Why is Employee Engagement Important?

Having made a case for why it may not serve us all that well to focus only on ensuring our employees’ happiness or satisfaction, and working to actually engage them ties more directly to the results we need to achieve, we should probably take the time to define employee engagement before diving into why it’s so important…

I recently shared an article on LinkedIn comparing these three phrases and received a comment soon after from someone stating that all of them are almost always fuzzy initiatives driven by someone in human resources that never yield tangible results because the “most CEOs continue to sit on the sidelines and let HR wack away at the problem.” As a recovering human resource professional myself, I tend to agree with his comment IF an organization approaches employee engagement solely as a human resources initiative. Quite honestly, that’s exactly why Cindy and I refuse to approach it as a human resource initiative with any of the organizations we serve… While we certainly work to include the human resources team in anything we provide for our clients so there can be some level of collaboration moving forward, our primary focus in on the folks in leadership roles - the supervisors, the managers, the executives, and the business owners - who carry the responsibility of achieving results and also have direct interaction with those team members we all need to earn engagement from. All that said, if a CEO or owner is willing to sit on the sidelines and allow someone in HR to blindly throw money and time at fluffy ideas that don’t produce measurable results, I kinda think they deserve what they get… Don’t you? I go back to what I’ve heard John Maxwell say for years, “EVERYTHING rises and falls on leadership.”

So how should we define employee engagement if we want to approach it in a way that yields measurable results from every bit of time, energy, or capital we invest in it? As I looked for various resources to help support my perspective, I found an outstanding article on Indeed called How to Increase Employee Engagement that defined it this way:

Employee engagement is a measurement of how committed an employee is to their employer, how passionate they are about the work they do and how well their personal goals and values align with the mission and objectives of their employer.

An engaged employee is enthusiastic about working with customers and providing them services that generate profit and a good reputation. Not only that, but if your company has an engaged workforce, you’re more likely to retain your current staff — instead of having to frequently spend time and money hiring new employees.

It’s important not to confuse employee engagement with employee satisfaction. While the two may sound similar, they’re actually two different concepts. A satisfied employee is someone who likes their job and feels their employer meets their needs, while an engaged employee is someone who is committed to their work, dedicated to their employer and consistently performs at a high level.

An engaged employee is always satisfied, but someone can be satisfied without being engaged. For example, an employee may be happy with the compensation and job duties, but they may not be emotionally connected to their work or loyal to their employer.

Think back to the definition of engaged that I shared before and tie it to this. If we’re looking at it from a purely behavioral perspective, I believe it’s safe for us to define an engaged employee as someone who has “pledged or entered into a contract to DO something” within their employment relationship. When those in leadership roles fulfill their responsibility and earn that engagement by “establishing a meaningful contact or connection with” their team members, there should be little room left for doubt as to whether or not this can be measured through their performance, or the organization’s productivity and profitability. Now let’s dig into what we can expect to see in those results showing why employee engagement really is important...

Consider the Numbers... 

Now that we have a foundation for what employee engagement looks like - meaning a clear picture of the types of behaviors we should be seeing from our engaged employees - let’s work through why it even matters and how engagement really does impact our bottom line. Just in case we’re not on the same page yet, I’ll share the analogy I heard years ago that helped me understand how varying levels of engagement impacted a workforce…

Imagine being one of ten people in a boat. Not a boat with a motor, a boat where each of us have to row. Now imagine we’re tasked with rowing upstream (because I’ve never seen a business be successful over the long haul by just riding the current downstream). We’re rowing our hearts out to reach our goal, giving it everything we’ve got! After a while, you happen to look around the boat and realize that only three of us are actually rowing. The five folks in the middle of the boat are at least holding their oars but they’re talking amongst themselves and the oars aren’t even touching the water. As frustrating as that is, you look farther back and see that the last two aren’t even holding their oars and instead have what appears to be a hatchet that they’re using to chop a hole in the bottom of their end of the boat.

I realize that’s a crazy scenario to picture… But if you and I were in that situation, two of the three out of all ten people in the boat who were actually rowing, would you be frustrated? I sure would be - and I may even be inclined to adjust how I’m using my oar for a few seconds to help those last two find their way out of the boat… We’ll circle back to that another time!

In all seriousness though, this is basically what employee engagement looks like in almost every organization. When I first facilitated an employee engagement survey with around 650 team members about a decade ago, I was told that an organization with best-in-class employee engagement had around 30% of their employees who were actively engaged - those were the ones who were rowing the boat. The corporate folks sharing those numbers with me went on to say that about 50% of the team members in basically every organization were neither actively engaged or actively disengaged - those were the folks who were holding their oars but just talking with each other instead of rowing. They said that the remaining 20% in even the best companies on the planet were actively disengaged - doing anything they could get away with to sink the boat. They did say that the percentages for the actively engaged could be as low as 20% and the actively disengaged could be as high as 30% in a struggling company.

I recently saw a Gallup study suggesting that the number of actively engaged employees had hit a 15 year high and was at 33%. Interestingly enough, that study was released around the height of the pandemic when a bunch of people weren’t even reporting to work. Regardless, I can’t see how any organization could achieve its goals with only 33% of the team members helping row the boat...

Let’s consider the numbers… An article I found from the Harvard Business Review shared that “organizations with a high level of engagement report 22% higher productivity.” That same article went on to detail these differences between the companies with higher engagement and the companies with lower engagement:

 “Comparing top-quartile companies to bottom-quartile companies, the engagement factor becomes very noticeable. For example, top-quartile firms have lower absenteeism and turnover. Specifically, high-turnover organizations report 25% lower turnover, and low-turnover organizations report 65% lower turnover. Engagement also improves quality of work and health. For example, higher scoring business units report 48% fewer safety incidents; 41% fewer patient safety incidents; and 41% fewer quality incidents (defects)”

Hey, I’m all for having an environment where everyone plays nice with one another. I’m just not terribly patient with drama… And if a human resources initiative can make that happen, I believe there’s value in investing into it. But when we base what we’re working to create by earning employee engagement - employees who have “pledged or entered into a contract (with us) to DO something” and they’re actually rowing the boat - we can expect to see the results in all aspects of our company’s bottom line. That said, this certainly isn’t something that HR should be tasked with whacking away at on their own. Let’s close for now by looking at who owns that responsibility...

Whose Job Is It Anyway?

Think back to the comment I shared earlier that a fellow had made on the previous LinkedIn article I published, “most CEOs continue to sit on the sidelines and let HR wack away at the problem.” All too often, employee engagement - and anything that’s done within an organization to address it - falls squarely in the lap of the human resources folks. But if employee engagement really does have the financial impact detailed in the Harvard Business Review article I just referenced, why would any business owner, CEO, or manager at any level not be working to improve engagement in their organizations with their every waking breath? 

I believe that’s easy to answer… I think the majority of the operations folks who see statistics cited by HBR look at the numbers briefly but don’t take the time to process the real financial impact each can have on the organization’s bottom line. 

Before we look at exactly who should assume complete responsibility for employee engagement on a daily basis, let’s translate a few of those percentages that were presented with a very broad brush into something that’s extremely easy to understand and ties directly back to what every operations professional pays close attention to. The article mentioned a pretty wide range in how employee engagement impacted turnover; from 25% to 65% depending on the organization. Let’s use simple numbers to nail down the real impact this can have on our own bottom line. To stay conservative, we’ll use the low number, 25%. The Bureau of Labor Statistics says the annual voluntary turnover rate in the US is 23.4% so let’s round that to 25% as well so my math doesn’t get too fuzzy… Now let’s consider one more number I’ve seen in various Gallup polls over the years, “It's generally estimated that replacing an employee costs a business one-half to five times that employee's annual salary.” For our purposes here, let’s stick with the low number on this too...

Math equation time… If our company has 100 employees at an average annual salary of $50k, we lose 25 per year due to voluntary turnover, and replacing each of them costs us half their annual salary, what’s the total impact - low numbers? 25 people times $25,000 = $625,000 in turnover costs. Holy crap!

Real quick here, how about safety? HBR’s numbers suggested an organization with high employee engagement would see a 41% reduction in safety incidents. In all the years I worked in safety, the trends I saw showed that the lower the number of total incidents, the less likely you were to have significant incidents. For the sake of time, I won’t go down that path with you here. Let’s keep this simple too. How about we pretend our company typically has ten safety incidents annually, and let’s say all of them are the least (statistically) expensive OSHA reportable incidents; hand lacerations requiring just a few sutures. While I was still in a Safety/HR Manager role several years ago, I pulled some numbers for the owner of the company that showed the average hand laceration in the US at that time ended up costing the company a total of around $10,000 (but around $70k if surgical repair is needed). This included the medical attention, time away from production, time for incident investigation, insurance premium increases (and they always increase), etc. While the initial doctor visit may only be $1,000 or so, the rest is rarely considered in the total cost! This math is easy; if we cut (pun intended) the total number of those incidents by 40%, we reduce our injury costs by $40,000!

When we see percentages alone, regardless of how stunning they may be, few people take the time to dig through all the actual costs so they have a real picture of how much impact they should expect to see. So back to why a CEO would sit on the sideline and let HR wack away at employee engagement… They won’t if they have real numbers, but providing real numbers takes some initiative that far too many people refuse to apply. 

OK, Wes… Point taken… Employee engagement has a real impact on the bottom line. But who really has a hand in driving this boat? Here’s what Gallup said about that in an article called Four Steps to Improve Employee Engagement, “Engagement isn't just an HR thing. Managers account for 70% of the variance in team engagement. There are no quick fixes when it comes to human relationships. It is essential that managers effectively interact with and develop each team member over time.”

Here’s my answer: EVERYONE who has any type of leadership responsibility in the organization! EVERYONE!!! And we’ll start working through how they can do that soon...

Can You Measure How Employee Engagement Impacts Your Results!

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