Employees drive community involvement—and its financial returns

people-purpose-progress

On Monday, April 30, I had the pleasure of welcoming 600 corporate citizenship professionals to the Boston College Center for Corporate Citizenship’s 2019 International Corporate Citizenship Conference in Dallas, TX. During that session, I had the opportunity to share some initial findings from the newly published Community Involvement Study 2019, and how it demonstrates the strong business case for corporate citizenship in engaging employees.

Below you can find a video and an edited transcript excerpting my remarks:

 

People + Purpose = Progress

I'd especially like to thank the Mary Kay team, our convening sponsor who brought us here to Dallas. They were instrumental in developing the theme and helping us think through the overall agenda. The theme that Mary Kay helped us develop is People + Purpose = Progress. So, let's just pause on that for a minute. We're all people, right? And we're here united by a common purpose, which is to create more good in the world. We want to create not only the world in which we want do business, but also the world in which we want to live. There are lots of resources that we offer through this conference to help you to do that. Our purpose here is to learn from each other.

I just want to take a minute and talk about the purpose of the Boston College Center for Corporate Citizenship. It's our great privilege as an organization to help people in companies think about how they make better choices about environmental and social investments. We do that in a variety of different ways, from our online resource library to our online community, where you can ask a question which will be answered by people from other companies or the team from the Center. We publish research, including a weekly Media Monitor that helps you keep track of the trends that are coming up in your practice. We have member knowledge requests, so if you're curious about how some of these issues might be impacting your industry or your company directly, you can call us and we'll put the resources together for you. Of course, we have networking events, such as this annual Conference. We also offer courses in a variety of formats, including self-paced and online options. We also have blended opportunities where you can complete part of the course in-person at the Accelerated Certificate Summit, which is another great networking opportunity.

New Research: Community Involvement Study 2019

Now I want to focus on some topline findings of the Community Involvement Study. So first, almost all companies are now committed to community involvement. When that used to be a “nice to have” 10 years ago when I started at the Center, it is now a core part of business. Almost 99 percent of companies are actually approaching community involvement as something that they have to do, and that they want to do.

Companies also continue to get more strategic about the causes that they choose. Now 92 percent of companies say that they are choosing causes that are aligned to their business operations. It used to be that companies might feel if they were doing something that was strategic to the business, it was uncharitable. Now, companies have come to realize that their strategically aligned programs tend to be viewed as more credible. We see companies investing more strategically and for the longer term. There's increased sophistication from the business side and the social side.

Employees are an important audience for community involvement programs. We've seen this as a trend that has intensified over the last couple of studies. One of the things we ask the companies that participate in this study is: Do you measure the correlation between engagement and participation in community involvement? What we see is that 63 percent of companies are measuring the connection between engagement and participation. This is something that's knowable in your company. If you don't know it yet—if you haven't yet figured out how to connect your retention to your participation—it's possible. The Center can help you figure out the process for that, or you may learn it here at the Conference, as you talk with other colleagues.

Of those 63 percent who are measuring, a whopping 95 percent of them see improved engagement among those employees who are participating in community involvement. That's hugely powerful and important. It's a real value that you as corporate citizenship professionals bring to your company.

The Business Case for Employee Engagement: A Closer Look

So we see that participation leads to engagement. Why is engagement important to us as corporate citizenship professionals? It's because engagement improves performance.

Gallup has done a lot of work on this, and here is a very topline recap of their most recent State of the American Workplace study[1]. We know that the bottom quartile of engagement is not going to perform as well as the top quartile. If we compare the top quartile to the bottom quartile, we see that the top quartile has 59 percent lower turnover in low turnover organizations even, 41 percent lower absenteeism, 17 percent higher productivity, 20 percent higher sales, and 21 percent profitability. Now, this data come from a data analysis across 200 different studies that span 34 countries, so this is pretty well substantiated. But we can clearly see that engagement leads to better performance.

Not only do we need to have high-performing people in our company staying in our company, we need to be able to attract great people to our companies. It turns out that this is going to be a huge issue for competitiveness in the coming decade, and we're already seeing some real indications of that.

In an ideal universe we have one person for one job. That's a perfectly balanced labor economy. As of pre-recession, we actually had, on average, more than one person for one job, so we had labor slack. Companies were in a pretty good position; if they had a job open they would have lots of candidates from which to choose. Post-recession, we see that that labor market starts to tighten. Of course, the knowledge-based companies are the ones that are most challenged in this situation. Retail and construction, not so much. In 2017, which is the most recently available data from the National Bureau of Labor Statistics, you can see that across the board, there are not enough employees to be able to fill the jobs that are available.[2] Some industries such as finance and insurance, IT and technology, and healthcare, are really challenged. Finance and insurance is only able to fill approximately 45 percent of vacancies. The average turnover in companies is 19 percent across the board in the U.S. So this is a significant problem for companies.

Let's look at the value of retention and recruiting. Say a company has 1,000 employees, and each is making an average salary of $70,000 per year. Each worker is expected to produce productivity of at least their salary, by a very conservative estimate. The average really is approximately three times the value of salary in the U.S. So you have productivity of $140 million per year based on that calculation. You also have an expense of $70 million a year from salaries. So, your net productivity would be $70 million.

We have vacancies of 19 percent, which is the U.S. average, which means that we get salary savings back of $6 million. But we also have a productivity cost, in which we've lost people so we're not able to get productivity from them. You have the turnover, which is 19 percent plus the vacancy rate from the last slide; for this illustration we're using the highest vacancy rate of 45 percent, in which you have a $12 million loss in productivity. Then you have the cost to fill and cover those vacancies, which is $2.6 million, conservatively. Add the onboarding and orientation costs of bringing new employees on; let's just say that's $1 million.

So you have gone from productivity of $70 million expected, if you are purely efficient, to productivity of $60,500,000. Which means that you have productivity loss of 16 percent. That's significant. Now, if you are able to reduce turnover and vacancy by 2 percent, you can save almost $2 million. And if you're able to reduce it by 4 percent, you can save almost $3 million.

This is a very simple calculation, just for the purposes of illustration. However, this is real value that actually your corporate citizenship work contributes to reducing turnover, and increasing the ability of your company to recruit and retain employees.

[1] Gallup, Inc. (2017). State of the American Workplace. Retrieved May 20, 2019, from https://www.gallup.com/workplace/238085/state-american-workplace-report-2017.aspx

[2] U.S. Bureau of Labor Statistics. (2017). Retrieved May 20, 2019, from https://www.bls.gov/