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.
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.
At Clear Review, we have designed our performance management and employee engagement software to enable conversations, improve performance and engage employees. Book a demo today to find out how we can help you.
Our eBook has plenty more information on the link between performance with engagement, who should be responsible for workplace engagement, and why we’ve been measuring it in the wrong way. Download it here.