What is the ROI from employee engagement?

We often hear from new HR managers who are enthusiastic about the opportunity to implement employee engagement survey programs in their organizations but have a hard time convincing senior management of the value they can bring vs. the cost of conducting surveys and doing the necessary follow-up to bring about change. HR is often on the losing side of the conversation and that's a real shame.

It's a ridiculously short-sighted management decision to ignore the potential benefits of measuring and increasing engagement and we'd like to show you why.

Here's a round-up of some of the statistics from studies conducted around the globe. The truth is, employee engagement programs should NOT be considered an unnecessary or frivolous expense. They are, in fact, an investment. And if done right, they are an investment with very healthy returns. 

Earnings Per Share & Turnover

• Companies with highly engaged employees have earnings-per-share levels 2.6 times higher than companies with low engagement scores.
• Organizations in the bottom quartile of engagement scores experience 41% higher turnover.

Net Income and Shareholder Return

• Companies with highly engaged employees experience 2 times higher net income than companies with poor engagement scores
• Organizations with highly engaged employees experience a 7 times greater 5-year total annual shareholder return than organizations with less engaged employees.

Operating Income

In a study prepared for the UK government (Engaging for Success: enhancing performance through employee engagement), researchers found the following correlations to employee engagement:

• Companies with low engagement scores earn an operating income 32.7 percent lower than companies with more engaged employees.
• Similarly, companies with a highly engaged workforce experience a 19.2 percent growth in operating income over a 12-month period.

Profitability & Attrition

The Corporate Leadership Council studied the engagement level of 50,000 employees around the world to determine its direct impact on both employee performance and retention. Here are two important findings:

• Engaged companies grow profits as much as 3 times faster than their competitors.
• Highly engaged employees are 87 percent less likely to leave the organization.

Customer Loyalty, Productivity, and Turnover

Any business owner can tell you that optimizing productivity levels is an uphill battle, and customer loyalty is what companies depend on to make payroll. (If only employees would understand that— right?) In an article published by Jonathan Pont, the most-engaged workplaces experienced the following performance metrics:

• 2 times higher customer loyalty
• 2 times higher productivity
• 2 times lower turnover

Cost of Disengagement

As if the business metrics that correlate to high levels of employee engagement aren’t convincing enough, let’s take a look at how much disengaged employees can cost a company. McLean & Company found some very compelling correlations: 

A disengaged employee costs an organization approximately $3,400 for every $10,000 in annual salary.

Disengaged employees cost the American economy up to $350 billion per year due to lost productivity.

Bottom line

If companies want to bolster productivity and profitability, increase customer loyalty and operating income, and slash attrition and disengagement losses, they have to engage employees. Also true is that you can't change what you don't measure. Hence the importance of a robust and comprehensive employee engagement survey.