Want Proof That Employee Engagement Leads to Increased Profits? Here It Is

Beth Miller |

All leaders want their company to be successful and profitable. But what is the one thing that, if you focused on improving it, would increase your profitability?  The answer for many successful companies is: focusing on their people.

This means going beyond making your employees happy. This means employees who are fully engaged.

Who are engaged employees? They:

  1. know their organization’s mission and core values;
  2. believe in and support those values; and
  3. engage themselves in activities that promote and support the company’s business objectives.

Only 30% of U.S. workers were  engaged in their work and workplace during the first half of 2012, according to Gallup. Also only 20% of employees around the world say that they are engaged. If your company’s engagement has similar levels, your company is at risk of lower productivity and higher turnover just to name a couple of negative implications.

In addition to Gallup’s work, below is further proof why employee engagement is so important, and why leaders should measure employee engagement and put a plan in place to increase it.

  1. “Any company trying to compete … must figure out a way to engage the mind of every employee.” —Jack Welch, the former CEO of General Electric.
  1. Engaged organizations have 3.9 times the earnings per share growth rate compared to organizations with lower engagement in the same industry, according to Gallup.
  1. It is engaged employees—who are aligned with organisational goals and act as advocates of their organisation—who are most critical to business success. The idea is that it is when people are so pleasurably immersed in their work that they are in “flow”, that they release “discretionary effort”, are less wasteful, more productive, come up with good ideas and generally do more to help achieve goals than people who are disengaged.” —Linda Holbeche, director of the Holbeche Partnership.
  1. Organization culture is not a soft concept. Its impact on profit can be measured and quantified.” —James L. Heskett, author of the book, The Culture Cycle: How to Shape the Unseen Force that Transforms Performance.

He also writes in his book: “We know, for example, that engaged managers and employees are much more likely to remain in an organization, leading directly to fewer hires from outside the organization. This, in turn, results in lower wage costs for talent; lower recruiting, hiring, and training costs; and higher productivity (fewer lost sales and higher sales per employee). Higher employee continuity leads to better customer relationships that contribute to greater customer loyalty, lower marketing costs, and enhanced sales.”

  1. Engaged workers maintain a positive mood throughout the week, while those who are not engaged or those who are disengaged have lower levels of positivity during the workweek, according to Gallup. A positive mood can go a long way, especially for your employees who directly with customers.
  1. Global research by Towers Watson, which analyzed 40 companies over three years, showed that, over a period of 36 months, companies with a highly engaged employee population turned in significantly better financial performance (a 5.75% difference in operating margins and a 3.44% difference in net profit margins) than did low-engagement workplaces.

In another analysis, they looked at companies in what we call our High-Performance Engagement Index. This group, which shows consistently higher engagement levels than average organizations, produced shareholder returns 9.3% higher than the returns for the S&P 500 Index from 2002 through 2006.

  1. Employee satisfaction improves corporate performance.” said Alex Edmans, MIT Sloan School of Management. He analyzed the financial performance of a portfolio of stocks by Fortune magazine as the “Best Companies to Work for in America” from 1998 to 2005. By the end of 2005, these stocks “earned average annual returns of 14 percent by the end of 2005, over double market return.”

Learn more about employee engagement by reading Executive Velocity’s case study of a company that has received recognition for its high level of employee engagement.

What other research can you add to this list that shows the importance of employee engagement? 

Photo Credit: Flickr user youngthousands

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Beth Miller

Beth Miller

Beth Armknecht Miller’s passion for learning, and dedication to helping others, are strands woven throughout her distinguished career, which continue to guide her work with Executive Velocity, a top talent and leadership development advisory firm. As a trusted executive consultant, Vistage Chair, and committed volunteer, Beth holds herself to a rigorous standard of excellence, and she encourages her clients to do the same when pursuing their goals.

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