An organization’s workforce is the blood of the company, and an engaged workforce can create a competitive advantage. According to a report from Harvard Business Review Analytic Services, 71 percent executives believe that “employee engagement as very important to achieving overall organizational success.”
But why is this the case? Why are so many people concerned with employee engagement? Why is it such a powerful tool for organizational success?
To answer these questions, we shall first look at what employee engagement is, and then we will move into understanding why it is important.
What Is Employee Engagement?
William Kahn, a professor of organizational behavior, was the first to define employee engagement formally. In a paper published in 1990, Kahn defined employee engagement as “the harnessing of organization members’ selves to their work roles; in engagement, people employ and express themselves physically, cognitively, and emotionally during role performances.”
What we can learn from this definition is that employee engagement is a commitment an employee has to their employer and their organization’s success.
This emotional commitment means engaged employees actually care about their work and their company. They don’t work for a paycheck or promotion, but on behalf of the organization and in service of its goals.
However, employee engagement is not the same as “employee satisfaction.” Employee satisfaction measures only a fraction of the emotional aspects of employment, whereby it determines whether a given individual is happy or sad with their job. Factors such as motivation, interest, level of involvement, and commitment are not taken into account. On the other hand, employee engagement addresses all these aspects of an employee’s relationship with their job.
A simple raise in pay can lead to employee satisfaction, but does that really imply that an employee is engaged? Top performers want to be challenged and to challenge the status quo. They embrace change, seek out ways to improve themselves and their organizations, and want all employees to be held accountable for delivering results. By contrast, low-performing employees often cling to the status quo, resist change, and avoid accountability whenever possible. An employee can be satisfied with their job and still slot into the low-performing category. A satisfied employee, therefore, cannot necessarily be categorized as an engaged employee.
Why Is Employee Engagement Important?
Employee engagement levels affect various performance outcomes. The top three reasons why employee engagement matters are enumerated and expounded upon below:
1. Lowered Absenteeism and Turnover Rates
An engaged employee is a person who loves their job and the organization they work for. Once someone has a passion for something, they would want to give it their all. The engaged employee’s drive to excel can be observed in their commitment to completing a given task at hand. The engaged employee would often rather complete a work project than take the day off. Engaged employees overall have lower rates of absenteeism.
If an engaged employee would rather work than take a day off, then it follows that an engaged employee would rather continue working for an organization than jump ship for a new role. The numbers bear this conclusion out: the presence of an engaged workforce may lower turnover by as much as 25 percent in high-turnover organizations and 65 percent in low-turnover organizations.
2. Higher Productivity
According to research from SHRM, employees with the highest levels of commitment perform 20 percent better than employees with lower levels of commitment. Similarly, research from the Hay Group found that engaged employees may boost office productivity by as much as 43 percent.
Another interesting fact is that, in a 2008 study from Towers Perrin, engaged employees “showed a 19 percent increase in operating income over a 12-month period, compared to a 33 percent decrease in companies with disengaged employees.
3. Higher Profits
Engaged employees lead to better business outcomes. Forbes reports that research from Towers Perrin found that companies with engaged workers see 6 percent higher net profit margins than companies without engaged workers.
Higher profits mean higher shareholder returns. According to the same Forbes article cited above, Kenexa found that “engaged companies have five times higher shareholder returns over five years” than less engaged companies.
We can deduce from the factors mentioned above that an organization has much to gain from creating and maintaining an engaged workforce. An engaged workforce leads to lower absenteeism and turnover, which in turn improves productivity and leads to higher profits and shareholder returns.