How Much of an Impact Does Employee Engagement Really Have on Performance and Results?

Written by: Zorian Rotenberg

As more and more hard evidence surfaces indicating the impact of employee engagement on company performance, it’s clear that organizations actively addressing this concern will outperform their competitors. Many forward-thinking enterprises are employing ongoing performance management tactics like Objectives and Key Results (OKRs) and continuous feedback loops to help teams a sense of purpose in their roles. Yet, as engagement is historically considered a “softer” area of focus in organizations, other business leaders still wonder: how much of an impact does it really have on performance and results?

Let’s take a look.

Defining Employee Engagement

Engagement has become a buzzword in today’s business landscape, and while most executives and managers know what it means, taking a step back to develop a concrete definition enhance our perspective on the matter.

The Society for Human Resource Management ( SHRM ) states that employee engagement is “the connection and commitment employees exhibit toward an organization, leading to higher levels of productive work behaviors.” Gallup , too, has its own definition, stating that engaged employees are those who are actively involved in and committed to their organization. In a Forbes article, contributor Kevin Kruse writes that engaged employees contribute “discretionary efforts.”

In other words, engaged employees care. They’re willing to contribute efforts beyond the bare minimum requirements their roles demand from them. As you can imagine, having these committed employees working for you – instead of those who just show up – is far better for your company’s performance and results.

How Can We Measure the Impact of Employee Engagement?

Based on the very definition of employee engagement, it’s clear that it matters to company performance. Yet, to what extent does it impact your results? Is there even a way to quantify its impact?

Our methods for measuring employee engagement have come a long way, and by actively gauging these levels, we can form better insights as to how it affects organizational performance. To help us understand to which degree engagement impacts performance, let’s look at some of the most compelling recent research:

Companies with a 9.3 to 1 ratio of engaged to disengaged employees showed 147% higher earnings per share than other organizations. ( Gallup )

Companies with the lowest engagement levels have 37% higher levels of absenteeism, which costs the U.S. more than $84 billion annually. ( Gallup-Healthways )

Organizations within the top quartile of employee engagement outperformed those in the bottom 25% by 22% in profitability. ( Gallup )

Disengaged employees yield turnover rates 12 times higher than those of highly engaged workers. ( Glint )

Employees who are highly engaged are 36% more likely to stay with their organization. ( Aon Hewitt )

In leading organizations, 86% of the workforce is engaged. ( Aon Hewitt )

Organizations where 60-70% of the workforce is engaged have an average shareholders’ return at 24.2%. ( Gallup )

Measuring the full impact of employee engagement is a complex challenge, especially when we consider the unique qualities of each organization and its workforce. Yet, the evidence above clearly indicates that it does indeed have a major impact on business outcomes. While it’s still impossible to know for sure just how significant a role employee engagement plays on each company, we do have the ability to measure – and improve – engagement scores.

Effective Ways to Improve Employee Engagement

By incorporating some effective tactics into their performance management strategies, managers can strengthen the communication they share with employees. This is critically important, considering Gallup reports that as much as 70% of fluctuations in engagement levels can be attributed to employees’ managers.

Here are effective strategies managers can use to keep employees engaged:

Develop Ongoing Feedback Loops

Employees need to feel that their managers are committed to their success in order to stay engaged. A weekly check-in with direct reports is one powerful way to establish an ongoing feedback loop with teams, through which managers can clarify priorities, discuss goal progress, and work through any impending obstacles.

Related: Technology's New Frontier: How to Best Use All Its Power to Meet Human Needs

Set Clear, Measurable Goals

Managers should work with their employees to set clear, measurable goals that are aligned with top-level company goals. In doing so, they’ll give employees a way to connect their own contributions with overall company success. Moreover, clear, measurable objectives give managers a way to track progress and provide detailed, constructive feedback, which also boosts engagement.

Measure Engagement Regularly

Lastly, a simple yet effective way to ensure employee engagement is on track is to measure it. Using tools like employee engagement surveys, you can anonymously poll teams to get real-time engagement metrics.

Ultimately, to make a lasting improvement on employee engagement, organizations must approach it as an ongoing activity rather than a one-time event. While implementing new tactics to improve employee engagement may at first seem like “added work,” these tweaks are easy to incorporate into a regular rhythm, and the tremendous payoff – improved company performance and profits – will be well-worth your efforts.