Engaging Employees – Measuring the Return on Investment

Senior Management are highly influenced by anything that positively impacts financial performance so when it comes to employee engagement, as with all projects, a viable business case must be presented in order to gain buy-in before it can become a real business focus.  In this short article, HDA reviews what is known of the real impact of an engaged workforce on both organizational performance and the bottom line.

HDA believes that an engaged workforce can have a significant impact on organizational performance – both directly and indirectly.  When employees are engaged they are open to releasing their discretionary effort; displaying a greater commitment to the organisation and thereby a greater willingness to contribute to company success (Towers Perrin).  The premise is simple – engaged employees equals committed employees; and committed employees perform 20% better and are 87% less likely to leave the organisation (The Corporate Leadership Council).   An organisation with an engaged workforce generally becomes more cohesive as employees develop a greater sense of belonging (Hewitt) and this in turn creates a competitive advantage, by enhancing recruitment and retention; and lowering rates of absenteeism (Mulcrum). 

Employees have considerable influence on the attitudes and behaviours of customers. As a result, the positive effects of engaging your workforce also expands into your client-base; with engaged employees leading to higher levels of customer satisfaction and retention and thereby greater organizational performance (North Western University).  

The Financials

Factors such as share price, income and profit are all positively affected by increasing levels of employee engagement. 

Share prices of organisations with highly engaged employees rose by an average of 16% compared with an industry average of 6% (Sirota Consulting).
According to Welbourne (2007), 73% of organizations who have initiated engagement programs have seen an increase in operating profit.
In a study by Towers Perrin (2007), firms with the highest percentage of engaged employees collectively increased operating income by 19%. While, firms with the lowest percentage of engaged employees showed declines of 33% in operating income.

Summary

Aligning HR strategy with business strategy is critical; for as this article demonstrates, it is your people that can deliver results.  They are undeniably your greatest asset.  This is particularly relevant in the current economic climate, where those who wish to sustain a competitive advantage and weather the Bear Market storm will be those who can draw upon the support, commitment and drive of their workforce – a workforce that must surely be engaged before success can be achieved. 

At HDA we believe that releasing the power of your people will be a key business focus of the coming year; a focus which, if undertaken wholeheartedly, will provide lasting results to organizational performance and the bottom line.


 

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