For a long time, discussions about employee engagement were confined to the dark corners of the HR department, far away from the spotlight, often dominated by big acquisitions, new product launches, and R&D breakthroughs.

More recently, though, the petitioning of HR leaders has paid off as the strategic benefits of great company culture, and highly engaged employees have made their way into the limelight.

The main reason this shift is taking place is that CEOs and their C-Suite counterparts have realised engagement is far more than a measure of abstract feelings, like employee morale or employee happiness, but is closely aligned with the company objectives: improving business outcomes.

According to Gallup, disengaged employees cost companies an additional 18% of their annual salary. These costs come in the form of recruitment and employee training, lost process efficiencies, higher employee safety incidents, more shrinkage, lower levels of product quality, and poor customer service.

For business executives and CEOs, this poses a significant challenge as the need to build a high-performing organisational culture is dependent on highly engaged employees.

These challenges are exacerbated in businesses with remote and distributed workforces as recognition programs and employee retention initiatives are highly dependent on the effectiveness of employee communication.

Despite these challenges, there are significant rewards for executives who can move the needle and build organisations that deliver a positive employee experience.

 

1. High levels of employee engagement is a source of competitive advantage

For businesses to leverage the benefits of a highly engaged workforce, their efforts need to move beyond employee recognition tactics and engagement surveys. Alone, these are not adequate tools for creating and nurturing employee engagement.

This is because engagement is more than simply being happy at work. Engaged employees go the extra mile to help customers and consistently deliver better service. The organisational benefits of this are clear: approaching engagement as a business strategy yields better results.

Organisations with more engaged workforces reported a substantial impact on several key performance indicators, including revenue growth, customer retention, production quality, and profitability.

 

2. Engaged employees drive business performance

For CEOs and other top-level executives, it is difficult to ignore the impact an effective employee engagement strategy can have on the overall performance of their organisations.

On an individual level, an engaged employee out-performs and out-produces disengaged employees by 14% which amounts to an extra $140,000.00 per $1,000,000.00 dollars spent on salaries annually. The impact of this is realised not only in levels of productivity, but throughout the business in the form of lower absenteeism, reduced employee turnover, and greater profitability.

Jim Harter, Ph.D., a chief scientist at Gallup Research, explains that “Engaged employees are more attentive and vigilant. They look out for the needs of their coworkers and the overall enterprise because they personally ‘own’ the result of their work and that of the organisation.”

Importantly, these results aren’t limited to single employees. If organisations can engage whole teams or business units, they see the same results.

Business units that scored near the top in employee engagement have nearly double the odds of success (based on a mixture of financial, customer, retention, safety, quality, shrinkage, and absenteeism metrics) when compared with those at the bottom.

 

3. Employee engagement increases customer loyalty and retention

There is plenty of evidence to show that acquiring a new customer is far more expensive than retaining an existing one. Depending on what industry you’re in, it can be anywhere from 5 to 25 times more expensive.

Businesses must recognise that their capacity for organic growth is inextricably tied to the everyday experiences of their employees.

There is also plenty of data showing the vital relationship between employee engagement and customer satisfaction. In fact, 86% of organisations with higher levels of engagement agree that an engaged workforce is important in creating loyal customers.

On average, these organisations enjoyed customer retention rates that were 18% higher than organisations with lower levels of engagement. This is a significant impact when you consider that, by increasing customer retention rates by merely 5%, businesses can increase profits anywhere from 25% to 95%.

 

Key Takeaways

With the clear strategic benefits of high engagement levels, it is surprising to see that, currently, 85% of employees worldwide are not engaged or are actively disengaged in the workplace.

The main reason for this is that today’s workplaces and leaders face mounting pressure due to new types of work arrangements, challenges to traditional management styles, and shifting expectations from workers, customers, and shareholders.

But, despite the challenges, there are significant rewards for CEOs and other top-level executives who can effectively move the needle on engagement:

  • 81% lower absenteeism
  • 64% fewer safety incidents
  • 41% fewer defects (quality)
  • 14% higher employee productivity
  • 10% higher customer ratings
  • 18% higher sales
  • 23% higher profitability

Ultimately these improvements translate into higher earnings per share, a metric against which CEOs’ performances are often measured. According to Gallup:

  • Publicly traded organisations that received the Gallup Great Workplace Award experienced 115% growth in EPS, while their competitors experienced 27% growth over the same time period.
  • The EPS of the best-practice organisations grew at a rate that was 4.3 times greater than that of their competitors.

Creating a culture of engagement starts at the top and requires leaders to prioritise engagement as a competitive, strategic point of differentiation.

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