ISG Software Research Analyst Perspectives

Employee engagement has been a dominant theme in both human capital management (HCM) and the systems to manage it in recent years; lately (though not necessarily appropriately) it is a topic often equated with the notion of the employee experience. On a related point, Gallup’s annual employee engagement survey has consistently found the majority of today’s workforce to be disengaged, defined as “not enthusiastic or passionate about their work.” Interest in the degree to which HCM technology can improve employee engagement (or mitigate disengagement) now rivals the attention given to such perennial chief human resources officer (CHRO) concerns as attracting and retaining top talent and retooling the workforce. The prevailing view is that the reasons for this concerning state of affairs include: multiple generations with different personal goals, drivers and career interests working side by side; a work environment characterized by constant change and business pressure to achieve more with less; and the need to bring in new staff with digital-era skills and competencies. The degrees of employee engagement can be understood using this hierarchy: Highly Engaged: an employee who exhibits exceptional discretionary effort and emotional commitment, even during periods of change Moderately Engaged: an employee who outwardly enjoys his or her job and overall work experience, sometimes delivering value beyond the job’s scope but still appearing not fully invested in or emotionally committed to the job Inconsistently Engaged: an employee who exhibits periods of enthusiasm and engagement but not on a consistent basis, and also exhibits periods of disengagement that adversely impact productivity Actively Disengaged: an employee who consistently appears disconnected and dissatisfied at work, likely undermining coworker engagement and productivity Whatever the reasons for disengagement, the costs of this condition include productivity dips, revenue erosion, customer dissatisfaction and retention issues, accidents, compliance fines and employer brand reputation damage. These make recruiting top talent more difficult and also lead to quality and execution issues across the organization. Additionally, if a disengaged employee happens to be a manager or socially entrenched employee, there can be a “negative multiplier” effect on colleagues’ engagement. And the opportunity costs to the organization can be just as acute, ranging from a lack of agility leading to inability to capitalize on market opportunities, to employees operating in disconnected silos where narrow thinking obstructs creative problem-solving and synergistic execution. With all the attention in recent years on employee engagement, many HCM systems, talent management suites and other HCM tools such as survey instruments have incorporated functionality that addresses this issue. New capabilities include highlighting potential causes of disengagement and identifying associated impacts and prescriptive remedies. We’ve also seen capabilities related to career pathing and mentoring as well as the ability to easily give kudos to recognize fellow workers. The first wave of AI-infused HCM systems functionality has largely been focused on personalizing the way employees are recruited, onboarded, developed and even rewarded. Personalization evidently mitigates disengagement, and consequently we see that HCM is increasingly focused on the individual rather than “talent segments.” After all, high potentials and recent college graduates are not all motivated by the same personal drivers, so individualizing the approach to talent management makes good sense. Personalization also helps to ensure more effective investments in people and programs. However, the pivotal question is whether the intense focus on employee engagement and the role HCM systems can play in fostering it have paid major dividends for HCM systems customers so far. In our view, if the cause of disengagement can be isolated to one or two triggers (such as a new senior manager with poor people skills or less competitive benefits plans) and remedial actions are taken swiftly, the prospects for a successful outcome are good. That said, every organization has employees with enthusiastic workers who like their jobs and their teammates but are not necessarily good at their jobs or productive. In these instances, focusing merely on improving employee engagement is obviously not enough. There are factors other than disengagement that are impeding productivity and organizational agility. Ventana Research believes the focus of both HCM initiatives and HCM systems should therefore shift from being concerned only with achieving high levels of employee engagement to a broader and more appropriate “superior employee experience” context. We believe that a superior employee experience is more directly correlated with employee productivity and better organizational execution in general, as enthusiasm does not axiomatically yield higher productivity. Enthusiasm and passion for doing one’s job also doesn’t equate with employees who are more committed to staying with the organization. This is analogous to a shopper who likes shopping in a particular store and routinely spends his or her money there. Companies increasingly view workers as businesses view consumers. And much like consumers, notwithstanding an exceptional experience, talent will stray when an organization with more to offer appears on the scene. Ventana Research’s recent Next-Generation Human Resources Management Systems benchmark research finds that increasing workforce productivity is the second-most prevalent reason for replacing an existing HRMS platform. Productivity improvements can indeed have a large impact, as even a minor uptick in revenue per employee can translate into several millions of dollars in incremental value for a larger organization. The Four-Pillar Employee Experience Framework I define employee experience as what employees do, feel and think about their daily experience at work. Core aspects of the employee experience include interacting with work colleagues, in person or via chat or social tools; using enterprise software and digital tools; navigating processes; and determining which messages and communication channels to respond to first. This definition is much broader in scope than simply an employee’s experience with business systems, which is how the enterprise software market often uses the term. Organizations will find it nearly impossible to achieve optimal workforce performance or retain top talent without delivering a rich, relevant and frictionless employee experience, one that emulates the best consumer experiences. Establishing a best-practice employee experience mindset also involves consistently demonstrating that each employee’s career interests and professional development goals are equally important to the organization. Ventana Research’s newly created Four-Pillar Employee Experience Framework addresses the challenge of creating a best-in-class employee experience, highlighting what employees require in their daily work experience in order for both the employer and employee to derive maximum value and benefit from the relationship. All four pillars address situations that are within the ability of the employer to influence using the right HCM strategies, programs and technologies. Pillar 1: the sense that he or she is doing meaningful work, is valued and is productive Pillar 2: a clear view of one’s career trajectory and how the employer supports it Pillar 3: a belief that he or she is being treated fairly regarding evaluations, rewards and investment in the employee Pillar 4: an uncluttered, comfortable and manageable work experience when using systems, tools and communication channels There are several key points to be made across these four pillars. One is that there are numerous ways an employee can deliver value or have an impact outside the confines of his or her role and these should be tracked and recognized by their employer in order to deliver a superior employee experience. Such sources of value include mentoring, referring top candidates, forwarding operational improvement ideas or sales leads to appropriate colleagues, and more. Just as in the consumer world, feeling valued often comes from feeling known and being treated as an individual with unique needs and interests. It also means being able to count on the organization ensuring efficient interactions as an acknowledgement that people value their time. Career goals and aspirations as well as professional development interests can change over the course of a career. Therefore, Pillar 2 emphasizes the importance of an employee’s changing interests and goals and an employer’s obligation to be aware of them. In addition, while Pillar 3’s call for a perception of fairness is ultimately subjective, transparency in communications and reliable, understandable data make workforce-related processes and decisions much smoother and defensible. Finally, organizations that create a working environment involving a manageable number of daily technology tools that can be used efficiently will likely have fewer overwhelmed employees (Pillar 4). Some Practical Guidance Astute HR leaders should seek to provide a superior employee experience and evaluate HCM systems on those terms. Systems deliver the best return on investment when they help an organization maximize employee productivity and commitment and also retain top talent. Keep in mind that improving productivity can have more impact on an enterprise than shaving even 40 or even 50 percent from a typical HR operating budget via cost savings and efficiency initiatives. A working environment that is a combination of the right data, processes and technology is the way to a superior employee experience. Organizations must consider an employee’s interests, goals and sources of value as they change over time, and track these appropriately with systems and processes. Of course, the organization must have technology tools that can adapt to fit each organization’s way of doing things by being highly configurable. Coaching interactions and performance reviews should include clear, data-driven explanations supporting actions and decisions, also known as the fairness principle. And while new digital HCM technologies such as predictive and AI-enabled personalization can have a profound impact on the employee experience, each new tool deployed must be evaluated to ensure it doesn’t burden or overwhelm employees. The employee experience is primed to supplant the focus on employee engagement in CHRO circles, and for good reason. It’s not just about having happy and enthusiastic employees. It’s about employees and their employers deriving maximum value from their relationship, resulting in better employee productivity, better organizational agility and the attraction and retention of top talent.

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