Blog: Disengaged employees will cost you millions

Employee Engagement

Disengaged employees will cost you millions

Employee engagement is nothing short of an obsession these days – at workplaces, conclaves, seminars, industry gatherings – everything seems to be linked to it. The reason is simple: Engaged workers are more productive, perform better, motivate others and perhaps most importantly stay in the organisation.
Disengaged employees will cost you millions

Employee engagement is nothing short of an obsession these days – at workplaces, conclaves, seminars, industry gatherings – everything seems to be linked to it. The reason is simple: Engaged workers are more productive, perform better, motivate others and perhaps most importantly stay in the organisation.

But what is the ground reality? Gallup has once again come up with its employee engagement scores, and as expected, it paints a not so rosy picture. Consistent with other equally downbeat employee engagement surveys, Gallup data shows 30 per cent of employees as engaged, 52 per cent as disengaged and 18 per cent as actively disengaged. Simply put, the findings indicate that 70 per cent of American workers are ‘not engaged’ or ‘actively disengaged’ and are emotionally disconnected from their workplaces and less likely to be productive.

So why are engagement scores important? Because disengaged employees will cost you millions every year. Gallup estimates that these actively disengaged employees cost the U.S. between $450 billion to $550 billion each year in lost productivity. Though the survey results are for the American workforce, its reverberations are equally true for other economies too.

Where does India fare in this? According to an April 2012 Gallup study, India does not have enough engagement to spare. As of 2012, 32 per cent of employed Indians are actively disengaged and 60 per cent are not engaged. Only 8 per cent of all Indian workers are engaged - or involved in, enthusiastic about and committed to their work.

Disengaged employees, actively or otherwise, are more likely to steal from their companies, negatively influence their co-workers, miss workdays and drive customers away. A recent study by Towers Watson further reveals that only two in five workers (39 per cent) in Asia Pacific are highly engaged at work. The rest, three-fifths of the workforce, are struggling to cope with work situations.

Disengaged employees (14.1 workdays) lose almost twice as many workdays a year than highly engaged employees (7.6 workdays).

Significantly, disengaged employees are more likely to leave their organisations and high retention risks. And this comes with a huge cost – the Bureau of National Affairs estimates that U.S businesses lose $11 billion annually due to employee turnover.

Women are more engaged than men

But who are these disengaged lot? The recent Gallup study provides a few interesting insights: Women (33 per cent) are more engaged than men (28 per cent); the most engaged generations are those leaving and entering the workforce. Traditionalists (defined as those at the oldest end of the spectrum, comprising 4 per cent of the working population) were 41 per cent engaged, followed by millennials at 33 per cent. The study notes that more educated employees were not necessarily more engaged, perhaps because higher education levels bring with them higher expectations.

What does an engaged workforce mean for an organisation? David MacLeod and Nita Clarke in their seminal work, 'Engaging for Success: Enhancing Performance Through Employee Engagement' for the UK government found a compelling correlation between employee engagement and operating income. Their study reveals that companies with low engagement scores earn an operating income 32.7 per cent lower than companies with more engaged employees, while companies with a highly engaged workforce experience a 19.2 per cent growth in operating income over a 12-month period.

How do engaged employees help?

A study conducted by Corporate Leadership Council, on the engagement level of 50,000 employees worldwide concluded that engaged employees grow profits as much as 3x faster than competitors and that engaged employees are 87 per cent less likely to leave the organisation. Further studies conducted by the likes of Tower Watson, Kenexa and LSA Global Learning Solution too have findings on similar lines. In this context McLean & Company's study states that a disengaged employee costs an organisation approximately $3,400 for every $10,000 in annual salary.

A simple cost benefit analysis makes a strong case to have an engaged workforce. As Kevin Kruse, author of Employee Engagement 2.0, says high engagement among employees improves morale, reduces turnover and improves profitability.

For once, now I understand why employee engagement is an obsession.

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Topics: Employee Engagement, Employee Relations

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