Measuring the Impact of Employee Engagement
March 10, 2017
In an era when nearly 70% of U.S. employees report being “not engaged” or “actively disengaged at work ¹, many companies are scrambling to determine their level of employee engagement and, if it's low, whether that's having a negative impact on their business.
Employee engagement - or how motivated staff is to perform their jobs - can impact businesses in different ways. Depending on the type of business and the employee role, the impact of low engagement levels can affect different business metrics.
Though poor engagement universally affects employee productivity and turnover rates, it can extend to a broader range of impacts, including everything from sick days taken to customer loyalty. For customer-facing staff, employee engagement levels affect their interactions with customers, impacting everything from customer satisfaction, customer loyalty, and even the company’s brand and reputation. For manufacturing businesses, low engagement correlates to higher rates of safety-related incidents. Similarly, across most businesses, absenteeism, sick days, and health claims (related to company health plans) are all impacted by employee engagement levels. In all of its various forms, poor engagement also correlates strongly to decreased sales and profits.
Regardless of the impacts you observe and measure, it’s important to understand these are the outcomes of poor engagement. And so any effort to improve engagement should start with analyzing why your employees are unengaged in the first place. A good understanding of the key drivers will arm you with the information needed to develop an action plan. Then, when it comes to business-casing the investment required to support your plan, you’ll know which metrics you can expect to impact. And you’ll be able to show the ROI from improving the metrics you believe you can impact through your action plan.
From analysis to action - national retail chain case study
Vision Source, a retail optical chain with 4,000 locations, realized that its franchise employees did not view themselves as “salespeople”. In particular, staff did not make a point of attempting to cross-sell or upsell patients as often as they could. The chain determined that this was largely due to a lack of system-wide sales training as well as motivational tools to focus front-line staff on making the effort to promote certain products and services.Given this assessment, Vision Source put in place a system-wide sales motivation program that included online training, reference materials, and sales incentives.The impact was immediate. Employees suddenly had access to training that helped them improve their on-the-job performance and attractive incentives for selling certain higher margin products and services. Employees felt more empowered and motivated. And the result was a significant increase in the year-over-year growth rate. ²
Impact statistics from the field
As presented earlier, the impact of poor employee engagement varies by business, industry, and employee role. Here are statistics³ from companies that have implemented employee recognition programs in which the focus is on recognizing and rewarding behaviours that reflect the company’s core values:
90% of companies say it has positively impacted engagement, resulting in a more meaningful and happier work environment.
68% say it has positively impacted employee retention. The estimated cost of replacing an employee ranges from one to three times his or her annual salary and the average company loses about $1 million with every 10 professional employees who leave.
37% say it has positively impacted employee safety, resulting in reduced absences from work-related injuries, lower injury-rates, and lower costs associated with worker medical expenses, worker replacements, training, and insurance premiums. On average, $1 invested in injury prevention returns between $2 and $6 in direct savings.⁴
29% report a positive impact on health and wellness goals, reducing the number of sick days taken, paid sick leave and lost productivity. Engaged employees are absent two-thirds less than the employees who are disengaged and unhappy.
Brand and Reputation
Organizations with 50% or more of their employees rating themselves as “engaged” retain over 80% of their customers.⁵ More highly engaged employees provide a better customer experience, which, in turn, promotes greater customer loyalty. In fact, companies in the top quartile of employee engagement experience a 10% higher customer rating than those in the lower quartiles. Improving the customer experience may pay for itself as U.S. brands are reported to lose approximately $41 billion each year from poor customer service.⁶
A high employee turnover rate correlates with inventory shrinkage. Inventory shrinkage is estimated to cost retailers a staggering $30 billion annually, and half of that loss, or $15 billion, is attributable to employee theft.