Six Hard Facts Every CEO Needs to Know About Employee Engagement

by Tom Devane

Part I: Disengaged Employees Cost You Money

The war on talent. Lean organizations. Fierce competition. If you’re like most CEOs, you’re well aware of the challenges facing your business. You’ve tried quality. You’ve tried Lean Six Sigma. But in today’s environment, there’s only one sustainable competitive advantage. Employee engagement.

Let’s start with a definition of employee engagement.

At WorkplaceDynamics, we define employee engagement as a powerful connection. A connection that results in employees’ contribution of discretionary effort and energy that benefits both your organization—and the individual. As the executive leader, you notice employee engagement in individuals who are passionate about what they do. Employees who are dedicated to your organization, who are not out looking for new opportunities. Employees who give 110% to your organization because they want to.

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employee engagementHere are six hard facts every CEO needs to know about employee engagement:

  1. Disengaged employees cost you money.
  2. “Show me the money” isn’t where it’s at.
  3. Disengaged employees are “silent killers”.
  4. Ignoring disengaged employees hurts your bottom line.
  5. Disengaged employees aren’t HR’s problem to fix.
  6. Engagement isn’t just for frontline employees and middle managers.

This series will discuss each of the six facts, but let’s start here:

Fact #1: Disengaged employees cost you money

Retention cost

Disengaged employees are far more likely to leave your organization than those who are engaged. And make no mistake, employee turnover is costly. Research shows the cost to replace senior managers is 1.5 – 2 times their annual salary1. Similarly, the replacement cost for employees and team members is 70% of the annual salary by the time recruitment costs, productivity time, onboarding, etc. are considered2.

Picture this: You’ve got 10 disengaged middle managers who left your organization for different opportunities. Conservatively speaking, that’s $750,000 worth of talent that just walked out the front door. Ouch! But even worse, what if they don’t leave?

Imagine the same group of middle managers plopped in their chairs. They stay, disengaged, unenthusiastic, and lacking passion. They could also be compelled to undermine your efforts and spread their misery like a cancer. Now that’s painful.

Productivity cost

Disengaged employees cost you in terms of productivity, too.  Research reveals organizations with a high-engagement culture outperform others by more than 20%. And let’s not forget, productivity is a key indicator of an organization’s potential for long-term growth.

This time, let’s say you have five disengaged managers on your staff. With the unproductive dollars, you could acquire a new, engaged manager who kicks the strategy ball forward. But keep in mind, this leaves you with one true contributor when you could’ve had two.

Consider a larger organization with 100 disengaged employees. It could’ve acquired the talent to staff two full departments of ten high performers each—or opted to invest the money for a capital project or bonus distribution.

And that’s not all

A lack of engagement will cost your organization in other ways too, including quality, safety, and customer retention. According to Gallup:

  • Quality is 21% lower in organizations with disengaged employees.
  • Safety incidents are 41% fewer when employees are engaged.
  • Customer satisfaction is reported to be 10% higher in engaged organizations.

Next time, tune in for hard fact #2: Show Me the Money Isn’t Where It’s At.

1 Bersin and Deloitte