Employee engagement is one of those soft factors in an organization that are hard to quantify, yet no less important to business success. Gallup defines employee engagement as “the involvement and enthusiasm of employees in their work and workplace.” Or, to put it simply, how happy your employees are to come in to work every day.
It makes intuitive sense that a company with high employee engagement would perform better than its peers – but are there data to back that up? Is there any proof that, beyond the warm-and-fuzzy feeling of a nice place to work, it’s worth investing time and money in improving employee engagement? A number of studies indicate that the answer is a resounding Yes.
Measuring employee engagement
Any initiative to improve employee engagement should start by taking a snapshot of where things stand today. Several methods have been developed in an attempt to put concrete figures on employee sentiment; these are usually based on surveys and interviews. One popular method involves calculating an “employee net promoter score”, which rates on a scale of 1–10 how likely an employee is to recommend their organization as a place to work.
The results of these surveys and interviews are then compiled in order to classify employees into three categories: engaged, not engaged, and actively disengaged. Engaged employees are those who are highly enthusiastic about what they do and drive their teams forward. Not engaged employees tend to be detached from their company culture; they execute tasks as required, yet without passion. Actively disengaged employees, the most noxious, are resentful about certain aspects of their jobs and could even try to undermine their coworkers’ achievements.
The goal is to move workers out of the “actively disengaged” category and into the “engaged” category insofar as possible. Research has shown that companies successful in doing so do see tangible benefits financially, with impacts on both the top line – through enhanced customer satisfaction and higher revenue – and the bottom line, through greater productivity and lower costs in a number of areas.
Benefits to the top line: Higher revenue
A study conducted by Taleo Research in 2009 found that organizations with highly engaged employees enjoy 26% higher revenue per worker [1], and that such organizations deliver 13% greater total returns to shareholders. That’s probably because employee engagement translates directly into an employee’s willingness to exceed their job requirements and go the extra mile to meet customer needs. This echoes a key finding from a more recent PricewaterhouseCoopers study, which estimates that employees most committed to their organizations put in 57% more effort on the job [2].
The PwC report corroborates what researchers at Northwestern University [3] concluded a few years earlier: there’s a direct link between employee satisfaction and customer satisfaction, and between customer satisfaction and improved financial performance. What’s more, this study also provided clues for what companies can do to improve employee satisfaction, stating that organizational communication – or how well people dialogue with each other, both upwards and downwards – is the key determining factor.
Improving the bottom line: Greater productivity and lower costs
Perhaps the most comprehensive study on the financial impact of employee engagement is the one done by Gallup. It examined differences in a number of cost metrics between top- and bottom-quartile business units. For instance, Gallup found that teams in the top quartile for employee engagement had 18%higher productivity, 23% greater profitability, 81% less absenteeism, 28% less shrinkage, and 43% less employee turnover relative to their bottom-quartile peers.
Turnover in particular is a key factor in many studies on employee engagement, as it constitutes the most direct impact and carries a substantial cost. New employees must be found and then trained – a process which can take over a year. The PwC study is particularly telling when it comes to the link between employee engagement and turnover; it revealed that employees most committed to their organizations are 87% less likely to resign than those who consider themselves disengaged. And because happiness matters, it’s also worth mentioning a study by Oxford University’s Saïd Business School [4] which found that happy workers are 13% more productive.
A solid business case
Research shows that the business case for investing in employee engagement is clear. Employees who are more satisfied are more productive, less likely to leave, less likely to undermine team spirit, and more willing to make an extra effort to please customers – and consequently bring in additional business.
A key component of employee engagement is workplace culture, and one way of improving that is through improved workforce communications. Intranet systems designed to encourage communication, like the one we’ve developed at ahead, connect workers and provide a forum for sharing achievements, building workplace communities, and opening up dialogue at all levels.
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[1] Alignment Drives Employee Engagement and Productivity, Taleo Research White Paper, 2009.
[2] The keys to corporate responsibility employee engagement, PricewaterhouseCoopers, February 2014.
[3] Linking Organizational Characteristics to Employee Attitudes and Behavior – A Look at the Downstream Effects on Market Response & Financial Performance, Northwestern University, 2005.
[4] Does Employee Happiness Have an Impact on Productivity?, Saïd Business School, Oxford University, 2019.
