As CFO and owner of the company finances, one thing you’re sure to see in analyzing your data is that turnover is a massive drag on the balance sheet. The expense of finding and hiring top talent in a competitive job market significantly impacts your cash flow.
So what causes turnover? Dissatisfied, disengaged employees who feel underappreciated, underutilized, unheard, or overworked. Employees reach the point of disengagement for many reasons—from not having the right tools to succeed to a lack of growth opportunities to a disconnect with the company vision. However it happens, it’s never good for business.
Disengaged employees who stay aren’t any better for the bottom line. They reduce productivity and impact revenue gains, whether they’re driving away customers with lackluster service or simply not putting their whole selves into the work.
Employee Engagement Programs: High Value, High Returns
While turnover and disengaged employees are a drain on organizational productivity and profit, engaging employees has the opposite effect.
When compared to the least engaged groups, Gallup reports that highly engaged business groups demonstrate:
- Up to 59% lower turnover
- 40% reduction in quality defects
- 28% decrease in unaccounted merchandise
- 21% greater profitability
- 20% increase in sales
- 17% increase in productivity
As an added benefit, employees at companies with a culture of high engagement often become brand ambassadors, referring the organization to people in their network and making it easier for you to hire top talent with less investment in promoting open positions.
Recently, we caught up with the CFO of Spirit Airlines Inc., Scott Haralson for his thoughts on the importance of having engaged employees. “Interactions with our Team Members are often the first experience Guests have with our brand, so it’s critical that our entire Spirit Family embody our brand, culture, and philosophy,” he told us.
But having employees who live and breathe your brand doesn’t simply happen on its own. This requires a concerted strategy, effort, and, yes, monetary investment.
“Recruiting top talent is critical, but so is retaining our existing Team Members. We can't ignore either,” Haralson explained. “For us, it’s about having people in the right positions with the right skill sets. It’s about keeping our team motivated and challenged and providing them opportunities to do their best and leverage their strengths. This inspires people to bring their best to work every day.”
How Can CFOs Help Maximize Engagement?
As the person holding the purse strings, your goal is to spend the least amount of cash required to effectively engage and retain employees. You need to balance the financial cost of engagement programs with the increased productivity, lower turnover, and other benefits of effectively engaging employees. It’s a delicate, nuanced equation.
While some engagement strategies (increasing organizational transparency, for example) are low cost, others require a larger spend. At Spirit Airlines, Haralson says providing competitive compensation is always a priority, there’s also a lot more that they keep top of mind.
“Most people don’t leave jobs for compensation, they leave for other reasons like having the right materials, clear communication, or growth opportunities. We spend a lot of time studying what good companies do well and investing to survey our Team Members on what they need,” he shared. “One of the things we do is work hard to really cultivate trust to create lasting value and connections. We’ve also expanded from an information-sharing perspective and from a recognition perspective.”
Such practices go far in building a strong culture of engagement. In particular, the science of motivation reveals that rewarding employees for high performance, effort, and alignment to the company mission is a particularly effective way to boost engagement.
To get the most for each dollar spent on your reward program, however, you must be strategic. Traditionally, most companies give everyone the same rewards, distributed via a predictable system. Yearly performance reviews, Christmas bonuses, and company coffee mugs for work anniversaries are prime examples. It’s a system that is egalitarian, but unexciting to employees. (No matter how substantial a reward is, psychology shows that employees adapt, setting that reward as their new baseline expectation.)
The only way to supercharge your limited budget and get the highest engagement in return for your spend is to utilize a variable rewards system. Variable rewards—unexpected rewards at unpredictable moments—keep people on their toes. The best rewards programs build employees’ anticipation by incorporating a mix of high-, medium- and low-value rewards while giving everyone an equal chance to win big.
When variable rewards programs are implemented systematically and supported with easy-to-use, turnkey technology, you can spend the same amount to reward the same number of employees. Compared to your old reward program, your employees’ motivation and focus on performance will soar, driving your company’s productivity and profit. That’s something every CFO can appreciate.