Category: The ARC Way

ROI of Employee Engagement

When it comes to ROI, employee engagement is critical in driving success. Investing in employee engagement is not just a best practice, it is a requirement for your organization’s long-term success.

Employee engagement comes at a cost — and those evaluating the budget may be compelled to push back. But it is difficult, if not impossible, for an organization to achieve success without the backing of a dedicated team of engaged employees.

There are clear, compelling reasons why even the most skeptical Executive Team can embrace the value of engagement. Scholars, consultants, and companies have been researching the ROI of employee engagement for many years and the correlative data revealed in their research is significant.

Whether you’re trying to make the case for purchasing an engagement tool, implementing an employee recognition program or just planning next week’s team-building offsite, here are just three reasons why you cannot afford not to prioritize employee engagement.

Engaged Employees Are More Productive Employees

All businesses want to have productive employees, but productivity is only one part of the equation. According to a 2016 Gallup report, organizations with high employee engagement rates are 21% more profitable and 17% more productive than those with low engagement rates.

There is compelling evidence to support that engaged teams work harder and produce higher-quality results. It is really that simple.

Ultimately, when organizations take action to make sure employees are engaged, they save money and increase productivity.

Disengagement is Costly

Every employee is a long-term investment, from the upfront cost of recruiting them to the time required to train them. So, it should come as no surprise that the cost of losing an employee can range from 50% to250% of their annual salary. Researchers and HR Professionals will all agree that disengaged employees tend to not be loyal to their organizations. Specifically, research outlined in the 2016 Gallup report noted that organizations in the bottom quartile of engagement scores experience 41% higher turnover.

And when employees start looking for their next opportunity, you will have to start the costly hiring, onboarding, and training process all over again.

You may be thinking “Not every disengaged employee leaves, though.” Let’s look at what an organization can expect when a disengaged employee doesn’t leave?

Gallup estimates 17.2% of the U.S. workforce is actively disengaged. This means employees are unhappy and acting out that unhappiness at work in the form of tardiness, missed workdays and decreased productivity. In fact, Gallup has estimated that a disengaged employee costs an organization approximately $3,400 for every $10,000 of salary.

Why would we incur such extreme costs by choosing not to invest in employee engagement?

Engagement Drives Profits

Research shows that an engaged workforce correlates to the success of an organization in many different ways, one of which is profitability. Let’s look at just a few key research findings.

Gallup researchers studied the differences in performance between engaged and actively disengaged work units and found that those scoring in the top half on employee engagement nearly doubled their odds of success compared with those in the bottom half. Those at the 99th percentile had four times the success rate of those at the first percentile.

The Corporate Leadership Council studied the engagement levels of 50,000 employees around the world to determine the direct impact on both employee performance and retention. They found that engaged companies grow profits as much as three times faster than their competitors.

According to research conducted by Towers Perrin, companies with engaged workers have 6% higher net profit margins.

It is clear that the investment in employee engagement will pay dividends to your organization.

If companies want to boost productivity and profitability while reducing attrition and disengagement losses, they must engage employees. Choosing to make that investment today will allow for a greater return for your organization in the future.