Article: How much is your disengaged employee costing you?

Performance Management

How much is your disengaged employee costing you?

Not engaged and actively disengaged employees can cost the company and economy billions of dollar in productivity loss
How much is your disengaged employee costing you?

The disengaged employees have a 23 per cent probability of turnover within 12 months


Not engaged and actively disengaged employees can cost the company and economy billions of dollar in productivity loss

$370 billion. This is approximately the combined GDP of Romania and Kazakhstan. But, according to Gallup's calculations, this is what actively disengaged employees, the least productive, cost the American economy per year in lost productivity.

Interestingly a 2011 study led by Gallup’s Jim Harter concluded that majority of American workers were not engaged in their jobs. The study states that the American workforce consists of 29 per cent engaged employees, 55 per cent who are ‘not engaged’ and 16 per cent who are ‘actively disengaged’. This implies that 71 per cent of American workers are ‘not engaged’ or ‘actively disengaged’ in their work, meaning they are emotionally disconnected from their workplaces and are less likely to be productive. Research findings from Corporate Leadership Council, a member-based advisory company, state that the disengaged employees have a 23 per cent probability of turnover within 12 months, compared to less than a 1% probability among highly engaged employees. Further, disengaged employees cost their employers on average 46 per cent of their salaries in lost productivity.  It is but clear that disengaged employees are expensive.

As I interact with my friends on this subject of employee engagement, the only conclusion that I can draw is that almost everyone starts out as an engaged employee. They say that when they turn up for work in a new organization on Day One, they are excited about getting the job and want to make a contribution. If this be so, then why do the same employees turn out to be ‘not engaged’ or even worse, ‘actively disengaged’?

Are the reasons to do with the lack of investment in terms of money and time on the part of the organisation for employee engagement? If so, then apart from the percentage of payroll that does not add any value, what is the lost opportunity cost? Common guesses would be that the organisation would not have lost customers had the employees been really engaged, the revenue perhaps could have been a lot more, and yes, perhaps a talented employees would not have quit. The last point is interesting, for as Curt Coffman says in his book First, Break All the Rules,Every day, actively disengaged employees tear down what their engaged co-workers are building.” The ‘actively disengaged’ employees (‘cave dwellers’ as Coffman terms them) also suck the vital life force out of the organization and can ruin the dynamics of a functioning and flourishing team.

Mohinish Sinha, Leadership and Talent Practice Leader, Hay Group India, says, “Disengagement creeps in when employees are not properly ‘enabled’ at work.” He reasons that this could be because – either the employees do not have the tools, technology, information, support, and other resources that are needed for them to be effective; or there are procedural barriers at the workplace that interfere with their ability to get their work done. He makes an interesting observation on role fitment, reasoning that perhaps employees are placed in roles that do not allow them to leverage their skill sets, as a result of which disengagement creeps in.

So what can organisations do? Can organisations increase engagement by buying it? Perhaps yes. A number of organisations offer above-industry-standard compensation and benefits, share options, etc., not realizing that these can only increase the engagement levels to some degree. Researches from Gallup and Dale Carnegie state that engagement has to do a lot with the immediate managers or supervisors. An employee engagement survey conducted by IABC Research Foundation, 2011, concluded that the top two factors contributing to an increase of employee engagement within organisations are individual supervisors (85 per cent) and amount of employee communication (81 per cent). Says Sinha, “Managers must combine engagement (the use of motivational tools), with enablement (the act of providing employees with effective resources).” In fact a lot depends on what managers do, from the day employees join the organisation, which determines whether the employee continues to be engaged or switches off and becomes not engaged or actively disengaged. 

Reengaging with Engagement, a 2011 report by The Economist, stated that 84 per cent of senior leaders globally believed that disengaged employees are one of the three biggest threats facing their business. However, only 12 per cent of them regularly worked to address employee engagement.

“Employee frustration is the silent killer of workplace productivity,” says Sinha. Given the loss to productivity, keeping employees engaged makes for a business sense.  Towers Watson, International Survey Research, 2011 found that organisations with engaged employees showed a 19 per cent increase in operating income over a 12-month period, compared to a 34 per cent decrease in companies with disengaged employees. Hay Group’s research with hundreds of companies shows that organisations in the top quartile on ‘engagement’ exhibit revenue growth 2.5 times more than those in the bottom quartile. Moreover, the companies in the top quartile on both engagement and enablement achieve revenue growth 4.5 times greater.

Organisations are open to choose – loss of billions of dollar or increase in revenues and operating income. 


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Topics: Performance Management, Strategic HR, #HRMetrics

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