Employers are falling into the trap of seeing employee engagement as an all-powerful indicator, guaranteeing company success, leading human capital specialist Rick Emslie has warned.
In an interview with the Human Capital Forum, he argued that it is more likely to be the case that engagement is just one of the by-products of strong leadership. ‘I am extremely sceptical about the relationship between engagement and company performance; largely because people are confused between correlations and cause and effect.
‘My theory, as yet untested, is that engagement and good company performance are both results of high-quality leadership, and it’s the classic mistake that you fall into: you think the world is just the two variables. With statistical analysis you naturally assume that one influences the other.’
It is possible that companies can fail with very high levels of employee engagement, because they are chasing the wrong type of business, or are poorly informed. Examples include the dotcom start-ups that failed, and some of the banks trading in securitised toxic assets.
‘Everything is multi-variate,’ he said. ‘An effective leader is not just focused on commitment, but on cash flow; product line; making sure you reach the market, and making sure the organisation is financially sound; that the brand is recognised. These are all the variables of running a business.’
Isn’t there a danger, however, that companies could understate engagement? As an example, it is difficult to have strong cash control if there is weak engagement in the finance department?
He acknowledged this dimension, stating: ‘That just demonstrates that it’s a complicated picture. Organisations that have engaged employees have an advantage because they go the extra mile. Emotionally, I can support arguments being put forward, but I get very concerned by people putting forward statistical justifications that are ill-founded.’
Human resources have to prepare and use human capital metrics that are geared towards organisational objectives, he said.
For example, he said: ‘The traditional way to have a discussion about absence is to say “I’m concerned that it’s gone up from 4.2% to 4.8%.” Then you agree that no one’s taking it seriously. Expressed in those terms it is difficult to get excited. But if, as a result of the increase in absence you can say that over six months it would have a £5 million impact on the bottom line – it’s more substantial.’
Rick Emslie is founder of Emslie Analytics and an adviser to COA Solutions.