3 ways engaged employees impact your bottom line
The impact of workforce engagement on a businesses’ bottom-line is measurable and very, very real.
For more than a decade, the benefits of positive corporate culture have been interrogated by academics and industry professionals.
Now, there is a wealth of evidence showing that engaging your workforce does more than improve attentiveness and satisfaction—it enhances organizational performance.
With employee engagement now a genuine concern for the entire C-suite, let’s take a look at three areas where a culture of engagement can give your business a competitive advantage:
- Branch performance
- Earnings and growth
There is no doubt that engaging your employees will impact productivity at every level of the business. That is why companies are turning to strategies to increase productivity that involve employee engagement.
It’s easy to assume that engaged employees are more productive than disengaged ones. Of course, smart executives prefer facts to assumptions. There is real research that proves the connection.
As far back as 2001, Hay Group concluded that engaged employees bring in 43% more revenue than disengaged ones.
Since then, Gallup polling has shown that organizations with great staff engagement are, on average, 18% more productive than their less-engaged competitors.
An IES/Work Foundation report, People and the Bottom Line even put a firm profit value on it, finding ‘that if organisations increased investment in a range of good workplace practices which relate to engagement by just 10%, they would increase profits by £1,500 per employee per year.’
2. Branch performance
Practical on-the-floor engagement can have a direct impact on the bottom line. You only need to look at the varied performance of branches within a single company to see the difference day-to-day engagement can make.
The financial services giant Standard Chartered conducted their own engagement study for just this purpose and found that branches where employee engagement was high exhibited:
… 16 per cent higher profit margin growth than branches where employee engagement was low. (p.41)
A 2005 organisational psychology study into retail banking branch networks across the UK and Ireland showed that when the average level of employee engagement went up, so did sales. In fact, it concluded that an increase of one standard deviation in the measure of employee engagement was linked to a 6% improvement.
3. Earnings and Growth
Back in 2010, Tony Hsieh (CEO of Zappos) hit headlines with his seemingly fanatical dedication to engagement. Still, he’s been proven right: not just by the success of the organization he leads but also by other industry and academic research.
Current evidence proves that private sector organisations with higher levels of employee engagement perform better financially. Managing for culture leads to profits in the end.
Let’s look at some of the specific studies, and investigate the proven links between engagement and two key metrics:
- Earnings per share
- Year-on-year growth.
Earnings per share One major study looked at the earnings per share (EPS) growth of 89 organizations with varying levels of employee engagement. It found that the EPS growth of organizations in the top quartile was 2.6 times that of organizations with below-average engagement scores.
Broader meta-analysis by Gallup concluded that companies with highly engaged workforces outperform their less-engaged peers by a whopping 147% in earnings per share.
Growth The consulting firm Towers Perrin (now Willis Towers Watson) analysed engagement data and corporate financials from more than 664,000 employees at 50 companies around the world. They found that:
Companies with high levels of employee engagement improved 19.2 per cent in operating income while companies with low levels of employee engagement declined 32.7 percent over the study period. (p.12)
Even more striking, the Corporate Leadership Council reports that engaged organizations grow profits up to three times faster than their competitors. That’ll get the C-suite’s attention.
What, How and Where Next?
The data is clear: organisations with higher levels of employee engagement have better financial performance.
Why? The short version is that an engaged workforce exhibits greater well-being. And a workforce with better wellbeing provides service that results in happier customers. And happier customers results in more commercial success.
Of course, there’s a bit more to it than that. We’ll look at some of the detailed connections in our next posts. If you’re interested in specific and measurable outcomes—including absenteeism, staff retention and innovation—we’ve got some good research for you coming up.
You might also enjoy our Impact of Engagement Whitepaper. Claim your free copy here.