Over thirty years of research, data and practice have proven that employee and client disengagement negatively affects an organization’s financial performance, client relationships, employee well-being, and shareholder returns. According to Gallup, about 70% percent of the workforce as a whole and 55% of managers are disengaged. Gallup’s State of the American Manager Report also shows only 1 in 10 managers have the natural talent to manage — much less be expected to lead, mentor, develop, and retain talent.
According to our research, an employee’s level of engagement represents his or her emotional and psychological commitment to their organization. Fully engaged employees are emotionally and rationally attached to their organizations and are eager to go beyond expectations to help their companies thrive.
Disengagement, on the other hand, results in disgruntled and unsatisfied workers who are less productive and less creative. The resulting culture creates high employee turnover. According to the Society of Human Resource Managers, the cost of employee turnover can range from an average of 60% of a person’s salary to up to 4 times the annual salary for key executives/key personnel.
According to Compdata Surveys, the average turnover rate for all industries is 17.8%. With some simple math, it’s easy to see how turnover for an SMB can create a real profit drain. This translates to an overall economic loss — Gallup reports that disengagement results in an economic loss to the U.S. economy of $450-$550 billion each year. We all pay extra for the disengagement costs that are built into the products and services we buy every day.
Solving the Engagement Problem
Data show 87% of executives think engagement is very important — but fewer than 25% have an actual plan in place to improve it. Those that address employee disengagement often spend vast amounts of money on ineffective programs. Per a 2012 Bersin & Associates report, companies spend around $720 million on measuring and improving engagement to gain a competitive edge.
The problem is that many of these expensive “engagement” activities are silo solutions put in place without integration or without a solid foundation of data from an employee engagement survey. The survey data is needed to measure, track effectiveness, and provide employee feedback to validate their value. Silo program examples include recognition and rewards programs; health and wellness, magic do-it-all human capital management and performance software; “perks” like ping pong tables, free snacks, nap rooms, and all the Red Bull you can drink. Many companies believe that engagement is derived by these high-level programs/perks. Our research shows these program can be helpful, but they don’t drive engagement. Engagement is driven by communication.
Building a highly engaged workplace requires that it become part of the culture organizationally, yet be implemented at the team level. As part of this cultural alignment, engagement must be supported by leadership by establishing the accountability and importance of an engaged culture.
The positive impacts of an integrated approach are well documented. These holistic programs result in measurable before-and-after differences in key performance indicators like employee turnover, customer ratings, client retention, productivity, overall profitability, product quality, absenteeism, shrinkage (theft), and safety-related incidents.
One of the biggest hurdles for SMB owners and managers is their lack of familiarity with the engagement business strategy. Employee and client engagement are rarely taught at the college or in business school level. In addition, due to limited budgets, SMBs are often underserved by the large engagement consulting firms. What we hear most often from our SMB clients is “where do I start and what does an employee engagement program look like?”
Improving Engagement is a Process
Consider hiring a company that specializes in employee engagement to generate impactful and long lasting results. The following is a simplified version of a programmatic approach to helping SMBs improve employee engagement.
- Measure – Start with a confidential, 3rd party, science-based (i.e., not do-it-yourself) employee engagement survey that is tied to business performance. There are many surveys in the marketplace from which to choose. A survey partner that can scientifically link their index to specific business outcomes such as turnover, per person productivity, safety, profitability and absenteeism, will help you to know whether you are getting a return on your investment. There are many companies that quote this type of linkage anecdotally, though it’s important to recognize that not all engagement surveys are created equal.
- Align – In this phase, you will want to make sure that everyone is educated about their role in building an engaged work culture. Leaders should establish importance and accountability around the organization’s engagement efforts. Discuss engagement frequently and use the information gathered in the survey to inform some of their decisions relative to new projects or changes that have been initiated. Managers should meet with teams and create dialogue around the survey results. Remove any barriers (real or psychological) that may be impacting your team’s performance. Employees should be instructed on how they can influence their own engagement as well.
- Perform – A worthwhile employee engagement program should not be about how happy we can make people, but rather how we can help them perform at a higher level. Generally, people want to feel a sense of accomplishment in their jobs. A well-designed and well-executed employee engagement program will assist team members in getting what they need so that they can deliver at a higher level. An engagement program should be aimed specifically at a certain set of business metrics (e.g., safety ratings or turnover).
Implementing a successful and integrated employee engagement survey program isn’t always easy and requires a dedicated investment of time and capital. However, the bottom line outcome is improved business performance which leads to financial rewards. According to our research, fully engaged employees are:
- 5 times more likely to recommend their company’s products and services
- 40 times more likely to recommend their company as a great place to work
- 5 times more likely to spend their career with the organization
- 4 times more likely to say they plan to be with the company 1 year from now
- 9 times more likely to report they have an excellent work/life balance
Engagement also helps improve key performance indicators for the business:
- Profitability – Data show engaged employees create engaged customers. Fully engaged customers represent a 23% premium to a business.
- Worker’s Compensation – Engaged teams experienced a 48% decrease in work related injuries, resulting in $47,988 dollars less paid out per worker’s compensation claim.
- Man Hours Lost – For one organization, employees in the bottom half of engagement lost 8,100 man hours annually for safety. The top half of engagement lost only 936 man hours.
- Auto Service Market Share – Groups that grew their employee engagement year over year saw an 85% increase in their market share of automotive service clients.
- Retail Sales Market Share – Groups that grew their employee engagement saw a 69% increase in their market share.
- On-Time Delivery – On average, sites with higher levels of engagement had a higher percentage of on-time delivery.