Employee engagement is one of the soft factors in a company that is difficult to quantify, but no less important for business success. Gallup defines employee engagement as "the commitment and enthusiasm employees have for their work and workplace". Or, to put it simply, how happy your employees are to come to work every day.
It makes intuitive sense that a company with high employee engagement will perform better than others - but is there data to back it up? Is there evidence that investing time and money in improving employee engagement is worthwhile, apart from the feel-good factor of having a nice place to work? A number of studies show that the answer is a resounding yes.
Any initiative to improve employee engagement should start with a snapshot of the current situation. Several methods have been developed to express the mood among employees in concrete numbers; these are usually based on surveys and interviews. One popular method is to calculate the "Employee Net Promoter Score" , which indicates on a scale of 1-10 how likely an employee is to recommend their company as a place to work.
The results of these surveys and interviews are then compiled to divide employees into three categories: engaged, disengaged and actively disengaged employees. Engaged employees are those who are enthusiastic about their work and drive their teams forward. Disengaged employees tend to isolate themselves from the company culture; they do their jobs as required but without passion. Actively disengaged employees are resentful of certain aspects of their work and may even try to undermine the performance of their colleagues.
The goal is to move employees from the "actively disengaged" category to the "engaged" category where possible. Research has shown that companies that succeed in this have tangible financial benefits that impact both revenue - through higher customer satisfaction and increased revenue - and profit - through higher productivity and lower costs in a number of areas.
A 2009 study by Taleo Research found that companies with highly engaged employees generate 26% higher revenue per employee and that such companies offer shareholders a 13% higher total return. This is probably because employee engagement is directly reflected in their willingness to go beyond the minimum requirements of their job and go the extra mile to meet customers' needs. This echoes a key finding of a recent study by PricewaterhouseCoopers, which estimates that employees who are the most committed to their organization are 57% more committed to their work.
The PwC report confirms what researchers at Northwestern University found a few years earlier: There is a direct correlation between employee satisfaction and customer satisfaction, as well as between customer satisfaction and improved financial performance. In addition, this study also provided clues as to what companies can do to improve employee satisfaction. It says that organizational communication - or how well people communicate with each other, both upwards and downwards - is the key factor.
Perhaps the most comprehensive study of the financial impact of employee engagement is the research conducted by Gallup. It analyzes the differences in a number of cost metrics between business units that are in the top and bottom quartiles. For example, Gallup found that teams in the top quartile of employee engagement had 18% higher productivity, 23% higher profitability, 81% less absenteeism and 43% lower employee turnover than their counterparts in the bottom quartile.
Turnover in particular is a key factor in many employee engagement studies, as it has the most direct impact and is associated with significant costs. New employees need to be found and trained - a process that can take over a year. The PwC study is particularly revealing when it comes to the link between employee engagement and turnover: it found that employees who are most engaged with their organization are 87% less likely to quit than those who consider themselves disengaged. And because happiness with your job is so important, it's also worth mentioning a study by Oxford University's Saïd Business School, which found that happy employees are 13% more productive.
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