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Determining the ROI of Employee Engagement

Can using a recognition program strategically impact an organization’s bottom line? Absolutely. The issue, however, is that many companies are unsure as to how to actually determine quantitative results of an increase in the engagement of their employees.

Employee engagement is impacted by a number of intangible factors, including, but not limited to:

  • whether top management believes in and supports a culture of recognition and engagement—not to mention how they run the company otherwise
  • the quality of the organization’s line managers
  • how much autonomy employees are given to do their jobs according to their skill sets
  • transparency of communication from the top down and vice-versa
  • the company culture and the types of people it hires
  • how well the company and industry are doing financially

Companies with high levels of employee engagement are, on the whole, far more successful than companies with disengaged employees. The question, then, is how does a company actually attribute the engagement levels of its employees to business and revenue?

Profit or Loss

A Gallup study found those companies having high levels of engagement were 21% more profitable than companies less engaged. In addition, MIT’s Sloane Review reported that more engaged organizations have a higher growth in profits (10-15%) than less engaged organizations (less than 1%). For example, one WorkStride customer, a financial organization, found that each point of engagement in its annual employee survey equated to over $25K in value per employee—not chump change for any organization with thousands of employees!

Turnover Costs

Studies show that employees who are not recognized regularly are up to three times as likely to quit their jobs in the upcoming year. What does that mean for an organization? First, it costs, on average, 20% of a single employee’s salary to replace them. And that’s just for the one employee! For a general sense of how much turnover is costing your organization, just do the math:

(Cost of Hiring + Cost of Onboarding + Cost of Training + Cost of Having an Unfilled Position)
x (Number of Employees x Annual Percent Turnover)
= Annual Cost of Turnover for the Organization
Formula compliments of HuffingtonPost
Corporate Executive Board found that highly engaged employees were 87% less likely to leave a company over their disengaged counterparts. And, according to Gallup, only 37% of engaged employees are looking for jobs versus 56% of disengaged employees.

Productivity Value

Gallup reports that only 33% of the American workforce is engaged, while The Engagement Institute says that disengaged employees cost organizations up to $550B annually. Gallup also notes that those organizations with highly-engaged employees are 21% more productive than those with lower levels of engagement, while seeing a 41% reduction in absenteeism, 48% fewer safety incidents, and 41% fewer quality incidents or defects.

Customer Service

According to Gallup, business units that incorporate engagement tactics into their daily routines outperform other teams by 10% in customer service. Customer satisfaction is directly linked to financial performance, and engaged employees are directly linked to customer satisfaction—thus engaged employees indirectly impact financial performance.

Increased engagement influences patient satisfaction as well. One WorkStride client’s overall ranking in the Centers for Medicare & Medicaid Services (CMS) survey of patient satisfaction jumped from about average to among the top 8% of the roughly 4,600 hospitals included in the overall survey.

In a nutshell, engaged employees are more excited and inspired at work, which increases productivity, which improves customer service, which ultimately impacts the bottom line on a grand scale. Investing in an employee recognition program can go a long way to improving engagement levels at your organization.

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