Business Value of Employee Engagement: How to Measure Employee Enagement

To be remarkable in today’s fast-paced business environment, companies need an engaged and motivated group of employees who are passionate about their organization’s success. Many business leaders and HR professionals have a hard time measuring the impact of engagement in their organizations. In this blog post, we will discuss the business value of having an engaged workforce and provide several important metrics that your organization can track when it comes to employee engagement.First, let’s define what engagement and disengagement look like in an organization:

Engaged Employees:
Willing and able to contribute to company success as well as infuse passion into their work (extra energy, brainpower, and time)

Non-Engaged Employees:
Focus on accomplishing tasks vs. achieving an outcome or goal. Often feel their contributions are being overlooked, and their potential is not being tapped

Disengaged Employees:
Disruptive and negative toward the organization and its mission; moreover, they undermine what their engaged co-workers accomplish
Business Value of Employee Engagement:

The stats below show the current level of engagement in the North America, and the cost of disengagement, including the cost of lost talent:

    • Only 22% of our workforce are engaged, 68% are not engaged, and 11% are disengaged (Towers Perrin’s Global Workforce Study)

 

    • In the U.S., the estimated cost of disengagement in the workplace is over $350 billion in lost productivity, accidents, theft and turnover each year (The Economics of Engagement by Allan Schweyer with Human Capital Institute and Enterprise Engagement Alliance)

 

    • Talent replacement costs an organization between 30% and 50% of the annual salary of entry-level employees, 150% of middle-level employees and up to 400% for specialized, high level employees (Ross Blake, Employee Retention: What Employee Turnover Really Costs Your Company)

 

 

Financial metrics are easy enough to quantify; however, when it comes to more qualitative aspects, such as talent engagement, it can be harder to measure; however, we suggest you try because the benefits will be a more in-depth understanding of your workforce. Below are results of recent studies that have been conducted to measure the business value of employee engagement:

    • High-engagement firms grow their earnings-per-share (EPS) at a faster rate (28%) while low-engagement firms experienced an average EPS growth rate decline of 11.2% (Towers Perrin, Closing the Engagement Gap: Global Workforce Study)

 

    • Highly engaged firms had a shareholder return that was 19% higher than average in 2009. In low-engagement organizations, shareholder return was actually 44% below average (Hewitt Associates)

 

    • Increased levels of employee engagement has been correlated with greater customer satisfaction, productivity, profit, and decreased turnover, absenteeism, and accidents. Resulting impact on revenue ranged from $960,000 to $1,440,000 per year per business unit when comparing those companies in the top quartile on employee engagement versus those companies in the bottom quartile. (Business-unit-level relationship between employee satisfaction, employee engagement, and business outcomes: A meta-analysis. Journal of Applied Psychology)

 

    • Engaged employees – work more effectively, instead of just working more; find ways to improve; share information with colleagues; develop creative solutions; provide suggestions; speak up for the organization; and try harder to meet customers’ needs, leading to repeat business (Schweyer)

 

 

Measuring Employee Engagement:

In 2009 Gallup accumulated 199 research studies across 152 organizations in 44 industries and 26 countries and they concluded that there is a direct correlation between employee engagement and company performance in the form of customer loyalty, profitability, productivity, turnover, safety, absenteeism, shrinkage, and quality. Below are the questions that employees were asked in order to measure & quantify employee engagement. You can create a similar questionnaire to measure and track engagement in your organization. You can ask these questions monthly, quarterly, or annually and have employees rate how much they agree or disagree on a scale of 1 to 5.

  • Am I satisfied with my company as a place to add value?
  • Do I know what is expected of me?
  • Am I using my strengths at work?
  • Was I recognized for a job well done this week?
  • Does my supervisor support my development and care about me as a person?
  • Do my opinions matter?
  • Do I understand the overall goals of my company and where my work fits in?
  • Am I surrounded by teammates who are motivated and doing great things?
  • Do I have a close friend at work?
  • Do I have access to feedback in order to progress in my role?
  • Are there opportunities to learn and grow?

Conclusion:

We all agree that employee engagement is important. Measuring the actual business value of an engaged workforce and how engaged your employees are is hard. However, it is very important as you’ll be able to better allocate your limited resources accordingly: What Gets Measured, Gets Managed!

You can use the examples and guidelines in this blog to create your own employee engagement metrics. Do you currently measure engagement in your company?

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  • http://timeclocksandmore.com/ Time Clock

    Employees work better when they’re engaged, whether it’s by increasing incentives or creating a new, more positive company culture. Employees should want to punch in on the time clock, not dread it!

    • http://www.7geese.com/ Devon Thompson

      Interesting. I would also say that employees work smarter when they are engaged. And perhaps instead of increasing incentives we could change the incentives to make them more meaningful. At 7Geese we believe that our connected world allows us to focus on performance results which can be accomplished anytime and anywhere versus the traditional 9-5 work week that can lead to ‘busy work’. Thoughts?

  • http://www.resourcefulhr.com/ Scott Verrette

    There is no doubt that positive employee engagement has a dramatic impact on business performance, and the facts presented in the blog posting are quite compelling. One element that I would like to see explored in more detail is a differentiation of the impact of high/low employee engagement on various types of industries. It strikes me that in very technical industries (e.g. the life sciences) where a vast amount of the employee effort is focused on often solitary, concrete, methodical/tactical work there might be a somewhat lessened impact of low organizational engagement if the employee IS deriving personal satisfaction (intellectual stimulation) from their very finitely defined piece of the overall organizational operation.

    I also think there could be some valuable additional questions added to the list of engagement questions above. Two that come to mind as particularly important are “Do I fully understand my own strengths, aptitudes and interests, and am I provided the opportunity to articulate/convey that info to the organization-at-large and those with/for whom I work?” and “Does the organization maintain some type of database of each employee’s respective strengths and interests so that strategic opportunities for development and skill utilization can be readily identified?”

    • http://www.7geese.com/ Devon Thompson

      Scott – I love your additional questions to gauge employee engagement. Taking the time to explore your strengths and passions in a self-inventory is very motivating. I recently read Marcus Buckingham’s ‘Now, Discover Your Strengths’ and found that the online strengths finder test was really helpful for me to re-focus my efforts at work and at play! Thanks for sharing.

  • http://twitter.com/mkajbaf Mehdi Kajbaf

    I just recently finished reading a couple books by Jeffrey Pfeffer which discuss high performance management systems, and they make a solid case for higher engagement as well. However, I think it is difficult to convince business leaders of the value of engagement despite all of the numbers because it is a long term endeavor. Extracting the full value of human potential in an organization is a product of many factors including culture, engagement, leadership, talent among others and it takes many years to fully work. Unfortunately, this sort of vision is lacking, and I really think it’s difficult to teach.