The cost of disengaged employees
Employee engagement has become a buzzword not only for Human Resources Professionals but also business executives as the impact of happy and engaged employees have become more transparent.
Gallup research in the US shows:
- 30% employees are engaged and inspired at work
- 20% are actively disengaged
- 50% are just present
The research also found that the top 25% of teams versus the bottom 25% in any workplace have nearly 50% fewer accidents and have 41% fewer quality defects. In world-class organizations, the ratio of engaged to actively disengaged employees is 9.57-to-1, compared to average organizations, with a ratio dropped to 1.83-to-1.
Few companies actively measure employee engagement as a key metric as most executives don’t realize the profound impact of employee engagement on company performance.
With companies not understanding how engagement impacts financial outcomes and business risk, they are missing out on the opportunities to deliver improved business performance by creating and sustaining a highly engaged workforce.
A Towers Watson study of 50 companies over a one-year period shows that organizations with high employee engagement had a 19% increase in operating income and nearly 28% growth in EPS. Conversely, companies with low levels of engagement saw operating income drop more than 32% and EPS decline 11%.
A similar study by Hay Group also finds that organizations in the top quartile in engagement generate revenue growth that is 2.5 times higher than those companies in the bottom quartile.
Example of cost
To illustrate the financial impact of employee engagement on business, let’s take a company with 100 employees and an average salary bill of $45000 per employee per year with:
- 15% highly engaged employees (employee contribution exceeds cost)
- 20% engaged employees (employee contribution equals to cost)
- 50% somewhat engaged employees (employee contribution below cost)
- 15% disengaged employees (employee contribution far below cost)
- The business is running at only 81% of its full performance potential
- It is experiencing a net loss of $850k or 19% of the salary bill per annum due to employee under performance
- The organizational loss contributed by the 65% disengaged and somewhat engaged employees exceeds $1mil or 22% of the salary bill per annum, as their contributions are less than the salary they received
Want to measure your business?
Option 1: Measure the level of your employee engagement through an online survey sent to all employees and receive a report based on the survey results within a week. This provides a basic but effective measure of levels of engagement, issue areas and financial impacts.
Option 2: Ask us about our comprehensive employee engagement solutions to identify levels of employee engagement and define action plans to help your business overcome financial loss and improved performance.