Finding the Secrets of Best Employers: How Strategic HRM Drives Business Performance

In the quest for organizational excellence, the role of strategic human resource management (HRM) cannot be overstated. As the global business landscape becomes increasingly complex and competitive, organizations are recognizing the critical importance of attracting, engaging, and retaining top talent. The best employers, those who consistently outperform their peers, understand that their success is inextricably linked to the effectiveness of their HR strategies and practices.

This article delves into the secrets of the best employers, drawing on insights from a comprehensive survey of 220 organizations. By examining the key drivers of employee engagement, the best practices of high-performing companies, and the tangible business benefits of strategic HRM, we aim to provide a roadmap for organizations seeking to join the ranks of the best employers.

The article begins by exploring the power of employee engagement, highlighting the stark differences in engagement levels between the best employers and the rest. We then delve into the six key drivers of engagement, providing actionable insights into how organizations can foster a highly engaged workforce. Next, we examine the best practices of the best employers, showcasing the strategies and initiatives that set them apart from their peers.

Finally, we present a compelling case for the bottom-line impact of strategic HRM, drawing on evidence from the survey and other research. By the end of this article, readers will have a deep understanding of what it takes to become a best employer and the transformative power of strategic HRM in driving business performance.

The Power of Employee Engagement

At the heart of strategic HRM lies the concept of employee engagement. Engaged employees are those who are emotionally invested in their work, committed to their organization’s success, and willing to go above and beyond to achieve exceptional results. The best employers recognize that employee engagement is not just a feel-good initiative, but a critical driver of business performance.

The survey of 220 organizations reveals a striking disparity in engagement levels between the best employers and the rest. While the best employers boast an impressive 76% employee engagement rate, the rest lag behind at just 62%. This 14-percentage-point gap may seem small, but its impact on organizational performance is profound.

Engaged employees bring a host of benefits to their organizations. They are more productive, more innovative, and more likely to deliver high-quality work. They have lower absenteeism rates, are less likely to leave their jobs, and tend to have better relationships with customers and colleagues. In short, engaged employees are the backbone of successful organizations.

The best employers understand that employee engagement is not a one-time event, but an ongoing process that requires consistent attention and investment. They create a culture that values and supports engagement, providing employees with the resources, opportunities, and support they need to thrive. By prioritizing engagement, these organizations are able to tap into the full potential of their workforce and drive superior business results.

The Six Drivers of Employee Engagement

To achieve high levels of employee engagement, the best employers focus on six key drivers: people, work, opportunities, quality of life, procedures, and compensation. Each of these drivers plays a critical role in shaping the employee experience and fostering a culture of engagement.

People

The people driver encompasses factors such as senior leadership, coworkers, culture, and values. The best employers recognize that the quality of relationships within an organization has a profound impact on engagement levels. They prioritize open communication, encourage employee feedback, and foster a positive organizational culture.

Effective senior leadership is particularly crucial for driving engagement. The best employers have leaders who are visible, accessible, and committed to their employees’ success. They regularly communicate with their teams, seek input and feedback, and act on employee concerns. By modeling the behaviors and values they wish to see in their organizations, these leaders create a culture that inspires and engages their workforce.

Positive relationships among coworkers are also essential for engagement. The best employers foster a sense of camaraderie and collaboration, encouraging employees to support and learn from one another. They create opportunities for social interaction and team-building, recognizing that strong interpersonal connections can boost morale, motivation, and productivity.

Finally, the best employers are intentional about creating a culture that aligns with their values and mission. They communicate their values clearly, consistently, and authentically, ensuring that employees understand and embrace the organization’s purpose. By fostering a sense of shared identity and purpose, these organizations create a powerful sense of belonging and engagement among their workforce.

Work

The work driver focuses on the nature of the work itself, including factors such as intrinsic motivation, task significance, and access to resources. The best employers understand that engaging work is characterized by a sense of purpose, autonomy, and mastery. They strive to create a work environment that challenges and inspires their employees, providing them with the tools and support they need to excel.

Intrinsic motivation is a key component of engaging work. The best employers seek to align employees’ tasks and responsibilities with their interests, passions, and strengths. They provide opportunities for employees to take on new challenges, learn new skills, and make meaningful contributions to the organization. By tapping into employees’ intrinsic motivation, these organizations foster a sense of ownership and pride in one’s work.

Task significance is another important aspect of engaging work. The best employers help employees understand how their individual efforts contribute to the larger goals and mission of the organization. They provide regular feedback and recognition, ensuring that employees feel valued and appreciated for their contributions. By connecting employees’ work to the bigger picture, these organizations create a sense of purpose and meaning that drives engagement.

Finally, the best employers ensure that their employees have access to the resources and support they need to perform their jobs effectively. This includes providing the necessary tools, technology, and training, as well as fostering a culture of collaboration and knowledge-sharing. By removing barriers to productivity and empowering employees to do their best work, these organizations create a work environment that is both engaging and fulfilling.

Opportunities

The opportunities driver focuses on employees’ perceptions of growth, development, and advancement within their organization. The best employers recognize that providing meaningful opportunities for learning and career progression is essential for fostering engagement and retaining top talent.

One key aspect of the opportunities driver is access to training and development. The best employers invest heavily in their employees’ growth, offering a wide range of learning opportunities, from formal training programs to on-the-job learning experiences. They create individualized development plans, tailoring learning and growth opportunities to each employee’s unique needs and aspirations.

Mentoring and coaching are also critical components of the opportunities driver. The best employers establish formal mentoring programs, pairing experienced leaders with up-and-coming talent. They encourage informal mentoring relationships as well, fostering a culture of knowledge-sharing and support. By providing employees with access to guidance and support from more experienced colleagues, these organizations accelerate learning and development, while also strengthening interpersonal connections and engagement.

Career advancement opportunities are another key aspect of the opportunities driver. The best employers create clear career pathways, providing employees with a roadmap for growth and development within the organization. They prioritize internal promotions and lateral moves, recognizing that providing opportunities for advancement is essential for retaining top talent. By investing in their employees’ long-term success, these organizations foster a sense of loyalty and commitment that drives engagement.

Finally, the best employers recognize and celebrate their employees’ achievements and contributions. They establish formal recognition programs, acknowledging outstanding performance and milestone achievements. They also encourage informal recognition, creating a culture of appreciation and gratitude. By recognizing and rewarding employees’ efforts, these organizations reinforce the value they place on their workforce, further strengthening engagement and motivation.

Quality of Life

The quality of life driver focuses on the ways in which organizations support their employees’ well-being and work-life balance. The best employers recognize that creating a positive and supportive work environment is essential for fostering engagement and productivity.

Flexible work arrangements are a key component of the quality of life driver. The best employers offer a range of options, from flexible scheduling to remote work opportunities, allowing employees to better balance their work and personal lives. They trust their employees to manage their time and responsibilities effectively, focusing on results rather than face time. By providing employees with greater control over when and where they work, these organizations create a sense of autonomy and empowerment that drives engagement.

Health and wellness initiatives are another important aspect of the quality of life driver. The best employers invest in their employees’ physical, mental, and emotional well-being, offering programs and resources designed to promote healthy lifestyles. This may include on-site fitness facilities, wellness workshops, stress management resources, and access to mental health support. By prioritizing employee well-being, these organizations demonstrate their commitment to their workforce, fostering a sense of care and support that strengthens engagement.

Work-life balance policies and practices are also critical for the quality of life driver. The best employers offer generous leave policies, including paid time off, parental leave, and sabbaticals. They encourage employees to disconnect from work during non-work hours, respecting their personal time and boundaries. They also provide support for employees’ personal and family needs, such as childcare assistance or eldercare resources. By recognizing and accommodating the diverse needs of their workforce, these organizations create a culture of empathy and understanding that drives engagement.

Finally, the best employers foster a sense of community and connection within their organizations. They create opportunities for employees to connect and build relationships outside of work, such as volunteer events, social gatherings, or affinity groups. They also promote a culture of inclusivity and belonging, ensuring that all employees feel valued and respected, regardless of their background or identity. By creating a strong sense of community and connection, these organizations foster a deep sense of engagement and loyalty among their workforce.

Procedures

The procedures driver focuses on the policies, practices, and processes that shape the employee experience. The best employers recognize that clear, fair, and consistent procedures are essential for creating a positive and engaging work environment.

One key aspect of the procedures driver is performance management. The best employers establish clear performance expectations, providing employees with regular feedback and coaching to help them excel in their roles. They use a variety of assessment methods, from traditional performance reviews to 360-degree feedback, to provide a comprehensive picture of employee performance. They also ensure that performance evaluations are fair and objective, using consistent criteria and involving multiple perspectives.

Compensation and benefits procedures are another important aspect of the procedures driver. The best employers establish transparent and equitable compensation practices, ensuring that employees are fairly rewarded for their contributions. They regularly benchmark their compensation and benefits packages against industry standards, making adjustments as needed to remain competitive. They also communicate clearly and consistently about compensation and benefits, ensuring that employees understand the value of their total rewards package.

HR policies and practices are also critical for the procedures driver. The best employers establish clear and consistent HR policies, from hiring and onboarding to performance management and employee relations. They ensure that these policies are aligned with the organization’s values and goals, and that they are applied fairly and consistently across the organization. They also regularly review and update their HR policies, incorporating employee feedback and best practices to continuously improve the employee experience.

Finally, the best employers prioritize communication and transparency in their procedures. They ensure that employees have access to the information and resources they need to navigate the organization’s policies and practices. They communicate regularly and openly about organizational changes, soliciting employee feedback and addressing concerns. By creating a culture of transparency and open communication, these organizations foster a sense of trust and engagement among their workforce.

Compensation

The compensation driver focuses on the financial rewards and incentives that organizations offer their employees. While compensation is not the sole driver of engagement, it plays a significant role in attracting and retaining top talent.

One key aspect of the compensation driver is base pay. The best employers offer competitive base salaries, ensuring that their employees are fairly compensated for their skills, experience, and contributions. They regularly review and adjust their salary structures, taking into account market trends, internal equity, and individual performance. By providing fair and competitive base pay, these organizations demonstrate their commitment to their employees’ financial well-being, fostering a sense of security and engagement.

Performance-based incentives are another important aspect of the compensation driver. The best employers establish clear and meaningful performance metrics, linking rewards to individual, team, and organizational success. They offer a range of incentives, from bonuses and commissions to stock options and profit-sharing plans, to motivate and reward high performance. By aligning incentives with organizational goals, these organizations create a sense of shared purpose and ownership among their workforce.

Benefits are also a critical component of the compensation driver. The best employers offer comprehensive and competitive benefits packages, including health insurance, retirement plans, and paid time off. They also offer a range of supplemental benefits, such as wellness programs, tuition reimbursement, and employee assistance programs, to support their employees’ diverse needs and interests. By providing a robust benefits package, these organizations demonstrate their commitment to their employees’ well-being, fostering a sense of care and support that drives engagement.

Finally, the best employers ensure that their compensation practices are fair, transparent, and equitable. They establish clear compensation philosophies and policies, communicating them openly and consistently to their workforce. They conduct regular pay equity analyses, identifying and addressing any disparities based on factors such as gender, race, or age. By prioritizing fairness and equity in their compensation practices, these organizations foster a sense of trust and respect among their workforce, further strengthening engagement and loyalty.

Best Practices of the Best Employers

The survey of 220 organizations reveals several common practices among the best employers, those who consistently outperform their peers in terms of employee engagement and business results. These best practices provide a roadmap for organizations seeking to join the ranks of the best employers.

Senior Leadership Commitment

One of the most striking findings from the survey is the level of commitment that senior leaders at the best employers demonstrate towards their employees. The CEOs of the best employers spend an average of 56% of their time on people-related issues, compared to just 40% for the rest. This significant investment of time and attention sends a powerful message about the value these organizations place on their workforce.

Effective senior leaders at the best employers prioritize open and transparent communication with their employees. They regularly share information about the organization’s performance, challenges, and opportunities, ensuring that employees feel informed and connected to the bigger picture. They also seek out employee feedback through surveys, focus groups, and informal conversations, using this input to guide decision-making and drive continuous improvement.

Senior leaders at the best employers also model the behaviors and values they wish to see in their organizations. They lead by example, demonstrating a strong work ethic, a commitment to excellence, and a deep respect for their employees. They are visible and accessible, regularly engaging with employees at all levels of the organization. By setting the tone from the top, these leaders create a culture of engagement and performance that permeates the entire organization.

Finally, senior leaders at the best employers are committed to their own learning and development. They seek out opportunities to grow and improve as leaders, whether through formal training programs, executive coaching, or peer mentoring. They recognize that their own effectiveness as leaders has a direct impact on the engagement and performance of their teams, and they invest in their own growth accordingly.

Focus on Learning and Development

The best employers recognize that investing in their employees’ learning and development is essential for fostering engagement, driving performance, and preparing the organization for future challenges. They offer a wide range of development opportunities, from formal training programs to on-the-job learning experiences, tailored to the unique needs and aspirations of their workforce.

One key aspect of the best employers’ approach to learning and development is a focus on career planning and progression. They work with employees to create individualized development plans, identifying short-term and long-term career goals and mapping out the skills, experiences, and competencies needed to achieve them. They provide regular career coaching and mentoring, helping employees navigate their career paths and make informed decisions about their professional development.

The best employers also invest in leadership development, recognizing that effective leadership is critical for driving engagement and performance. They offer a range of leadership development programs, from high-potential training to executive coaching, designed to build the skills and capabilities needed to lead in a complex and rapidly changing business environment. They also prioritize succession planning, identifying and grooming future leaders to ensure a deep bench of talent ready to step into key roles as needed.

In addition to formal training and development programs, the best employers create a culture of continuous learning and growth. They encourage employees to seek out new challenges and experiences, whether through stretch assignments, job rotations, or cross-functional collaborations. They foster a culture of curiosity and experimentation, encouraging employees to take risks, learn from failures, and share their knowledge and insights with others.

Finally, the best employers recognize that learning and development is a two-way street. They seek out feedback from employees on their development experiences, using this input to continuously improve their programs and offerings. They also encourage employees to take ownership of their own learning and development, providing the resources and support needed to pursue their goals and aspirations.

Strong Values and Culture

The best employers understand that a strong, positive organizational culture is essential for driving engagement and performance. They are intentional about defining and communicating their values, ensuring that these values are reflected in every aspect of the employee experience.

One key aspect of the best employers’ approach to culture is a focus on values alignment. They use their values as a key criterion in hiring, promotions, and performance evaluations, ensuring that employees at all levels of the organization embody and uphold the organization’s core principles. They also emphasize values alignment in their onboarding and orientation programs, helping new hires understand and embrace the organization’s culture from day one.

The best employers also prioritize consistent and authentic communication of their values. They ensure that their values are visible and prominent in all aspects of the organization, from marketing materials and internal communications to performance reviews and recognition programs. They regularly engage employees in discussions about the organization’s values, encouraging them to share examples of how they see these values in action and how they can better embody them in their own work.

In addition to communicating their values, the best employers create a culture that supports and reinforces those values. They establish policies, practices, and programs that align with their values, from flexible work arrangements that support work-life balance to community service initiatives that reflect a commitment to social responsibility.

They also foster a culture of transparency, openness, and psychological safety, encouraging employees to speak up, share their ideas and concerns, and engage in constructive dialogue.

Finally, the best employers recognize that culture is not a static concept, but an ongoing process of evolution and improvement. They regularly assess and measure their culture, using employee feedback, engagement surveys, and other data sources to identify areas of strength and opportunity. They are proactive in addressing cultural challenges and making necessary changes to ensure that their culture remains aligned with their values and supportive of their employees’ needs and aspirations.

Employee Engagement in the Business

The best employers recognize that engaging employees in the business is essential for driving performance, innovation, and continuous improvement. They create opportunities for employees at all levels to contribute their ideas, insights, and expertise, fostering a sense of ownership and empowerment throughout the organization.

One key aspect of the best employers’ approach to employee engagement is encouraging employee involvement in decision-making. They establish forums and channels for employees to provide input and feedback on key business issues, from strategic planning to process improvement. They also involve employees in problem-solving and innovation initiatives, leveraging their frontline expertise to identify and address challenges and opportunities.

The best employers also prioritize transparency and communication in engaging employees in the business. They regularly share information about the organization’s performance, challenges, and opportunities, ensuring that employees have the context and understanding needed to contribute effectively. They also establish clear channels for employees to ask questions, raise concerns, and provide feedback, demonstrating a commitment to open and honest communication.

Another important aspect of the best employers’ approach to employee engagement is providing opportunities for cross-functional collaboration and learning. They create project teams, task forces, and other forums that bring together employees from different departments and levels of the organization, fostering a sense of shared purpose and enabling employees to learn from one another. They also encourage job rotations and stretch assignments, providing employees with opportunities to develop new skills and gain exposure to different parts of the business.

Finally, the best employers recognize and reward employees for their contributions to the business. They establish recognition programs that celebrate individual and team achievements, from small gestures of appreciation to formal awards and bonuses. They also provide opportunities for employees to share in the organization’s success, through profit-sharing, stock options, or other financial incentives. By recognizing and rewarding employees’ efforts, these organizations reinforce the value they place on their workforce and the importance of employee engagement in driving business success.

Attention to Quality of Life

The best employers understand that supporting their employees’ quality of life is essential for fostering engagement, productivity, and well-being. They recognize that employees are whole people, with lives and responsibilities outside of work, and they create policies and programs that help employees balance their work and personal lives.

One key aspect of the best employers’ approach to quality of life is offering flexible work arrangements. They provide options for flexible scheduling, telecommuting, and part-time work, allowing employees to better manage their work and personal responsibilities. They also offer generous leave policies, including paid time off, parental leave, and sabbaticals, recognizing the importance of rest and rejuvenation for employee well-being and performance.

The best employers also prioritize employee health and wellness, offering programs and resources designed to support physical, mental, and emotional well-being. They provide on-site fitness facilities, wellness workshops, and health screenings, encouraging employees to prioritize their health and well-being. They also offer employee assistance programs, providing confidential support and resources for employees facing personal or professional challenges.

In addition to formal programs and policies, the best employers create a culture that values and supports work-life balance. They encourage employees to disconnect from work during non-work hours, respecting their personal time and boundaries. They also model healthy work-life balance behaviors, with leaders and managers demonstrating a commitment to their own well-being and encouraging their teams to do the same.

Finally, the best employers recognize that supporting employees’ quality of life is an ongoing process, requiring regular assessment and adjustment. They seek out employee feedback on their work-life balance and well-being initiatives, using this input to continuously improve their programs and policies. They also recognize that employees’ needs and priorities may change over time, and they remain flexible and responsive in adapting their approach to meet those evolving needs.

The Bottom Line

The evidence from the survey of 220 organizations is clear: strategic HRM practices, with a focus on employee engagement, talent development, and a positive work environment, are critical drivers of business success. The best employers, those who prioritize these practices, consistently outperform their peers on key business metrics, from financial performance to customer satisfaction to innovation.

One of the most compelling findings from the survey is the impact of strategic HRM on employee retention. The best employers have significantly lower turnover rates than their peers, with an average of 45% lower turnover in India and half the turnover in the United States. This retention advantage translates into significant cost savings, as well as benefits in terms of institutional knowledge, productivity, and customer relationships.

The best employers also have a competitive advantage in attracting top talent. Their reputation as great places to work, combined with their strong employer brand and compelling employee value proposition, enables them to attract a larger and higher-quality pool of candidates. This talent advantage, in turn, fuels innovation, creativity, and business growth.

Perhaps most importantly, the best employers deliver superior business results. In India, the best employers outperform comparable indices and industry-related performance metrics by an impressive 15%. This performance advantage is driven by a range of factors, from higher employee productivity and engagement to better customer service and loyalty to more effective innovation and problem-solving.

The bottom line is clear: investing in strategic HRM practices, with a focus on employee engagement and well-being, is not just a nice-to-have, but a business imperative. By prioritizing these practices, organizations can create a virtuous cycle of engaged employees, satisfied customers, and strong business results, positioning themselves for long-term success in an increasingly competitive and dynamic business environment.

Conclusion

In today’s fast-paced and ever-changing business landscape, organizations that prioritize strategic HRM are well-positioned to thrive. By focusing on employee engagement, talent development, and a positive work environment, these organizations are able to unlock the full potential of their workforce, driving innovation, productivity, and business success.

The secrets of the best employers, as revealed by the survey of 220 organizations, provide a roadmap for organizations seeking to join their ranks. By committing to employee engagement, investing in learning and development, fostering a strong culture and values, engaging employees in the business, and supporting their quality of life, these organizations create a powerful competitive advantage.

But the journey to becoming a best employer is not a quick or easy one. It requires a sustained commitment from leadership, a willingness to invest in people and culture, and a focus on continuous improvement. It also requires a recognition that strategic HRM is not just an HR function, but a business imperative, essential for driving long-term success.

For organizations willing to make this commitment, the rewards are significant. From lower turnover and higher productivity to better financial performance and customer loyalty, the benefits of strategic HRM are clear and compelling. By prioritizing their people and creating a culture of engagement and well-being, these organizations position themselves for success in an increasingly complex and competitive business environment.

In conclusion, the secrets of the best employers are not really secrets at all. They are proven strategies and practices, backed by compelling evidence and real-world examples. By embracing these strategies and making them a core part of their business model, organizations of all sizes and across all industries can unlock the full potential of their workforce and achieve exceptional results. The choice is clear: invest in your people, and watch your business thrive.