Dissecting the science of Employee Disengagement & its impact
Although there’s no ‘official’ or agreed-upon formula to quantify employee disengagement, most experts agree that the following metrics are directly affected by the rise or fall of the overall Employee Engagement:
- Productivity Costs
- Turnover Costs
- Absenteeism Costs
- Onboarding Costs
Productivity Costs (Click to expand)
In an empirical study done by Gallup, titled “State of the American Workplace” revealed that 70% of employees are disengaged at work. This costs companies between $450 and $550 billion dollars every year.
Looking at data from 1.4 million employees surveyed by Gallup, they discovered that the top 25% most engaged teams had 21% higher productivity than the rest.
Turnover Costs (Click to expand)
A direct correlation exists between the level of engagement and employee turnover (estimate your employee turnover cost). When the employee disengagement goes up, the latter also goes up. similarly, when employee disengagement goes down, so does the latter. In other words, you get to keep your best and happiest employees.
In the same study, Gallup discovered that the same highly engaged companies saw 25% less turnover (in high-turnover industries) and 65% lower turnover (in low-turnover industries).
If you think about this for a moment it simply makes sense: High-performing companies hire employees who are a good fit, thus decreasing turnover rates.
Absenteeism Costs (Click to expand)
Engaged employees actually love going to work every day. Even if they feel a little under the weather, they will try to power through and make into the office. On the other hand, disengaged employees will look for any excuse to “call in sick”. Actually, businesses with highly engaged team members saw a drop in absenteeism of around 41%, according to the Workforce Institute. Another study by DDI World showed that “…in a Fortune 100 manufacturing company, teams scoring higher in employee disengagement score averaged 14.5% more in turnover, and absenteeism hovered around 8%. For highly engaged teams, absenteeism was only 4.8%, and turnover came down to 4.1%.
Onboarding Costs (Click to expand)
Training a new hire and getting them up to speed is extremely costly. Depending on the complexity of the job, a new hire will only be a fraction as productive as the person they replaced. In fact, a good rule of thumb says that full productivity is only achieved after 90 days. Add to this lack of productivity the actual cost to train the new employee, the loss of productivity from whoever is training the new hire and all the costs associated with actually hiring the person in the first place and you can see how retaining an employee is far more cost effective than getting new blood into the company.