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Does Employee Engagement Translate to Hard Dollars?

does employee engagement translate to hard dollars
does employee engagement translate to hard dollars

does employee engagement translate to hard dollarsThere has been considerable talk over the years about so-called soft measures, like employee engagement, which begs the question, is this a nice-to-have element or a must-have element? 

I doubt any executive would say he or she doesn’t really care about employee engagement, but when you examine the time and money spent on establishing such an outcome, it would appear most companies and most managers don’t devote enough. 

Infographic: Top 15 Reasons Your Employees StayIn my 28 years of consulting companies, I see boards of directors, chief executives, regional managers, and even local managers talk much more about sales goal attainment, margins, cost efficiencies, and budget adherence than employee engagement. But those hard measures are what needs to happen.

Employee engagement is a key element of how these measures will actually be attained.


How Does Employee Engagement Translate to Hard Dollars?

1. Turnover

This a very measurable factor directly related to employee engagement. The less engaged your people are the most likely they are to jump for a better environment. A common formula regarding the cost of turnover is 1.5 times annual salary. If you look at a $75,000 salesperson, for example, and lose ten of those over the course of a year it’s three quarters of a million dollars. Nobody budgets for that, but they should. When I tell executives they should put a line item in their budget for this, they laugh, but the reality is this turnover is an un-budgeted “internal bleeding” they are paying for anyway.

2. Productivity

There may not be as finite a formula to measure this one but it stands to reason that engaged employees produce more than disengaged employees. For one thing, engaged workers come to work more often (that is measurable). They work harder, and are also more likely to innovate, feeling motivated and comfortable contributing ideas. 

3. Recruitment Edge

We all know there is a war for talent out there, especially these days.  Companies with an engaged workforce develop a reputation as a good place to work. Managers with an engaged team become someone others want to work for, and thus, they have a “talent magnet” that allows their unit or department to consistently excel.

How big is the employee engagement problem? A recent study by the Gallup Organization indicates that less than one third of employees are engaged at any given time. That’s shocking, and the number has been consistent since the year 2000 when Gallup first studied this.

So, what can companies do to assure a high-level of employment engagement? Hire great managers.  Company initiatives are nice, but employee engagement starts one manager at time. Highly talented and motivated managers find ways to create employee engagement naturally. Here is how great managers cultivate employee engagement among their people:

  • They establish and maintain strong relationships with their direct reports.
    There is a lot of lore in business that managers should not get too close to their people because they might lose their objectivity, or they might have to discipline them someday. Do we advise parents they shouldn’t get too close to their children because they might lose their objectivity or have to discipline them someday? Great managers get to know their people as humans and know a lot about what is going on their lives, not just the workplace. They take a genuine interest in the people who report to them and help them relate what they do at work each day to achieving their personal life goals. None of this, by the way, impedes their ability to be objective. Objectivity and a close relationship are independent variables. Exit surveys indicate the number one reason people leave a company is their manager didn’t care about them, not money.
  • They individualize their approach.
    Powerful managers know there are common standards in the workplace, but they are very good at seeing and treating each of their direct reports as individuals because each of them is different. They each bring a unique set of talents to the job and they accomplish things by using their strongest talents. Even a work group of ten salespeople, for example, with essentially the same job description has ten individuals who approach the job differently depending on their innate behaviors.  Great managers know this, which allows them focus on strengths, not weakness. Some salespeople are naturally innovative, with an idea a minute. Others are not, but have great strength in overcoming obstacles that slow down the sales process. The work that effective managers do with each of these individuals is different and focuses on natural strengths. They also find workarounds for talents not as strong instead of harping on weaknesses for which the individual has no effective response.

    Individualizing goes beyond focusing on talent. Great managers also know that each of their people has their own set of expectations for the job – how they like to be coached, why do the job at all, what kind of recognition they want, or even who they want to know about their successes, and they use this knowledge to develop their people one by one.  Instruments like an Individualized Management Questionnaire can help managers learn what drives each of their people, and they can change their own behavior in managing each of their people.
  • They make their own expectations clear.
    How do people know when they are doing a good job?  Employee surveys show an alarming number of people don’t know if they are succeeding in their roles because their manager has not made expectations clear or provided meaningful feedback about how they are doing. If you believe that most people actually want to do good and meaningful work in their jobs this is recipe for lack of engagement. Job descriptions and once-a-year performance reviews are not enough. Great managers translate objectives on job descriptions to monthly, weekly, and even daily activities. They work with their people collaboratively and provide frequent and informal feedback that's useful to succeed in the role.  Employees who work for effective managers know how they're doing, and that provides the fuel for them to grow and achieve. Nothing is more frustrating than not knowing how to do a good job.

If you are a company executive, you should make certain you are hiring and developing managers who can create employee engagement. You should also know the characteristics of great managers also apply to you. Managers need to be engaged too. Managers and execs need to think about how they can strengthen relationships, focus on strengths, individualize their approaches, and make their expectations clearer. It will pay off with increased levels of employee engagement, and now we know that soft measure carries hard economic implications.engagement elevators ebook

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About Author

Jim Hopes
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