7 ways employee engagement drives ROI

Updated: 10/11/23

We hear a lot about employee engagement and how important it is to organizational success. But what does that really mean? And what’s the ROI of employee engagement? It’s a question that’s more important than ever, since Gallup's latest State of the American Workplace study shows that only 23% of U.S. workers are engaged in their jobs, compared to 59% who state they are not engaged. Globally, over half of employees expressed some level of intent to leave their job with 51% currently employed workers saying they are watching for or actively seeking a new job.

Image of a company employee talking to a customer.

7 ways strengthening employee engagement impacts your organization

Building a business case for employee engagement is easier than you think. All you need are updated statistics and insights that demonstrate there’s a measurable return on investment – including increased profitability. Here are 7 key talking points you can use to foster more buy-in at your company.

1. Increased profitability

You can draw a direct line from your company culture to profitability. A report by Wellable states that companies with thriving corporate cultures — those that value employees, foster leadership and create a challenging, yet supportive, environment grew 682% in revenue. Conversely, those that lacked good company culture only grew 166% in revenue.

2. Productivity gains

Engaged employees get more done, faster, and with higher quality. That’s because they believe what they’re doing matters and they’re personally invested in the results. Teams with high employee engagement are 21% more productive, according to Gallup. O.C. Tanner’s Global Culture Report adds that employees who aren't engaged are 47% less likely to put in a great deal of effort to help the organization succeed.

Disengaged employees are lower-performing than their engaged peers on multiple levels. They have an 18% lower productivity rate, 15% lower profitability rate, and higher absenteeism rate, with a 37% increased likelihood of taking time off work. On average, a disengaged employee costs a company 34% of their annual salary, or $3,400 for every $10,000 the employee. When workers feel their work matters, that it’s more than just a job, their energy levels are higher and attention to detail increases. You get more done when you’re happy, don’t you? Guess what. That’s human nature.

3. Increased trust in management

Research by Towers Watson shows that 8 out of 10 highly engaged employees have trust and confidence in their leaders, and another shows that 90% of engaged employees trust their immediate superior. However, more data shows that among millennials, 34% of those who have worked for 5 companies or more say they don’t trust their direct manager, and 48% say their organization only thinks about profit.

But plainly, when employees are engaged with leadership and feel supported and seen by their managers/bosses they are more likely to stay with the company rather than look for another job. This reduces hiring and onboarding costs and increases retention rates.

4. Increased innovation

59% of engaged employees strongly agree that their current company brings out their most creative ideas, and 78% of employees who say their company encourages creativity and innovation also say they’re committed to their current employer. These statistics directly tie to the higher profitability we noted earlier in this post. If innovation matters in your business (is there any business where it doesn’t?!), then so does employee engagement. In fact, 69% of employees report that they would work harder if they felt more appreciated at work.

5. Reduced absenteeism and health care costs

Actively disengaged workers have significantly worse health, more on-the-job accidents and higher absenteeism than engaged workers. And those costs add up quickly. 43% of workers say they’re often or always stressed, and one-third of these employees say the stress they experience is detrimental to their health.

According to Gallup, engaged employees have 41% lower absenteeism. The savings associated with more working days and fewer illnesses and injuries are well worth the investment in employee engagement.

6. Higher retention levels

Retention is key to productivity, and employee engagement is key to retention. Higher levels of employee engagement mean higher retention levels. In fact, at least 40% of employees say they are somewhat likely to leave their current job in the next 3-6 months. Further, 36% of employees who had quit in the past six months did so without having a new job in hand, and one-third of adults say they would leave their current job for a higher-level position, better company culture, or a shorter commute.

That includes your star players, whose departure has a disproportionate impact on your business results.

7. Lower recruiting costs.

Low employee engagement is a costly problem! Haiilo reports that it costs businesses $4,700 on average to hire new talent, and around $986 to onboard the new hire. That means you lose almost $6,000 each time an employee walks out the door, not to mention the unquantifiable cost of losing an experienced employee!

And employee engagement has an effect on recruiting, too – 70% of executives say their employees’ desire for purpose is affecting HR’s ability to recruit and retain top talent. The cost of losing an employee averages 6 to 9 months of that employee’s salary – and that doesn’t even account for the loss of your internal knowledge base, lost productivity as other staffers fill in and the time it takes to get the right new person into the role.

And what if you make a hiring mistake? People working at the most engaged companies are 30% less likely to look for a new job and 20% more likely to recommend their workplace on Glassdoor or similar sites.

Engaged management and effective communication matter

Most managers and executives don’t know how to effectively communicate objectives and results – or how to implement employee engagement strategies. That leaves their teams feeling disengaged and out of the loop. That, in turn, puts them – and your business – at risk.

63% of employees say managers are the most responsible for implementing employee engagement strategies, so creating effective communications that help managers and executives better communicate with their teams creates a real competitive advantage.

Need more insight into building culture, now? It’s what we do, every day. Contact us to start building your culture and your employee engagement levels!