Why is employee engagement important?

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.

Click here to find out how to use per­for­mance man­age­ment soft­ware to boost engage­ment lev­els in your organisation.

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 orga­ni­sa­tion, reduc­ing over­all turnover and the costs asso­ci­at­ed with it. They feel a stronger bond to their organisation’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.

Learn more about employ­ee engagement

Learn more about employ­ee engage­ment and how you can improve it, from our col­lec­tion of free resources — includ­ing our pop­u­lar eBook on ​“Pow­er­ing per­for­mance with engaged employees.”