Enterprise Insight Series

Roadmap to
Success:
Driving Bottom-Line Results
with People Performance
Roadmap to Success: Driving Bottom-Line Results with People Performance Enterprise Insight Series

In today’s hyper-competitive business

environment, companies must maintain
the highest level of performance in order
to succeed and win.
As a result, companies must service. In order to deliver In the paper How Smart HCM
increasingly leverage every excellent results, employees Drives Financial Performance,
resource to create and main- must be motivated and have Dr. Jac Fit-enz author of eight
tain a competitive advantage. the necessary competencies, books and acknowledged
The resource most difficult to or the capacity to develop father of HCM metrics, and Erik
harness is people. This them. Furthermore, the Berggren of SuccessFactors
resource, however, is also organization must have the Research, proved that there is
where companies find their proper tools and support for significant financial benefit to
greatest gains in productivity, the employee to succeed. implementing a superior
creativity, and innovation. Human Capital Management
The desire to harness the
People are central to the latent potential of employees is system (see below). Now that
success of any organization. driving the adoption of Human this link has been established,
Simply put, great people make Capital Management (HCM) it is critical to understand how
great teams that make great software, in order to motivate, HCM actually drives increases
products, and deliver great teach and allocate resources. in revenue and profit.

How Smart HCM Finding 1: 67% of companies with stronger financial performance cover
all managers and some levels below with the performance
Drives Financial management system. Only 28% of the weaker performers do.
Performance

2007 Finding 2:

Finding 3:
44% of the stronger performers have almost 100% aligned goals
at the managerial level. None of the weaker performers do.

38% of the strong performers have a succession planning

program in place. 0% of the weaker performers do.

Source: Berggren, E., Fitz-Enz, J. (2007), How Smart HCM Drives Financial Performance, SuccessFactors Research, San Mateo, CA.

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Roadmap to Success: Driving Bottom-Line Results with People Performance Enterprise Insight Series

HCM Business Impact Employee

Model Engagement
The SuccessFactors Research
Human Capital Management Business Customer
Retention
©
Impact Model illustrates the dramat- Satisfaction
ic impact of HCM on all aspects of busi-
ness. Two-way relationships are noted Productivity
with two-way arrows, one-way rela-
tionships with one-way arrows and
partial relationships with dotted-line
arrows (figure 1).
Increase top line Revenue
Employee engagement stands at the and bottom line Profits
apex of this model, driving customer
Fig. 1 – HCM Business Impact Model ©
satisfaction, productivity, and retention,
which in turn drive revenues and profits.
This paper examines the following engagement is, and how it is defined or co-workers that, in turn, influences

relationships in detail: for the purposes of this paper. him or her to apply additional discre-
tionary effort to his or her work.
1. Engagement to Customer The Conference Board1 recently

Satisfaction (2-way) conducted a survey of 12 research

studies that were focused on under- Driving Engagement
2. Engagement to Productivity standing and driving employee
(1-way) The aforementioned Conference
engagement, which they define as:
Board survey found eight drivers of
3. Engagement to Retention a heightened emotional and intellectual engagement across all of the examined
(2-way) connection that an employee has for engagement studies (see Figure 2

4. Retention to Productivity his or her job, organization, manager, below). These eight factors can be

(1-way)

5. Retention to Customer Eight Factors that Drive Engagement

Satisfaction (1-way) Trust and Integrity

6. Retention, Productivity and Relationship with One’s Manager

Customer Satisfaction to Nature of the Job
financial performance. Career Growth Opportunities
Line-of-Sight between Individual Performance and Company Performance
Defining Engagement
Employee Development
While retention, productivity and
Coworkers/Team Members
customer service are self-explanatory,
Pride About the Company
it is important to understand what
Fig. 2 – Engagement Factors

1. Gibbons, J. (2006), Employee Engagement: A Review of Current Research and Its Implications, The Conference Board, New York, NY.

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Roadmap to Success: Driving Bottom-Line Results with People Performance Enterprise Insight Series

HIGH
summarized through one theme: Customer Satisfaction
These optimized
self-determination. In order to operate These partially
units are to Engagement
3.4
optimized units are
with self- determination, an employee 1.7

CUSTOMER ENGAGEMENT
must have trust in their business times more effective
As stated, there is a two way relationship
times more effective
than the baseline. than the baseline. between Engagement and Customer
processes, a clear understanding of
the business environment, the ability Satisfaction. The latter also drives the

to gain the skills necessary to succeed

These partially former. Engaged employees and
optimized units are

in the environment, and a career path

[1] 1.7 satisfied customers form stronger
Baseline units
within that environment. are nonoptimized. times more effective relationships and employees are more
than the baseline.
likely to engage with happy customers
This is evident in a published paper more frequently and with greater
LOW EMPLOYEE ENGAGEMENT HIGH
with Emerald, Transparency Drives attention. This connection is often
Fig. 3 – Employee & Customer Engagement
Strategy Execution2, where Erik overlooked in research, and should
Berggren of SuccessFactors Research be explored further in future studies.
and Rob Bernshteyn, VP of Product Manage Your Human Sigma3, shows
Management and Marketing at This is particularly important in today’s
the clear bidirectional relationship
SuccessFactors, discuss the impor- environment, where the definitions of
between engaged customers and
tance of a transparent environment customer, partner, colleague, and
engaged employees. As customers
for driving strategy forward. They and employers become more
explain the link between strategic
transparency and employee performance
engaged, performance increases
dramatically.
Global
and the open, navigable environment Engagement
desired by self-determined, engaged However, customer satisfaction is not

employee. only the product of outward facing

employees. Timely order fulfillment
14% 86%
of the World of the World
and product quality are also critical to Workforce is Workforce is
Engagement to customer satisfaction. According to a highly engaged moderately
Customer Satisfaction Northwestern University4 study: engaged or

It is logical that an engaged employee

84% disengaged
Employee Satisfaction and Employee of Highly
would produce higher levels of
Engagement have both direct and Engaged 31%
customer satisfaction. An engaged Employees of disengaged
indirect effects on subsequent market
high performer would offer better believe they can employees
and financial outcomes. Employee positively impact believe they can
customer service, with more frequent
Satisfaction directly influences the quality of positively impact
engagement with the customer.
Customer Satisfaction, while their work the quality of
Employee Engagement’s effects on their work
The SuccessFactors Research HCM
Business Impact model links engage- Customer Satisfaction are indirect Source: Talent Management in the 21st Century:

ment to customer satisfaction. The through market orientation and Attracting, Retaining and Engaging Employees of
Choice WorldatWork Journal, 1st Quarter 2006.
Harvard Business Review article, Customer Behavior.

2. Berggren, E., Bernshteyn, R. (2007), Transparency Drives Strategy Execution, Emerald Press, London, U.K.
3. Coffman, K., Fleming J. H., Harter, J. K. (2005), Manage Your Human Sigma, Harvard Business Review, Boston, MA.
4. O Cozzani, C. Organizational Characteristics to Employee Attitudes and Behavior, Forum for People Performance Management, Evanston, IL.

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Roadmap to Success: Driving Bottom-Line Results with People Performance Enterprise Insight Series

competitor are blurred. A positive Engagement to
relationship in this uncertain environ- Retention
ment encourages learning, and
employees are more likely engage According to a recent study from
with those persons whose company SuccessFactors Research, quoted in
7
they enjoy, irrespective of employer. Forbes magazine , the voluntary
turnover of high performers costs US
businesses a staggering 340 billion
Engagement to dollars per year. Furthermore, the
Productivity departure of a top performer often
constitutes a disruptive turnover,
Again, it is logical to expect that an
leaving knowledge, skill and produc-
employee who is vested in his or her
tivity gaps within the organization.
work, and who is willing to contribute
extra effort, will be more productive. Most employers misunderstand this
This increase in productivity is the relationship, and focus their retention
anchor of the Success Factors Research programs on extrinsic rewards, such
HCM Business Impact model. A recent as salary and benefits. An underlying
article from EDS5 reveals a concrete assumption is made that higher pay will
correlation between engagement and lead to higher employee satisfaction.
Cost of Goods Sold (COGS). However, a Towers Perrin study
most important driver for retention,
superseded by an inspirational manager,
opportunities for advancement, and
the reputation of the company as a
good employer8.
When the top intrinsic drivers of reten-
tion are compared with the drivers of
engagement, clear, one-to-one relation-
ships can be seen. It is no wonder that
engagement leads to higher retention
of high performing employees, as
many of the drivers are the same.
The study also confirms that there is
a powerful link between retention and
engagement. As shown in Figure 4
above, 59% of highly engaged
employees have no plans to leave,
versus 35% of moderately engaged
employees and 24% of disengaged

Businesses with an engaged workforce revealed that salary is only the 4th employees.

have an average one to two percent

lower COGS. Conversely, businesses
with a highly disengaged workforce
have up to four percent higher COGS.

Engagement not only increases the

speed and quality of execution, but
also nurtures an environment in
which employees are willing to reach
outside of their silos and create better
business processes. This motivation
leads to more efficient, productive
business processes. ISR, a leading HIGHLY MODERATELY DISENGAGED
ENGAGED ENGAGED
employee research firm, found that
companies with higher engagement Have No Plans to Leave
have 5.75% better operating margins
Fig. 4 – Intent to Voluntarily Separate
than those less engaged6.

5. Gebauer, J. (2005), Building the Global Village, Synnovation: Quarterly Journal of the EDS Agility Alliance, Vol 1. Issue 2.
6. ISR Research. (2006), Global Employee Engagement Study. ISR Research. Chicago, IL.
7. Barret, V.M. (2007), Fight the Jerks, Forbes Magazine. New York, NY.
8. Towers Perrin. (2003), The 2003 Towers Perrin Talent Report: Working Today: Understanding What Drives Employee Engagement, Stamford, CT.

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Roadmap to Success: Driving Bottom-Line Results with People Performance
Retention to
Engagement
Retention also drives engagement.
In his presentation, Enthusiastic
Employee: How an Engaged
Workforce Delivers Profits,
SuccessFactors Research Thought
Leader David Sirota, PhD., found a
high .36 correlation between employee
satisfaction and camaraderie. He
found this to be a nearly universal
factor among all tenure groups, races,
genders, and management levels.
Clearly, high turnover disrupts
camaraderie. Through retention of
high performers, camaraderie will
help drive engagement and create an
equitable environment, which is also
highly correlated with satisfaction by
Dr. Sirota.
A SuccessFactors customer, Quintiles
Transnational, found that HCM can
have dramatic effect on how workers
feel about their environment. In their
findings, the percent of workers who
agreed with the statement “I feel I am
part of a team” increased from 49%
to 81% after the implementation of
the new processes, which also led to
a 7% reduction in turnover.
Retention to
Productivity
Tenured employees, those with three
or more years of service with a company,
are difficult to replace — they have
9. Baker, A. (1998), Employee retention improves with virtual routing systems. Call Center Solutions.
All rights reserved.
Enterprise Insight Series
Retaining Top Talent
The link between engagement and retention is strong
Three of the strongest factors for retention, according to Towers
Perrin, correlate strongly with the factors that drive engagement,
found in the aforementioned Conference Board study.
1. Opportunities to Advance One’s Career
This retention factor maps directly with the career growth opportu-
nities sought by engaged employees.
2. Employee Learning and Development
Also linked to career growth opportunities, skill development drives
both engagement and retention.
3. Reputation of the Company
This retention factor maps directly with the Pride About the
Company engagement factor. While not always a controllable factor,
it illustrates the strong similarity in those factors that encourage
engagement and retention, respectively.
been fully trained, fully integrated Turnover results in time and effort
into the working culture of the company, expended to train employees with the
and are fully productive. skills required to execute the strategy.
Similarly, it takes time for new
Retention of engaged performers
employees to understand the strategy.
reduces the need to constantly
Multi-year, forward-looking strategies
re-staff and retrain, and gives employees
require that resources, including people,
time to form productive, working
are aligned and ready to execute.
relationships with one another. When
HCM is used to drive retention, it can
help reduce the risk of knowledge
gaps forming because of an unexpected
departure.
Retention not only affects daily
productivity, but also the ability to
effectively execute long-term strategy.
6
Roadmap to Success: Driving Bottom-Line Results with People Performance Enterprise Insight Series

Retention to Customer 30 which revealed growth rates 60% to

Satisfaction 130% higher for offices with a mature

RELATIVE STOCK RETURN (%) —

20
HCM system. Learning capacity,

1 YEAR PERFORMANCE
Customers typically prefer a consistent 10
workforce optimization, knowledge
experience, service or product, over 0 accessibility and employee engagement
time. Retention programs are all played a critical role.
-10
designed to retain exceptional
employees, to ensure that the customer -20 The report also showed a strong linkage
can expect exceptional, consistent between maturity of HCM systems
-30
customer service, or product quality, -20 -10 0 10 20 and financial performance at financial
in the case of product development HCM MATURITY SCORE companies. Figure 5 below shows
and manufacturing. Fig. 5 – HCM Maturity & Performance stock performance on the y-axis and
HCM maturity on the x-axis.
For call centers, retention of high
performers is particularly important reviewing performance, and tracking In the aforementioned Quintiles
for satisfying customers. Inexperienced learning and development. Transnational case, operating income
operators lead to higher abandoned per headcount was also seen to
In her paper, Maximizing Your Return
calls and higher queuing9. Call Center dramatically increase with an effective
on People, Dr. Laurie Bassi, a
Solutions noted that high turnover HCM investment. Figure 6 illustrates
SuccessFactors Research partner,
should be avoided in order to ensure the increase in average operating
shows precisely how a mature HCM
customer retention: income as HCM implementations
implementation leads to higher
improve in effectiveness. The top 25%
The connection between agent performance10.
most effective HCM implementations
retention and customer retention will Dr. Bassi conducted a study of have substantially higher average
only grow stronger in the coming American Standard sales offices, operating income per headcount.
years. For many vertical markets,
225.00
such as health care, and some
AVERAGE OPERATING INCOME PER HEADCOUNT

horizontal markets, such as technical 200.00

203.9
consulting, individual agent skill is 175.00
the foundation of companies’ market
150.00
and competitive positions.
125.00

100.00
Engagement, Customer
96.11
Service, and Retention 75.00

to Revenue Growth and 71.02

50.00
Profit 25.00
8.86
HCM Drives Engagement, which 0.00
BOTTOM QUARTILE LOW AVERAGE HIGH AVERAGE TOP QUARTILE
drives Customer Service and
Retention, by aligning goals, objectively EFFECTIVENESS OF HCM SOLUTION
Fig. 6 – HCM Effectiveness vs. Operating Income

10. Bassi, L., McMurrer, D. (2007), Maximizing Your Return on People, Harvard Business Review. Boston, MA.

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Roadmap to Success: Driving Bottom-Line Results with People Performance Enterprise Insight Series

Conclusion

The SuccessFactors Research HCM
Business Impact model demonstrates
the clear linkages between engagement,
customer service, productivity, and
retention. An engaged employee is
more likely to put extra thought and
effort into their work, engage the
customer more frequently, speak
highly of the company, and is far less
likely to leave.
This adds tangible value and savings
for businesses that invest in HCM.
This investment in improved process better, and are all the more suited to
and smart technology can help drive the hyper-competitive business
engagement, therefore improving environment of today. HCM drives this
productivity, customer service and performance, engaging and retaining
retention, which ultimately drives employees, leading ultimately to
revenue and profit. satisfied customers and superior
financial performance.
Dr. Peter Cappelli and SuccessFactors
Research revealed in a recent presen-
tation that 65% of the costs of doing
business are labor related11. Employee
performance is crucial. Businesses
with engaged employees simply perform

Driving Real Performance

Engagement
“Engagement with employees within a firm has shown to motivate the employee to work beyond personal fac-
tors and work more for the success of the firm.” — The Gallup Organization

Inspires Retention
“Work groups whose members are positively engaged have higher levels of productivity and profitability, better
safety and attendance records, and higher levels of retention. Not surprisingly, they’re also more effective at
engaging the customers they serve.” — Manage Your Human Sigma

Customer Satisfaction
“In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a key
differentiator and increasingly has become a key element of business strategy” — Lawrence J. Gitman

Productivity
“Mature systems support consistent application across units driving down G&A expense. More importantly they
promote communication with employees, giving them clarity in terms of their effect on the business, thereby
driving motivation. This leads to productivity and financial gain.” — How Smart HCM Drives Financial Performance

11. SuccessFactors Research (2007) http://www.successfactors.com/media/webinars/talent-on-demand/

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Roadmap to Success: Driving Bottom-Line Results with People Performance Enterprise Insight Series

References

Baker, A. (1998), Employee Retention Gebauer, J. (2005), Building the

Improves with Virtual Routing
Systems, Call Center Solutions.
Barret, V.M. (2007), Fight the Jerks.
Forbes Magazine, New York, NY.
Bassi, L., McMurrer, D. (2007),
Maximizing Your Return on People,
Harvard Business Review,
Boston, MA.
Berggren, E., Bernshteyn, R. (2007),
Transparency Drives Strategy
Execution, Emerald Press,
London, U.K.
Berggren, E., Fitz-Enz, J. (2007),
How Smart HCM Drives Financial
Performance, SuccessFactors
Research, San Mateo, CA.
Coffman, K., Fleming J. H., Harter,
J. K. (2005), Manage Your Human
Sigma, Harvard Business Review,
Boston, MA.
Global Village, Synnovation:
Quarterly Journal of the EDS Agility
Alliance, Vol 1. Issue 2.
Gibbons, J. (2006), Employee
Engagement: A Review of Current
Research and Its Implications,
The Conference Board, New York, NY.
Gitman, L. (2004), The Future of
Business, South Western College
Publishing.
ISR Research. (2006), Global
Employee Engagement Study,
Chicago, IL.
Towers Perrin. (2003), The 2003
Towers Perrin Talent Report: Working
Today: Understanding What Drives
Employee Engagement, Stamford, CT.

Cozzani, C. Organizational
Characteristics to Employee
Attitudes and Behavior, Forum for
People Performance Management,
Evanston, IL.

All rights reserved. 9