CEOs spend a lot of time pursuing profitability improvement. Business process optimization, supply chain management, investment in AI-driven service models are just a few strategies companies take in the effort to improve profit margins.
However, a rich opportunity to generate double-digit increases in profits is frequently overlooked when companies chart strategies for increasing their net gains. What are they overlooking? Engaging their own employees more fully.
Employee engagement can be an incredible value creator that can dramatically improve all aspects of the business.
Organizations with engaged employees show improved employee retention, decreases in absenteeism, better work quality, and increased productivity. The net effect of improved employee engagement? Double-digit increases in sales and profitability.
And, as Engagement Multiplier’s founder and CEO, Stefan Wissenbach, puts it, “An engaged organization is easier to run.”
Direct business impacts – more revenue and profit
As your workforce becomes highly engaged and satisfied, results will start to show up in the bottom line. According to a study by Gallup, having a highly engaged workforce leads to 20% higher sales, and 21% higher profitability.
Along the same lines, as reported in a 2017 Employee Engagement Benchmark study, The Temkin Group found that better-performing companies have highly engaged employees. According to their research, 82% of employees at companies with strong financial results are “highly” or “moderately” engaged, as opposed to only 68% at under-performing companies.
Salesforce found employees who feel that their voice is heard within their organization are 4.6x more likely to feel empowered to perform their best work. You guessed it – this means increased productivity!
The high cost of disengagement
So, if engaged employees improve revenue and profit, how much are disengaged employees costing you? The numbers can be staggering. When Gallup collected data on this, they found disengaged employees have a 37% higher rate of absenteeism, 18% lower productivity, and 15% lower profitability.
To dive a little deeper into the costly impact of disengagement, on average, Gallup found disengaged employees cost organizations $3,400 for every $10,000 they make. So, if an average employee salary is $50,000, for every disengaged employee, the organization loses $17,000.
In total, Gallup also estimates the cost of disengaged employees in the United States is between $450 to $550 billion. Imagine what this amount of money could be spent on, marketing initiatives, additional sales team members, innovating products…it’s no shock that higher engagement leads to a healthier bottom line.
The even higher cost of employee turnover
Reducing employee turnover is one of the most significant material benefits an engaged organization realizes. With the cost of replacing an employee pegged at one-third of their salary, increases in turnover can be incredibly costly. Reducing turnover can deliver tens of thousands in savings to smaller enterprises, and six- and seven-figure impact to larger companies.
However, increasing employee engagement is one of the surest ways to improve employee retention and knockdown turnover rates. According to a recent meta-analysis by Gallup, companies with high levels of employee engagement enjoy employer turnover rates that are more than 40% lower than those of companies with disengaged teams.
Improve employee wellness
Individual wellness is an increasingly important aspect of the employee experience, going hand in hand with an individual’s engagement. Two of the benefits an organization realizes when they achieve high levels of engagement are increased employee satisfaction and well-being.
A study by Gallup bears this out, finding that 62% of engaged employees felt their work positively affected their health. The opposite is also true for disengaged employees: the survey found for self-assessed disengaged employees, 54% said their work-life has a negative effect on their health, likely contributing to the higher absenteeism so common when people become disengaged.
So, before hiring expensive consultants and embarking on a new project, consider focusing on your own employees first. In our experience, 90% of our clients achieve engaged status within one year. The cost is small and the benefits are great – and improved profitability is just the beginning. Engaged organizations are more resilient, more likely to rebound from a recession, and over time show better financial returns.
See how much your company could save with engaged employees
