How beneficial is employee engagement? - Let's talk numbers!

While it's known that employee engagement drives performance and commitment at the individual level, how does it benefit the organization? Furthermore, is there a number that can be put to the extent there is an improvement in organizational performance transcending factors such as organizational objectives, cultures, values and the nature of the industry itself?

One of the most important studies in this regard is undertaken by Gallup as part of its Q¹² Meta-Analysis research every few years. The latest comprehensive study conducted meta-analysis on 456 research studies with data from 276 organizations in 54 industries and across 96 countries. It included more than 100,000 business-units and over 2.7 million employees. While the scale and complexity of the research have improved over the years, the results still consistently confirm the relation between employee engagement and organizational performance. 

What’s particularly key about the study is that it is backed by thorough science and Meta-analysis, which is a technique used by statisticians to isolate common findings by aggregating results of several studies. It eliminates measurement and sampling errors and other biases. 

Insights 

As can be observed, the engagement and performance metrics are closely linked. It is also consistent across different organizations and industries and across different parts of the world. This is most clearly observed by comparing the median percent difference between companies in the top and bottom quartiles. 

On each of the parameters, there is a significant difference between the top and bottom quartile companies. On some factors, such as safety incidents this is a 64% reduction, simply because the engaged employees are more aware of their surroundings. There is also lower absenteeism by 81% and lower shrinkage by 28% when the employee feels more connected to the workplace and colleagues. Even more importantly, the turnover percent is also much lower at 41% for low turnover organizations and 18% for high turnover organizations, which has its own significant financial impact in terms of better productivity, lower downtime, lower hiring & training costs among others. 

A closer look at all the variables above also reveal that some are a bit different than the others. One, there are factors that directly influence employee behavior such as increased retention (lower turnover), lower absenteeism, lesser number of safety incidents, higher participation and an overall improvement in wellbeing. 

While all these are positive outcomes, what the statistics also show are that these serve as a mediating variable (causal variables) for critical downstream outcomes for businesses such as higher customer engagement & loyalty and increased productivity. 

This connection, especially important in a service industry, is probably what Hyatt’s CEO Mark Hoplamazian talks about when he says “the key to Hyatt's success is making sure we are connected with what our guests and colleagues are experiencing, and then designing their experience so that it's fulfilling for them”. This is demonstrated in the fact that the employees, instead of sticking to scripts during interactions with customers are free to be their true selves and they’re rewarded with a genuine authentic connection with customers. 

Higher customer engagement, loyalty and hence satisfaction as well as improved productivity by the employees themselves inevitably leads to a higher profitability for the organization. This linkage between employee engagement and profitability was also shown in a previous study over 49 publicly traded companies. Of the companies with an average ratio of 9 : 1 engaged to dis-engaged employees, the EPS number was 147% higher. However, if the average ratio was lower at 2.6 : 1 of engaged to disengaged employees, the EPS was lower by 2% as compared to competition.  

In conclusion, while some may believe employee engagement as an altruistic effort that is done because it has to be done, there is enough evidence to suggest that it should be focussed on because of it’s direct tangible benefits to the organization and that doing what is best for employees does not have to contradict what is best for the business or organization. 

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