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As an HR You are aware that your team should be focusing more on employee engagement, but to measure the real return on any such initiative is an arduous task. It’s a good idea in theory, but it keeps ending up at the bottom of your priority list because there are not many convinced takers. The feeling of Déjà Vu deepens. Well you are not alone. Employee engagement power packs individual performance in an organization, but do companies with more engaged employees’ race ahead of those with a less-engaged workforce? Can the company with engaged employees show a stronger financial performance and operational efficiency? If not, then employee engagement is just another well garnished but tasteless dish for executives to deal with until you the HR comes up with a bigger-and-better entertainment.
We know that understanding the ROI of Employee Engagement is critical to organizational success. Here are some finer points of ROI of employee engagement to help you make a strong case and be able to divert resources where it matters the most: your people.
Engagement’s prerequisite is that both our emotions and our actions are brought to the table—our hearts, spirits, minds, and hands. These represent our intense passion (the “heart,” is like a teacher who believes she is making a difference to kids), as well as a never-ending love for our work (“spirits,” much like the team spirit felt watching a winning team take the championship). But, feelings alone do not bring in results. Engagement needs action. That’s where the minds and hands come in. Employees with a focused mind innovate new products, identify and plug the quality issues, and ask themselves, “How could we make this process, even more, customer-friendly?” Then, the hands take over. This involves getting to work.
In an article published by Jonathan Pont, the most-engaged workplaces experienced the following performance metrics:
- 2X higher customer loyalty
- 2X higher productivity
- 2X lower turnover
Taking a cue from the above and adding one more we would today elaborate on the 4 main aspects to examine for results while assessing ROI of employee engagement.
- Productivity
- Absenteeism
- Turnover
- Speed of Onboarding
Let’s go through each one quickly.
Employee Productivity
Happier people are about 12% more productive, were the findings of a study done by UK researchers, who claim to have provided the first scientifically-controlled evidence of the link between human happiness and productivity
Absenteeism
Companies with high employee engagement exhibited 37% lower absenteeism, according to Gallup.
Employee Turnover
There is a 43% correlation between engagement levels and turnover. When engagement goes down, turnover goes up. If engagement goes up, turnover goes down.
Speed Of Onboarding
Michael Watkins in his book The First 90 Days by, explains how it usually takes 90 days before an employee starts adding real “value” to a company. In the book, he elaborates the importance of onboarding as a process. Optimizing the onboarding process, lets the employees start creating value much faster.
The Financial Benefits Of Employee Engagement
The Corporate Leadership Council in its study of the engagement level of 50,000 employees across the globe and its direct impact on both employee performance and retention reveals the following two key facts.
- Engaged companies grow profits as much as 3X faster than their competitors.
- Highly engaged employees are 87 per cent less likely to leave the organization.
Further, plenty of researches show that engaged employees lead to more profitable businesses.
- Companies with highly engaged employees have earnings-per-share levels of 2.6 x higher than companies with low engagement scores.*
- Organizations in the bottom quartile of engagement scores experience 41% higher turnover.*
The book Make More Money by Making Your Employees Happy, cites many stories of how happy employees lead to higher profits. Some noticeable piece from the book:
- A Jackson Organization study shows that companies that effectively appreciate employee value enjoy a return on equity & assets more than triple compared to firms that don’t.
- Fortune’s “100 Best Companies to Work For” stock prices rose an average of 14% per year from 1998-2005, compared to 6% for the market overall.
Here are a few more studies that show the clear ROI of employee engagement:
- Standard Chartered Bank discovered that branches with a numerically significant increase in levels of employee engagement (0.2 or more on a scale of five) witnessed a 16% higher profit margin growth than branches with decreased levels of engagement.
- Fabick CAT improved the “per cent of industry net sales” by 300% by focusing on employee happiness.
The reason for all of this lies in a concept called the Service Profit Chain. The service profit chain is the chain from the way your employees work internally all the way to customer delight and loyalty.
It all begins with having happier employees. Unless happy, they won’t treat the customers right, and without good customer service, you’ll never see repeat business from customers. If companies want to boost productivity and profitability, increase customer loyalty and operating income, and slash attrition and disengagement losses, they have to engage employees.
