How Employee Engagement Improves the Bottom Line

Wednesday, September 28, 2022

How Employee Engagement Improves the Bottom Line

Employee engagement has the power to influence almost every aspect of an organisation. While many studies and independent research show that employee engagement has a measurable impact on a business's profitability, many leaders still fail to appreciate how employee engagement influences the bottom line.

What is Employee Engagement? ‍

Employee engagement is an overarching term that describes an employee's emotional relationship with your organisation and how committed they feel towards the company's goals. Instead of simply measuring how happy your employees are, employee engagement takes a variety of drivers into account in determining what drives performance and revenue generation in your organisation.

There are two main factors of employee engagement, and companies need to take both into account when gathering feedback form employees and introducing employee engagement strategies. ‍

a) Engagement with the Company

The first factor looks at an employee's relationship with and view of the company as a whole, including senior management, business strategy, and how well the company treats its employees.  

As part of this, you'll learn about your employees' confidence in senior management, if they feel that the company treats them fairly and if they feel that their values match the organisation's. ‍

b) Engagement with the Manager ‍

The second factor looks at how employees engage with their direct supervisors, whether they feel respected in the workplace, and how well they feel their goals match those of their managers.

As part of this factor, you'll learn about how your employees feel about their direct supervisors, how they're treated in the workplace, and how they evaluate their relationships with their managers. ‍

What Do the Experts Say about Employee Engagement? ‍

Experts largely agree that employee engagement is one of the most important things modern businesses need to focus on, with CEOs, HR managers, and recruitment specialists all discussing the merits of improving employee engagement in the workplace [1].

One report, in particular, The Workplace View from ADP, is a great resource explaining why employee engagement is so important for your business's bottom line. While the employees surveyed are from countries across Europe, the findings in this report can easily be applied to any business regardless of location.

If there's one finding you should take from this report, it's this:

“Companies with engaged employees generate 2.5x more revenue compared to competitors with low engagement levels”

This report also found that employees are looking for more support from their organisation, and feel that current efforts don't go far enough to address mental health and discrimination in the workplace - two key issues that are highlighted as harmful to employee engagement. This means that organisations need to do better to support their employees to foster greater employee engagement.

Similarly, bad management practices and the prevalence of unpaid overtime have again been cited as primary productivity drains in the workplace and two of the main reasons why employees aren't engaged in the workplace.

Finally, there's a growing body of evidence to suggest that employee engagement will be helped by the introduction of a four-day week and more flexible working hours. While the amount of people drawn towards being self-employed is showing signs of decreasing, it's clear that employee engagement initiatives need to include flexibility as a key strategy. ‍

Here are some of the benefits of employee engagement.

How Employee Engagement Quantifiably Benefits Your Bottom Line ‍

1. Improving Employee Retention ‍

Employee recruitment and retention is a significant outgoing cost for any organisation, which is why reducing employee turnover is vital to any modern business.

Employee engagement directly impacts your employee retention rates. Given that employee engagement is a measure of how well your employees connect with your business, it's to be expected that when that no longer applies, actively disengaged employees will leave for job roles elsewhere.

As such, employee engagement and retention go hand in hand in reducing the cost of recruitment and onboarding new employees. With staff turnover costing up to 33% of an employee's annual salary [2], your company can potentially save hundreds of thousands of dollars each year by improving employee engagement and job satisfaction. ‍

One of the easiest ways successful organizations improve the level of employee engagement and retention is by offering career advancement opportunities for onsite and remote employees. Another way to raise the company's retention rate is by ensuring a good company culture.

2. Increasing Productivity ‍

It's fairly obvious that if your employees are more productive, they'll generate more revenue. While this is already evident in roles that directly generate revenue, like sales or marketing, it's also worth understanding how improving employee engagement with employees who don't face customers will result in greater income and a better chance of business success.

Highly engaged organizations regularly report their productivity as 22% higher than their less-engaged counterparts [3], which just goes to show that employee engagement alone can improve your bottom line. Furthermore, research shows that if you increase your employee engagements by as little as 10%, you can increase your profits by an estimated $2,400 per employee per year [4].

While this does mean spending more in the short term, it's a worthwhile investment to help your bottom line grow. ‍

3. Safer Workplaces ‍

One surprising benefit of investing in employee engagement is that it can save thousands in the resulting costs stemming from safety incidents in the workplace.

According to Gallup, when a workplace is highly engaged, 70% fewer safety incidents occur [5]. A big reason for this is that when employees feel valued, respected, and heard, they're more likely to go the extra mile to make sure their job is done well, not just done quickly. Not only that, engaged employees also feel more confident to speak up about hazards in the workplace, ensuring that leaders know what's happening at all times.

Research shows that the average workplace injury costs $1,100-$42,000 per employee, with this number rising to $1,220,000 if an employee dies as a result of an accident [6]. When this number is reduced by high employee engagement levels, your business can save hundreds of thousands of dollars. ‍

4. Reduced Absenteeism ‍

Your employees are only human, so you'll always have instances where employees are too ill to work or will want to use their vacation time. However, that's not to say that every day off from work is for legitimate reasons. Absenteeism, or days off outside of scheduled vacations and the occasional sick or mandated personal day, is a leading cause of decreased productivity and, therefore, revenue.

The average cost of unscheduled absenteeism is roughly $2,660-$3,600 per employee per year [7], with that cost reflecting wages for absent employees, reduced productivity, and administrative costs.

However, according to Gallup, businesses can lower their absenteeism rates by up to 41% by improving employee engagement [8]. The reason behind this is simple - the more employees are connected with their company and their work, the less likely they are to take sudden days away from work for mystery illnesses.

By reducing absenteeism through employee engagement and employee satisfaction, you're both increasing productivity and reducing the cost of absenteeism on your bottom line, helping your company to generate more revenue. ‍

5. Better Product Quality ‍

Improving employee engagement doesn't just boost productivity, either. Companies with a highly engaged workforce have an average of 40% fewer quality defects in their products [9].

Again, this is likely because highly engaged employees are more invested in the outcome of their work, and they are more emotionally invested in the company and its goals. It's unsurprising that, in companies that sell products, this results in far fewer defects.

Defective products, depending on the problem, can have a significant impact on a company's bottom line. Ranging from replacing a handful of defective products to major recalls, dealing with poor quality products can easily cost millions of dollars if the issue is severe.

Not only that, but better product quality will positively impact your bottom line by improving customer loyalty, generating recommendations, and producing a higher return on investment.

Therefore, by improving employee engagement, you're ensuring that fewer defective products make it to your customers, saving your bottom line from the cost of returns and recalls. In simpler terms, an engaged employee can significantly increase customer satisfaction.

How Employee Engagement Affects Customer Loyalty and Satisfaction

One of the reasons why employee engagement is an important metric to track is due to its relationship with having better customer service and creating loyal customers. A company that prioritizes employee well-being are likely to have engaged teams.

Healthy and engaged employees will be more committed to the needs of your customers. They will deliver customer service beyond the minimum of what is expected of them, helping customers spend less time or money. This results in happier clients, which could lead to them becoming repeat customers.

In addition to going above and beyond, engaged employees are more likely to have a better understanding of the product they are selling. Employees who genuinely believe in what they are selling can easily build relationships with customers based on similar interests and passions, resulting in more satisfied clients and a better customer experience in the long run.

In conclusion, there are numerous benefits of investing in Employee Engagement. Having an engaged workforce improves retention, increases productivity, creates safer workplace, reduces absenteeism, delivers better products and ultimately leads to higher profitability of the company. Therefore, it makes good business sense to make Employee Engagement a priority for your organisation.

Qualee's platform automates the process of assessing the employee experience, providing actionable insights that can measurably improve employee engagement. Change what you can measure with Qualee and sign up for our FREE Starter Plan today.

[1] https://blog.thedigitalgroup.com/hr-experts-talk-about-employee-engagement-strategies
[2] https://www.forbes.com/sites/johnhall/2019/05/09/the-cost-of-turnover-can-kill-your-business-and-make-things-less-fun/?sh=482c4e487943
[3] https://hbr.org/2013/07/employee-engagement-does-more
[4] https://talentculture.com/6-eye-opening-employee-engagement-statistics/
[5] https://news.gallup.com/businessjournal/191831/engaged-workplaces-safer-employees.aspx
[6] https://injuryfacts.nsc.org/work/costs/work-injury-costs/
[7] https://www.investopedia.com/articles/personal-finance/070513/causes-and-costs-absenteeism.asp#:~:text=According%20to%20Absenteeism%3A%20The%20Bottom,Wages%20paid%20to%20absent%20employees
[8] https://www.gallup.com/workplace/236366/right-culture-not-employee-satisfaction.aspx
[9] https://www.gallup.com/workplace/283985/working-remotely-effective-gallup-research-says-yes.aspx

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