(This is Part 1 of “How to improve employee engagement”)
As a business leader, you hold the key to unlocking the full potential of your workforce. However, achieving high levels of employee engagement is no easy feat. If you are like most American businesses today, two out of your three employees or teammates are not engaged. And that, according to Gallup, is the highest engagement level worldwide: the global average employee engagement is only 21 percent.
Could we have reached the natural limit of engagement?
In this post, we will delve into the strategies and insights specifically tailored to business owners and leaders. Discover how you can drive employee engagement, enhance productivity, and maximize profits within your organization.
Defining Employee Engagement
Employee engagement is more than a buzzword; it’s a catalyst for success. It is the emotional commitment the employee has to the organization and its goals (Forbes) and the involvement and enthusiasm of employees in their work and workplace (Gallup).
Employee engagement is the emotional commitment the employee has to the organization and its Purpose. Employee engagement is the involvement and enthusiasm of employees in their work. It is driven by the emotional connection an employee has with the company.
The True Costs of (dis)Engagement
While some may dismiss employee engagement as an insignificant expense, the truth is far from it. In fact, disengagement can have a significant financial impact on your organization’s bottom line.
Recent studies by McLean & Company reveal that a disengaged employee can cost your organization $3,400 for every $10,000 in annual salary.
These costs manifest as reduced productivity, increased absenteeism, high staff turnover, lost business opportunities, and safety incidents. Ignoring employee engagement is a costly mistake that business leaders cannot afford.
Leveraging Productivity for Profits
Let’s look at the financial implications of productivity levels within your workforce. These costs of (dis)engagement are hidden even from business leaders.
Your organization can be divided into three categories: engaged, not engaged, and disengaged employees. Engaged employees align with your company’s purpose and values, working at their peak potential (80-100%). Disengaged employees openly exhibit dissatisfaction and contribute only 20% of their productivity potential. The remaining not engaged employees operate at approximately 60% of their capacity.
The engaged work at 80-100 % of their capacity. (Nobody can realistically work more than 100%).
According to research, employees must maintain productivity at about 40 percent to keep their job. The disengaged are below that, about 20 percent on average.
The remaining – not engaged – employees work at about 55 percent of their potential.
We may safely approximate that an average enterprise has about 20% engaged employees, 60% not engaged, and 20% disengaged (a 20:60:20 ratio). That corresponds to 18%+33%+4%=55% effective productivity only!
By improving the 20:60:20 ratio, you have the power to unlock significant efficiency within your organization. This means optimizing employee engagement to drive productivity and increase your profits.
Unlocking the Potential within Your Organization
As a business leader, you understand the unique challenges you face in driving employee engagement. Small and mid-sized businesses (SMBs) often encounter lower levels of employee engagement than the national average. This presents an extraordinary opportunity for improvement.
Let’s take a look at a real-life example:
Current productivity (baseline):
Engaged: 6%@90% = 5%, Not Engaged: 67%@60% = 40% DisEng 28%@20% = 6%
Effective productivity today = 51%
Target productivity (if we achieve the US/Can average):
Engaged: 33%@80% = 26%, Not Engaged: 51%@60% = 31%, DisEngaged: 16%@20% = 3%
Realistic productivity in 6-12 months = 60%
In this scenario, by improving employee engagement, your SMB could unlock over $900K of additional salary funds within a year. But that’s only the beginning. These improvements are not temporary; they will have a lasting impact on your organization’s success. By focusing on employee engagement, you can allocate resources towards growth and expansion instead of costly recruitment and replacement efforts. (More about it in Part 4 – The Performance Triangle: Three Factors that Boost Team Potential.)
Let’s look at the calculation from the opposite end:
by not doing anything to improve their employee engagement, this typical SMB leaves about $1M on the table every year.
Taking Action as a Business Leader
If you’re a business leader determined to unlock your team’s productivity potential, it’s time to take action. go to Part 2: Employee Engagement: Practical Steps to Take Now of this series, where we will provide practical steps specifically tailored to business owners and leaders. Discover how to create a culture that fosters emotional connections, aligns employees with your company’s purpose, and drives unprecedented business success.