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Employee Engagement – cost or revenue – better get it right !

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Employee Engagement – cost or revenue – better get it right !

By , July 17, 2013

Based on various recent research ( as outlined by Reese Haydon at Decision Wise ), the costs – both real and opportunity – of not having engaged employees are substantial. Our work with Employee Share Ownership Plans and Ownership Thinking is largely focused on engaging employees within mid market businesses:

Operating income In research prepared for the UK government (Engaging for Success: enhancing performance through employee engagement), David MacLeod and Nita Clarke found the following correlations to employee engagement:

Companies with low engagement scores earn an operating income 32.7 percent lower than companies with more engaged employees.

Similarly, companies with a highly engaged workforce experience a 19.2 percent growth in operating income over a 12-month period.

Profitability & attrition The Corporate Leadership Council studied the engagement level of 50,000 employees around the world to determine its direct impact on both employee performance and retention. Here are two important findings:

Engaged companies grow profits as much as 3X faster than their competitors.

Highly engaged employees are 87 percent less likely to leave the organization.

Customer loyalty, productivity, and turnover Any business owner can tell you that optimizing productivity levels is an uphill battle, and customer loyalty is what companies depend on to make payroll. (If only employees would understand that — right?) In an article published by Jonathan Pont, the most-engaged workplaces experienced the following performance metrics:

2X higher customer loyalty;

2X higher productivity; and,

2X lower turnover.

The cost of disengagement As if the business metrics that correlate to high levels of employee engagement aren’t convincing enough, let’s take a look at how much disengaged employees can cost a company. McLean & Company found some very compelling correlations:

A disengaged employee costs an organization approximately $3,400 for every $10,000 in annual salary.

Disengaged employees cost the American economy up to $350 billion per year due to lost productivity.

Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.