Employee Engagement: What’s the ROI?
This year we’ve seen historical changes to the workforce. Come about by political elections, a pandemic, the Great Resignation, and a new generation of workers to name a few factors, employers across…
This year we’ve seen historical changes to the workforce. Come about by political elections, a pandemic, the Great Resignation, and a new generation of workers to name a few factors, employers across the nation are noticing a push for value and purpose at work. Simply working to pay the bills is no longer cutting it, individuals are demanding more. Assuming a traditional career route, an average American spends about 90,000 hours over their lifetime at work. With 90,000 hours of life on the line, individuals rightfully would like to see more purpose, meaning, value, and connection at work. This can be summed up as employee engagement, defined by Engage for Success as “a workplace approach resulting in the right conditions for all members of an organization to give of their best each day, committed to their organization’s goals and values, motivated to contribute to organizational success, with an enhanced sense of their own well-being.” While it may feel as if meeting these new demands is draining of time, energy, and company resources, the reality is that more engaged, inspired, purpose-driven employees, provide their employer’s benefits, too. Let’s talk about the return on investment of engaged employees. Employees who are inspired at work are generally more productive, more loyal to their company’s values, more innovative, more likely to spread the good word about their company, and less absent, both physically and mentally. As we evaluate each of these characteristics of inspired employees, we’ll also consider how this investment to create engaged employees contributes a return for employers and their company’s.
1. Engaged employees are more productive.
According to a 2016 study by Gallup, teams of engaged employees are 17% more productive than their less-engaged peers. Employers have been trying everything from exercise balls and office plants to insane incentives to increase productivity at work. While these efforts may show short-term results, they are essentially band-aid solutions. Instead, facilitating employee engagement treats the root of productivity issues. When employees feel aligned with their company’s mission and values, they feel motivated to spend discretionary time contributing to the company, thus the higher levels of productivity. With increased productivity, the return on investment of engaged employees is obvious, naturally, increased productivity leads to greater output and boosted profits. At the end of the day, profit is inarguably one of the top metrics for measuring business success, so investing time, energy, and company resources to inspire and engage employees is just that, an investment with an expected return.
2. Employee engagement drives innovation…and vice versa.
Engaged employees tend to be more innovative and creative at work. Funny enough, when employees have the opportunity to be innovative at work, they become more engaged and engaged workers are more innovative. So, employee engagement and innovation at work go hand-in-hand, working in a cycle. Several studies show that the more inspired employees are, the more innovative or creative they become:
- 2009: A McLeod study reports that engaged employees want to spend more of their time contributing innovative ideas to their business because they are driven by company values and purpose. The report reiterates this using case studies that show increased creativity from employees who feel more engaged at work.
- 2007: A Gallup study by Kreuger and Killham found that 59% of engaged employees feel that their jobs bring out their “most creative ideas.” This is compared to a mere 3% of employees who are not engaged and feel the same.
- 2015: A report published by the University of Sussex consolidated the results of 214 studies whose findings showed a significant link between innovation and engagement.
Businesses function at their highest potential when employees have the ability to think innovatively and creatively. The sharpness of a competitive angle is often determined by who has the most innovative ideas. Inspired employees who are offered the flexibility necessary to cultivate innovation may be the architect of an organization’s next big idea.
3. Engaged employees are loyal employees.
Here’s the breakdown: engaged employees are happy employees, happy employees are more likely to be all in, more committed to their jobs; it’s that simple. While job longevity seems to be a fading trend, loyalty still means a more profound dedication to the company and personal goals. Again, loyalty has historically been incentivized by raises, bonuses, and promotions. All along, the solution to employee loyalty has been right in front of us: employee engagement. By definition, employee engagement is an emotional commitment to the organization and its goals, leaving the employee feeling proud of his or her own work as well as the output of the company as a whole. Another influencing factor is that employee engagement helps employees to see the effects of their work over time, and feel that they are contributing to a larger whole, in turn increasing company loyalty.
When employees feel that their own values and goals are aligned with and accomplished alongside the company’s mission, they feel a greater sense of purpose and belonging, leading to higher levels of employee retention. The implication left for employers is that there is a lower turnover rate, saving the resources it costs to lose, recruits, and train even just one employee. Those resources include the monetary cost, of course, but also consider the time and energy an organization spares when employees stay dedicated to a company.
4. Inspired employees are more likely to spread the word about a great work environment.
While employee motivation and engagement are huge, arguably the biggest, factors in employee and company success, it certainly doesn’t hurt to have a good word floating around to your top choice talent. As is human nature, we tend to rave about the things that we enjoy, and even more so, the things that we hate. Employees are no different; whether the culture at work and level of engagement is excellent or less-than-stellar, word-of-mouth may be a factor in determining an employer’s recruitment fate. Engaged workers are more likely to spread the word and in turn, give the company a striking reputation as an employer. Investing in really making sure that employees are engaged means also investing in an impressive reputation. As aforementioned, this means a good word in the ear of leading talent, making recruiting a much more seamless and successful process.
5. Employee engagement leads to lower levels of absenteeism.
Absenteeism negatively affects company productivity, and it’s on the rise. In 2014, the average days lost per worker in a year was 8.8; in 2018, that number increased to 10 days missed in a year. It’s a nationwide issue, but it can easily be remedied by investing in inspiring employees. Absenteeism caused by systematic issues, meaning it comes from within an organization and its culture, needs to be addressed from the root. Improving company culture via employee engagement have shown a 41% decrease in absenteeism, according to a study by Gallup. This may feel like beating a dead horse here but simply put, engaged employees are happier than their disengaged colleagues because they feel valued and purposeful at work. Happy and engaged employees are going to show up for their employers with their best effort and a good attitude. Employees who are more present, physically and mentally, are just another ROI of employee engagement.
What is the cost of disengaged employees?
We’ve covered several aspects of the return on investment of engaged employees, but what about the cost to companies who choose not to invest in employee engagement? For one, employees will leave. In light of the Great Resignation, employers are learning that employees want more than just a paycheck out of work, and they’re ready to risk it all to find value and purpose in their careers. This year in September alone, a record breaking 4.4 million people quit their jobs, many complaining of poor treatment. Higher turnover rates can cost companies millions of dollars each year. According to Gallup, replacing a single employee can cost one to two times the employee’s annual salary—on the conservative side. For an organization of 100 people, employee turnover costs could range from $660,000 to $2.6 million per year. Gallup also estimates that disengaged employees cost the overall United States economy as much as $350 billion every year calculating for several factors. Specific expenses can vary by company, but here are a few contributing factors:
- Disengaged employees take more sick days or are late to work more often than engaged employees.
- The decreased levels of productivity by each disengaged employee costs their employer anywhere from $3,400 to $10,000 in salary.
- Lack of motivation among disengaged workers lends itself to missed deadlines and poor performance.
- Disengaged employees create disengaged customers and clients who are more likely to complain.
If employers don’t aim to inspire and motivate their employees, the outcome can be equally as influential in the opposite direction. Instead of a return on investment for engaged employees, there are additional costs bringing down overall company performance for organizations full of disengaged employees.
We are in the midst of a pandemic of an uninspired workforce. The solution is clear, proven, and beneficial to all involved parties. For employees, engagement means a happier work experience, a more purposeful and meaningful career, and a sense of greater work-life balance. Employee engagement must be planned, instituted, and invested in by organizations; it’s not as simple as an employee choosing to be engaged at work. Rather, employers carry the responsibility to invest in their employees by facilitating engagement. Though it may seem like a hefty cost to bear, the opposite is true. Resources spent on employee engagement come with an expectation for a return on investment. For employers, the ROI of employee engagement is greater innovation, higher levels of productivity, increased sense of loyalty, improved company reputation, and lower levels of absenteeism from their workers. On the other hand, opting for a route that does not include employee engagement brings massive costs to a company including lower productivity and higher employee turnover rates. Simply put, the proof is in the pudding. The sheer dollar amount that it costs to have a disengaged workforce should be motivating enough to invest in employee engagement. Meanwhile, employers who are pioneering the employee engagement effort are already reaping and showcasing the benefits. Today, the greatest competitive edge is employee engagement.