UNC Kenan-Flagler Insights

Powering your bottom line through employee engagement

September 5, 2013 By kfblogadmin1

Exec Dev Sept 2013The following is an excerpt from a white paper by Kimberly Schaufenbuel, director of UNC Executive Development.

Some of the biggest concerns CEOs say they grapple with on a regular basis with are operational excellence, innovation, risk, the regulatory environment, and the global economy. Addressing those concerns effectively takes human capital, the “people thread” that is the key to helping organizations compete and win. It takes more than bodies, though, to gain the competitive advantage organizations need to positively impact their bottom lines. They need fully engaged, motivated employees.

Unfortunately, engaged employees are a rare find these days. A recent Gallup poll found that more than 70 percent of American workers are either actively or passively disengaged from their work. Now is the time for HR, talent management professionals, and business leaders to assess (or re-assess) how widespread and entrenched employee disengagement is in their organizations and partner together to improve it.

The Price of Employee Disengagement

The financial cost of employee disengagement for organizations and economies is staggering. Consider the following:

  • According to Gallup, disengaged workers costs the U.S. economy $370 billion a year in lost productivity.
  • According to a McLean & Company study, disengaged employees cost organizations $3,400 a year for every $10,000 in annual salary.
  • Watson Wyatt found that turnover—the inevitable outcome of disengagement—costs organizations between 48 and 61 percent of an employee’s annual salary.

The financial costs to organizations include more than lost productivity and increased employee turnover. Disengaged workers are absent from work more often than engaged workers, are more likely to engage in theft, have more safety incidents, and exhibit poorer customer service. The Gallup poll found that organizations with higher employee engagement levels experience:

  • 37 percent less absenteeism;
  • 25 percent less turnover in high-turnover organizations;
  • 65 percent less turnover in low-turnover organizations;
  • 28 percent less shrinkage (theft);
  • 48 percent less safety incidents;
  • 41 percent less patient safety incidents;
  • 41 percent less quality incidents (defects);
  • 10 percent higher customer metrics;
  • 21 percent more productivity, and;
  • 22 percent more profitability.

Disengaged workers not only have a negative effect on employee morale, they are also detrimental to an organization’s financial health. It is imperative that HR and talent management professionals regularly take the pulse of employee engagement levels in their organizations and take steps to ensure that senior leaders understand and support boosting those levels to improve organizational results.

Steps to Monitor and Improve Employee Engagement

There are steps that HR, talent management professionals, and organizational leaders can take to identify, monitor, and improve employee engagement levels:

Step 1: Know the engagement levels of employees.

Step 2: Measure employee engagement.

Step 3: Design and implement programs and initiatives designed to target disengaged workers.

Step 4: Ensure that leadership teams are on board with and held accountable for employee engagement levels on their teams.

To achieve stronger bottom line results, it is essential that HR and talent leaders partner with business leaders to foster a culture of engagement. HR, talent professionals, and business leaders can start by taking the pulse of their organization’s engagement levels and designing and implementing programs and policies that will re-engage and retain their talent. Engaged employees feel emotionally connected to the organization, understand what it takes to help the organization succeed, and drive for that result. Increasing an organization’s employee engagement and commitment can dramatically improve operational excellence, innovation, and the ability to compete.