Research on the business case for employee engagement

“Despite the difficulties and weaknesses it is hard to ignore the volume of studies which show, to varying degrees, with varying sophistication, a positive relationship between high performance/involvement work practices and outcome measures.”

John Purcell in Engaging for Success

A number of studies from academics, consultancies and organisations have modelled the impact of employee engagement on organisational outcomes. The nature of the research methods, measures used and purpose of the research varies.  To gain a accurate assessment of the impact of increasing employee engagement in an organisation, it is best to create a statistical model using the organisation’s specific performance measures. However, here are a few key findings from cross-industry research to help establish a business case for making an investment:

 Financial
  • Organisations with highly engaged employees showed a 19% increase in operating income whilst those with low engagement scores experienced a 33% decrease over 12 months (Towers Perrin, 2008)
  • Organisations with top quartile engagement scores averaged 12% higher profitability than those with below average engagement scores. (Gallup, 2008)
  • Profit growth is three times faster than competitors (Corporate Leadership Council, 2008)
  • A UK retailer with 174 stores found those with improved engagement year on year and grew their profits by 3.8 per cent. Stores that did not improve their engagement saw their profits decrease by 2 per cent. (Gallup, 2008)
  • Companies in the Best Companies to Work For league tables increased their turn-over by 94 per cent and their profits by 315 per cent between 2004-08. (Best Companies, 2009)
  • Standard Chartered found that branches where employee engagement was high achieved 16 per cent higher profit margin growth than branches where employee engagement was low and had 46 per cent lower voluntary turnover. (MacLeod&Clarke, 2009)
  • Accenture assigned a member of staff to work on employee engagement full-time. Six months later, engagement scores had significantly improved, and their net revenue increased by 21.6 per cent. (MacLeod Review, 2010)
Customer
  • Customer loyalty increases by 56% above the average (Gallup)
  • 70% of engaged employees indicate they have a good understanding of how to meet customer needs, while only 17% of non-engaged employees say the same. (Right, 2006)
  • Based on 3 years work at Sears, a profit chain model was developed and concluded that ‘there is a chain of cause and effect running from employee behaviour to customer behaviour to profits.’  (Rucci et al, 1998)
  • Three-quarters of highly engaged workers believe they can impact costs, quality and customer service; and only 25 per cent of the disengaged believe they can. (TowersPerrin)
  • Within the organisation, there was a strong correlation between highly engaged staff and client satisfaction in KPIs (PWC)
  • Units that scored above the median on both employee and customer engagement were on average 3.4 times more effective financially (in terms of total sales and revenue performance to target and year over year gain in sales and revenue) than units in the bottom half of both measures. (Harter et al, HBR)

 

 Innovation and processes
  • Over 60% employees are 33% as productive as they could be because they don’t understand what they are being asked to do. (The Conference Board, 2006)
  • 60% of employees with low trust in management intend to leave their organisation, compared to 20% with a high degree of trust. (Center for Creative Leadership, 2009)
  • There is a significant association and influence between employee engagement and innovation. (CMI, 2007)
  • In a Fortune 100 manufacturing company, turnover in low engagement teams averaged 14.5 per cent, compared with 4.8 per cent in high engagement teams. Quality errors were significantly higher for poorly engaged teams. (DDI, 2005)
People
  • Engaged employees take an average of 2.7 sick days per year; the disengaged take 6.2 (Gallup, 2003)
  • 86% of engaged employees say they very often feel happy at
  • work, versus 11% of the disengaged. (Gallup, 2006)
  • Engaged employees outperform disengaged employees by 20-28%. (The Conference Board, 2006)
  • Business units in the top half of engagement scores had 27 per cent higher profitability than those in the bottom half. (Gallup, 2006)
  • Highly engaged organisations have the potential to reduce staff turnover by 87 per cent and improve performance by 20 per cent. (Corporate Leadership Council, 2008)
  • Decreasing incidence of workplace deviance and increasing level of ethical conduct were associated with higher levels of employee engagement. (Johnson, 2011)
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