why employee engagement is important

Why Employee Engagement Is Important?

Talent management is becoming a key area of concern for most C-suit executives. Business leaders know that workforce is their biggest asset and plays the most pivotal role in success of a business. Therefore it is important to ensure that employees are happy, motivated and share the same vision as the company. It is in this context, that the concept of employee engagement is gaining a lot of attention these days. What is employee engagement and why do businesses need it?

What is employee engagement?

In HR, engagement simply means how motivated and energetic employees feel about their work. It’s not only about how communicative they are, or how satisfied they are with what they are doing as these emotions can be misleading. An employee might be satisfied with the little work that he is doing but is that good enough for the business? Employee engagement is the passion that an employee feels about their work, the extent to which they are committed to the vision of the business and the amount of efforts they put in the direction towards achieving it.

Why is employee engagement important to a company’s success?

A highly engaged workforce has often been found the key difference between a successful business and an unsuccessful one. According to a report by Gallup, 87% of employees worldwide are still not engaged at work. However, companies that have engaged employees outshine their competitors by 149% earnings per share. That seems a good enough reason to explain the need of employee engagement. Here are some other ways in which employee engagement adds value to your organization:

Employee engagement to reduce attrition cost

A disengaged workforce is more of a liability than an asset, slowly draining the business of its financial resources in the form of salaries, perks and other benefits. According to Gallup estimates, a disengaged workforce is costing businesses around $550 billion every year in terms of lost productivity. Also, since a disengaged employee is more likely to leave the organization, finding a new replacement for them will also waste valuable time, money and productivity. According to a study, it can cost up to 33% of the employee’s salary to replace them. With better engagement, this sheer wastage can be avoided. This clearly indicates the cost benefits of performing employee engagement activities.

(Also Read: How to improve employee engagement in your organization)

Impact of employee engagement on employee retention

Engaged workforce bring more value and energy to the table simply because they are more connected with the business vision and have a firm belief in it. They are willing to stick to the company even when times are tough. Their loyalty is with the business idea and the vision of the company, not with a manager or any other individual aspiration. Therefore, it is observed that engaged employees reflect higher retention rate. When companies put in place effective HR engagement practices, they will into only increase employee motivation and their ability to work to their full potential, but also improve employee satisfaction level that ensures they remain loyal to the organization.

Employee engagement impact on revenue

Not only does an engaged workforce reduces financial drainage, but also positively impacts the overall bottom line of the business. The Gallup report estimates companies with highly engaged employees earn per share 2.6 times higher than the companies with low engaged employees. Similarly, businesses with a highly engaged workforce achieves 2 times higher net income than businesses with poor engagement levels. The Taleo research also found out that organizations experienced 26 percent higher revenue per employee where the engagement levels are high. A Towers Perrin research reported 6% higher net profit margins in companies with engaged workers. There is a growing body of research that indicates which now seems obvious; engagement drives revenues up.

(Also Read: Benefits of employee referral programs)

Effect of employee engagement on organizational performance

A HBR research when asked C-suite executives to define the factors which are most likely to bring success and growth in future received the following answers:

  • High level of customer service
  • Effective communication
  • High level of employee engagement

Around 71% of the executives surveyed believe that high levels of employee engagement must be one of the priorities to drive growth and investment. When asked to rate the importance of employee engagement for business performance and overall organizational success, 48% gave a 9-10 rating which signifies extremely important. A disengaged workforce exhibits 33% higher absenteeism and is 60 % more error prone.  These are some datapoints that directly reflect the impact of employee engagement activities on workforce performance. To foster a high-performance culture in the organization it is essential to engage with your employees so that roadblocks can be identified and worked upon.

(Also Read: Three Simple Steps to Avoid Making a Bad Hire)

Employee engagement leads to customer satisfaction

Based on the extensive evidences we have covered till now, it’s obvious that employee engagement impacts business outcomes positively. One of the best business outcomes for companies that have a greater engagement level is a highly satisfied customer base. It is not difficult to understand that when an engaged team puts in the hard work, and passion to deliver product or services, this will affect customer satisfaction. ISS, facility service provider collected 20,000 customer responses from over 2500 contracts and also 500,000 employee responses. The data analysis concluded a high correlation between employee engagement and customer satisfaction with a correlation coefficient 0.55, which is even higher than a correlation coefficient of sleeping pills and insomnia (0.38).  This drives the clear conclusion that employee engagement affects customer satisfaction for businesses.

(Also Read: Why Employee Referrals are the Best Source of Hire?)