Talk to Me About Money: The Return on Investment of Employee Engagement

Employee engagement improves individual performance in an organization, but do companies with higher employee engagement really outperform companies with lower employee engagement in their workforce?

Can a company demonstrate stronger financial performance and operational efficiency with engaged employees? If not, then for company executives, employee engagement is just a time-consuming game that keeps managers and employees busy until the HR department puts a bigger and more distracting task in front of them. Understanding the Return on Investment (ROI) of Employee Engagement is therefore critical to organizational success.

Commitment requires us to put both our emotions and our actions - our hearts, souls, minds and hands - on the line. These represent our love for what we do - the heart (similar to the teacher who believes he or she is making a difference for the children) and our passion for our work - the spirit (similar to the team spirit felt when watching a winning team become champions). However, just feeling doesn't get us very far when it comes to business results. Commitment involves action. This is where minds and hands come into play. With their minds focused on their work, employees create innovative products, identify and solve quality issues and ask themselves "how can we change this process to make the customer's life easier?" Then, hands take over. This involves work.

Academics, consultants, non-profit organizations and companies have been studying the ROI of employee engagement for some time. The correlations that have emerged from this research have given us some important insights. Here are some of the findings:

Earnings Per Share & Personnel Change Rate

• Companies with very high levels of employee engagement have 2.6 times higher earnings per share than companies with low levels of engagement.*
• Organizations in the lowest quartile of engagement scores have 41% higher employee turnover rates.*

• Companies with high employee engagement generate 2 times more net income than companies with low engagement.
• Organizations with high employee engagement generate 7 times higher "5-year total shareholder return" than less engaged organizations. **

Operating income
A study by David MacLeod and Nita Clarke for the UK government, "Engagement for Success: Improving Performance through Employee Engagement" study found the following links between employee engagement and success:

• Companies with low engagement have 32.7 percent lower operating revenues than companies with higher employee engagement.
• Similarly, companies with high employee engagement experience a 19.2 percent growth in operating income over a 12-month period.
  

Profitability and Personnel Loss
The Corporate Leadership Council studied the engagement levels of 50,000 employees worldwide to determine its direct impact on both employee performance and retention. Here are two important findings:

• Engaged companies grow profits up to 3 times faster than their competitors.
• Employees with high employee engagement are 87 percent less likely to leave the organization.

Customer Loyalty, Productivity and Staff Turnover
Any business owner can tell you that optimizing productivity levels is an uphill battle and that being able to pay salaries depends on the loyalty of customers. (Wouldn't it be nice if employees could understand this?) In an article by Jonathan Pont, it is noted that the most engaged workplaces experience the following performance metrics:

• 2x higher customer loyalty
• 2x higher productivity
• 2 times lower staff turnover

The Cost of Disengagement
If the business metrics associated with high levels of employee engagement are not convincing enough, let's take a look at how much disengaged employees can cost a company. McLean & Company found very compelling relationships in this regard:

• For every $10,000 in annual salary, disengaged employees cost the organization approximately $3,400.
• Disengaged workers cost the American economy $350 billion annually in lost productivity.