Top 10+ reasons why employee engagement is important

Top 10+ reasons why employee engagement is important

reasons why employee engagement is important

Employee engagement remains a challenge for many companies

Have you ever asked yourself, just how many of the employees in my organization are really engaged? If you believe it is about half, you may actually be overestimating the number.

But in this incredible time of competing pressures – demand for profitable growth, financial market volatility, political uncertainty, global shifts in workforce demographics and a rapidly shifting technology – a finer point must be put on that core engagement question. Leaders must ask themselves not only “what do employees need in order to be engaged?” but also “what behaviors are we asking them to engage in?”

Need a business case for employee engagement

But why is employee engagement important to businesses? It’s simple: to make higher profits. Businesses with more engaged employees perform better. Need convincing? Need a business case for employee engagement?

  • Businesses with more engaged employees have 51% higher productivity
    • (Harter, J.K., Schmidt, F.L., & HayesT.L., Psychology, 2002 Vol. 87, No. 2)
  • Businesses with higher engagement have 9% higher shareholder returns
    • (Towers Watson, 2009)
  • Companies with the most effective employee communication have 47% higher shareholder returns over the last five years
    • (Towers Watson, 2010)
  • Engaged employees outperform disengaged employees by 20-28%
    • (The Conference Board, 2006)
  • Organizations with engaged employees showed a 19% increase in operating income over a 12-month period, compared to a 33% decrease in companies with disengaged employees
    • (Towers Perrin, 2008)
  • Employer understanding of the business strategy and how their work contributes to company performance is one of the top drivers of engagement
    • (The Conference Board, 2006)
  • Almost two-thirds of all employees are 33% as productive as they could be because they don’t understand what they are being asked to do
    • (The Conference Board, 2006)
  • 80% of employees with a high degree of trust in management are committed to the organization, compared with 25% of employees with a low degree of trust
    • (Center for Creative Leadership, 2009)
  • In organizations with highly engaged employees the share prices rose by an average of 16 percent compared with an industry average of 6 percent
    • (Serota Consulting, 2005)
  • Highly engaged employees have less absence days – in average 3,5 days – compared to not engaged employees
    • (Gallup Germany, 2011)
  • A 5% increase in total employee engagement correlates to a 0.7% increase in operating margin
    • (Towers Perrin 2004 European Talent Survey: Reconnecting with Employees: Attracting, Retaining, and Engaging, Towers Perrin)
  • Organizations with highly engaged employees achieve twice the annual net income of organizations whose employees lag behind on engagement
    • (The Impact of Employee Engagement – Kenexa)
  • In companies where 60 to 70 percent of employees were engaged, average total shareholder’s return (TSR) stood at 24.2 percent; in companies with only 49 to 60 percent of their employees engaged, TSR fell to 9.1 percent; companies with engagement below 25 percent suffered negative TSR
    • (Employee engagement at double-digit growth companies, Hewitt Research Brief)

Convinced? Good

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About The Author

Torben Rick

Experienced senior executive, both at a strategic and operational level, with strong track record in developing, driving and managing business improvement, development and change management. International experience from management positions in Denmark, Germany, Switzerland and United Kingdom

Blog Comments

Thanks Rick for this article – good to have so many great stats about employee engagement in one place! Only one question – what does the German quote translate as?

Torben, thank you a lot for compiling this nice list. Have added as “read more…” to my article about measuring employee engagement.

Torben, thanks for sharing your insights.

Employee engagement must start before the job offer is made because we need to hire employees for their internal motivation. As they say, “Everything that’s controllable has a person connected to it,” and when discussing employee problems that person is a manager or an executive or the CEO.

Internal motivation, unlike external motivation, is not under the control of the employer. Managers who know this don’t make the mistake of presuming that they can change employees’ internal motivation.

When there are disengaged or problem employees we need not look beyond managers and executives.
– Too many employees are in the wrong jobs, i.e., management errors.
– Too many managers are in the wrong jobs, i.e., executive errors.
– Too many executives are in the wrong jobs, i.e., CEO errors.
– Too many managers and executives Reward A hoping for B.
– Poorly behaving employees are tolerated, i.e., management errors.
– Poorly behaving managers are tolerated, i.e., executive errors.
– Poorly behaving executives are tolerated, i.e., CEO errors.
– In other words, we get who we hire and who we promote.

If we want to break the cycle, then begin hiring the right people for all positions.

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