How Important Is Employee Engagement? The Business Case in Numbers

Why Is Employee Engagement Important?

Key Terms

Employee Engagement Importance

Employee engagement is a leading indicator of organisational performance — predicting productivity, profitability, customer satisfaction, safety, and retention before these outcomes are visible in financial results. High engagement does not just correlate with better performance; longitudinal research shows it precedes it, making it one of the most powerful diagnostic and predictive metrics available to business leaders.

The Evidence: What High Engagement Produces

The Cost of Disengagement

Gallup estimates active disengagement — employees who are not just unmotivated but actively undermining their colleagues — costs the global economy $8.8 trillion annually. In a typical 100-person organisation with average engagement levels, approximately 20 people are actively disengaged. The drag this creates on culture, productivity, and customer experience is both significant and preventable.

Related Employee Engagement Resources

• ►How to Improve Employee Engagement: Practical Steps
• ►Motivation Theories: The Root of Engagement
• ►Psychological Contract: The Hidden Engagement Driver
• ►Providing Great Feedback: Activating Discretionary Effort

The following section contains our original guide on the importance of employee engagement.

I was recently asked by a business owner, “how important is employee engagement, anyway?” And so I thought I would share some reasoning behind Employee engagement and its importance.

Employee Engagement Defined

But first, what’s employee engagement?

Employee engagement is about getting the right conditions in place to enable employees to give their best every day.

As an employee, employee engagement is about getting up in the morning and eagerly anticipating the day ahead.

It’s thinking about what needs to be done and being enthused to get stuck in.

It’s about looking forward to seeing the team and carrying on with the good relationships that you’ve built.

It’s also about being fully included in the team and having a sense of camaraderie. And a sense of belonging.

For me personally, the best time I ever had in employment was when I was working for a printing company in a team of 6.

We developed a great friendship. We helped each other out and we enjoyed working around each other.

And as I moved up the career ladder, so to speak, I still think back about those days as being the best days in my career.

That’s interesting because I didn’t earn a lot, then. But we worked together well. We went out together at the weekends. We worked autonomously and were empowered to create the right working patterns to meet customer demand.

And we were respected as a team by management. We also respected each other.

How Important is Employee Engagement for the Employer?

If you’re part of a senior management team, how often have you heard anyone speak about employee engagement levels?

Be honest…

Most executives talk about the hard-nosed KPIs, like profit, return on capital, sales, and so on.

Hardly ever anyone mentions the engagement levels of employees or the average training days this year.

But this stuff matters.

So, here’s the business case to answer the question: how important is employee engagement?

How Important is Employee Engagement: Some Stats

Let’s face it, if someone’s more engaged, they’re extremely likely to get more out of their jobs.

In fact, per a study conducted by Harter, Schmidt, and Hayes, in their article; Psychology (2002), those people that are engaged have a 51% higher productivity than those that are not engaged.

Why is that?

Well, if I’m engaged and happier at work, I tend to get involved more. I’m probably easier to communicate with, and dialled into what needs to be done.

And because of this, I get through more work than those that are not engaged. My general work flow is more productive.

Productivity improves.

And so too, efficiency.

This in turn, has a direct impact on profitability.

This is backed up by the results of a study from Towers Perrin, which showed that companies that have engaged employees can expect a 19% increase in profitability.

And for those with non-engaged employees? Well, they’ll reduce your profit by an average of 33%.

And another study, this time from Harvard, highlights workers in the top 1% in terms of productivity, add about $5,000 to profit per year.

In contrast, a disengaged worker costs about $12,000 per year.

Imagine if all your employees were engaged… What would that mean to your bottom line performance?

Absenteeism

A study conducted by Gallup, who looked at over 20,000 businesses worldwide, found that:

• ►The average absenteeism per engaged employee is 2.69 days.

• ►For those that are not engaged, this equated to 6.19 days.

What does that mean? Well, less productive days if you have a workforce that just aren’t engaged.

In fact, in the USA, and in accordance with a study from Carcadian, unplanned absenteeism costs the typical US company $3600 per hourly worker and £2650 for each salary worker, per year.

In the UK, it has a negative impact of around £17 billion to the economy as a whole.

Customer Satisfaction

As employees are more engaged, customer satisfaction increases too.

Friendlier staff…

Quicker responses…

Improved communication…

Better quality and delivery…

These can all have a lasting impact on customers and how they perceive your business.

Aberdeen Group, in their studies, have identified that companies with engaged employees can typically see 233% greater customer loyalty and a 26% increase in revenue each year.

Business Growth

If you have highly engaged employees, who in turn provide:

• ►Greater productivity
• ►Better customer service
• ►Reduce staff turnover

By default, your business will be worth more.

Serota Consulting (2005) found that in their study, in companies with highly engaged employees, share prices rose by an average 16%

Hewitt Research Brief provided an even greater insight. They found that in companies where 60 to 70% of employees were engaged, average shareholder return was at 24.2%.

In companies with 49 to 60% engaged employees, average shareholder return fell to 9.1%.

And the worst thing: Companies with less than 25% engaged employees, average shareholder value suffered negative growth.

The lesson here is simple. Improving employee engagement can have a real benefit to your processes, work environment, customer service and shareholder return.

How Important is Employee Engagement

The Main Drivers to Engagement

Ok, we’ve answered how important is employee engagement. But what are some of the main drivers affecting the level of engagement?

The usual things apply:

• ►Leadership and how people centric leaders are
• ►Affective communication
• ►Development
• ►Equitable Pay

Generally, it’s the ability to see employees as assets and therefore investing time and resource in them.

Here’s some supporting statistics from various studies:

Company Objectives and Performance

Understanding of what the business is trying to achieve and how each employee’s work directly influences this, appears to be a big driver of staff engagement.

The Conference Board (2006), highlights that almost two-thirds of employees are only 33% as productive as they could be because they don’t know what they’re being asked to do.

 Trust

Being able to trust your manager and believe in their actions is another big contributor. In fact, The Conference Board again highlighted that 80% of employees that say they have a high level of trust in their managers, are committed to the organisation.

Compare this to just 25% of employees who have a low degree of trust, and little commitment.

A Sense of Belonging

Analysis from Gusto highlights that 54% of employees admitted that due to a good work environment and a community feel, they stayed a lot longer in their job than was in their own interest.

This is interesting because it corroborates the view that people are motivated and driven by more than just money.

Some will stay in their comfort zone, in fear of losing the relationships they currently have.

And another study… this time from ICIMS. They highlight that 55% of employees haven’t looked for another job because they don’t want to leave their employees and lose the working relationships they currently have.

Interesting stuff.

Recognition

Recognition is a critical part of employee engagement. In fact, according to BambooHR, 75% of employees who receive at least monthly recognition in their jobs, are satisfied in their role.

BambooHR even highlight that recognition doesn’t have to be a formal – shout from the roof-tops announcement. Informal recognition works just as well.

How often do you provide recognition?

How Important is Employee Engagement? It’s A Business-Critical Subject

It’s extremely important. But often overlooked and undervalued.

If you can give employee engagement the focus that it deserves…

And if you can improve it, you can expect gains in productivity, profitability, and customer satisfaction.

At your next board meeting, why not measure people centric KPIs, too?

What get’s measured often gets improved.

Return from “How Important is Employee Engagement”, to Leadership Home Page