Here is another installment of our series centered on the Return on Employee Investment (ROEI). Throughout the series I’ll speak directly to what ROEI is, how organizations can maximize it and how they can calculate it.
Employee engagement is the measurement of how dedicated an employee is toward the organization he/she works for and that organization’s values. Organizations that can establish trust between the workforce and management and between co-workers create an engaged workforce and enjoy the benefits that go along with it.
For organizations, the difference between engaged and disengaged workers can equate to success or failure. According to Alan Schweyer in The Economics of Engagement, disengaged employees are estimated to cost the U.S. economy as much as $350 billion per year in lost productivity, accidents, theft and turnover.
A major opportunity for corporate performance improvement and employee retention lies in engaging the workforce to drive better customer engagement, better revenue and higher profits. Schweyer points out that:
“Most leaders and organizations know the difference between a fully engaged worker and one that is marginally engaged or disengaged. The former brim with enthusiasm, they contribute ideas, are optimistic about the company and its future, are seldom absent from work, they typically stay with the organization longer and are among the organization’s most valuable ambassadors.”
Investing in employee engagement increases workforce retention and thus decreases employee turnover costs. But the advantages of engaged employees goes for beyond the reduction of the turnover rate. Increasing employee engagement correlates directly with a positive impact on key business metrics.
According to Schweyer, engaged employees:
- work more effectively, instead of just working more
- find ways to improve
- share information with colleagues
- develop creative solutions
- provide suggestions
- speak up for the organization
- try harder to meet customers’ needs, leading to repeat business
Numerous studies show a direct correlation between employee engagement and business results:
- A 2008 BlessingWhite study demonstrated a correlation between engagement and retention– 85% of engaged employees planned to remain with their employer for ten or more months.
- Towers Perrin discovered that high-engagement firms grow their earnings-per-share (EPS) at a faster rate (28%) while low-engagement firms experienced an average EPS growth rate decline of 11.2%.
- The Center for Human Resource Strategy at Rutgers University found that highly engaged business units were on average 3.4 times more effective financially than units who were less engaged. This paper also found that when disengaged, workers can cost the company in lost productivity and negatively affect customer relationships.
- A report by the Society of Human Resource Management (SHRM) estimates that by strengthening engagement, MolsonCoors saved more than $1.7 million in one year – citing one example where the average cost of a “safety incident” for an engaged employee was $63, compared with the average of $392 for a disengaged employee.
- Hewitt Associates found that highly engaged firms had a total shareholder return that was 19% higher than average in 2009. In low-engagement organizations, total shareholder return was actually 44% below average.
ROEI is grounded in fact – we aren’t making this stuff up. How much do you think disengaged employees are costing your organization?