Employee Engagement Is Out, Employee Experience Is In: What the Shift Means for Small Business Success

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When William Kahn, in a 1990 study for the Academy of Management Journal, introduced the concept of employee engagement—the idea that people who are enthusiastic and passionate about their work and workplace are more effective than those who aren’t—small and midsize businesses (SMBs) didn’t pay much attention.

It wasn’t until 2000 when Gallup began tracking employee engagement across the U.S.—and discovered that less than a third of workers nationwide were engaged at their job—that everyone started to take notice.

Then they panicked.

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Since that time, conversations in the HR world have been dominated by one question: “How do we improve employee engagement?”

Everything from wearables to custom engagement surveys and special employee engagement tools have been proposed as solutions, and the results speak for themselves: In nearly two decades, employee engagement levels haven’t budged.

In a competitive landscape in which your people can mean the difference between success and failure, it’s time for SMBs to rethink their approach to talent management.

According to a 2017 Capterra survey on top technology trends, hiring the right people and motivating and retaining staff are two of the three biggest challenges facing SMBs in the next one to two years.

Top challenges to achieving business goals

Chart showing the top challenges that small and midsize businesses (SMBs) expect to face in the next 1-2 years.

High employee engagement is still a major goal in conquering both of these challenges. But it remains just that: a goal.

How is this goal achieved? What are the means to the end?

The answer is the employee experience: a holistic concept borrowed from the worlds of sales and marketing that scrutinizes every touchpoint an employee has with your organization as if they were a valued customer.

In 2019, employee experience will become the key differentiator between good employers and great ones. SMBs that make sustained investments in their employee experience will be able to hire and retain top talent, and dominate the competition.

With help from the Gartner report “Designing for ‘Employee Experience’ Will Increase Engagement and Business Impact of IT Projects,” let’s look at what the employee experience entails and why this concept is so important to small business success (full research available to Gartner clients). We’ll also cover how SMBs can start addressing their employee experience.

What is employee experience?

Gartner defines employee experience as a worker’s perception of their employer from the cumulative effect of their interactions with customers, leaders, teams, processes, policies, tools, and work environment.

When the concept of customer experience (CX) went mainstream, it revolutionized the way businesses thought about their buyers.

Instead of treating customer interactions with sales, marketing, and customer service in silos, businesses learned that these facets are highly interconnected and that each plays a role in the larger customer journey.

This school of thought is also what also drives employee experience.

From your technology to your managers, your office space, and even the way you hold meetings, there are hundreds of touchpoints that influence how your workers feel about you as an employer. Enough failures in any of them can cause top performers to take their much-needed skills to your competitors.

a graphic detailing the different facets of the employee experience

This graphic was repurposed from “Designing for ‘Employee Experience’ Will Increase Engagement and Business Impact of IT Projects” (full research available to Gartner clients)

In essence: The employee experience examines valuable employees as if they were valuable customers to understand how they tick and ensure they’re supported in every dimension of their work lives.

Why should SMBs prioritize improving their employee experience?

Research shows that companies that invest in their employee experience enjoy healthy returns in engagement, revenue, profit, and more.

The concept of employee experience didn’t appear out of nowhere. It stemmed from a growing need for companies to address not only stagnant engagement but also new economic and demographic realities.

After the U.S. economy rebounded from the Great Recession, the job market experienced a seismic shift in power from employers to employees, which has had detrimental effects on all businesses, but especially SMBs:

  • Companies have more roles to fill and fewer qualified candidates to fill them with.
  • There are more job openings in the United States than ever before (nearly 7 million) and fewer than one unemployed person per job opening, as of June 2018.
  • Recruiting timelines and budgets have exploded. The average job opening now goes unfilled for more than 31 working days, the longest ever recorded. This has led recruiting costs to balloon to over $4,400 per hire.
  • When companies do manage to hire good workers, they don’t stay. The median tenure at one company for Millennials—now the largest generation in the U.S. workforce—is a paltry 2.8 years.

SMBs hoping for another recession to turn the job market back in their favor may not survive the turmoil to reap the rewards, which is why they need to focus on their employee experience.

Offering a better employee experience than the competition is the only sustainable way to attract, hire, and retain top talent—a critical component in achieving growth.

What does this look like in practice? It looks like famous London retailer Harrods.

Case Study: Harrods

In 2006, Harrods was dealing with high turnover, high absenteeism, and a large number of internal complaints stemming from poor management practices. After some internal research, they realized they needed to overhaul their employee experience in three key areas:

  • The psychological experience. To turn their employees from brand adversaries to brand advocates, Harrods used a variety of tactics to help develop an emotional connection to their brand.
  • The economical experience. To better compete against other retailers, Harrods completely revamped their pay structure, benefits packages, and internal career opportunities. It also invested heavily in promoting gender equality.
  • The functional experience. To establish a more open, continuous dialogue between workers and management, Harrods dropped its annual employee surveys in favor of a quarterly employee forum called “Your Voice.”

Since these changes, Harrods has more than halved their turnover rate (from 48% to 22%), their absenteeism is the lowest in their sector, and the percentage of their workforce that’s stayed for more than two years has risen to 75%. These employee-driven results have led to financial ones: Harrods has experienced double-digit growth since 2007.

Research has shown similar outcomes at other businesses. An analysis of more than 250 organizations found that those that scored highest in employee experience factors had higher profits, higher revenues, lower turnover, and less headcount.

And if you’re still chasing that precious engagement, don’t worry: By 2022, Gartner predicts that organizations that have made sustained investments in employee experience will improve employee engagement scores by 10%.

SMBs that prioritize their employee experience are setting themselves up for long-standing, sustainable growth. SMBs that ignore it, on the other hand, are doomed to fail.

How can SMBs improve their employee experience?

Hire outside specialists, understand your value proposition, map out the employee journey, and refine as needed based on feedback.

The sheer scale of employee experience can make it a daunting undertaking for any SMB, especially when compared to focusing solely on engagement.

Where do you begin?

For starters, consider hiring an employee experience manager—a hybrid project manager/HR specialist whose primary responsibility is planning, implementing, and measuring the impact of employee experience initiatives.

We expect this role to become more and more prominent in organizations over time as the concept of employee experience hits mainstream audiences.

Once you’ve hired an employee experience manager, here are your next steps:

  • Figure out your employer value proposition. Just as customers receive exclusive benefits from buying your product or service, so too do your employees receive exclusive benefits from working for your company. What are they? Talk to your workers to identify: 1) the different worker personas you have in your organization and, 2) what your employees desire from an ideal employer.
  •  
    Use this information to come up with an employer value proposition that ideally mirrors your customer-facing brand (e.g., companies known for bleeding edge tech may also emphasize offering top-of-the-line systems and tools to workers).

  • Create an employee journey map. Similar to a customer journey map, an employee journey map dissects every key process employees go through when engaging with your company (e.g., being recruited, their first day on the job, submitting an expense claim, etc.).
  •  
    For every process, you should determine the desired outcomes and identify the gaps between an ideal experience and your current one. This way, you can figure out which processes need serious work and should be prioritized.

An example of an employee journey map for using a company intranet

An example of an employee journey map for using a company intranet (Source)

  • Collect employee feedback and measure the impact of any changes. Whether it’s through formal surveys, focus groups, general observation, or monitoring various social channels, it’s important to regularly monitor employee sentiment on any changes and adjust as needed.
     
    The employee experience is never static, so be sure to assign people to have clear ownership over any needed revisions as employees suggest them.
Our collective obsession over employee engagement resulted in a lot of think pieces but little progress in addressing current talent management challenges. The employee experience promises to fix that, but SMBs need to decide to make this important shift.

INFORMATION ON CAPTERRA’S TOP TECHNOLOGY TRENDS FOR SMBS SURVEY

We conducted this survey in April and May 2017 among 699 U.S.-based SMBs, with more than 10 employees and annual revenue of less than $100 million. The survey excluded nonprofit organizations. The qualified respondents are decision-makers or have significant influence on the decisions related to purchasing technologies for their organization.

Looking for Talent Management software? Check out Capterra's list of the best Talent Management software solutions.

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About the Author

Brian Westfall

Brian Westfall is a Senior HR and Talent Management Analyst for Capterra. His research has been cited in various publications, including TIME, Entrepreneur, Fast Company, and Undercover Recruiter.

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