Why Does Employee Engagement Matter?

Employee engagement results in lower absenteeism and turnover, as well as higher productivity and profitability. A 2012 Gallup study — which examined nearly 50,000 business or work units and roughly 1.4 million employees in 192 organizations across 49 industries and in 34 countries — concluded that employee engagement has a huge impact on these and other key organizational outcomes, regardless of the economic climate.

Indeed, even during difficult economic times, employee engagement is a key competitive differentiator. According to the Gallup study, titled “Engagement at Work: Its Effect on Performance Continues in Tough Economic Times,” which measured the difference between the top 25 percent of employees and the bottom 25 percent of employees when it comes to employee engagement, employee engagement affects the following performance outcomes:

  • Absenteeism: Organizations with the most engaged employees have 37 percent lower absenteeism than companies where employees are least engaged.

  • Turnover: Even among high-turnover organizations, those with the most engaged employees experience 25 percent lower turnover. The number is even more impressive in low-turnover organizations: 65 percent.

  • Shrinkage: On average, a highly engaged workforce results in 28 percent less shrinkage. Shrinkage refers to a loss of inventory that can be attributed to such factors as employee theft, shoplifting, administrative error, vendor fraud, damage in transit or in store, and cashier errors that benefit the customer. In other words, shrinkage is the difference between recorded and actual inventory.

  • Safety incidents: Are safety incidents a concern in your organization? If so, it should interest you to know that organizations with the most engaged employees experience 48 percent fewer safety incidents than their least-engaged counterparts. And if you're in healthcare, where patient safety is critical, you'll be pleased to find that organizations with a highly engaged workforce experience 41 percent fewer patient safety incidents.

  • Quality incidents: For many industries, quality — that is, lack of defects — is key. Not surprisingly, organizations with highly engaged employees experience 41 percent fewer quality incidents.

  • Customer metrics: Organizations with highly engaged employees boast 10 percent higher customer metrics than those whose employees are least engaged.

  • Productivity: Highly engaged employees are significantly more productive than their least-engaged counterparts. Indeed, organizations with a highly engaged workforce enjoy 21 percent higher productivity.

Considering all these points, it's probably no great surprise that business or work units that score in the top half of their organization in employee engagement have nearly double the odds of success of those in the bottom half. Moreover, those at the 99th percentile have four times the success rate of those at the 1st percentile.

Here are a few other interesting tidbits about employee engagement, these from a 2012 study published by Temkin Group, “Employee Engagement Benchmark Study”:

  • Compared with disengaged employees, employees who are highly engaged are 480 percent more committed to helping their organization succeed.

  • Highly engaged employees are 250 percent more likely to recommend improvements.

  • Employees who are highly engaged are 370 percent more likely to recommend their company as an employer (which increases the chances of your organization hiring additional highly engaged workers).

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