“There are only three measurements that tell you nearly everything you need to know about your organization’s overall performance: employee engagement, customer satisfaction, and cash flow. It goes without saying that no company, small or large, can win over the long run without energized employees who believe in the mission and understand how to achieve it.” Jack Welch, former CEO of GE
Most businesses want greater profit. It sounds very simplistic, given how complex business organizations are, but there are realistically only a few paths you can take to greater profitability. You must increase the money coming in, or you must decrease costs, or both! And the best way to do both of those is through highly engaged employees.
Not convinced that higher levels of employee engagement correlate with profits? Consider:
- Increasing employee engagement investments by 10% can increase profits by $2,400 per employee, per year.
- A disengaged employee costs an organization approximately $3,400 for every $10,000 in annual salary.
- Firms with high levels of employee engagement increased their operating income by 19% over a twelve-month study period, while firms with low levels of employee engagement reported decreases in operating income.
- Firms with high levels of employee engagement generate earnings per share (EPS) 342% higher than the industry median.
One of the reasons that increasing employee engagement can have such dramatically positive impact on business outcomes is because employees impact business profitability in so many different ways. Gallup has repeatedly conducted an analysis into the relationships between engagement and business outcomes to identify how employee engagement increases profitability. Their analysis has identified the seven performance outcomes that can be positively influenced through higher employee engagement – all of which are directly linked to the bottom line:
- Customer ratings and loyalty: If customers are satisfied, they become loyal, which means they purchase more frequently, in greater amounts, and are less price-sensitive.
- Productivity: Lowering the cost of goods or service delivery directly impacts business results.
- Turnover: Hiring, training, re-training – all the hard and soft costs involved in losing and replacing employees can negatively impact profit. Not to mention the hit to productivity!
- Safety incidents (including patient safety incidents): Safety incidents result in injury, down-time, and lower productivity.
- Shrinkage (theft): Organizations with higher employee engagement experience less theft than do companies with lower engagement.
- Absenteeism: If employees don’t show up, they can’t work. And productivity takes another hit that could have been lessened by improved employee engagement.
- Quality (defects): The cost of re-work or discarding product can have a big impact on profit that is mitigated by employee engagement.
Only about one-quarter of U.S. companies have an employee engagement strategy, so Employee Engagement will be a key business strategy for 2017. Bersin and Associates reports the current annual employee engagement spend in the US is $720 million and project this spend to increase to about $1.5 billion. And no wonder! Disengaged employees cost the American economy up to $350 billion per year due to lost productivity. The fact is we simply can’t afford disengaged employees!
If you are one of the many U.S. firms who are not reaping the benefits of Employee Engagement, give us a call today! 888-262-3186.
Click here to see our July 2015 blog reporting on 29 studies of Employee Engagement and Profit!