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Employee confidence level can predict the unemployment rate, says study

By Workplace Staff
| www.cos-mag.com

In groundbreaking research, Kenexa, a global provider of business solutions for human resources, says it has established a link between changes in the level of employee confidence and the rate of change in country-level unemployment rates on a quarterly basis. These results come from Kenexa’s employee confidence study, a quarterly measure of worker opinions and a component of the forthcoming Kenexa Composite.

The results indicate that since the second quarter of 2008, as employee confidence improves, the rate of change (the amount of increase) in the unemployment rate has declined. As employee confidence has declined, the rate of change in the unemployment rate has increased.

A high level of employee confidence is achieved when an employee perceives their organization as being effectively managed with good business processes, competitively positioned with attractive products and believe they have a promising future within their organization, job security and skills that would be attractive to other employers outside their organization. Employee confidence recorded the lowest scores in the first quarter of 2009. In contrast, the U.S. unemployment rate, until July 2009, has been moving steadily higher.

Kenexa has linked employee confidence across multiple organizations to “business” metrics that cross organization, industry and country levels, establishing linkages with GDP growth, bankruptcy filings and shareholder’s total rate of return (TRR). For example, the Kenexa Research Institute has found that organizations with highly confident employees achieve approximately six times greater TRR than organizations whose employees are not confident.

A variety of studies has demonstrated the link between employee attitudes and business metrics such as sales per square foot, absenteeism, employee retention, and customer retention and satisfaction. One thing much of this previous work has in common is that the findings apply to only one organization at a time.

Jeffrey Saltzman, principal at Kenexa, says, “We put our heads together and thought about how employee attitudes toward their organization’s performance and their own personal situation would be reflected in the unemployment rate. What we came up with is that we should be looking at the change in the rate of increase or decline in unemployment quarter-to-quarter and the change in employee confidence levels in those corresponding quarters.”

Saltzman notes, “What we fundamentally believe is that when you ask the workers, the people in the trenches, ‘how is it going?’ they know. If you select your sample appropriately, ask the right questions and analyze the results in a meaningful fashion, you are tapping into a group intelligence that enables you to generate valuable insights that can help organizations improve their performance. Whether that ‘organization’ is a department, a division, an entire company, a government entity or a country, the wisdom workers yield provides insight into where the more traditional ‘hard’ economic metrics, such as unemployment levels, GDP or bankruptcy filings will fall. Collecting and analyzing these data can be done relatively quickly and the insights gained can be made available well in advance of when the ‘hard’ metrics are traditionally available.”

The Kenexa Composite is a country-level indicator of economic health and employment conditions. Using a combination of the Kenexa Employee Confidence Index (ECI) and the Kenexa Jobs Index, the Kenexa Composite tracks labor demand and employee optimism in the 12 largest economies, accounting for 73 per cent of the world’s GDP.

The Kenexa Jobs Index is comprised of a fixed set of Forbes Global 2000 organizations and gauges their hiring activity. These organizations use Kenexa’s large-scale recruiting solutions.

The Kenexa Employee Confidence Index (ECI) measures the degree of confidence employees have in their employers’ marketplace competiveness and their own careers. The ECI is measured quarterly using opinions from workers in Brazil, Canada, China, France, Germany, India, Italy, Japan, Russia, Spain, the United Kingdom and United States. Kenexa’s ECI was started in June 2008 and was normalized for each country to equal 100. Subsequent scores are reported in percents above or below that starting point. Data are available by country, industry, age, gender and job type.

Additional information about Kenexa and its global products and services can be accessed at www.kenexa.com.

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