The ROI of Engagement: How Investing in Employees Pays Off
Posted by Melissa Meunier on Thu, Apr 04, 2019 @ 01:00 PM

Are your employees engaged? It’s a question that has earned its place at the forefront of business strategy, because it directly affects the quality of work produced and overall outcomes. Eight out of ten business leaders rank employee experience, including engagement, as important or very important for the future of their companies. But even when organizations have a generalized understanding that engagement is valuable, it’s not always easy to show a measurable return on investment in terms of dollars and cents. Yet that is precisely what it takes to demonstrate value to those in charge of budget approvals.

So how can you measure return on your investment in employee engagement? To answer that question, let’s look at how engagement affects your bottom line.

How Engaged Employees Make Your Company More Profitable

Disengaged employees cost companies billions of dollars in lost productivity every year. Higher turnover, lower output and increased absenteeism all require companies to invest more in recruiting, hiring, training and motivating employees. 

Strategic investments in engagement alter the equation by creating employees who enjoy their work, believe in the value their company provides and will go the extra mile to deliver excellent outcomes. Engaged employees show up at work more often, do better work while they are in the office and stay with your company longer. 

Here’s what engagement can do for your company: 

  • Higher Productivity – Engaged employees perform better work and accomplish more during the workday than their disengaged co-workers. Companies with disengaged employees experience 18% lower productivity and 60% more workplace errors than those with an engaged workforce. Higher productivity also translates into greater profit over time, since productive employees boost output, sales and brand image. 
  • Lower Turnover – Happy employees tend to stay with your company longer, and that leads to measurable decreases in your turnover rate. That’s great news, because replacing an employee can cost your company up to half of that employee’s annual salary. In addition to an average cost-per-hire of more than $4,000, replacement costs also include lost productivity while the position remains unfilled, ramp-up times after the new employee joins your team and the cost to onboard and train the new employee. 
  • Higher Retention Rates –The longer an employee stays with your organization, the more he or she understands your culture and processes. When that employee leaves, you lose the ingrained institutional knowledge that they developed over the course of their employment, and that’s not easy to replace. As you invest in employee engagement, your star players will stay with you longer, which translates into higher value across the organization. 
  • Reduced Absenteeism – Absenteeism can cost companies thousands of dollars in lost productivity and diminished team morale, which results in lower quality work. When you invest in strategies to promote engagement among employees, those employees will be less likely to miss work and more likely to make positive contributions to their teams. 
  • Lower Recruiting Costs – As we mentioned above, it can cost thousands of dollars to recruit and hire a single employee, and that number multiplies exponentially as your turnover rates climb. As engagement drives down turnover and boosts retention, you will see a corresponding drop in recruiting costs. To carry this one step further, strategically incorporating engagement into the recruiting process also has its benefits. Our Trendicators™ research found the number one reason job seekers accepted a job offer was due to “being treated with dignity and respect during the hiring process.”

The ROI of engagement can be calculated by considering the revenue added by engaged employees (productivity) and the money saved (turnover, retention, absenteeism, recruiting costs). 

What’s the Key to Engagement? 

According to SHRM, employees say that the number one contributor to their satisfaction on the job is respectful treatment of employees at all levels. It ranks higher than compensation, job security, benefits, culture and career advancement.  If that’s the case, then engagement should be a high priority for every organization.

The underlying key to a successful engagement strategy is consistent, sustained action on the part of managers and leaders to make employees feel valued. Simple acts on the part of direct managers that recognize employee value and reward effort will help you build a highly engaged workforce that loves to show up at work every day. 

And that’s worth the investment.

Topics: Employee Engagement

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