How much employee engagement cost us?

Here is what Kimberly Kniveton, founder of Ascent Coaching & Consulting said on this topic. Can our economy afford to lose an estimated $328 billion dollars over the next year? Is your organization willing to contribute to that loss? If you are not looking into engaging your employees you are. $328 billion dollars - that is the estimated cost to our US economy through disengaged workers. Now is the time to put a stop to that kind of needless spending!

How does engagement cost us? 

First of all, a disengaged worker is one that is not fully committed to helping an organization achieve its purpose, vision and mission. How many of these do you know? According to Gallup, disengaged workers comprised over 70% of the workforce! In recent speaking engagements and discussions with clients, that number appears to be increasing. I was recently working with a company that estimates over 85% of their workforce falls into this category. So the costs:
  • High turnover. While many organizations are relieved when the disengaged worker goes, there are recruitment costs associated with continual hiring of workers that some say are estimated to be 2 - 6 times an employee's annual salary.
  • Training: Companies can spend resources either a) training the disengaged worker to get up to speed; b) training the new employee that replaced the disengaged worker; c) training engaged workers to pick up the slack (uh, which has the potential effect of driving that person to the disengaged category...); d) all of the above. None of which really work anyway.
  • Overload/Stress: Disengaged workers cause others in the organization to pick up the slack causing others to become overworked, put in longer hours, and become resentful of management that does nothing about it. Again, eventually those that pick up the slack start to find themselves in the disengaged category.
  • Overtime: When an company culture allows disengagement, more time is spent by others to meet deadlines and achieve organizational outcomes. Compensation is needed to cover this extended time spent.
  • Lost Customers: And the dollars of revenue associated with the lack of interest in doing "what's needed" to keep the customer satisfied.
  • Absenteeism: Calling in 'sick' because "I'm just not feeling well today."
  • Health premium Increases: Disengagement and the accompanying stress leads to higher rates of claims on your insurance.
  • Lower Morale and consequentially, lower productivity.....Oh, by the way, which leads to lower results.

I'm sure there are other costs that you can think of as well. But the real question is...What is the hit to your bottom line? Here is one way to estimate what it is costing you just in terms of compensation:
  • List each employee who you believe may be disengaged at work
  • Determine the compensation for each employee you have listed above
  • Multiply the employee's compensation time 30% to estimate the value of productivity lost due to that disengagement.
What do you come up with? Whatever the number is - can your business afford it? Think about what else you could be doing with that money. Think about what you are wasting and how much more you could reclaim by increasing engagement levels in your organization. And this isn't even estimating revenue lost associated with all the other costs listed above!

Why invest in engagement strategies?

Engaged teams and workers:
  • 50% more likely to have lower turnover
  • 56% higher than average customer loyalty
  • 38% report above average productivity
  • 27% report higher profitability
What Can We Do About It?

The surprising thing is, engaging the workforce doesn't 'cost' the organization much in terms of resources. Engaging workers is about winning over their hearts and hands - not about paying them more or giving them more benefits. Here are the real drivers of engagement:
  • Employees feel cared for by their supervisor.
  • There is trust and integrity
  • They receive recognition and feel valued
  • They believe someone is concerned about their development
  • They feel pride about their company
  • They have a quality relationship with their direct manager or supervisor
  • Their job has meaning and purpose - they are able to make a difference
What do you notice about this list? Two things jump out for me...
  1.  Engagement is driven by feelings...how do I FEEL about my work, my company, my supervisor. As we say at 6 Seconds Emotional Intelligence Network: Emotions Drive People, People Drive Performance.
  2. Those that make a difference are the front line supervisors and managers - what are you investing in them at the moment to help drive engagement in your workforce?
The ROI on engagement is a no brainer! The costs of the disengagement far outweigh the costs required to bring in and execute an engagement strategy. How long are we willing to keep this going? How much longer can our economy afford to do this? What will you do today to commit to bringing in more drivers of engagement to your workforce?

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About Me

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A change agent who successfully led and supported HR transformations across a variety of industries, making significant progress in reducing costs and improving operating effectiveness through HR system and process improvements, organizational excellence programs (EFQM Model), shared services, centers of excellence, outsourcing and employee self-service. Commercially oriented and capable of driving the best practices in the areas of HR business partnering, talent management, total rewards, performance management, talent acquisition, HR information systems and localization.