The best of companies innately understand the importance of having an engaged workforce.
Having engaged employees is a prerequisite for becoming a high-performing organization where people care about their work and know that they are an important part of the company.
But how do we convince the decision-makers towards investing in enhancing employee engagement? More importantly, how do we answer the tricky question, “...but what’s the ROI of employee engagement’?
As anyone in the people operations or human resources can attest, measuring ROI of boosting employee engagement is no easy task.
To help you answer the question of the ROI of improving employee engagement, we have built a simple, free-to-use calculator. It gives you an estimate of potential gains that your company can realize from increasing employee engagement.
📥 Access the Employee Engagement ROI Calculator here.
But before diving into more details of the calculator, let’s talk about the different levers through which highly engaged employees impact your business.
Engaged employees care more
Highly engaged employees are more involved in their work and experience superior levels of satisfaction at the workplace.
Because of the high levels of involvement and satisfaction, they take more initiative, are more productive, come up with better ideas, do higher quality of work, and support their team better.
Apart from the individual and team contributions, highly engaged employees have a tangible impact on boosting revenue and reducing costs for the business.
In this article and within the calculator, we focus on the three most important levers through which employee engagement impacts the business:
- Increase in productivity
- Reduced employee turnover
- Decrease in absenteeism
1. Engaged employees boost productivity
Highly engaged workforce resulted in a 17% increase in productivity, as shown by a Gallup study with data collected from more than 195,600 U.S. employees.
According to Gallup, actively disengaged employees cost the US US$483 billion to US$605 billion each year in lost productivity.
When employees enjoy coming to work and understanding their impact on the business they feel actively engaged and get more done at the workplace.
The enhanced productivity impacts the top-line of the organization through increased revenue generating activities and the profitability through higher utilization of existing resources.
2. Engaged employees stay longer
Highly engaged workforce resulted in 24% lower turnover for High-Turnover organizations and 59% lower turnover for Low-Turnover organizations, according to a study conducted by Gallup.
High employee turnover is costly and disruptive for any business.
According to HR influencer Josh Bersin, the total cost of losing an employee can range from tens of thousands of dollars to 150-200% of the annual salary. It includes the cost of hiring and onboarding a new person, lost productivity, lost engagement, customer service and errors, training cost (invested in previous employees), and cultural impact.
Engaged employees, who feel belonging to the organization’s mission and receive recognition at their workplace, are substantially more loyal to the organization.
Employees with lower engagement are 4x more likely to leave the organization than the average employee in an organization according to the Corporate Leadership Council.
Building employee engagement helps improve retention and avoid expensive turnover costs.
3. Engaged employees are less absent
A highly engaged workforce resulted in a 41% decrease in absenteeism, as shown by a Gallup study with data collected from more than 195,600 U.S. employees.
Engaged employees are not only more likely to stay in the organization, they are also more likely to show up to work.
The cost of absenteeism is estimated to be between 20.9% and 22.1% of the total payroll. The estimate considers both the direct costs, such as replacement and overtime costs, as well as indirect costs, such as loss of productivity.
Increasing job satisfaction and creating a positive company culture with clear expectations can counteract absenteeism in organizations.
With a workforce of 100 employees and an average salary of US$50,000, this can result in a cost reduction of more than US$440,000 per year. For a more detailed calculation of the impact that employee engagement can have on your company, access the calculator.
Other factors that increase the ROI on employee engagement
Engaged employees care more about quality
Highly engaged employees are more attentive and mindful of the defects and quality issues towards their products or services. Highly engaged business units experienced a 40% reduction in quality defects.
Fewer safety incidents at engaged workforces
Highly engaged employees are more aware of their surroundings and these employees work more diligently to ensure safety for everyone. Studies show that highly engaged organizations realize a 70% reduction in the number of employee safety incidents and a 58% decrease in patient safety incidents.
Engaged employees boost customer satisfaction
Highly engaged workers have a strong sense of belonging to the organization and to their customers. They are often brand advocated who commit to building long-lasting relationships with customers.
Research points out that business units with highly engaged employees achieve a 10% increase in customer metrics and a 20% increase in sales.
And finally, the overall profitability goes up
Higher employee engagement helps profitability to go up from both directions i.e. from increasing the revenue while also decreasing the costs.
Revenue goes up due to increased productivity and enhanced customer satisfaction whereas the cost goes down due to lower employee turnover and absenteeism.
Considering everything together, organizations with highly engaged employees benefit from an increase in profitability of 21% according to Gallup’s meta-analysis.
The impact on the bottom-line is also rewarded through company’s share prices. Research of stock prices over the years shows that companies with engaged employees outperform their peers by 2.3% to 3.8% higher stock returns per year.
How to use the Leapsome ROI Calculator
To calculate the return on investment on employee engagement at your organization, you can make use of the Leapsome ROI Calculator.
You only need the following variables for your company:
- Number of employees
- Average salary
- Employee turnover rate
Not sure about your turnover? Find the average employee turnover for your industry here
There’s an efficient way to build engagement
With Leapsome, you can create a cycle of performance management and personalized learning that powers employee engagement and the success of your business.
Leapsome automates and simplifies the process of collecting employee feedback through customizable surveys loaded with best-practice questionnaires, quantifying engagement through engagement scores and eNPS, conducting impactful sentiment analysis powered by Natural Language Processing and Machine Learning technology that analyzes and scores the sentiment of written responses to each of the open-ended questions.
On top of that, Leapsome enables managers to conduct meaningful and effective 1-on-1 meetings, give and receive growth-oriented feedback, align the entire team towards company goals, and enable people with development-focused performance reviews.
— Learn more about how you can increase the levels of employee engagement from one of our product specialists.