The August 16, 2010 Employee Ownership Update is online and discusses the following:

• Employee Engagement Strongly Related to Corporate Performance
• They Never Paid Me What They Owed Me!
• UK Starts Down Path of Privatizing Public Service to Cooperatives
• Lists of ESOP Companies Now Available
• Where Would You Like the 2013 Conference to Be?
• Reminder on Ownership Thinking Conference

The Update discusses a recent Hewitt Associates Analysis that Shows Steady Decline in Global Employee Engagement Levels and how the analysis reports a strong link between employee engagement levels and corporate performance:

In its annual survey of employees in client companies around the world, Hewitt Associates found the largest drop in employee engagement scores it has ever recorded. The analysis reports a clear link between employee engagement levels and financial performance. Organizations where 65% or more of employees are engaged had total shareholder returns 19% higher than the average total shareholder returns. Companies with less than 40% of employees engaged had total shareholder returns that were 44% lower than the average. The study is based on 900 organizations worldwide. Engagement looks at employee morale, confidence in the organization, career opportunities, rewards and recognition programs, and trust in leadership. The data parallel findings on employee engagement and shareholder returns from the Great Place to Work Institute, which creates the Fortune "100 Best Companies to Work For" lists. While part of the causality is that more successful companies have more engaged employees (it's easier to be engaged in a company doing well than one facing financial problems), the findings fit in with many other studies showing that among predictors of corporate success, engagement is the most powerful but is one of the least seriously attended to by leaders in conventional companies. Fortunately, the employee ownership community takes these issues much more seriously.

The Hewitt Analysis uncovers the key factors of companies with improved engagement levels:

• Focus on the long term
• Obtain buy-in from leadership
• Implement measurable actions
• Involve all stakeholders
• Understand key employee segments
• Utilize a broader array of information and analytics

Here is the press release:

July 29, 2010

Percent of Organizations with Falling Engagement Scores Triples in Two Years, with Most Notable Drops Occurring This Year

LINCOLNSHIRE, Ill. — While the economy is slowly recovering, a recent analysis by Hewitt Associates, a global human resources consulting and outsourcing company, shows employee engagement and morale in the workplace are not. Almost half of organizations around the world saw a significant drop in employee engagement levels at the end of the June 2010 quarter — the largest decline Hewitt has observed since it began conducting employee engagement research 15 years ago. This highlights the growing tension between employers — many of which are struggling to stabilize their financial situation — and employees, who are showing fatigue in response to a lengthy period of stress, uncertainty and confusion brought about by the recession and their company's actions.

Since July 2008, at the onset of the economic downturn, Hewitt began closely analyzing changes in employee engagement levels by quarter for more than 900 organizations globally that conducted annual engagement studies. These studies covered topics such as employee morale, confidence in the organization, career opportunities, rewards and recognition programs, and trust in leadership.

Historically, Hewitt's research shows that about half of these organizations improved their engagement levels in a one-or-two year period, while only 15 percent had experienced a decline. However, the past two years have been more challenging:
the percent of organizations with declining engagement has been steadily growing. This trend is particularly notable in 2010. Hewitt's research shows that 46 percent of organizations experienced a decline in engagement levels in the quarter ending June 2010, while just 30 percent saw an improvement.

"The economic situation over the past two years has clearly strained the connection between employers and employees and the stress continues to increase," said Ted Marusarz, leader of Global Engagement and Culture at Hewitt. "Organizations are struggling to improve employee engagement, but they need to stay focused. The extra effort companies put forth now will make a difference in how successful they are at boosting employee morale and retaining top talent as the economy stabilizes and employee opportunities open up."

Engagement Linked to Financial Performance

Hewitt's analysis suggests a clear link between employee engagement levels and financial performance. Organizations with high levels of engagement (where 65 percent or more of employees are engaged) outperformed the total stock market index even in volatile economic conditions. During 2009, total shareholder return for these companies was 19 percent higher than the average total shareholder return. Conversely, companies with low engagement (where less than 40 percent of employees are engaged) had a total shareholder return that was 44 percent lower than the average.

Steps to Improve Employee Engagement

In its work with organizations around the world, Hewitt has uncovered key factors that differentiate organizations that improve their engagement from those that are not. According to Hewitt, companies with improved engagement levels: