You routinely calculate your return on investments you can measure, such as supply costs, overhead and consulting. Even customer satisfaction can be gauged by certain analytics. Measuring the emotions of your human resources can feel elusive by comparison, so it's easy for someone who loves numbers to just put the matter aside. The fact is, though, that the functioning of your human capital has as much bearing on your bottom line as do your shipping rates or insurance premiums. Disengaged employees are responsible for an estimated $450 to $550 billion annually nationwide, according to a Gallup poll. Here's a closer look at what goes into that figure.
Crunching the Numbers
Leadership consultant Britt Andreatta uses some figures from Gallup to make a point about the value of employee happiness. She points out that a disengaged employee generally costs the company about 34 percent of his or her salary annually. The typical level of employee engagement in the United States is about 32 percent. That means that in a typical business, 68 percent of the workers are less than engaged. If even a few of your workers follow the Gallup formula of costing your business 34 percent of their salary every year, this amounts to a financial leak of near-crisis proportions.
How Actively Disengaged Employees Cost You Money
At this point, you may be looking at Gallup's figures and shaking your head. Why do disengaged employees matter so much, especially if they're on the job every day? After all, once they're at work, they're accomplishing tasks, right? So how can their state of engagement really cost the company money?
Contented employees want to continue in their current positions. Replacing any member of your organization is a costly proposition, especially if that person has a deep, specialized knowledge of your organization. You can hire people with generic skill sets, but sometimes the most crucial skill is familiarity with the history and culture of your company. Just looking at averages, the estimated cost of replacing an employee ranges from 50 to 200 percent of the person's salary. You will inevitably lose some employees due to life changes, but you don't want to increase that figure by extra attrition from unhappiness.
What would you do if someone parachuted you into a job you really didn't like? You'd probably do the minimum necessary to stay out of the boss's cross-hairs, and then spend the rest of your energy looking around for an escape hatch, wandering to the snack counter for another doughnut, checking out Facebook, organizing your email archives, or clipping dead leaves off your fern.
Productivity has other aspects besides sheer on-task time, though. Even if your employees are in roles that require steady focus, such as answering support calls or responding to customer needs, their general demeanor makes a huge difference. Are they glad to see each client? Will they go the extra mile to make sure the customer leaves happy? Your people are the face of your brand, and if that face is unhappy, it broadcasts a discouraging message. Conversely, an engaged, enthusiastic worker conveys a general sense of well-being to every potential and current customer who interacts with your business.
Damaged Workplace Culture
The feel of any workplace is vulnerable to the emotional moods of employees. You wouldn't force your workers to remain at their desks if your company's ventilation system was emitting a chemical that affected people's energy levels and happiness, would you? Yet actively disengaged employees are going to have that same discouraging effect on everyone in the vicinity. Jim Clifton, CEO of Gallup, comments that "Roughly 20 million (20%) of employees who are actively disengaged ... roam the halls spreading discontent." Their disconnection will not only make extra work for their colleagues but will also make otherwise happy employees feel much less positive about your company. If disaffected workers are actually close to their co-workers, the impact of their disengagement will be even stronger.
Think In Terms of Protecting Your Investment
The percentage of your overhead dedicated to employee compensation probably ranges from 15 to 50 percent, depending on your industry. If you bought a new piece of equipment for tens of thousands of dollars, you'd certainly make sure you were taking optimal care of it. If it needed a certain maintenance schedule, you'd assign an employee to check off every single item on that schedule. You'd manipulate your building so that the device had the optimal ventilation, temperature, power supply, and so on, even if that meant you had to clear a special place for it or install new wiring. Although you probably spend more on your workers than you'll ever spend on equipment, you may not be in the habit of itemizing their needs with the same urgency. Unfortunately, employees don't come with maintenance manuals. But just like a finely-tuned instrument, a human being has some very specific needs.
Employee Engagement Yields a Great ROI
Improving your employee alignment is one of the best ways to highlight your leadership and strengthen your company's financial resilience. During today's digital transformation, your business may be pouring significant resources into all kinds of infrastructure upgrades. Important as infrastructure is, though, no other spending category will yield the long-term ROI of investing in employee motivation. To learn more, read the full white paper: The True Cost of Employee Disengagement.