The Impact of Employee Engagement on Performance and Results

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Nowadays, employee engagement statistics are almost difficult to avoid. Gallup recently reported that a meager 33% of employees are engaged in the U.S., with an Aon Hewitt study indicating that engagement has recently dipped for the first time since 2012.

Understandably, companies are overhauling performance management systems in response, using tactics like OKR goal setting and feedback apps to improve engagement levels.

Yet, with the near-constant stream of updates surrounding employee engagement, there comes a point at which we might begin to wonder: is it really that important?

Not only is the answer an unequivocal “yes,” but it’s possible that employee engagement is even more important than we originally thought.

Let’s take a look at how it specifically impacts company performance and results.

What Is Employee Engagement?

To fully understand the impact employee engagement has on an organization, it’s important to first get some clarity on what it truly means.

Definitions vary from one source to the next, but we’ll take a look at how some credible sources describe it – while also describing what it isn’t – for a more concrete definition.

The Society for Human Resource Management (SHRM) defines employee engagement as “the connection and commitment employees exhibit toward an organization, leading to higher levels of productive work behaviors.”

Gallup, the leading source on employee engagement statistics, calls engaged employees “those who are involved in, enthusiastic about, and committed to their work and workplace.”

Employee engagement is thus NOT employee happiness (though it may have an impact on it).

Despite variations in definitions, one thing most sources agree on is that engaged employees are more likely to contribute discretionary efforts to an organization. That means these employees aren’t simply there to make a paycheck; instead, they’re actively committed to their role in achieving organizational goals.

Clearly, then, having engaged employees is important. After all, having teams that are actively dedicating their efforts to your company goals will yield better results than having employees who simply “show up.”

So, Employee Engagement Matters – But to What Extent?

The degree to which employee engagement will impact an organization’s performance will obviously vary by company.

Still, there’s some compelling evidence that indicates it can wield significant power over your business outcomes, regardless of your industry, business size, or other differentiating factors.

Let’s take a look.

  • Research links employee engagement directly to productivity. A 2009 study by the University of Iowa and Gallup revealed an 18% drop in productivity among most and least engaged employees.
  • The same survey also noted a connection between absenteeism and engagement: it’s 37% higher among employees with engagement scores in the lowest quartile. To put into perspective just how much absenteeism impacts productivity: a Gallup-Healthways Well-Being Index survey shows missed worked days cost U.S. organizations upwards of $84 billion in 2013. 
  • A study from Glint shows the turnover rate of disengaged employees is 12 times higher than that of highly engaged employees. The implications of losing top performers can significantly impact productivity, not to mention the potential financial ramifications of trying to replace them: the University of Florida states the cost of turnover can reach up to 150% of an employee’s salary. Aon Hewitt data shows highly-engaged employees are 36% more likely to stay with their company.
  • Raising employee engagement can help improve your operational efficiency. The same Aon Hewitt findings referenced above indicate that organizations with higher engagement levels tend to have 75% fewer quality defects, along with 26% fewer workers’ compensation claims related to safety.
  • Perhaps the most compelling evidence of employee engagement’s impact on performance is its link to stock performance. Forbes describes a 3.9 times earnings per share growth rate between companies with employees who have the highest engagement levels versus the lowest.

As you can see, measuring the impact of employee engagement on an organization is near impossible, but with links to productivity clearly evident, it’s time for employers to find more effective solutions to the problem – and quickly.  

What you can measure is employee engagement itself. And, you can act on that information, putting improvement strategies in place.

How Can We Improve Employee Engagement?

Strengthening employee engagement can be improved in a few different ways, but it’s important to take an all-encompassing approach instead of selecting just one method.

Here are the strategies that have the greatest impact on employee engagement:

Frequent Communication With Managers

Gallup shows that managers could be responsible for as much as 70% of variance in employee engagement levels. In order to stay engaged in their work, employees need to feel that their managers genuinely care about their achievements and have their best interests in mind.  

One way to achieve that is to ensure your managers are regularly checking in with their teams.

For best results, encourage managers to meet for one-on-one meetings with each of their direct reports for a brief check-in session weekly. This succinct yet powerful meeting should be used to discuss any impending obstacles, small wins, and overall progress on goals, which brings us to our next point.

Clear, Measurable Goals Aligned With Company Priorities

While check-ins give managers the opportunity to give employees feedback – which employees need in order to stay engaged – they must have clear, measurable goals in place against which they can gauge progress. Without clear, measurable goals, managers won’t be able to provide actionable feedback to help employees grow and develop.

Moreover, when goals are clear, measurable, and linked with larger organizational objectives, employees get a directly line of sight into how their efforts impact company success. This helps them identify a clear role in overall business performance, which can also support engagement.

Survey Your Teams

Finally, there’s no way to really know where your organization stands in terms of engagement if you’re not measuring it. Using employee surveys on a regular basis can allows you to retrieve data which you can then apply towards future decisions.

Just be sure to ask employees specific, relevant questions to clearly assess engagement levels, and consider making surveys anonymous to retrieve the most honest feedback.

Most importantly, remember that employee engagement should be factored into your overall performance management framework, and is thus an ongoing activity – not a one-time event. With this approach in mind, you can apply strategies to continuously improve engagement, and enhance performance as a result.  

Written By
Zorian is CEO of Atiim Inc. (i.e. A-team), a SaaS company that makes sales and marketing teams more productive. Previously he was VP of Sales & Marketing at InsightSquared and has been a speaker at many industry conferences, including the American Association of Inside Sales Professionals (AA-ISP). He has also contributed to WSJ Accelerators Blog, Top Sales World Magazine and the Salesforce.com Blog, among others. He holds an MBA from Harvard Business School.