Companies face employee engagement challenge

A Watson Wyatt survey, which involved over 700 organisations across Europe plus some from Africa and the Middle East, found that 58 per cent of businesses have undergone significant organisation changes and six in 10 companies have implemented salary freezes in the past six months. However only 30 per cent have followed this through with changes to their reward strategy and even fewer (27 per cent) have communicated more about their pay strategy.

According to Watson Wyatt, with continuing limited reward budgets in 2010 (58 per cent of companies have frozen or reduced salaries in 2009 and 13 per cent are looking to take a similar action in 2010), disengaged employees and improving alternative employment opportunities, companies need to reconnect with their employees. They need to communicate changes to their reward and talent strategies to ensure employees understand their employment deal.

“It is clear that actions have been taken very quickly around salary freezes to manage cost, but this needs to be followed up with effective communications,” said Carole Hathaway, European head of strategic reward at Watson Wyatt. “Salary freezes cannot be maintained over multiple years without denting engagement and leaving employees more open to opportunities elsewhere. To ensure employees feel valued and recognised, companies need to increase differentiation around reward, clarify their performance management approach and exploit engagement alternatives such as recognition plans.”

The Watson Wyatt survey found that a majority of companies have undertaken changes to their organisation structure in the last six months and 56 per cent will continue to make changes over the next half year. However, only four in 10 companies have changed the way they define jobs. According to Watson Wyatt, employers need to ensure that changes are fully embedded throughout the organisation in terms of redefined roles and responsibilities. Roles that have not been reviewed and that may have become disconnected from the business will mean inefficiencies, lack of focus and frustrated employees.

“We are seeing that companies are taking the necessary steps to deliver difficult messages on restructures and business performance, but they must also ensure they clarify their position on pay, bonuses and individual performance,” said Carole Hathaway.

Watson Wyatt’s survey shows that only 40 per cent of companies will increase their communication on reward, career management, performance and the use of recognition programmes in the next six months.

“Engaging employees is critical,” said Carole Hathaway. “Companies need to let their workforce know that they haven’t been forgotten. Now is the opportunity for companies to embed changes through roles, reward, talent and engagement practices to reconnect their people to the business.”