“Take care of your employees and they will take care of your business”
– Richard Branson
From the above, LHS = RHS, hence proved; Employee Engagement ROI exists. In a few simple words, the founder of Virgin Group, a British Multinational Corporation Venture Capital, has captured the essence and importance of “Employee Engagement”. Also see, how to improve your employee engagement & calculate the savings from it here.
The current age CXOs and leaders place “Employee Engagement” in most critical levers of human capital, and take all necessary steps to feel the pulse of the organization, and constantly work towards keeping their employees motivated and engaged.
While it’s proven that when employees are highly engaged, organizations perform better. In fact, it’s been proven that there is a direct link between employee engagement and revenue. But in terms of Employee Engagement ROI, how does the metrics come out to be ?? Let’s take a deep dive, gauging the differential increment contributed by employee engagement.
Earnings Per Share, Turnover & Employee Engagement ROI
Organizations with higher satisfaction rates (not engagement rates) have annual stock returns averaging 2.3 to 3.8 percent higher than those of their competitors
Gallup’s research on 49 publicly traded organizations found:
- Corporations with about 2.6 engaged employees per each disengaged employee experienced 2% lower earnings per share than their competitors
- Corporations with about 9.3 engaged employees per each disengaged employee experienced 147% higher earnings per share than their competitors
- Companies with highly engaged employees have earnings-per-share levels 2.6 x higher than companies with low engagement scores.*
- Organizations in the bottom quartile of engagement scores experience 41% higher turnover.
Profitability, Turnover & Employee Engagement ROI
The Corporate Leadership Council studied the engagement level of 50,000 employees around the world to determine its direct impact on both employee performance and retention. Here are two important findings:
- Engaged companies grow profits as much as 3X faster than their competitors.
- Highly engaged employees are 87 percent less likely to leave the organization.
Net Income, Shareholder Return & Employee Engagement ROI
- According to Kenexa, organizations with highly engaged employees experience 2x higher net income than companies with poor engagement scores
- Kenexa also reports that organizations with highly engaged employees experience a 7x-greater 5-year total annual shareholder return than organizations with less-engaged employees
Operating Income & Employee Engagement ROI
As per David MacLeod and Nita Clarke, in a research sponsored by UK Government, Engaging for Success: enhancing performance through employee engagement, found the following correlations to employee engagement:
- Organizations with low engagement scores earn an operating income 32.7 percent lower than organizations with more engaged employees.
- Similarly, organizations with a highly engaged workforce experience a 19.2 percent growth in operating income over a 12-month period.
Customer Loyalty, Productivity & Employee Engagement ROI
In an article published by Jonathan Pont, the most-engaged workplaces experienced the following performance metrics:
- 2X higher customer loyalty
- 2X higher productivity
Disengagement Costs & Employee Engagement ROI
And lastly, if the business metrics that correlate to high levels of employee engagement aren’t able to put a compelling case, this is how much a disengaged employees can cost an organization. According to McLean & Company, here are some metrics in favor of employee engagement:
- A disengaged employee costs an organization approximately $3,400 for every $10,000 in annual salary, this does not include turnover costs.
- Disengaged employees cost the American economy up to $350 billion per year due to lost productivity.
