Business Value of Employee Engagement: How to Measure Employee Enagement

March 29, 2012 - 6 minute read - Posted by

To be remarkable in today’s fast-paced business environment, companies need an engaged and motivated group of employees who are passionate about their organization’s success. Many business leaders and HR professionals have a hard time measuring the impact of engagement in their organizations. In this blog post, we will discuss the business value of having an engaged workforce and provide several important metrics that your organization can track when it comes to employee engagement.First, let’s define what engagement and disengagement look like in an organization:

Engaged Employees:
Willing and able to contribute to company success as well as infuse passion into their work (extra energy, brainpower, and time)

Non-Engaged Employees:
Focus on accomplishing tasks vs. achieving an outcome or goal. Often feel their contributions are being overlooked, and their potential is not being tapped

Disengaged Employees:
Disruptive and negative toward the organization and its mission; moreover, they undermine what their engaged co-workers accomplish
Business Value of Employee Engagement:

The stats below show the current level of engagement in the North America, and the cost of disengagement, including the cost of lost talent:

    • Only 22% of our workforce are engaged, 68% are not engaged, and 11% are disengaged (Towers Perrin’s Global Workforce Study)

 

    • In the U.S., the estimated cost of disengagement in the workplace is over $350 billion in lost productivity, accidents, theft and turnover each year (The Economics of Engagement by Allan Schweyer with Human Capital Institute and Enterprise Engagement Alliance)

 

    • Talent replacement costs an organization between 30% and 50% of the annual salary of entry-level employees, 150% of middle-level employees and up to 400% for specialized, high level employees (Ross Blake, Employee Retention: What Employee Turnover Really Costs Your Company)

 

 

Financial metrics are easy enough to quantify; however, when it comes to more qualitative aspects, such as talent engagement, it can be harder to measure; however, we suggest you try because the benefits will be a more in-depth understanding of your workforce. Below are results of recent studies that have been conducted to measure the business value of employee engagement:

    • High-engagement firms grow their earnings-per-share (EPS) at a faster rate (28%) while low-engagement firms experienced an average EPS growth rate decline of 11.2% (Towers Perrin, Closing the Engagement Gap: Global Workforce Study)

 

    • Highly engaged firms had a shareholder return that was 19% higher than average in 2009. In low-engagement organizations, shareholder return was actually 44% below average (Hewitt Associates)

 

    • Increased levels of employee engagement has been correlated with greater customer satisfaction, productivity, profit, and decreased turnover, absenteeism, and accidents. Resulting impact on revenue ranged from $960,000 to $1,440,000 per year per business unit when comparing those companies in the top quartile on employee engagement versus those companies in the bottom quartile. (Business-unit-level relationship between employee satisfaction, employee engagement, and business outcomes: A meta-analysis. Journal of Applied Psychology)

 

    • Engaged employees – work more effectively, instead of just working more; find ways to improve; share information with colleagues; develop creative solutions; provide suggestions; speak up for the organization; and try harder to meet customers’ needs, leading to repeat business (Schweyer)

 

 

Measuring Employee Engagement:

In 2009 Gallup accumulated 199 research studies across 152 organizations in 44 industries and 26 countries and they concluded that there is a direct correlation between employee engagement and company performance in the form of customer loyalty, profitability, productivity, turnover, safety, absenteeism, shrinkage, and quality. Below are the questions that employees were asked in order to measure & quantify employee engagement. You can create a similar questionnaire to measure and track engagement in your organization. You can ask these questions monthly, quarterly, or annually and have employees rate how much they agree or disagree on a scale of 1 to 5.

  • Am I satisfied with my company as a place to add value?
  • Do I know what is expected of me?
  • Am I using my strengths at work?
  • Was I recognized for a job well done this week?
  • Does my supervisor support my development and care about me as a person?
  • Do my opinions matter?
  • Do I understand the overall goals of my company and where my work fits in?
  • Am I surrounded by teammates who are motivated and doing great things?
  • Do I have a close friend at work?
  • Do I have access to feedback in order to progress in my role?
  • Are there opportunities to learn and grow?

Conclusion:

We all agree that employee engagement is important. Measuring the actual business value of an engaged workforce and how engaged your employees are is hard. However, it is very important as you’ll be able to better allocate your limited resources accordingly: What Gets Measured, Gets Managed!

You can use the examples and guidelines in this blog to create your own employee engagement metrics. Do you currently measure engagement in your company?

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