A Compelling Business Case for Employee Engagement Initiatives

calculatorThis guest blog has been provided by Kevin Sheridan, best-selling author and innovator in the field of Employee Engagement.

Are you frustrated by trying to get your Finance people or other Senior Executives to understand the value of measuring and building Employee Engagement?  If so, you are not alone.  I’ve talked to thousands of managers and HR people who are at their wits end trying to justify the cost on such initiatives. Sometimes people in the Finance function are quick to question the cost of “that soft and fuzzy people stuff.” (I am allowed to say this because I spent a large part of my career in Finance).

The well-researched statistics below will give you great fodder for enlightening the naysayers and turning them into passionate believers in the value of Employee Engagement.

The Best-in-class or most Engaged Organizations (regularly defined as the top 10%) garner the following awesome business and financial outcomes compared to those organizations with average levels of Employee Engagement:

  • 20 times more innovation and creativity – In addition, 59% of Engaged Employees report that their job brings out their best creativity versus only 3% for the Disengaged Employees.1 Needless to say, this heightened out-of-the-box thinking pays huge dividends in “Creative” and “Design” type job functions and industries.
  • 44% Higher Retention2
  • 37% Higher Sales3
  • 125% Less Burnout/Job Stress.4 Side note:  Job stress/workload/lack of work life balance are the number one reason people contemplate resigning from their jobs.
  • 66% Lower Absenteeism and Absenteeism costs the average North American employer $3,600 per hourly employee, and $2,650 per salaried employee, per year.5
  • 51% Less Turnover6 Side notes: Turnover costs the American economy over $300 Billion dollars each year.  Replacement costs for an employee resignation run anywhere from one to two years base salary for that position.
  • 53% of the Actively Disengaged are content to continue to cash their paychecks as opposed to begin to look for new employment7; these are commonly referred to as the “Quit and Stay” employees.
  • Communication is five times more likely to be seen as a positive by the employees8
  • Higher volunteerism by employees leading to 31% Higher Productivity9
  • Much better safety compliance and thus, fewer workplace accidents. Engaged Business Units have 62% less safety incidents tan their unengaged counterparts10
  • Significantly lower instances of Employee Theft or what the Retail industry commonly calls “Shrinkage.” Companies above the 50th percentile on Employee Engagement versus those in the bottom half experienced a 123% higher success rate in eliminating this theft.11
  • Engaged employees are linked to Engaged Customers at a very high correlation coefficient of .8512

One of the most meaningful metrics is specific to the healthcare industry.  Sadly, in America, you are five times more likely to die of a hospital-born infection than you are a homicide.13   Why are so many infections creating these needless deaths?  The primary reason is the lack of proper hand washing by caregivers.  Thus, knowing that there is a near-perfect correlation between Employee Engagement and Hand Washing Compliance (a .99 correlation coefficient according to HR Solutions), increasing engagement actually saves lives!

Increasing Employee Engagement also increases Ethical Behavior.  In fact, the two topics are highly correlated at a .73 coefficient.14  One can only wonder how unengaged GM’s engineers were when they decided that $1 per car was too costly to fix the faulty ignition switch that was ultimately linked to the pointless deaths of 13 people.  The same Hay/ERC study also reported that Engaged Employees were much more likely to report misconduct than their unengaged and disengaged coworkers.  A review of the internal memos at GM clearly showed that although many employees noticed the switch problem that could cut off engines and disable airbags, power steering and power brakes, the company failed to recall 2.6 million cars until more than one decade later.  In this case, a culture of Ambivalence and Disengagement tragically cost 13 lives, or maybe more.

Lastly, if you are attempting to sell an Employee Engagement Initiative or survey to a CFO or other Executive that only cares about “the bottom line,” share this metric with them:

“Best-in-class organizations are 350% more profitable than organizations with average levels of Employee Engagement levels.”15

The American author/speaker Zig Ziglar once said, “Profitability comes from loyalty, productivity, and having a character base from which to work.”  My hope is that your leaders aspire to build a character base which puts the Human back into Human Capital and genuinely value employees over money.  As my Grandmother Rita said to me many times growing up, “Kevin, one hand washes the other.”  So true.

Source citations:

  1. Source: Gallup 2009 Q12 Meta-Analysis 
  2. Source: Gallup 2013 State of the American Workplace
  3. Source: September, 2013 Before Happiness, Shawn Achor
  4. Source: Gallup 2012 Q12 Meta-Analysis Report
  5. Source: Forbes, July 2013 The Causes and Costs of Absenteeism in the Workplace
  6. Source: Gallup 2013 State of the American Workplace
  7. Source: Modern Survey Trends in Employee Engagement – 2013
  8. Source: HR Solutions 2007 The Link Between Workplace Communication and Employee Engagement.
  9. Source: September, 2013:  Before Happiness, Shawn Achor
  10. Source: 2012 Q12 Gallup Meta-Analysis
  11. Source: Gallup 2013 State of the American Workplace.
  12. Source: Harvard Business Review 1994 and updated July, 2008 Service-Profit Chain Reports
  13. Source: Centers for Disease Control and Prevention:  2005 Hospital-born Infection Report
  14. Source: July, 2010 Joint Report by The Hay Group and Ethics Resource Center
  15. Source: March, 2008 – Employee Satisfaction Contributes to the Bottom Line – The Wharton School of Business

This guest blog has been provided by Kevin Sheridan, best-selling author and innovator in the field of Employee Engagement.

Kevin Sheridan is an Internationally-recognized Key-Note Speaker, a New York Times Best Selling Author, and one of the most sought-after voices in the world on the topic of employee engagement.   He spent thirty years as a high-level Human Capital Management consultant, helping some of the world’s largest corporations rebuild a culture that fosters productive engagement, earning him several distinctive awards and honors. Kevin’s premier creation, PEER®, has been consistently recognized as a long- overdue, industry-changing innovation in the field of Employee Engagement.  His book, “Building a Magnetic Culture,” made six of the best seller lists including The New York Times, Wall Street Journal, and USA Today.  He is also the author of The Virtual Manager, which explores how to most effectively manage remote workers. 

Kevin received a Master of Business Administration from the Harvard Business School in 1988, concentrating his degree in Strategy, Human Resources Management, and Organizational Behavior.  He is also a serial entrepreneur, having founded and sold three different companies. Kevin can be reached via email at kevin@kevinsheridanllc.com, on LinkedIn at http://www.linkedin.com/in/kevinsheridan1 and on twitter @kevinsheridan12. His webpage is www.kevinsheridanllc.com.

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