shows that corporate sustainability practices can attract, retain, and foster a quality workforce. This is because many employees are motivated and engaged by their company’s environmental and social efforts. For example:
- The consulting firm, SustainAbility, found that if a firm has a positive reputation specifically regarding the environment and human rights that it has increased ability to attract and retain staff whereas the firms that have a negative reputation in those areas will see an opposite effect.
- Towers Perrin’s 2007 Global Workforce Study shows that a firm’s reputation for social responsibility (including environmental work) is one of the top ten drivers of employee engagement worldwide.
- Employees of sustainability-conscious companies have improved morale because they find the firm’s sustainability initiatives engaging. It is a situation similar to employees who work at nonprofits because of the mission of the organization.
Once people understand the business case for engaging employees in sustainability, other questions can include, “How do we specifically engage employees or keep them engaged around our sustainability efforts?” “What are the best policies and tools for engagement?
There are many elements that can comprise employee sustainability education and engagement campaigns. These need to be tailored to a company’s circumstances, but will typically include visible sustainability goals, visible executive support, effective communication channels, proper messaging and training content, policies and programs to institutionalize sustainability and integrate it into employee roles and proper incentive structures.
Of course, the right incentive structures for employees will vary from company to company, depending on geography, cultural norms, socio-economics, functional roles, team and individual personalities, etc. Figure 1 is a visual depiction of the different motivations that we’ve seen propel employees to be engaged and change their behavior with regards to sustainability.
Through our research we’ve seen that for large-scale behavior changes to occur with respect to sustainability, employee incentives need to be aligned with the organization’s sustainability goals. Managers can take a look at their corporate policies to identify what current employee incentive structures exist. Depending on what does exist, entirely new incentive structures may need to be created or current policies may need to be re-aligned so that incentives motivate employees to act in a way that is aligned with corporate sustainability goals. In addition, different groups of employees may have different motivations so multiple types of incentive policies and programs may be needed at one company. For example, at Intel, the company has found that employees are very motivated by their annual performance bonus, so corporate sustainability goals have been tied to this bonus structure.
It is clear that corporate sustainability goals and activities are playing a growing role in business operations today. In addition, there is a strong business case for corporate employee engagement, and employees want to be engaged in sustainability activities. In order for companies to derive the value in employee engagement in triple bottom line terms, the right incentive structures need to be in place. With proper incentive and goal alignment companies will not only save time and money, but can tip the scale in their journey to becoming a more sustainable enterprise.
Jackie Pitera is a senior analyst at AltaTerra Research. AltaTerra is hosting a series of web conferences on employee sustainability engagement entitled, “Leading Employee Practices for Sustainability Series”.
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