Evaluating Employee Engagement Outcomes Is Achievable

Learn to prove the value of engagement programs to the business.

No topic is more frequently discussed in the talent development area than employee engagement. Articles, conferences, and books are filled with issues about employee engagement, usually for good reason: Fully engaged employees will remain with an organization, be more productive, deliver better quality, and be more efficient. Further, they will satisfy customers and increase sales.

To achieve this, examine the why, what, and how of work. When you address these issues properly, you can foster a long-lasting, high-performing work team. As the chief talent development officer, you have the appropriate role for driving the engagement process; here's how.

Value of engagement

Employee engagement is critical to business performance and is a success factor on many levels, from the execution of business strategy to financial performance to employee productivity and the ability to create innovative products and services. Researchers have developed many comprehensive studies to show the business impact of engagement. These studies focus on macroanalysis. However, the foundation is based on a logical and intuitive assumption about engagement. Logically, executives want their employees engaged, and this causes them to invest in, and support, this important area.

As funding becomes more difficult, executives need studies that show the value of engagement with a new initiative, and this leads to the impact and return on investment for the engagement expenditure. More studies are needed at the organizational level, comparing the monetary benefits of engagement with the investment to show ROI. This is the microanalysis.

ROI analysis

At the heart of ROI analysis is the variety of data collected throughout the process and reported at different intervals. Most projects and programs use logical steps of value, and their sequential use can be linked to a variety of guidelines and models. Our ROI Methodology, based on five levels of evaluation, is a logical flow of data that is appropriate for engagement, because employees react to the engagement process, learn how to be engaged, apply and use engagement actions and concepts, and have an impact in their work. By next converting the impact to a monetary value and comparing it to the cost of the engagement program, you can calculate the ROI.

As you move your evaluation to higher levels, the value you ascribe to the data increases, as does the degree of effort and cost of capturing that data. With proper project planning and preparation, you can minimize costs. Let's explore each level.

Input data. Input represents a category of data (Level 0) that reveals the volume, time, and cost of engagement programs. It includes the number of people involved and the time of their involvement, representing a fully loaded cost profile. It reflects all direct and indirect costs. Level 0 data do not represent outcome data, but they are important because they represent the scope and investment in engagement.

Reaction data. The first category of outcome data (Level 1) that you collect is the perceived value of the concept of engagement. At this level, you take a variety of key reaction measures to gain insight into the value, importance, relevance, and usefulness of the engagement programs, and the intent to engage more with the team and the work.

Learning data. As the company implements the engagement program, you will acquire new information while individuals learn new skills. This level of measurement (Level 2) focuses on the changes in knowledge and skill acquisition. Some engagement programs have a high learning component, such as major changes in job design and workflow. Others may have a low learning component, such as brief engagement actions and behaviors.

Application and implementation data. Application and Implementation (Level 3) is a key measure that shows the extent to which employees are engaged, behavior has changed, and job performance has improved. These data reflect the extent of actions individuals have taken, the skills they've applied, the habits they've changed, and new processes initiated because of the engagement programs. This is one of the most powerful categories because it uncovers not only the extent to which the employee engagement programs are successful but also the reasons for lack of success. At this level, you detail barriers and enablers to application and implementation.

Impact data (tangible and intangible). As employees become more engaged, monitor the outcomes. These can be described in one or more measures in the work unit representing output, quality, time, and costs. These Level 4 data reflect the specific business impact and include measures—such as sales, production, services delivered, errors, waste, accidents, retention, costs, innovation, job satisfaction, and customer satisfaction—that the engagement program has influenced.

You must establish a direct link between the business impact and the engagement program to have credible results. This requires using a technique to isolate the effects of the program from other influences that may be driving the same measure. Answering this question is essential: How do you know the employee engagement program caused the improvement and not something else?

Intangible data are impact measures that you do not convert to monetary value, because the conversion is not credible with a reasonable amount of resources.

ROI data. Level 5 compares the monetary value of the business impact measures with the total cost of the program. ROI is the ultimate level of accountability and represents the financial impact directly linked with the program, expressed as a benefit-cost ratio or ROI percentage. Figure 2 provides an example of a small banking system with 700 employees. The engagement program addressed turnover reduction in the branches.

The most important data set for those who sponsor projects is the impact, which is the consequence of application expressed in business terms. However, showing a program's impact isn't enough for some executives. They want the ultimate level of accountability: ROI. To develop a credible analysis for impact and ROI, you must use conservative assumptions and proven processes (see the sidebar for 12 guiding principles).

Evaluating wisely

Evaluate every employee engagement program in some way, even if you only collect reaction data from those involved. The challenge is to collect additional data at higher levels and to do so only when it is relevant and feasible. Level 3 evaluation, which shows how well employees are engaged in the workplace, is common with standard and customized engagement surveys. If the cost of the program increases, sponsors may ask for an impact (Level 4) or even ROI (Level 5) evaluation of the program.

Because of the resources required and the realistic barriers for ROI implementation, only use ROI analysis for those programs that are expensive, linked to strategic objectives, important for solving organizational problems, and highly visible. A comprehensive employee engagement program usually meets most of these criteria.

of talent development professionals evaluate engagement at Level 1 (reaction), while only 12 percent evaluate at Level 5 (ROI).

Source: ATD Research, 2017