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How does employee engagement impact performance?

Employee Engagement and Performance.

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 in the hope of a pay rise, or to get a pro­mo­tion. They actu­al­ly care more about their work. It’s what psy­chol­o­gists call intrin­sic moti­va­tion or dis­cre­tionary effort. So we would expect then 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 just this ques­tion. Here is a sum­ma­ry of five of the most impor­tant stud­ies in this area, which clear­ly demon­strate the link between employ­ee engage­ment and indi­vid­ual and organ­i­sa­tion­al performance:

1. Engaged employ­ees per­form better

In a glob­al study of 50,000 employ­ees, the Cor­po­rate Lead­er­ship Coun­cil found that 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.

2. The 10:6:2’ rule

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 10 per­cent improve­ment in com­mit­ment increas­es an employee’s effort lev­el by 6 per­cent, and every 6 per­cent improve­ment in effort increas­es an employee’s per­for­mance by 2 percent.

3. Organ­i­sa­tions with high­er employ­ee engage­ment are more profitable

In 2012, Gallup per­formed an analy­sis of 263 sep­a­rate research stud­ies across 192 orga­ni­za­tions in 49 indus­tries and 34 coun­tries. They stud­ied the top quar­tile and bot­tom quar­tile employ­ee engage­ment scores and looked at the per­for­mance of the organ­i­sa­tions with­in those quar­tiles. They found that 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.

4. Employ­ee engage­ment improves employ­ee retention

The study men­tioned above con­duct­ed by the Cor­po­rate Lead­er­ship Coun­cil (num­ber 1) con­clud­ed that engaged employ­ees are 87% less like­ly to leave the orga­ni­za­tion than dis­en­gaged employ­ees. Sim­i­lar­ly, a 2004 sur­vey by Tow­ers Per­rin showed that 66% of high­ly engaged employ­ees had no plans to leave their com­pa­ny, and only 3% of them were active­ly look­ing, com­pared to 12% and 31%, respec­tive­ly, for dis­en­gaged employees.

5. 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 — that employ­ee engage­ment (‘organ­i­sa­tion­al com­mit­ment’) had a more per­sis­tent influ­ence on per­for­mance than vice versa.

How to improve employ­ee engagement

There are numer­ous con­sul­tan­cies who make their liv­ing from mea­sur­ing employ­ee engage­ment and offer­ing advice on how to improve it; indeed it has become a sci­ence in itself. How­ev­er, I’m a big fan of sim­plic­i­ty and one of my favourite approach­es to increas­ing employ­ee engage­ment is that offered by the US entre­pre­neur and author, Kevin Kruse, in his book Employ­ee Engage­ment 2.0. Kevin states that engage­ment can be boiled down to four things:

  1. Com­mu­ni­ca­tion
  2. Growth & Development
  3. Recog­ni­tion & Appreciation
  4. Trust & Confidence

We’ve put togeth­er a short guide on how you can tai­lor your per­for­mance man­age­ment process­es to improve employ­ee engage­ment, using the above four prin­ci­ples, which you can read here.