Independent Directors

Employee Engagement is a fundamental concept used in an effort to understand and describe, both qualitatively and quantitatively, the nature of the relationship between an organization and its employees. Employee engagement in the corporate world is directly related to good corporate governance and not solely focusing on the bottom line and revenues of the organisation. Successful organizations are value-driven with employee-centric cultures. It stands in an unspecified relationship to earlier constructs such as morale and job satisfaction. A conventional focus on employees in accordance with the goals of the organisation will lead to precipitous gains as well as the well-being of the employees.

An apotheosis of the pivotal concept can be witnessed through an example of the United Kingdom. In culmination of lack of employee engagement, recent revisions have been made in UK Corporate Governance code which will be applicable by 1st Jan 2019. Most salient changes are:

• For engagement with the workforce, the Code recommends one of three employee engagement mechanisms: (i) a director appointment from the workforce; (ii) a formal workforce advisory panel; or (iii) a designated non-executive director. The FRC (Financial Reporting Council) leaves it up to individual companies to choose the right mechanism or combination of mechanisms, or to choose an alternative arrangement.

• In a change from the proposals, the board (rather than the remuneration committee) will now have the responsibility of overseeing workforce policies and practices. The remuneration committee will have responsibility only for remuneration-related matters and will be responsible for reviewing workforce remuneration and related policies.
This will not only lead to better corporate governance, namely, transparency, integrity, ethics, fairness. But, at the same time will attract larger investments in the long term considering the wider horizon of opportunities.

Many would ask the question that “How can focusing on employees bolster the organisational goals?”. The answer to which can be given by considering the exact opposing case of lack of focus.

Studies show a dramatic increase in both worker and business performance when an organization effectively sets and closely ties individual employee goals to the company’s overall strategy. Yet amazingly, a mere 7% of employees today fully understand their company’s business goals and strategies and what’s expected of them in order to help achieve organisational goals due to the lack of opportunities given to employees in the decision making processes.

Top airline companies like Air India, Jet Airways and Vistara have constantly tackled with operational disruptions due to well-orchestrated strikes by their cabin crew. This clearly indicates serious lapses on the levels of employee satisfaction within the organisations. That said, such cases aren’t just limited to the aviation industry, many others like hotels, real estate, media, medical etc. have witnessed a tremendous volume of similar cases where employees weren’t taken into consideration resulting in severe outcomes like bankruptcy, decline in share value and several other decrees of organizational paralysis.

In a recent survey conducted by Times Jobs across various Industries, HR managers have boldly stated that during the disengagement phase with their employees, the management had seen 40% higher absenteeism, 50% more accidental cases, and 75% more errors and defects in the daily tasks. Besides these organisations have also experienced lower productivity, lower profitability and lower job growth in the same period. Interestingly, with improvement in engagement levels, the same organisations have enjoyed a rise of over 50% in productivity and 30-50% in job applications, reported 75% organisations in the survey. Organizations with an engaged workforce outperform their competition. They have higher earnings per share (EPS) and recover more quickly after recessions and financial setbacks. Hence, employee engagement is a key differentiator when it comes to growth and innovation.

Furthermore, for any Industry or business to thrive in the longer run, the organisational goals will not only need to be smarter, they will be required to be more cohesive, more productive than its larger competitors and also be more focused towards their employees as well as shareholders to have close ties with them. To be effective, goals must serve both the needs of the company and those of its employees and other stakeholders. For the company, goals must be fed by both short and long-term business strategies. For the employees, goals must be clear, objective, and understandable or they will quickly become disengaged.