Staff who like their work and want to stay are a prized asset. So how can a company generate a high level of engagement? Caroline Scotter Mainprize looks at recent research. If your workforce is passionate about your organisation, committed, motivated, happy and aligned with corporate objectives and values - in short, engaged - it's pretty clear you have an edge.

Companies with highly engaged employees have almost four times the earnings-per-share growth rate of similar firms with lower levels of engagement, according to market research by Gallup. Hay Group, the human resources consultancy, claims that highly engaged employees can improve business performance by up to 30%. Fully engaged employees are 2.5 times more likely to exceed performance expectations than "disengaged" colleagues. With statistics like these being bandied about, directors across the globe are saying, "We'll have some of what they're having." As many companies downsize, or at least tighten their belts, keeping employees energised and focused is a real challenge, however thankful they may be still to have a job.

Building loyalty
In countries such as India and China the challenge is equal but opposite. There the problem is staff retention - because in booming markets, where skills are in short supply, there are many opportunities for employees to earn more money and to develop elsewhere. Learning how to engage employees and build loyalty to the organisation is crucial to hanging on to the staff who will create a company's future success. So does staff engagement mean the same thing in these very different business contexts? And if not, what are the implications for multinational organisations? These questions were behind research commissioned by the Society of Human Resource Management Foundation in the US from a team of academics including Veronica Hope-Hailey, Professor of Strategic Human Resource Management at Cass Business School, and Dr Elaine Farndale, Assistant Professor in the Department of Human Resource Studies at Tilburg University in the Netherlands. A Study of the Link between Performance Management and Employee Engagement in Western Multinational Corporations Operating across India and China looked at four companies headquartered in either Britain or the Netherlands which also had operations in India and China. Although the companies had different histories and structures, what the Human Resources departments meant when they talked about "engagement" seemed to be very similar. This was true, too, in the different countries in which they were represented. Interviewees all used words such as passion, commitment, motivation, happiness and alignment with the organisation's objectives and values.

Faster growth
AkzoNobel is a Dutch multinational producing paints, finishes and specialty chemicals. An HR Manager at AkzoNobel in China said: "Employee engagement is an internal force of the company. If employees have engagement, they can build the internal power of the company and work as a team. They can push the company to grow in the same direction and it will grow faster." Of course it is possible for people to be passionate, committed and motivated but apply these qualities only to their own job or their own team. They are engaged, but with what? This was a problem for AkzoNobel in India, which grew rapidly after acquiring ICI's Indian operations in 2008. "People connected most strongly with the individual brands for which they worked, such as Dulux," says Professor Hope-Hailey. "AkzoNobel wanted to shift loyalty to the company as a whole, which would improve their flexibility." Both the companies studied in China faced the problem of skills shortages. So if they had people with the relevant skills, they wanted to hang on to them. They needed to tie people emotionally to the company, so they would not be easily tempted away by the offer of a higher salary or better benefits and training. One problem that the research team identified was that none of the measures of engagement currently used delved into these distinctions. "They all used standard surveys. These are obviously useful for benchmarking purposes, but they are not necessarily focused enough," says Dr Farndale. "There is quite a lot about general happiness, for example. But given that there are these different types or dimensions of engagement, it is essential to be clear about what types are being measured, and which of these are important for the company."

Sense of family
The study also highlighted crucial cultural differences in the ways that line managers connected with their subordinates. This would inevitably have an effect on employee engagement. Simon Hardaker, Director of Employee Communications for GKN, one of the companies studied, says: "In our experience what people in India, and to a similar extent in China, still have is a very strong sense of family. This is reflected in a typically paternal management style. Within the hierarchy this means that relationships may appear to be more like a parent and child than the peer-to-peer relationships common in Europe - but it also implies a sense of responsibility on both sides." These familial relationships between managers and subordinates mean that often employees are working for individual people rather than for the organisation - which means they are more likely to be job-engaged or role-engaged. "Understanding these cultural differences is very important when it comes to interpreting results of the employee engagement survey," says Simon Hardaker. "Questions which relate to staying with the organisation, for example, become very important when you're looking at role-engaged locations. Knowing that means you can adapt your engagement strategy on a regional basis."

Learning responses
There were cultural differences, too, in how employees responded to surveys used to measure engagement. Typically, the Chinese culture is more modest: employees asked to rate their feelings on a scale of one to ten would not at first use marks at the extreme ends of the scale. Over time, though, they learned what responses were considered appropriate - they would learn how to do the surveys and the engagement scores would improve. An immediate response to this is that it cannot be desirable. If people are "learning" responses, are they just telling management what they want to hear? To a certain extent, yes, but Dr Farndale says that in the context of engagement this is actually a good thing: "If they are adopting the same behaviours as colleagues in the rest of the organisation, it signals that they are more engaged: they are more aligned with how things are done at that company." So how do you induce a level of engagement in which people overcome their natural cultural bias and change their behaviour to mirror that within the corporate culture? It was clear from everyone interviewed for the study that the line manager was the key figure in employee engagement. One Business Manager at AkzoNobel in India said: "For all employees, their immediate boss or supervisor is like the company." Line managers form a link with corporate HR, but, even more importantly, because they are interacting daily with employees, they are very influential in modelling and rewarding desired behaviour.

Performance management
The line manager is also the key figure in performance management - the person who conducts appraisals, makes recommendations and implements the performance management system. It is also assumed to be down to the line manager to improve employee engagement. However, Dr Farndale says: "The interesting thing is that in none of the companies we studied did anyone make the connection between the performance management system and the employee engagement survey." Three of the companies involved in the study had standard corporate performance management systems in place, usually with a semi-annual review. These were used to determine budget allocations and individual pay awards, and sought to strike a balance between reaching targets and developing employees. An HR Director for GKN in Britain and China said: "Performance management in its rawest form of getting someone to work harder... it's about having the skills to be more effective." Of course, in its rawest form, engagement might also be said to be about getting people to work harder, just as both engagement and performance management are about aligning with corporate objectives. But in all four companies, the performance management and employee engagement processes were conducted in parallel: "Both systems were run by HR; both had line managers as lynchpins; but they were seen as two entirely separate activities," says Professor Hope-Hailey. In all the companies and cultures studied, performance management enhanced engagement when the process was seen to be leading to outcomes that were valued by the employee. This did not just mean pay rises or bonuses (though these also had their place), but included measures such as training and development, job rotation and increased autonomy.

Target setting
The study also shows that being involved in target setting encourages employees to have positive feelings about their job and the organisation as a whole. The concept of the line manager and subordinate jointly discussing objectives is a central characteristic of most Western-originated performance management systems. But in the Chinese and Indian cultures it can be more difficult. Employees believe in a strong hierarchy and are more willing to take instruction from their line managers. So managers may find that it is effective to allow themselves some cultural leeway in the application of these standard systems. "Employee engagement is still a fairly new concept, and though there is a broad consensus on what it means, there is still relatively little understanding of how best to measure it and what drives it," said Professor Hope-Hailey. "This is particularly the case in multinational companies, which are operating across different business and employment contexts, as well as across different cultures."

Source: A Study of the Link between Performance Management and Employee Engagement in Western Multinational Corporations Operating across India and China, by Professor Veronica Hope-Hailey, Professor of Strategic Human Resource Management at Cass; Dr Elaine Farndale, Assistant Professor in the Department of Human Resource Studies at Tilburg University; Dr Clare Kelliher, Reader in Work and Organisation at Cranfield School of Management; and Marc van Veldhoven, Professor of Work, Health and Well-Being at Tilburg University, funded by the Society for Human Resource Management Foundation.

Caroline Scotter Mainprize is a writer on management issues.

For more information on the research, contact Dr Christina Makris, Business Development Manager. E: christina.makris.1@city.ac.uk T: +44 (0)20 7040 3273