The Value of Employee Engagement

Today’s business landscape looks a whole lot different than it did just a decade ago. For example, did you know that:

• 90% of employees who have experienced the benefits of working remotely now want to do so for the rest of their careers?
• People long for meaning at work, and are more than three times as likely to stay with a company when they find it?
• A growing percentage of the workforce now values company culture over compensation?

These trends aren’t just shaping how people view the workplace. They’re driving a whole new set of expectations — one that employers everywhere will need to embrace. Because the more engaged your workforce is, the more successful your company can be.

However, while most executives have become accustomed to hearing about “employee engagement,” many still have questions about what the concept involves and where it fits in.

Why is employee engagement important? Can it really drive productivity? What is the impact of employee engagement on performance, customer satisfaction, and other factors that impact the bottom line?

Here at 15Five, our specialists work with thousands of employees across a wide range of industries to answer these questions and many others like them.

Today’s employees want more than paychecks. They want careers with employers that give them plenty of opportunities to contribute and grow. These expectations are not part of a passing fad. They’re here to stay, and a company’s decision to invest in or ignore these needs will be the determining factor between success and failure.

The key is to understand what it means to help employees feel fully engaged at work, and how that engagement can be transformed into positive business results.

In this guide, we uncover the true meaning of employee engagement, the “path to value” that it produces, and why engagement is vital to the success of your business.

Ready to begin? Let’s dive right in.

TABLE OF CONTENTS:
What is employee engagement?
How does engagement lead to profit?
What are the biggest benefits of employee engagement?

• Lower turnover
• Increased productivity
• Employer reputation

3 steps to creating value with employee engagement

What is employee engagement?

Forget everything you’ve heard. Forget everything you’ve assumed. In a work world where people value culture far more than compensation, employee engagement isn’t about showering employees with pay and perks to make them happier.

It involves appealing to individuals’ deep-seated motivations — the drivers that make them want to work harder, perform better, and take the company further.

Before you can begin to address the 17 drivers of employee engagement, you need to gain a strong understanding of: 1) what it means to engage employees and 2) how employee engagement differs from employee satisfaction.

At 15Five, we define employee engagement as:

An employee’s emotional and intellectual connection with an employer, demonstrated by motivation and commitment to positively impacting the company vision and goals.

Did you catch that part about “positively impacting the company vision and goals”? When employees are engaged and committed to the vision and mission of the company, a subsequent path to value ensues.

That’s a far cry from employees who are merely happy with their employers and satisfied with the work they do. An employee can be satisfied with a job that meets his or her basic needs and still feel no inspiration whatsoever.

And that’s a big deal. The more an employee is driven by passion and purpose, the more profound the bottom-line impacts will be for the business at large.

How does engagement lead to profit?

Make no mistake: Organizations that invest in their employees will reap tangible benefits. Research has shown that employee engagement investments can open the floodgates to productivity, profits, and personal fulfillment. For example:

• Willis Towers Watson reports that companies with high and sustainable levels of engagement have operating margins up to three times higher than companies with low or unsustainable levels of engagement.
• In a study of nearly 200 organizations, companies with the highest levels of employee engagement were 22% more profitable and 21% more productive than those with low levels of engagement.
• Another analysis found that organizations with engaged employees outperform those without by an astounding 202%.

In stark contrast to these findings, research has also put a hefty price tag on the penalties companies pay when workers become disengaged. A single “toxic” worker has been shown to cost a company more than $12,000 a year, and businesses are losing an estimated $500+ billion annually to issues related to disengagement.

If engaging your employees isn’t already an urgent priority, ask yourself: How much can your company afford to lose if you let disengagement go unaddressed?

Researchers and third-party experts may all have their own takes on employee engagement, but one thing remains constant. Employee engagement has a proven, positive impact on profit and shareholder value.

In other words…
Many of today’s most competitive companies are the ones that view employee engagement as a critical investment.

What are the biggest benefits of employee engagement?

Research is finding that the best, most competitive companies are also the ones that have made deep investments in their employees. But what does this look like in practice? Will strengthening employee engagement really drive productivity? And how can the benefits of employee engagement be so significant that they increase actual revenue and profit?

It all comes down to three important benefits. Based on 15Five’s research, including work with over 100,000 employees and executives to measure the impact of engagement on performance, our specialists have identified three common outcomes experienced by companies that invest in employee engagement:

1. Lower turnover
2. Higher productivity
3. A positive employer reputation

These benefits aren’t just temporary revenue boosters, either. When measuring employee engagement is adopted as an ongoing business process, it tends to have long-lasting business value regardless of industry or company size.

Let’s take a deeper look at these three key drivers of profit to uncover the best practices behind them.

1. Lower turnover

Losing employee talent is never a good thing. A sudden or unexpected resignation is bad for morale and creates a void for the team. Beyond these setbacks, however, there’s a far more pragmatic issue that comes into play.

Voluntary attrition is expensive.

Research has revealed that it takes the equivalent of six to nine months of an employee’s salary to hire and train a replacement, and that losing an executive-level manager can cost a whopping 213% of that person’s annual salary.

Depending on the expertise needed to fulfill the types of roles your company employs, finding the right employees and training them to do complex jobs can take anywhere from weeks to years. Each position requires a significant investment of time and money to cover a wide range of needs, such as:

• Contractor fees to cover vacant positions until a full-time replacement is found
• Recruiting agency costs
• Employee hours devoted to vetting and interviewing candidates
• Onboarding and training expenses
• Additional “ramp up” time to new employee productivity

Depending on an employee’s tenure and wage level, the losses can be staggering.

For example, let’s look at one of the most vital departments across organizations and industries: sales. The department responsible for bringing in new business and keeping customers happy is also one of the most likely to experience high rates of voluntary attrition. Replacing a single sales representative has been found to cost nearly $115,000 once you factor in replacement, training, and other costs, according to one recent academic analysis. With the average turnover rate for sales positions at 28%, the annual cost to companies can be significant. And that’s just within one division!

Money isn’t the only thing that can cost your company. When employee turnover is high, more human resources time is spent filling those positions — instead of focusing on ensuring employees have what they need to be productive and engaged.

But turn the focus inward, and amazing things can happen.

When executives prioritize the employee experience and work toward building a strong company culture, the risk of turnover is greatly diminished. Employees who spend their days in an environment defined by trust, authenticity, and fairness are far less likely to even consider going elsewhere. Factor in other employee engagement drivers such as meaning, role clarity, and professional development opportunities, and people will really start to take your company’s mission and vision to heart.

That’s why, according to neuroscientist Paul Zak, a 10% increase in employee trust in leadership can have the same impact as a 36% increase in salary.

The results are undeniable: Employee engagement is the key to reducing turnover and retaining talent.

2. Increased productivity

Research shows us that employees who are engaged are more productive. Depending on which study you’re looking at, having a work culture where people are engaged and inspired by their work can boost productivity by 12% to 22%.

But productivity is about a lot more than just increased output. The fully engaged employee tends to produce more effective, passionate, and strategic work.

In his book, Employee Engagement: Tools for Analysis, Practice, and Competitive Advantage, researcher William H. Macey explains it this way:

The more engaged employees become, the more likely they are to exhibit the behaviors that lead to higher performance. These include:

Proactivity
Engaged employees are more likely to plan ahead and take action when new or unforeseen challenges arise. They often anticipate and fulfill needs before managers make requests. This is advantageous for managers and employers alike, since outcomes are reached earlier and new strategic initiatives can be pursued sooner.

Expanded Job Roles
Engaged employees will rarely be heard saying “that’s not my job.” With a willingness to take on additional job roles for the good of the company — and not just for personal advancement — engaged employees often contribute by anticipating the needs of the business and filling gaps to meet those needs.

Expanded Skills
Engaged employees invest time and effort in not only their work, but also in professional development and growth. When invited to take on new responsibilities, an engaged employee will actively build the necessary skills instead of waiting to be trained.

Persistence
More than overtime or even additional effort, true persistence is the best unsolicited advantage an engaged employee can give to a company. Persistent employees willingly work for longer stretches and make continued attempts to succeed when faced with failure.

Adaptability
Change is inevitable in any business environment, especially in the digital era. But while an unengaged employee will often react negatively to change with a “that’s the way it’s always been” frame of mind, engaged employees do the opposite. They’ll embrace change for all the new opportunities it could bring for both themselves and the business.

3. Employer reputation

Most companies look to happy customers to help promote the business, whether through standard testimonials and case studies or more involved advocacy and loyalty programs. However, not as many think to view employees through the same lens.

Which is a shame, since one of the biggest benefits of having an engaged workforce is the health and reputation of the company.

Think of it this way: We all have at least one business we frequent because of an employee who works for the company. Maybe it’s a trainer at your gym or a stylist at your salon. If that person were to leave for another nearby facility, what would you do? Would you stick around and hope for someone just as talented? Or would you follow your favorite staffer to their new place of employment?

Contrary to popular belief, the best advocates for your organization are not happy customers. They’re the employees who take care of those customers. When you provide employees with everything they need to feel engaged at work, they’re naturally inclined to present your company in a positive light. Consider the following findings:

• Nearly 70% of consumers are willing to pay more for a product or service if it means getting a better customer experience.
• When they don’t get it, they leave. More than 50% of consumers will stop doing business with a company because of poor customer service.

When you focus on strengthening employee engagement, everyone benefits.

Of course, this phenomenon isn’t prevalent within the realm of customer experience alone. It directly impacts your reputation within the business community as well.

With sites like glassdoor.com allowing employees to anonymously post their true sentiments about a company and its leadership, it’s more important than ever to focus on employee engagement. Positive public posts, along with the verbal recommendations your employees make to peers when they’re outside the workplace, can lead to a stronger talent pool and the ability to be more selective when it’s time to hire.

What’s more, engaged employees will proactively promote your products and brand to their social networks without being asked — simply because they want to be seen as a part of the organization. It’s how companies like Patagonia and Semco have become employers of choice, and how you can create a sustainable culture of people with shared values, trust, and friendship.

3 steps to creating value with employee engagement

Building an engaged workforce isn’t free — nor will profit start flowing simply because you start throwing money at a deep-rooted problem like employee disengagement.

But by making simple investments in employee experience, you can help employees begin to focus more energy toward their jobs. This, in turn, will lead to the long-term effects of engagement.

The best way to know what your employees need to be engaged? Ask. Employees want to feel like they have a say and a stake in the game.

The thing is, surveying your employees requires more than just a once-a-year poll of arbitrary questions. To realize true value from your employee engagement, you must measure it first, then set tangible goals to improve the challenge areas that are negatively affecting productivity and retention.

Start by developing a sound strategy, and commit to regularly gathering feedback that helps you:

• MEASURE. Things change. People change. Even if you’ve conducted employee surveys in the past, it doesn’t mean you have an accurate picture of the current state of engagement. To adequately measure your employee engagement, you need to gather a combination of quantitative and qualitative employee feedback that gives you comprehensive insights on a regular and sustainable basis. It’s better to understand how your employees are feeling now and implement steps for improvement than to realize there was a problem as they’re on their way out the door.
• DIAGNOSE. Measuring employee engagement is only worthwhile if it results in actionable steps. Make sure your survey is set up to pinpoint where pain is being felt, and then segment results by departments, teams, locations, and roles for accurate diagnosis. That way, you can send follow-up questions later to groups struggling with engagement. For instance, if your survey results reveal there’s a problem with marketing’s sense of autonomy, follow up by asking what you can do to improve it. Employees will feel heard and have a sense of influence over their own destinies.
• SOLVE. Beware of surveys that result in loads of data, but no real action plan. There’s no point to gathering employee feedback if it’s not going to help you improve your company productivity, revenue, and retention in the long run. Review your data to identify overarching themes that will help you address problems, proactively engage employees, and prevent future challenges. Not comfortable analyzing data? Find an employee engagement partner you can trust to help you diagnose issues and develop a realistic plan of action.

In today’s professional landscape, employees demand to be engaged. They long for a sense of meaning and purpose, and want to feel like they’re part of a thriving culture and company. Lucky for you, what’s good for your employees is also good for your business. Don’t wait to build your employee engagement strategy. Your business depends on it.