Is Poor Employee Engagement Damaging the UK Economy?
New Paper from IPPR Commission on Economic Justice suggests traditional British model of Corporate Governance might be responsible for flagging engagement levels and productivity
A recently published paper from the IPPR Commission on Economic Justice suggests poor employee engagement is causing economic issues. It cites a lack of worker involvement in key decision processes in the workplace as a major factor, with managers likely aping endemic failings within corporate governance where poor employee representation is rife.
The IPPR Commission on Economic Justice is an independent initiative comprising leading figures across business, trade unions, civil society organisations and academia. Its goals are to examine challenges facing the UK economy and make practical recommendations for reform. Before publishing their final report in September 2018, individual commissioners are producing discussion papers to contribute to debate on major issues. The latest paper, called Corporate Governance Reform: Turning business towards long-term success, has now been published.
The paper highlights employee engagement as an area for improvement, arguing “employee engagement in decision-making is a key contributor to productivity and innovation in modern companies, particularly as a more knowledge-based economy has placed a higher premium on human capital and skill.” However, there is disparity between this importance and its actual prevalence in the workplace.
The UK is pinpointed as underperforming in this area, which is why there is a growing trend for organisations here to focus on employee engagement. The paper emphasises that only a third of UK employees report feeling engaged at work, and that less than half are content with their degree of involvement with decision making in the workplace.
One reason suggested for this is the dominance of ‘managerial prerogative’ in British workplace culture. This is described as the belief that managers have the right to make business decisions without the involvement of employees. It’s likely this mindset stems from being a reflection of common practice in British corporate governance, which generally excludes employee representation on company boards, leaving them no formal rights to information or involvement in decision making.
The paper speculates that since a company board is often constituted primarily of shareholders, although employees are integral components of an organisation with more long-term and exclusive commitments to it, they are often treated simply as another group of stakeholders. This is even before any moral responsibility of organisations to grant partial governance rights to employees is taken into account, since corporate decisions often have a huge impact on the workforce.
Out of 30 European countries, 19 currently include some provision for workers’ representation on company boards. Countries such as Germany, Netherlands, Sweden and Denmark, counted amongst Europe’s most successful economic performers, go further with extended systems of corporate governance which include works councils and consultative structures which give workers further say.
The UK record on employee involvement is amongst the lowest in Europe, coming out 23rd out of 28 EU countries in the European Participation Index, which ranks employee representation and involvement. It is difficult not to see the parallel between low productivity and low levels of employee representation across all levels of governance.
From a purely practical perspective, it is worth organisations remembering that whilst skills and loyalty are important assets which drive success, they are assets inseparable from the individual employees who possess them. If British organisations are able to break the historic mould and give employees more say on the corporate governance level, it’s likely this effect will trickle down and ensure more managers mirror this change.
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Please contact us to see how we can tailor a Workforce Management solution to overcome the challenges faced by your specific organisation.