Low employee engagement is a serious issue many organizations were facing before the COVID-19 pandemic. Now, it is getting a bit worse.
According to Gallup, employee engagement in the U.S. dropped from 36% in 2020 to 34% in 2021 and dropped again to 32% in 2022. The number of actively disengaged employees climbed to 17%, an increase of one percentage point from 2021.
With many workers shifting to remote and hybrid work environments, spotting the more obvious signs of disengagement may be harder than it used to be because it isn’t easy to read an employee’s body language or pick up on nonverbal cues in Zoom meetings.
Employees who are trying to balance their jobs and their personal lives may be struggling to integrate the two in remote work settings, and managers can have difficulty determining whether an employee is experiencing heightened stress associated with burnout or is becoming disengaged from their work.
This is bad news for a business’s bottom line for several reasons.
The cost of low employee engagement is estimated to be around $450-500 billion each year. Low engagement leads to high turnover, which costs U.S. organizations a trillion dollars annually and also has a negative impact on employee morale and overall productivity, hurting an organization’s profitability.
In this article, I’ll discuss the high cost of low employee engagement and the value of high employee engagement.
Employee Engagement Defined
In brief, employee engagement is an employee’s emotional commitment to their work, the organization they work for, and its goals. It describes the bond an employee builds with their specific job and the organization.
Employee engagement drives organizational success and is essential for increasing retention, attracting top talent, fostering loyalty, boosting customer satisfaction, improving organizational performance, and providing stakeholder value.
The main drivers of engagement are leadership, organizational culture, purposeful work, development opportunities, autonomy, recognition, feedback, work/life balance, and an inclusive work environment that fosters honesty and transparency.
Engagement is a critical metric for organizations because it can have a tremendous impact on so many aspects of a business and can significantly affect its overall profitability.
Workers fall into three categories of engagement: engaged, not engaged, and actively disengaged.
High Engagement vs. Low Engagement
When considering the financial impact of engagement, we need to look at the ways in which it can improve profitability when there is a high level of employee engagement or hurt profitability when there is a high level of disengagement in an organization.
There are three different levels of engagement that we typically refer to: engaged, not engaged, and disengaged.
Becoming familiar with the behaviors associated with each of these levels can be incredibly useful when considering new engagement initiatives and help us determine the best ways to focus engagement efforts.
It can also provide a clearer idea of just how much of an impact employee engagement can have on profitability.
Engaged
The emotional commitment engaged workers have to their jobs helps them feel a deep sense of purpose and meaning in the work they do. It also makes them more likely to care about their co-workers and inspires a dedication to the organization’s mission and vision.
While compensation certainly plays an important role in engagement, we know that real engagement is achieved when employees are working for something more than salaries.
Engaged employees do not just show up for the paycheck—they truly care about the organization’s mission, vision, and values. They are invested in the organizations they work for and are aware of the important role they play in making it successful.
Engaged employees thrive on feedback, whether it’s giving feedback to leaders that will help to improve processes or receiving feedback to improve their performance.
Organizations with high engagement see less absenteeism, higher retention rates, increased productivity as the result of high performance, improved customer service, resulting in more client satisfaction and client retention, and better overall profitability for the organization.
Not Engaged
Employees who are not engaged exhibit little commitment to or enthusiasm for the work they do. While they may do what they are asked, because they aren’t fully invested in the organization’s success or aligned with its vision, they will not go the extra mile for customers or their co-workers.
Employees who are not engaged may miss deadlines repeatedly, which will adversely affect productivity and client relations.
They may also communicate poorly with their leaders and co-workers, have poor collaborative skills, lack accountability, and avoid taking ownership of their duties.
Most workers currently fall into the not engaged category.
Actively Disengaged
When employees are actively disengaged, the results can do significant damage to an organization’s bottom line.
Disengaged employees lack the commitment engaged employees demonstrate. These employees aren’t just unhappy in their roles, they can make their co-workers unhappy in their roles by spreading negativity that ends up causing them to disengage.
Workers who are disengaged will not be interested in problem-solving, process improvement, collaboration, or innovation and may even sabotage the efforts of others.
They may be averse to change and express frustration when they are asked to do certain tasks or learn new processes.
They can also end up costing companies a lot of money, and this makes disengagement a serious threat to an organization’s success.
The High Cost of Low Engagement
One of the most profound impacts employee engagement can have on an organization is the impact it has on its financial success. This is because of the high costs associated with the turnover low engagement causes.
Turnover is expensive. Organizations in the US are losing a trillion dollars yearly due to voluntary turnover. It has been reported that turnover costs companies, on average, six to nine months of an employee’s salary to replace them.
In addition to the costs associated with replacing employees, low engagement can also hurt employee morale. Low engagement employees can hurt the engagement of other employees and even drive away engaged employees due to toxic behavior.
Research has shown that just one toxic worker can cost a company over $12,000 a year, and it is estimated that the issues caused by disengaged employees costs organizations over $500 billion a year.
The employees who stay with organizations with high turnover, high absenteeism, and toxic work environments can become overworked due to increased workloads and responsibilities when there is a lot of turnover, leading to burnout, increases in absenteeism, and even more turnover.
Unfortunately, disengaged employees often remain in jobs for a long time, sometimes longer than more talented employees. This phenomenon is referred to as “sheltering in job.”
Employees that stay with organizations for a long period of time may be more averse to change, less willing to take on new responsibilities and learn new processes, are more stagnant in their thinking, which leads to less innovation, and they can prevent organizations from hiring more talented employees.
They can also impact an organization’s diversity and make work environments less inclusive. Inclusion is a very important factor emerging in job seeker behavior, one that we should expect to become even more important to job seekers over the next few years.
Low engagement can also negatively impact customer satisfaction and hurt customer retention due to the bad customer experiences disengaged employees provide.
When you consider that it can cost five to 25 times more to acquire a new customer than it does to retain and strengthen the relationship with an existing one, the impact disengagement can have on profitability is clear.
Employee Engagement and Employee Experience
An employee’s level of engagement is tied to how the employee feels about their overall work experience or employee experience.
Employee experience refers to what a worker encounters, experiences, and observes over the course of their employment with an organization, starting with the recruitment process.
It is an important factor to consider when we talk about engagement and how we maintain it in our organizations.
When an organization provides a positive employee experience, they see improvements in customer satisfaction, greater innovation, and generate 25% higher profits than organizations that do not provide a positive employee experience.
Engagement grows out of a positive employee experience and is influenced by how employees are treated in an organization, whether or not they feel a sense of purpose in the work they do, and whether or not they feel that the organization is dedicated to an authentic vision that they can get on board with.
Meaningful work, job clarity, opportunities for professional development, autonomy, an inclusive work environment, regular recognition of contributions, healthy feedback between leadership and employees, a good work/life balance, and trust-based working relationships all drive employee engagement.
Meaningful work, job clarity, opportunities for professional development, autonomy, an inclusive work environment, regular recognition of contributions, healthy feedback between leadership and employees, a good work/life balance, and trust-based working relationships all drive employee engagement.
Leadership plays a pivotal role in engagement because leaders shape an organization’s culture—a key factor that can significantly affect engagement. A leader’s ability to foster a culture that values employees and build authentic relationships with all team members will determine how engaged an organization’s employees are.
The Value of High Engagement
While we may not be able to attach an exact dollar value to high employee engagement, we can look at how engagement affects employees in terms of productivity, job satisfaction, and dedication, and we can consider the ripple effects of low engagement to get an idea of just how important engagement is to sustainable success.
This is because the success of any organization depends on how invested employees are in their work.
Employee engagement can affect performance, productivity, and profits, and it plays an essential role in business sustainability. This makes engagement a vital component of employee sustainability and a predictor of an organization’s future success.
High levels of employee engagement yield improved retention, less absenteeism, better performance, and an increase in productivity, all of which boost profitability. Because engaged employees believe in the work they are doing, they are better at serving and helping retain customers.
Companies that make employee engagement a goal and constantly work toward improving engagement levels will see higher profits and better overall productivity than companies with lower engagement.
Organizations with engaged employees outperform organizations without high engagement by 202%.
Willis Towers Watson reports that organizations with high levels of engagement see operating margins up to three times higher than organizations with low engagement.
Out of the 200 organizations surveyed for the report, organizations with the highest levels of engagement were 22% more profitable and 21% more productive than organizations with low engagement.
These numbers show just how critical it is for organizations to invest in employee engagement and make it a priority. But it isn’t just critical for an organization’s success.
Engagement levels are also key to helping employers identify and address the needs of staff and reveal areas that need improvement in order to foster a high level of employee morale.
This can give leadership a better understanding of how to create and foster work environments that help employees thrive.
Employees who feel strongly engaged in the work they do have a higher level of trust in their organization and feel valued by leadership which improves their overall employee experience, making them happier and less likely to leave.
In order to maintain high levels of engagement, leaders can consistently make efforts to help employees feel that they are valued members of the organization, that their feedback helps drive decision-making, that they are contributing to the future success of the organization, and that they are making a real impact in the community.
When employees feel valued, they are going to be engaged with their work and motivated to perform at their best and better serve clients. The evidence shows that organizations that foster a culture of customer satisfaction through caring for employees experience a competitive advantage.
One of the most amazing results of having a culture of care where employees feel valued is the added value it provides for customers. Employees who truly care about their company and team members will take care of their customers.
Matt Tenney has been working to help organizations develop leaders who improve employee engagement and performance since 2012. He is the author of three leadership books, including the groundbreaking, highly acclaimed book Inspire Greatness: How to Motivate Employees with a Simple, Repeatable, Scalable Process.
Matt’s ideas have been featured in major media outlets and his clients include numerous national associations and Fortune 500 companies.
He is often invited to deliver keynote speeches at conferences and leadership meetings, and is known for delivering valuable, actionable insights in a way that is memorable and deeply inspiring.
