“Engagement” might rank as the number-one business buzzword of 2014. Human resources teams across the country launched attempts to track, measure, and boost employees’ “engagement.”
But did those efforts work? As 2015 rolls in, many executives are asking whether engaging with “engagement” for another year is worth it. Is “employee engagement” just another tired HR buzzword — or is it your key to profitable growth in 2015? These stats tell the story.
Engagement: Why is it important?
Engaged employees are emotionally connected or attached to the company’s success. Seeing how their goals and the company’s goals are connected, engaged employees are more likely to offer discretionary effort in their work — to do more than they “have” to.
Good engagement plans tend to boost employee happiness. But engagement itself is less about “making employees happy” and more about increasing the emotional investment each employee makes with the organization’s goals. The more invested an employee is, the more likely they are to go the extra mile to succeed. And those extra miles add up.
The High Costs of Low Engagement
If “engagement” describes the emotional investment an employee has in pursuing the organization’s goals, then “low engagement” occurs when employees have little to no interest in pursuing those goals. When employees aren’t engaged:
- They may not know what’s expected of them. According to Gallup chief scientist and engagement expert Jim Harter, knowing what’s expected is a “basic need” for employees. Workers who know what they’re at work to do are more likely to do it — and to do it efficiently.
- They may feel as if work is a waste of time. Fewer things “demotivate” a person like feeling as if their time has been wasted — and wasting workers’ time means wasting the company’s time as well.
- Performance suffers. One study by The Conference Board found a .51 correlation between engagement and performance in customer service, according to Forbes. A Gallup Business Journal article credits Fabick CAT’s 300 percent boost in “percent of industry net sales” to employee engagement. Low-engagement companies struggle to keep up.
- Retention suffers. Low engagement results in more absenteeism and higher turnover, costing the company more. One study cited in Forbes found a negative .43 correlation between a company’s employee engagement level and its turnover rates, while another found that turnover in a Fortune 100 manufacturing company dropped more than 10 percent when engagement plans were enacted.
- The “bottom line” suffers. Any executive who hears “our staff don’t know what their goals are, don’t do any more work than they have to, and have one foot out the door!” knows that the next quarter — or year — isn’t likely to be a good one financially.
Engagement boosts shareholder returns, revenues, and profit. One Hewitt Research Brief found that average total shareholder’s return (TSR) fell from 24.2 percent to 9.1 percent when engagement dropped from 60 percent to 50 percent. When engagement falls below 25 percent, most companies face a negative TSR.
The 2003 Towers Perrin Talent Report noted that “high-engagement” companies tended to ride one percent ahead of average revenue growth; their “low-engagement” counterparts tended to fall two percent behind average.
An ISR Report cited in Forbes found that the net profit margin for high-engagement companies averaged 2.06 percent. In the lowest-engagement companies, however, net profit margin dropped past zero, to -1.38 percent. According to a Gallup study of 23,910 business units, businesses in the top quartile for engagement averaged 12 percent more profitability than those in the bottom quartile.
Boost Engagement to Kickstart the New Year
The numbers don’t lie: focusing on employee engagement is a worthwhile endeavor for 2015. But like any business undertaking, it must be executed correctly to yield the desired results.
Here’s how to build engagement the “right” way to increase retention, boost performance, and produce the biggest ROI:
- Choose engaged leaders. To show employees how giving their best aligns with everyone’s interests, choose an engaged member of your company’s leadership to spearhead the engagement charge. Because engagement involves a sincere emotional investment, engagement programs are best led by example. Find the leader who is already emotionally invested and who regularly “goes the extra mile.”
- Make it measurable. “Improve engagement,” while a promising vision, isn’t concrete enough to help the front-line workers and managers who must turn “engagement” into results. Choose a metric you’ll use to measure engagement and set a target date two-to-three years in the future. The target should be ambitious, but reachable — if engagement really is improving.
- Recruit the HR department. Your human resources staff can do much to boost engagement by recruiting people whose career goals and work styles “fit” the company’s goals and culture. Don’t forget to contact your staffing firm as well: your recruiter brings a new perspective on your industry to the table, and will surely have recommendations for improving employee fit.
- Talk to managers. If employees seem bewildered, unsure of the company’s goals, or unwilling to do more than they absolutely must, start with management. Do managers know what the goals are? Do they understand how to show employees the ways in which employees’ work supports these goals — and how employees benefit when the goals are met? Do managers and employees “fit” well together in terms of skills, work styles, and personalities? Find out what’s going on down on the “front lines,” make needed changes, and require managers to report regularly on their results.