A Compelling Business Case for Employee Engagement Initiatives

employee engagementAre you frustrated from trying in vain to get your finance department or other senior executives to understand the value of measuring and building employee engagement?  If so, you’re not alone. I’ve talked to thousands of managers and HR professionals who are at their wits end trying to justify the cost of such initiatives.

Sometimes people in the finance function are quick to question the cost of “that soft and fuzzy people stuff.” (I’m allowed to say this because I spent a large part of my career in finance.) But the statistics below will give you great fodder for enlightening the naysayers and turning them into passionate believers in the value of employee engagement.

Research on Employee Engagement

The best-in-class or most engaged organizations (those regularly defined as being in the top 10 percent) garner the following awesome business and financial outcomes compared to those organizations with average levels of employee engagement:

  • 20 times more innovation and creativity.
    • 59% of Engaged Employees report that their job brings out their best creativity versus only 3% for the Disengaged Employees.1 Needless to say, this heightened out-of-the-box thinking pays huge dividends in creative roles and industries.
  • 44% Higher retention.2
  • 37% Higher sales.3
  • 125% Less burnout/job stress.
    • Burnout and lack of work-life balance is the number one reason people contemplate resigning from their jobs.4
  • 66% Lower absenteeism.
    • Absenteeism costs the average North American employer $3,600 per hourly employee, and $2,650 per salaried employee, per year.5
  • 51% Less turnover.
    • Turnover costs the American economy over $300 billion each year. Replacement costs for an employee resignation run anywhere from one to two years’ base salary for that position.6
  • 53% of the Actively Disengaged, a.k.a. “quit and stay” employees, are content to continue to cash their paychecks as opposed to begin to look for new employment.7
  • Communication is five times more likely to be seen as a positive by the employees.8
  • Higher volunteerism by employees, leading to 31% higher productivity.9
  • Much better safety compliance, and thus, fewer workplace accidents. Engaged business units have 62% less safety incidents than their unengaged counterparts.10
  • Significantly lower instances of employee theft, or what the retail industry commonly calls “shrinkage.” Companies above the 50th percentile on Employee Engagement versus those in the bottom half experienced a 123% higher success rate in eliminating this theft.11
  • Engaged employees are linked to engaged customers at a high correlation coefficient of .85.12

Employee Engagement Makes a Difference in Hospital Outcomes

One of the most meaningful metrics is specific to the healthcare industry. Sadly, in America, you are five times more likely to die of a hospital-born infection than you are a homicide.13 Why are so many infections creating these needless deaths? The primary reason is the lack of proper hand washing by caregivers. Thus, knowing that there is a near-perfect correlation between Employee Engagement and hand washing compliance (a .99 correlation coefficient according to HR Solutions), increasing engagement actually saves lives!

Employee Engagement and Ethics

Employee Engagement Makes a Difference in Ethics

Increasing Employee Engagement also increases ethical behavior. In fact, the two topics are highly correlated at a .73 coefficient.14 One can only wonder how unengaged GM’s engineers were when they decided that $1 per car was too costly to fix the faulty ignition switch that was ultimately linked to the pointless deaths of 13 people. The same Hay/ERC study also reported that Engaged Employees were much more likely to report misconduct than their unengaged and disengaged coworkers. A review of the internal memos at GM clearly showed that although many employees noticed the switch problem that could cut off engines and disable airbags, power steering and power brakes, the company failed to recall 2.6 million cars until more than one decade later. In this case, a culture of Ambivalence and Disengagement tragically cost 13 lives, or maybe more.

Employee Engagement Makes a Difference in Profits

Lastly, if you are attempting to sell an Employee Engagement Initiative or a survey to CFOs or other executives who only cares about “the bottom line,” share this metric with them:

“Best-in-class organizations are 350% more profitable than organizations with average levels of Employee Engagement levels.”15

The American author/speaker Zig Ziglar once said, “Profitability comes from loyalty, productivity, and having a character base from which to work.” My hope is that your leaders aspire to build a character base which puts the Human back into Human Capital and genuinely value employees over money. As my Grandmother Rita said to me many times growing up, “Kevin, one hand washes the other.” So true.

1. Gallup 2009 Q12 Meta-Analysis
2. Gallup 2013 State of the American Workplace
3. September, 2013 Before Happiness, Shawn Achor
4. Gallup 2012 Q12 Meta-Analysis Report
5. Forbes, July 2013 The Causes and Costs of Absenteeism in the Workplace
6. Gallup 2013 State of the American Workplace
7. Modern Survey Trends in Employee Engagement – 2013
8. HR Solutions 2007 The Link Between Workplace Communication and Employee Engagement.
9. September, 2013: Before Happiness, Shawn Achor
10. 2012 Q12 Gallup Meta-Analysis
11. Gallup 2013 State of the American Workplace.
12. Harvard Business Review 1994 and updated July, 2008 Service-Profit Chain Reports
13. Centers for Disease Control and Prevention: 2005 Hospital-born Infection Report
14. July, 2010 Joint Report by The Hay Group and Ethics Resource Center
15. March, 2008 – Employee Satisfaction Contributes to the Bottom Line – The Wharton School of Business

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