Subscribe to Entrepreneur for $5

4 Ways Encouraging Employee Engagement Improves the Bottom Line

Opinions expressed by Entrepreneur contributors are their own.

We’re all aware of the numerous ways to keep our employees engaged in their work and satisfied in their positions. Be transparent, provide feedback, create a productive work environment. But it’s not all just feel-good advice intended to improve employees’ well-being, it actually has an impact on a company’s bottom line.   

So what’s the actual return on investment (ROI) of employee engagement? Here are a few data-backed ways employee engagement (or lack thereof) can affect a company’s bottom line:

1. Productivity and Profitability

A 2013 survey of more than 500 employees worldwide by Harvard Business Review found that 71 percent of respondents rank employee engagement as very important to achieving overall organizational success. There’s no arguing that a highly engaged employee is a productive employee. They’re more focused on their work and more motivated to achieve their goals than their disengaged counterparts.

High engagement leads to increased productivity which results in more profit. Gallup research conducted in 2012, which examined about 1.4 million employees in 192 organizations across the globe, found that companies with a highly engaged workforce are 22 percent more profitable.

2. Absenteeism

It's no surprise that employees who are not committed to their jobs are far more likely to intentionally and habitually miss work. In fact, Gallup interviews of more than 5,000 employed adults in Germany revealed that, on average, employees who are engaged at work only miss 3.9 days of work per year. That’s nearly three times lower than the absenteeism of those who are actively disengaged and miss an average of 10.7 days of work per year.

Seventy-five percent of HR professionals say employee absences have a large impact on revenue and productivity, a 2014 study of more than 1,000 respondents worldwide by Kronos and the Society for Human Resource Management revealed. The same report found that unplanned absences, in particular, were reported to add to the workload, increase stress, disrupt the work of others and decrease morale.

While employers expect employees to occasionally miss work, excessive absences can lead to decreased productivity and ultimately affect other factors that play a role in an organization’s success.

Related: 5 Ways to Reduce the Cost of Employee Absences

3. Employee turnover.

Employee engagement also has an undeniably large influence on employee turnover. In fact, disengaged employees are 3.6 times more likely to leave, as found in a 2013 study of 12 organizations by Quantum Workplace.

The cost of losing an employee is no joke, either. The Center for American Progress reviewed 30 case studies in 11 of the most relevant research papers on the costs of employee turnover and found that it costs businesses about one-fifth of a worker’s salary to replace that worker. Not only do employers have to invest time and money in hiring and onboarding replacement workers, but it takes time for new hires to reach the level of performance and productivity that their predecessors maintained.

It costs much less to retain employees than it does to replace them, which makes the need for engaged employees even more important.  

4. Overall cost of employee disengagement

Gallup’s 2013 State of the American Workplace survey of more than 350,000 respondents nationwide estimates that disengaged employees cost the U.S. between $450 billion to $550 billion each year in lost productivity. These employees are emotionally disconnected from their companies and can potentially end up working against their employers’ interests. See how much companies can save by fostering a highly engaged workforce using Officevibe’s Employee Engagement ROI Calculator.

Related: 13 Signs of a Disengaged Employee (Infographic)

Entrepreneur Editors' Picks