Show Me the Money: The Bottom Line Impact of Employee Engagement

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Jun 11, 2013

Employee engagement seems to be the buzzword constantly reverberating throughout the global HR arena. But is it legitimate?

I mean, really, does it matter if employees are engaged? Are organizations with engaged employees any better off?

And I’m not talking about employees being better off emotionally (no one cares about that). I mean does the company have a stronger financial performance and operational efficiency with engaged employees? If not, then employee engagement is just another time-wasting hoax for executives to deal with until the HR department comes up with a bigger-and-better distraction to throw their way.

Anyone who agrees with the statements and questions posed here hasn’t taken the time to do a routine Google search on employee engagement research (and obviously has no heart). Scholars, consultants, non-profits, and companies have been researching the validity of engagement for quite some time. The correlative data revealed in their research initiatives is significant. Here are some recent findings:

Operating income

In research prepared for the UK government (Engaging for Success: enhancing performance through employee engagement), David MacLeod and Nita Clarke found the following correlations to employee engagement:

  • Companies with low engagement scores earn an operating income 32.7 percent lower than companies with more engaged employees.
  • Similarly, companies with a highly engaged workforce experience a 19.2 percent growth in operating income over a 12-month period.

Profitability & attrition

The Corporate Leadership Council studied the engagement level of 50,000 employees around the world to determine its direct impact on both employee performance and retention. Here are two important findings:

  • Engaged companies grow profits as much as 3X faster than their competitors.
  • Highly engaged employees are 87 percent less likely to leave the organization.

Customer loyalty, productivity, and turnover

Any business owner can tell you that optimizing productivity levels is an uphill battle, and customer loyalty is what companies depend on to make payroll. (If only employees would understand that — right?)

In an article published by Jonathan Pont, the most-engaged workplaces experienced the following performance metrics:

  • 2X higher customer loyalty;
  • 2X higher productivity; and,
  • 2X lower turnover.

 The cost of disengagement

As if the business metrics that correlate to high levels of employee engagement aren’t convincing enough, let’s take a look at how much disengaged employees can cost a company. McLean & Company found some very compelling correlations:

  • A disengaged employee costs an organization approximately $3,400 for every $10,000 in annual salary.
  • Disengaged employees cost the American economy up to $350 billion per year due to lost productivity.

Ouch. Bottom line (pun intended): if companies want to bolster productivity and profitability, increase customer loyalty and operating income, and slash attrition and disengagement losses, they have to engage employees.

Don’t shoot the messenger.

This was originally published on the DecisionWise blog.

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