No business leader would consciously choose not to adopt strategies that would make them four times as successful as their competitors.
But why is employee engagement not a primary strategy for more organizations around the globe?
What are they missing out on?
How does employee engagement affect business results exactly?
Gallup Report on Employee Engagement Key Findings
To first get a glimpse into the global impact of employee engagement, let’s look at Gallup, the world leader in meaningful data about people and businesses.
We mentioned previously that companies with the highest rates of employee engagement are four times more likely to succeed than the companies at the opposite end of the spectrum.
Why is that?
Well, it’s pretty simple really.
Companies with poor employee engagement perform poorly because low employee engagement negatively affects these nine key business performance indicators:
- safety incidents,
- customer ratings,
- patient safety incidents,
- quality (i.e., number of defects),
- shrinkage (i.e., amount of theft), and
- turnover (for both high-turnover and low-turnover organizations).
The numbers are clear.
High employee engagement equals less absenteeism, less turnover, less theft and defects.
More safety, more profitability and better quality.
And happier customers!
Companies with better levels of employee engagement vastly outperform competitors in every area.
Performance, productivity and profitability.
Employee Engagement and Performance
The increased performance of engaged employees shows up in several forms.
The aforementioned data shows us that engaged employees help companies receive higher customer approval ratings, reduce product defects and loss of product, and increase safety, resulting in fewer incidents.
Levels of higher performance could also be recognized by improved NPS results (both external and internal), lower churn/turnover, and can be noticed in any well defined metrics, KPI’s, and OKRs.
All of these factors combined highlight the invaluable impact of increased performance on an individual and company level.
Every organization yearns for more productive employees, but productivity isn’t everything.
Some companies try to squeeze productivity out of employees with mandatory overtime, strict quotas, and restrictive policies.
While this may temporarily improve productivity, it will cause long-term harm to the employees and the business, and will likely cause a net loss in overall productivity.
Employee Engagement and Productivity
In addition to increased performance, there is a strong correlation between employee engagement and productivity.
The more employees are engaged at work, the less resources are needed to reach that higher level of performance.
Again, you can look to your internal metrics to see your organization’s resource expenditures. Comparing this to the performance metrics above, you can see if employees are more productive overall.
Hint: If your employees are engaged, you will see increased productivity as well.
As the Gallup data shows, companies with higher employee engagement see over 20% higher productivity than the competition.
Engaged employees are not just effective, they are also committed to what they’re doing.
A workplace that makes employee engagement a priority is full of growth opportunities for both the business and the individuals working there.
Because engaged employees aren’t simply following orders and waiting for time to pass before they can hurry back home in the evening.
Engaged employees are actually happy at work. They own their projects and actually want to do great work.
Employee Engagement and Profitability
While only you can figure out the exact financial impact of engagement (or lack thereof) on your business, even the surface level data makes it obvious that the numbers are massive.
Having 85% of your staff disengaged with each person being far less productive would be like flushing tens of thousands of dollars of payroll down the drain, even for small businesses.
Calculating How Much Employee Engagement Impacts Profitability
Let’s do some quick math based on a very conservative 10% drop in productivity for disengaged employees.
For a company of 500 people, 85% disengagement means 425 people are some level of disengaged.
If your average company salary is $50,000, you’re losing $5,000 for each of those disengaged employees.
You would be losing $2,125,000 annually.
That’s over 2 MILLION dollars a year down the drain solely because your employees aren’t engaged in their work.
Thankfully, the reverse is also true and there’s something you can do about it!
More engaged employees means better performance and higher productivity, netting your company more profitability even if you were just measuring production impact.
Beyond the individual productivity factor
Higher employee engagement is not just about individual productivity.
Higher employee engagement also means less burnout, less turnover, less absenteeism, less safety incidents, less shrinkage, less quality defects, and more.
Going even deeper, more engagement means less need for constant supervision, less time spent on coaching, or discipline.
This means more hours saved for your managers and supervisors - who are often among the highest paid employees.
All of these factors together made it clear how creating an environment of high employee engagement reaps countless benefits for your organization, increases profits and reduces spending, and helps you stand out from the competition.
Just by dipping our toes in the vast pool of information that exists on employee engagement, we can see how tremendously impactful it is for both your people and the business’s bottom line.
It’s obvious now how important it is to have higher levels of employee engagement, but getting there is another task all its own.
Don’t worry. You’re not alone!
In upcoming articles, we’ll discuss how to improve your employee engagement and how to measure the effectiveness and progress of such implementations so that you can identify what’s working, what’s not working, and where to focus your attention next.