Employee engagement in the U.S. retail sector has sunk to its lowest levels since 2009, according to a new study claiming that employee engagement is directly linked to customer satisfaction, staff retention and financial performance.

"The World of Retail: How Employee Engagement Can Help the Registers Ring," released by Kenexa High Performance Institute, examined employee engagement trends in the retail sector since 2007 in the U.S., Brazil, China, Germany, India and the United Kingdom. The results show a marked drop in employee engagement in all six nations in 2011. Retail engagement scores in the U.S. trail only the U.K. and Germany.

"The economic downturn has hit retailers everywhere hard, as costs have been cut, plans have been put on hold and brands have gone out of business," said Rena Rasch, research manager of the Kenexa High Performance Institute. "The sector has also seen an increase in employee theft and shoplifting, which has been attributed to low pay, poor benefits and a perception among employees that their companies don't care about them."

The study reveals that employee engagement has a direct correlation with customer satisfaction and organizational performance.

"The simple truth is that engaged employees make a difference, particularly those in customer-facing positions," Rasch said. "When engagement is low, customer satisfaction and organizational performance tend to be low. But when engagement levels rise, these factors also improve because employees are more motivated to contribute to the organization's success and more willing to put in extra effort to accomplish tasks that are central to the goals of the organization. In other words, by improving employee engagement, retailers can enhance customer satisfaction and increase sales volume."

According to the study, a low level of employee engagement also results in higher staff turnover. More than 50 percent of unengaged retail employees plan to leave their employer in the coming year, compared to only about 10 percent of highly engaged workers.

"The retail sector has faced a perennial struggle with employee engagement, partly because it employs many part-time, low skilled and seasonal workers," Rasch said. "However, retailers are at risk if leaders and HR practitioners don't act to bolster employee engagement in their organizations."

The report includes four recommendations to help retailers improve employee engagement:

• Develop effective leaders. Leaders need to inspire confidence in their employees through their actions and their demeanor. They must be trustworthy, honest and caring.
• Help employees balance their work and life priorities. Retailers should provide practical support, such as flexible work schedules, as well as emotional support and understanding.
• Ensure compensation levels are fair. More than the amount of compensation, what matters most is each employee's perception of pay fairness. Explain how their pay was determined and show the link between their pay and their performance.
• Foster a climate of innovation. Employees want exciting work. They like trying new things, sharing their ideas and being listened to. The chance to be innovative challenges and motivates them to perform at their best.

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