Building a Winning Team: The Link Between Employee Engagement and Business Performance

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It’s highly improbable that a CEO would willingly forego the opportunity to double their profits, especially compared to their competitors. Employee engagement is the factor that has the most significant impact on business performance. It affects so many areas of an organization’s performance that it’s astonishing how many firms still lack a solid strategy to engage the workforce. 

This engagement affects business success by impacting revenue, efficiency, absence, retention, and customer happiness. It is also related to a company’s ability to develop new ideas and change with the times, which affects how well the company will do in the future. 

Let’s look at the strong connection between engaged personnel and how well a business does. For now, though, let’s focus on the connection between employee engagement and the employee experience.

The employee engagement/employee experience connection

Employee engagement describes employees’ commitment to their duties, passion for their work, and enthusiasm for their company. Engaged employees believe in the organization’s purpose, vision, and critical principles. 

Employee engagement depends on 

  • How they feel about their job
  • How they are treated in the business
  • Whether they have a sense of purpose in their work
  • If they believe the organization is committed to a genuine vision

Employee engagement is based on an employee’s complete job experience, starting with recruiting. Certain demands need to be addressed for employees to be engaged, passionate, motivated, and dedicated. Employee satisfaction depends on an organization’s capacity to satisfy their needs. Positive employee experiences increase engagement. 

Impact of employee engagement over 7 performance indicators

Let’s now understand the impact of employee engagement over various performance indicators to build a winning team.

Impact of employee engagement on Profitability

Organizations falling in the top 25% for employee experience report twice the sales return of those at the bottom. 82% of employees at financially successful organizations are highly or moderately engaged, compared to 68% at underperforming companies.

Engaged companies increase earnings up to three times quicker than their rivals. Organizations can use goal management software to determine how highly engaged employees are contributing towards achieving the company’s profit-earning goals. High involvement increases productivity, safety, absenteeism, retention rates, and customer service. This leads to increased employee happiness and retention leading to improved profitability.

Impact of employee engagement on Productivity

Employee productivity is critical for any company since it leads to higher profitability. According to Gallup, dissatisfied employees are 18% less productive than engaged ones1. Engaged employees are driven by more than money. They are dedicated to the organization’s mission and believe they contribute to its success. 

Also, these employees are more productive, with organizations claiming 22% greater production. They bond with team members, improving collaboration, thus fostering unity and purpose. This boosts an organization’s productivity and enhances employees’ problem-solving skills. 

Impact of employee engagement on Absenteeism

Absenteeism costs a lot of money every year. As per the Centers for Disease Control and Prevention (CDC), absenteeism costs U.S. businesses $225.8 billion per year in lost productivity. Disengagement costs 5,000 days each year in a 10,000-person organization. This costs companies $600,000 in salaries paid, even though no work was done. Unscheduled absences cost each hourly employee $3,600 annually and about $2,650 annually for salaried employees. 

The good news is that organizations with highly engaged employees see a 41% drop in absenteeism2. Highly engaged employees are less likely to skip work due to workplace stress. Absenteeism reduction benefits employees and the company’s financial line. Less job-related stress, burnout, and anxiety reduce employee absenteeism.

Impact of employee engagement on Retention

According to reports, replacing an employee costs 6 to 9 months of their salary. Due to personnel turnover costs and efficiency losses, companies lose performance. Employee engagement increases retention, improving a business’s financial performance and reducing the cost of replacing employees who depart. 

High employee engagement reduces turnover expenses, including recruiting and onboarding new hires, productivity loss, and performance decline due to disengagement. Engaged workers are less inclined to quit. They are more loyal to their employers and stay longer.

According to research, highly engaged people are 87% less likely to leave their jobs, while firms with high employee engagement have 31% lower turnover rates.

Impact of employee engagement on customer satisfaction

Companies with above 50% staff engagement retain 80% of consumers3. Engaged employees are happy at work, in turn keeping customers happy. Happy consumers are more inclined to keep doing business with the company.

Engaged personnel are proud of their job. They serve their clients better when they enjoy their profession and have a purpose. Employees that feel valued and appreciated interact with consumers and go the extra mile for them, improving client pleasure and contentment. Employee engagement and customer satisfaction are therefore crucial to customer retention. 

Superior service improves client retention, creates good attitudes about an organization, and boosts its reputation with new consumers. It also increases brand awareness and respect, setting a business apart from rivals. 

Impact of employee engagement on Innovation

Innovation and employee engagement are related. Engaged employees display innovative behaviors across all industries. They are motivated to go the additional mile for leaders, coworkers, and customers. Innovation is closely associated with this sort of drive. 

As per research, around 8 out of 10 highly engaged employees believe their enterprises have cultures that support creativity, but just half of the least engaged employees feel the same. Senior leadership needs to boost innovation by creating a workplace that engages and retains employees.

Innovation requires embracing failure. Allowing employees to fail and learn creates trust in leadership and helps them feel acknowledged. Innovation is often sparked by a work environment that encourages creativity, new ideas, and employee feedback. 

Impact of employee engagement on Adaptability

McKinsey & Company suggests fostering adaptability to achieve innovation. Engaged workers are more adaptive. When adaptive, they quickly learn new skills, techniques, and technologies to use in different scenarios. 

Adaptability boosts employee well-being, optimism, and productivity. Career adaptability is high among enthusiastic employees. As per a study printed in the SA Journal of Human Resource Management, high employee engagement improves career flexibility.

An employee’s capacity to adapt to changing responsibilities, participate in continuous development and self-learning, fulfill their work obligations successfully, and strategically steer their career is called career adaptability. 

Engaged, career-adaptable employees assist with succession planning and adapt to industry changes, which boosts performance. 

The negative impact of disengagement on business

In 2021, employee engagement in the U.S. dropped to 34% from 36%, according to a Gallup survey. In early 2022, only 32% of full- and part-time employees were engaged. 17% of workers were actively disengaged, up 1% from 2021.

Disengagement lowers productivity, absenteeism, and turnover, hurting many companies’ income. Low engagement and excessive disengagement cost firms $450–500 billion yearly, hurting performance. Poor engagement ratings diminish operating income by 32.7%, according to research. Disengaged workers cost a business $3,400 for every $10,000 income. These figures demonstrate how poor engagement affects financial and employee performance. 

Engaging employees to improve business performance

Highly engaged employees generate 26% more revenue per employee4 and 13% more shareholder returns. Employee experience in the top 25% doubles revenue return compared to the lowest quartile.

Positive employee experiences increase engagement. 82% of employees at high-performing organizations are highly or moderately engaged, compared to 68% at underperforming companies. These figures show that good employee engagement is linked to organizational performance and need to be a focus in all firms. 

Organizations need to always strive to increase employee engagement and satisfaction. The Great Resignation shows that employee engagement evolves with changing requirements.

Instead of focusing on quick wins, creating a long-term strategy to continuously enhance employee experiences and maintain high employee engagement is better for the company’s future. It creates a healthier working atmosphere for employees, improving engagement and performance.

How to improve employee engagement

Let’s explore 2 effective strategies to improve employee engagement, ultimately leading to higher job satisfaction, retention, and overall organizational performance.

Performance improvement plan (PIP)

Discussing an underperforming employee seems to be awkward. It’s essential to discuss productivity, especially if it’s affecting others. Finding the correct balance between nudges and job satisfaction is crucial. When the employee doesn’t see the problem, it’s more complicated.

In this case, a clever performance enhancement strategy that motivates a struggling employee is optimal. Let’s look at when and how to execute employee performance enhancement.

Use a PIP software

One solution is to implement Perkbox, a centralized platform for documenting PIP-related information, setting and tracking performance goals, and facilitating communication between employees and managers. What is Perkbox? It is a comprehensive employee experience platform designed to streamline the PIP process, improve accountability, and enhance collaboration for better performance management. By using Perkbox, organizations can effectively support struggling employees in turning their performance around.

Employee recognition

Employee recognition software is an alternative. Employee recognition shouldn’t be a one-time event. Companies need to acknowledge employee successes and actions to create an open, sound, and scalable recognition culture. 

The Power of employee recognition software

Employee recognition software lets companies create scalable recognition and pay systems and invest in employee growth. By leveraging this software, managers, and executives can effectively celebrate individuals, enhance engagement, and establish data-driven, scalable procedures for compensation and promotion. It empowers organizations to harness the potential of employee recognition and drive meaningful growth and development within their workforce.

Employee engagement is a growth accelerator for companies and its employees

The elements listed above show how high employee engagement boosts profitability, cuts costs, and sets you apart from competitors. Employee engagement significantly influences your employees and your business’s bottom line. Every business that desires success and employee satisfaction to go hand-in-hand needs to focus on building a successful team. The challenge is getting there now that we know how vital employee engagement is.

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