A Data-driven Case for Understanding the Impact of Employee Engagement on Retention
Employee turnover is a headache for the managers who wind up stuck with spots to fill, but employee departures aren’t just a hassle -- they can also be quite costly.
Karlyn Borysenko, writing for the TLNT blog, pinned the cost of employee turnover at roughly 30 percent to 50 percent of an entry-level employee’s annual salary, 150 percent of a mid-level employee’s annual earnings and as much as 400 percent of the average salary of a high-level or highly-specialized employee.
Losing more than one employee, according to this model, adds up quickly; a company that loses six entry-level employees, four mid-level employees and two-high level employees in one year can anticipate costs of more than $1.5 million just to replace these 12 employees.
Naturally, employee retention is a growing concern for forward-thinking companies, and it’s made all the more important by increasing competition for talent. In fact, according to data from Spherion: “78 percent of businesses are more worried about a talent shortage than they were last year.”
As Brittany Hink shared on her Human Resources iQ blog: “Organizations continue to fight the battle to recruit and retain the best employees, even if that means ‘poaching’ the employees from a direct competitor.
"It is common for recruiters to seek top talent at other organizations in order to strengthen their team," Hink continued. "Sometimes, this can come from direct competitors, and other times it comes from an innovative and aggressive industry.”
So, how can you keep your own employees from jumping ship to your competitor? The answer may be as simple as engaging them.
What is employee engagement?
Hubworks’ Hannah Botelho has offered several definitions of “employee engagement,” but they all boil down to essentially the same thing: Engaged employees are those who buy into the goals and vision of the business, and -- consequently -- feel nurtured, empowered and enabled to do good work that drives the company forward.
Botelho goes on to share more than 50 ideas for improving employee engagement in the workplace, encompassing everything from putting free snacks in the breakroom to prioritizing diversity and inclusion in an explicit way.
What’s clear from her list are the dozens of different ways in which employees can be engaged. What matters less than the specifics of an engagement campaign is the company’s understanding of the psychology and data that should underpin these efforts.
The data-driven case for engagement
Employee engagement as a retention tool makes sense on an intuitive level, but data from Glint backs it up: The attrition rate of disengaged employees is 12 times higher than for highly-engaged employees over a year-long period. Here's why that’s the case:
First, consider Gallup’s most recent employee engagement survey, in which 80,844 employed adults were asked to rate their engagement based on factors such as having an opportunity to do what they do best each day, having someone at work who encourages their development and believing their opinions count at work.
According to Gallup, those factors predict organizational performance outcomes; unfortunately, only 32 percent of employees count themselves as being “engaged.”
What's driving this disengagement? The Dale Carnegie Training Institute highlights two factors based on a national representative sample of 1,500 employees:
- Eighty percent of employees who were dissatisfied with their direct manager were disengaged.
- Seventy percent of employees who lack confidence in the abilities of senior leadership are not fully engaged.
Further, data from a TINYpulse survey of 400 full-time U.S. employees concluded that:
- Employees who described themselves as chronically overworked and burned out were 31 percent more likely to think about looking for a new job.
- Employees subject to micromanagement were 28 percent more likely to think about departing.
- Employees who gave their company culture low marks were 15 percent more likely to be looking for a new job.
The factors in these two surveys shouldn’t come as a surprise. Who among us wants to work under micromanaging bosses or in workplaces whose cultures we’ve come to dread?
What should be more startling to businesses is the impact that disengagement can have on employee loyalty and retention:
- Forty-five percent of employees reported that they would be likely or very likely to look for other jobs outside their current organization within the next year. (SHRM)
- Forty-four of millennials said that, given the choice, they expected to leave their current employers in the next two years. (Deloitte)
- Thirty-three percent of senior leaders believed employee loyalty has a direct relationship to profits. (American Management Association)
Adopting employeeengagement policies
Ultimately, Deloitte authors David Brown, Josh Bersin, Will Gosling and Nathan Sloan were best at summing up the approach managers should follow upon learning how important employee engagement is to retention efforts: “Engagement is not reactive but proactive," they wrote. "Efforts to build engagement should be 'always on' through extensive data use and analysis by business leaders.
"HR, too, must be proactive in engagement efforts. Leading companies have made this their goal and are reaping the benefits; all organizations that want a passionate workforce should follow suit.”