Engaged Employees Lead to More Profitable Business Outcomes

VRM Intel, by Sue Jones — What is it that keeps your employees coming back to work each day? Is it their paycheck or an opportunity for advancement? Is it having challenging assignments or a personal connection to your organization’s mission? Research shows that engaged employees result in a more profitable business.

When employees are engaged in the business and believe your mission, they work harder, are more productive and, most importantly, they feel successful. The Corporate Leadership Council conducted a worldwide engagement study and found that the most important driver of employee engagement is a connection between an employee’s job and organizational strategy.

Almost anything that happens at work has a direct impact on your employees’ engagement. How your employees are coached and evaluated; the work environment, tools, and resources they use; their relationships with management and peers; and their opportunities for growth and professional development are all important to how connected and engaged your employees are.

So how do you know if you have an engaged workforce?  You can see it on your employees’ faces. Engaged employees are more focused. They are driven to work more creatively and efficiently. They openly communicate about their work, results and challenges, both verbally and nonverbally. Engaged employees are emotionally connected and committed to their organization. They care about the work they do, and they care about their company. They don’t simply work for a paycheck; they focus their efforts on your organization’s goals and priorities. Engaged employees put forth their discretionary effort willingly.

In contrast, disengaged employees show it in their attitudes. It might be making caustic or toxic comments, rolling their eyes, or silently glaring in your direction. They complain and make excuses. They lack enthusiasm and initiative. Disengaged workers not only have a negative impact on employee morale, they don’t care about your company, and they have no intention of helping it grow. Research by McLean & Company[ii] found that disengaged employees cost an organization approximately $3,400 for every $10,000 in annual salary. That is a significant amount of money to spend on employees who aren’t connected to your business.

You know that employee engagement is important, but are you aware of the significance it can have on your bottom line and productivity?  Several studies correlate increased engagement to more profitable business outcomes, which provides strong evidence that higher levels of employee engagement will drive better results for your organization. Employee engagement is all about having a more enthusiastic and more committed workforce caring about the work they do.

According to Gallup,[iii] employee engagement consistently affects key performance outcomes, regardless of the industry or company. Gallup’s results showed that companies with highly engaged employees experience:

  • An increase of 10 percent in customer loyalty/engagement
  • An increase of 21 percent in profitability
  • An increase of 20 percent in productivity
  • A 40 percent reduction in turnover

Studies from the Society of Human Resources Management[iv] indicate that it can cost between six and nine months’ salary (on average) to replace a position. If you lose a position paying $40,000 a year, you can expect to incur $20,000 to $30,000 in replacement costs, not including the loss of productivity and team morale. Imagine what a 40 percent reduction in turnover would add to your bottom line.

Employee engagement is about to become even more interesting as millennials grow into the largest share of the workforce. At a recent SHRM conference, Gallup Chairman and CEO Jim Clifton described how workers’ perspectives are shifting from “my paycheck” to “my purpose” and from “my boss” to “my coach.” With four generations in the workplace, employees are showing up each day with at least four different sets of expectations of work. Motivating employees is no longer a one-size-fits-all task. Creativity and flexibility are essential to keep employees motivated and engaged.

Listed below are seven key strategies you can utilize to increase your employees’ efficiency and productivity, your business profitability, and your employee retention:

  1. Share your organization’s vision and goals. Employees are more engaged when they believe their efforts contribute toward a vision they can believe in and can contribute to. Business objectives and strategies need to be clearly communicated using multiple channels, and they must be continuously reinforced by line managers.
  2. Empower employees. Employees want a stake in the success of the team and company; let them take responsibility for their work and their decisions. Allow them to exercise independent judgment in doing their jobs. Be clear about their performance expectations and levels of decision-making.
  3. Measure employee engagement. What gets measured gets done. Find out how engaged your employees truly are by using simple tools such as Gallup’s[v] twelve questions or an employee net promoter score to quickly determine where your workforce stands. Follow up on your measurement by openly communicating with your employees about the findings and actions you plan to take.
  4. Manage performance one day at a time. Managers are directly responsible for this critical element of employee engagement. Employees like to know where they stand and how they are performing on a real time basis. Find ways to provide meaningful feedback in a timely manner.
  5. Use “stay” interviews. Forget about conducting exit interviews. Start implementing “stay” interviews with your employees to find out why they are staying, what they like and don’t like about their current position, and what is important to them. Wouldn’t you rather know what keeps your employees vs. waiting until they leave to find out why they are leaving?
  6. Evaluate your managers. Most employees leave managers, not companies. Providing more manager training on soft skills such as how to give effective feedback, setting SMART goals, and dealing with conflict will go a long way toward improving your employee engagement and retention.
  7. Design and implement programs that target disengaged workers. This goes back to getting the basics right: getting the right people into the right seats, setting clear expectations, and providing the tools your employees need to do their jobs. Focus on dealing with disengaged workers on a one-on-one basis vs. with a one-size-fits-all approach to drive higher levels of engagement.

 

Employee engagement can be difficult to quantify. A great place to start is to create a baseline using a net promoter score along with tracking key human resource metrics.

A combination of the following metrics will provide you with a well-rounded assessment of your employees’ engagement:

Employee Net Promoter Score (NPS)

This measures how willing your employees are to recommend their workplace to friends and acquaintances. You ask one simple question such as, “How likely is it that you would recommend your employer to a friend or acquaintance?”  The key to calculating an employee’s NPS is to use a scale of 0–10 with the responses divided into three categories:

  • 0–6 = Detractors
  • 7–8 = Passives
  • 9–10 = Promoters

Calculating your employee NPS is done by finding the percentage of promoters (9–10 ratings) minus the percentage of detractors (0–6 ratings).

Revenue Per Employee

This is a simple calculation that divides annual company revenue by the average number of employees or FTE’s (full-time equivalents).

Profit Per FTE

This metric calculates the amount of profit generated per FTE. You can calculate this by dividing the difference between your annual revenue and your operating costs by your total number of FTEs.

Turnover Rate

This metric tracks employees who leave your organization, either voluntarily or involuntarily, as a percentage of your headcount. You can calculate your turnover by taking the total number of terminations (involuntary and voluntary) and dividing it by your total number of employees (headcount).

Making employee engagement a priority will improve your employee morale, create a more positive culture, and significantly improve your bottom line.

 

As former Campbell’s Soup CEO Doug Conant said, “To win in the marketplace, you must first win in the workplace.”

 

[i] https://www.usc.edu/programs/cwfl/assets/pdf/Employee%20engagement.pdf

[ii] http://www.kenan-flagler.unc.edu/~/media/Files/documents/executive-development/powering-your-bottom-line.pdf

[iii] http://www.gallup.com/services/191489/q12-meta-analysis-report-2016.aspx

[iv] https://www.shrm.org/about/foundation/research/documents/retaining%20talent-%20final.pdf

[v] http://www.goalbusters.net/uploads/2/2/0/4/22040464/gallup_q12.pdf

 

By Sue Jones

Sue Jones, founder and managing director of KLS Group, is passionate about creating strategic human resource programs and services to effect positive change in organizations. She is an innovative HR leader experienced with both large and smaller businesses. Sue has worked in many different industries and is adept with transferring her knowledge, skills and abilities across business channels. An experienced HR professional, Sue brings a fresh approach to her clients, addressing their needs in a personalized manner. Sue is a Veteran of the US Navy, holds a Master’s Degree in Business Administration from Northeastern University and is both SHRM-SCP and SPHR certified. About KLS Group Today’s business landscape is complex. Companies rely on KLS Group for all of their human resource needs, from consulting to training to recruitment. Based in Bend, Oregon, KLS Group serves businesses large and small throughout the US. The KLS Group, keeping life simple. Please visit us at www.theklsapproach.com

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