Why Employee Engagement Matters

It might seem like employee engagement is a nice-to-have – but it’s actually closely connected to the bottom line.

If you’re doing hiring and firing right, it might seem like having a high level of employee engagement is simply a bonus. However, research has proven that engagement is closely connected to the bottom line.

In 2009, the UK government commissioned The MacLeod Report – one of the largest studies into employee engagement ever published. It found firm evidence that improving engagement correlates closely with improving organisational performance.

What’s more, there’s a wide body of literature that explores how the performance of engaged employees compares with that of their disengaged colleagues – and it underlines just how important engagement is.

Findings include:

  • Engaged employees generate 43% more revenue (Hay Group, 2001)
  • 70% of engaged employees have a good understanding of how to meet customer needs; only 17% of disengaged employees say the same (Right Management, 2006).
  • 9/10 of the key barriers to the success of change programmes are people-related (PwC, 2000).
  • Engaged employees are more likely to embrace change and suggest new ideas (PwC, 2000).
  • Engaged employees in the UK take an average of 3.5 fewer sick days each year (cited in The MacLeod Report).
  • Engaged employees are 87% less likely to leave the organisation, significantly reducing recruitment costs (Corporate Leadership Council, 2004).

And this fact is recognised by some of the most innovative companies in the world. “Google would not have been able to innovate as quickly as it has, nor create the products it has in such a short space of time without highly valuing employee engagement,” said Liane Hornsey, Director of People Operations, Google.

Jack Welch, former CEO of GE, meanwhile, rates employee engagement as being as important as cash flow and customer satisfaction. “There are only three measurements that tell you nearly everything you need to know about your organization’s overall performance: employee engagement, customer satisfaction and cash flow,” he said. “It goes without saying that no company, small or large, can win over the long run without energised employees who believe in the mission and understand how to achieve it.”

Higher Productivity, Customer Satisfaction and Profitability

Fundamentally, engagement is the glue that holds the organisation together – and it’s about far more than simply limiting staff turnover. Here are three more studies that highlight just how important engagement really is.

Study 1:

Gallup (2006) examined 23,910 business units and compared top and bottom quartile financial performance and engagement scores. They found that:

Those with engagement scores in the top quartile averaged 12% higher customer advocacy, 18% higher productivity and 12% higher profitability.

Those with engagement scores in the bottom quartile averaged 31-51% higher employee turnover and 62% more accidents.

 

Study 2:

A Watson Wyatt (2009) study of 115 companies suggested that those with highly engaged employees will perform, in financial terms, four times better than companies with poor levels of engagement.

Study 3:

The Corporate Leadership Council (2008) reported that engaged organisations grew profits as much as three times faster than their competitors. They also found that highly engaged organisations have the potential to reduce staff turnover by 87%.