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Why Is Employee Engagement Important?

Employee Engagement and Performance.

We hear a lot of talk about employ­ee engage­ment, includ­ing the­o­ries on how to improve it and what fac­tors influ­ence it. But why is employ­ee engage­ment impor­tant? What’s the link between employ­ee engage­ment and performance?

This blog post was updat­ed in Sep­tem­ber 2019 for accuracy.

As HR pro­fes­sion­als, most of us would prob­a­bly agree that employ­ee engage­ment has an impact on employ­ee per­for­mance. We’ve all seen how engaged employ­ees go the extra mile. And they aren’t mere­ly doing so in the hope of a pay rise, or to get a pro­mo­tion. Employ­ees care about their work and the suc­cess of their com­pa­ny. It’s what psy­chol­o­gists call intrin­sic moti­va­tion or dis­cre­tionary effort. Engaged employ­ees get more from their work than a pay­check. They enjoy a reward­ing sense of pur­pose and accom­plish­ment and it is this that spurs them on to be great performers.

So we would expect that hav­ing more engaged employ­ees who per­form bet­ter should lead to bet­ter organ­i­sa­tion­al per­for­mance. But is this actu­al­ly the case, and can it be proved?

For­tu­nate­ly, a lot of research has gone into this ques­tion. Below, we’ll look at a few of the busi­ness ben­e­fits of engaged employ­ees. The points below clear­ly demon­strate the link between employ­ee engage­ment and per­for­mance. They also help to answer the ques­tion — why is employ­ee engage­ment crit­i­cal to a company’s success?

Engaged Employ­ees Per­form Better

In a glob­al study of 50,000 employ­ees, the Cor­po­rate Lead­er­ship Coun­cil found those employ­ees who are most com­mit­ted per­form 20% bet­ter. These high­ly engaged employ­ees fre­quent­ly help oth­ers with heavy work­loads, vol­un­teer for oth­er duties, and are con­stant­ly look­ing for ways to do their jobs more effectively.

In anoth­er glob­al study, the Cor­po­rate Exec­u­tive Board con­clud­ed that com­pa­nies on aver­age see per­for­mance improve­ments from boosts in engage­ment. They called it the 10:6:2” rule, as they found that every ten per­cent improve­ment in com­mit­ment increas­es an employee’s effort lev­el by six per­cent — and every six per­cent improve­ment in effort increas­es an employee’s per­for­mance by two per cent.

More recent­ly, the ADP Research Insti­tute sur­veyed over 19,000 employ­ees from 19 dif­fer­ent coun­tries. Har­vard Busi­ness Review described the sur­vey as the most exten­sive and method­olog­i­cal­ly con­sis­tent glob­al study of engage­ment yet under­tak­en”.

The ADP study revealed those employ­ees who were ful­ly engaged per­formed bet­ter and were more loy­al. Those less engaged and sim­ply com­ing to work” were far less like­ly to go above and beyond. After hear­ing sta­tis­tics like this, it’s easy to see why employ­ee engage­ment is so impor­tant to indi­vid­ual, team and organ­i­sa­tion­al performance.

Click here to find out how to use per­for­mance man­age­ment soft­ware to boost engage­ment lev­els in your organisation.

Organ­i­sa­tions with High­er Employ­ee Engage­ment Lev­els Are More Profitable

You might have heard employ­ee engage­ment dri­ves busi­ness results and improves a company’s bot­tom line. Stud­ies con­firm this to be true. In 2012, Gallup per­formed an analy­sis of 263 sep­a­rate research stud­ies across 192 orga­ni­sa­tions in 49 indus­tries and over 34 coun­tries. They stud­ied the top and bot­tom quar­tile employ­ee engage­ment scores and looked at the per­for­mance of the organ­i­sa­tions with­in those quar­tiles. They found those organ­i­sa­tions in the top engage­ment quar­tile were on aver­age 22% more prof­itable than those in the bot­tom quar­tile. The top quar­tile organ­i­sa­tions also had 21% high­er productivity.

In 2017, Gallup fol­lowed this up with anoth­er study that showed sim­i­lar results.

A fur­ther study by Willis Tow­ers Wat­son revealed com­pa­nies with high lev­els of engage­ment have oper­at­ing mar­gins up to three times high­er com­pared to com­pa­nies with low lev­els of engage­ment. This infor­ma­tion makes sense when you con­sid­er engaged employ­ees are more moti­vat­ed and more eager to see the com­pa­ny suc­ceed. To engaged employ­ees, their organ­i­sa­tions are more than just a place of work. They’re a mean­ing­ful part of their lives. So, they do their best to help their com­pa­nies thrive.

Employ­ee Engage­ment Is Linked to Improved Recruitment

Com­pa­nies with high­er lev­els of employ­ee engage­ment essen­tial­ly have a host of ded­i­cat­ed brand ambas­sadors. These employ­ees are more like­ly to engage with your com­pa­ny on social media and to share their pos­i­tive expe­ri­ences on sites such a Glass­door. We’re no longer liv­ing in an employer’s mar­ket. Unem­ploy­ment is at its low­est for decades and top per­form­ers now have the lux­u­ry of choice when it comes to pick­ing a com­pa­ny. They’re much more like­ly to be tempt­ed by com­pa­nies who have engaged employ­ees and who offer a pos­i­tive employ­ee experience. 

If you’re hav­ing trou­ble with engage­ment in your organ­i­sa­tion, make sure you’re not mak­ing these employ­ee engage­ment mis­takes.

Employ­ee Engage­ment Improves Employ­ee Retention

The Cor­po­rate Lead­er­ship Coun­cil study men­tioned above also con­clud­ed engaged employ­ees are 87% less like­ly to leave the orga­ni­sa­tion than dis­en­gaged employ­ees. Sim­i­lar­ly, a 2004 sur­vey by Tow­ers Per­rin showed 66% of high­ly engaged employ­ees had no plans to leave their com­pa­ny, with only 3% of them active­ly look­ing. These fig­ures com­pared to 12% and 31%, respec­tive­ly, for dis­en­gaged employees.

In their State of the Amer­i­can Work­place report, Gallup explains this con­nec­tion perfectly: 

Employ­ees who are engaged are more like­ly to stay with their orga­ni­za­tion, reduc­ing over­all turnover and the costs asso­ci­at­ed with it. They feel a stronger bond to their organization’s mis­sion and pur­pose, mak­ing them more effec­tive brand ambas­sadors. They build stronger rela­tion­ships with cus­tomers, help­ing their com­pa­ny increase sales and profitability.”

Employ­ee Engage­ment and Organ­i­sa­tion­al Out­comes — Proof of Causation

In light of stud­ies such as those list­ed above, many com­men­ta­tors have ques­tioned whether employ­ee engage­ment actu­al­ly caus­es these out­comes, or whether high­er per­form­ing organ­i­sa­tions have more engaged employ­ees because they are more suc­cess­ful. A 2012 study exam­ined this ques­tion and found that it is indeed the for­mer. Employ­ee engage­ment — or organ­i­sa­tion­al com­mit­ment” — had a more per­sis­tent influ­ence on per­for­mance than vice versa.

Employ­ee Engage­ment Pos­i­tive­ly Influ­ences Cus­tomer and Client Satisfaction

Pas­sion is con­ta­gious. When your employ­ees are engaged and excit­ed about their goods or ser­vices, your cus­tomers and clients will take notice. Engaged employ­ees, eager to help the com­pa­ny advance are more like­ly to want to deliv­er an excep­tion­al cus­tomer expe­ri­ence, know­ing the impact this will have on the busi­ness as a whole.

Learn more about employ­ee engagement

Learn more about employ­ee engage­ment and how you can improve it, from our col­lec­tion of free resources — includ­ing our pop­u­lar eBook on Pow­er­ing per­for­mance with engaged employees.”

The key to employee engagement

Learn more about employee engagement from our collection of free resources. You'll discover how you can boost performance and productivity through improving employee engagement.

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