The importance of employee engagement can’t be overstated – employee engagement has been proven to reduce staff turnover, improve productivity and efficiency, improve customer service and retention, and deliver higher profits. Conversely, Gallup estimates low employee engagement costs the global economy $8.1 trillion per year.

Ultimately, having an engaged team makes running a business easier and enables leaders to focus on higher-value activities, such as innovation, process improvement, and development. In a nutshell, this is why employee engagement is so vital to business outcomes and success.

Defining employee engagement

An engaged workforce or employee ensures that everything they do is infused with purpose, energy, and enthusiasm. Some define employee engagement as the degree of commitment a person feels to their employer and the company’s goals. Or, in other words, how much a person cares about their job.

When an employee builds an emotional commitment to their organization and draws a link between their work and a higher purpose, we call this goal an “Engaged Purpose.” It’s critical to employee engagement that we require every client to define one and share it with their employees.

If a person feels pride in their work and the company they represent, they will score highly on any measure of engagement. Now, take those feelings of pride and commitment, and multiply them across the company. As a workforce becomes more engaged, improvements in performance and productivity aggregate, creating a measurable positive impact on company results.

An older but relevant study published in the Journal of Occupational and Organizational Psychology concluded that organizational commitment “had a more persistent influence on performance at the business unit level than vice versa.” Researchers concluded that job attitudes lead to improvements in business unit performance.

Why does employee engagement matter?

Engaged employees believe in what they’re doing and who they work for, so they always act in ways that advance their organizations’ interests. So, what effect does that have? Huge dividends on employee satisfaction and overall organizational performance.

“Organizations that are the best in engaging their employees to achieve earnings-per-share growth more than four times that of their competitors. Compared with business units in the bottom quartile, those in the top quartile of engagement realize substantially better customer engagement, higher productivity, better retention, fewer accidents, and 21% higher profitability. Engaged workers also report better health outcomes.” – Gallup, “Employee Engagement on the Rise” by Jim Harter, August 2018

Gallup conducted a meta-analysis of 263 research studies across 192 organizations in 49 industries in 34 countries to look at how employee engagement affects performance outcomes in:

  • Customer ratings
  • Profitability
  • Productivity
  • Turnover
  • Safety incidents
  • Theft
  • Absenteeism
  • Patient safety incidents
  • Quality of output

They found that the companies that scored highest in employee engagement had four times the success rate of companies that scored lowest.

employee engagement affects key business outcomes

How employee engagement impacts work performance

To understand how employee engagement improves work performance, take a look at the critical components of employee engagement, which include:

  • Clear understanding of one’s role and responsibilities
  • The tools, training, and resources needed to do one’s job
  • Recognition for their contributions and successes
  • The opportunity to develop professionally and advance one’s career
  • An environment in which employees have an authentic voice
  • Having leadership that cares about the well-being of employees.
  • A sense of purpose and contributing to the good of the community or other stakeholders
  • A sense of belonging.

It’s not difficult to understand how role clarity, access to training and resources, and recognition for a job well done improve an employee’s performance. The ability to learn new skills and develop oneself professionally, combined with a culture and environment that values employees’ feedback and ideas, enables people to establish skills and go from strength to strength. They also accrue expertise and intellectual capital that only increases their value to the organisation.

Retaining these valuable employees is a top priority for leaders. Those who care about employee well-being and foster a strong sense of belonging and purpose will be rewarded with improved retention, intrinsic motivation, and job satisfaction.

In short, employee engagement is the very foundation of job performance.

engaged employees are 20% more productive

How to strengthen key business areas with employee engagement

Building on these ideas, to better understand why employee engagement is so meaningful, it’s helpful to look at its relationship to three critical areas of the business:

  1. How employee engagement improves customer satisfaction
  2. How employee engagement helps drive sales
  3. How employee engagement inspires workplace innovation

How employee engagement improves customer satisfaction 

Suppose you’ve angrily hung up the phone after talking to a customer service person while snarling about never doing business with the company again because of the wasted time you just endured. In that case, you already have some insight into how employee engagement affects the service experience. Unhappy situations like this one are the direct result of practices that prioritise numbers over people, creating incentives for employees to focus on getting callers off the phone rather than delivering satisfaction.

A study from Glassdoor, a site where employees rate and review their employers, draws a straight line between the employee experience and customer satisfaction. It noted that “on average, a 1-point increase in Glassdoor company rating is associated with a 1.3-point increase in customer satisfaction,” measured by the American Customer Satisfaction Index.

Indeed, at the top of the heap in terms of both employee and customer satisfaction on the ACSI is Trader Joe’s, a popular grocery store chain. Famous for its nontraditional approach, Trader Joe’s culture is steeped in seven fundamental values – one of which is “WOW customer service.”

However, the company’s success in delivering a great customer experience is likely equally attributable to the other values which it strives to live. These include kaizen (continuous improvement,) no bureaucracy, and integrity, creating an empowered workforce with control over its destiny. You can see it when you shop at Trader Joe’s (as your author frequently does) – employees are smiling, thoughtful, and determined to help – in other words, they’re engaged.

How employee engagement helps drive sales

There are numerous studies about the connection between sales success and employee engagement. According to a Gallup study, employee engagement can drive double-digit increases in company sales. If you think about it for a few minutes, the line between improved employee engagement and better sales performance becomes clear. By understanding what sales teams values and needs offer a prime example of how to foster employees, leading to better performance.

The top four drivers of engagement for salespeople are, in order:

  1. Confidence in senior management
  2. Opportunities to grow and develop
  3. Confidence in the future of the organisation
  4. A sense of belonging — both as a team member and a contributor to the organisation

In short, an organisation that offers a bright future will do a better job engaging – and retaining – its sales professionals. The latter being the most critical. Sales teams are notorious for employee churn, so keeping and developing top performers can be a real challenge and can  make or break a company’s numbers.

One of the most powerful benefits of employee engagement is that it slows exit. Our clients experience 60% less turnover than published averages. In 2021, organisations suffered an average turnover rate of 57.3%. For the same period, our clients’ average turnover was 23.17%.

engagement multiplier clients experience 60% less turnover

Finally, the last driver has emerged as one of the most crucial engagement trends and a real workplace superpower. In fact, 20% of employees who feel they don’t belong are engaged, whereas 91% of those feel they do – that’s 3.5x more. So to tap into that motivating factor, focus on:

  1. Teamwork and camaraderie. Most salespeople are natural-born extroverts – they are energised by other people, and they are likely to feel the effects of lockdown and working from home more keenly than some other employees. Organisations that prioritise an esprit de corps will create an environment that supports your sales team and makes the kind of camaraderie that enables them to feed off each others’ energy.
  2. Build a Sense of Purpose. Creating belief in the company’s purpose – and enthusiasm for it – is powerfully motivating for employees, particularly the sales team. Engagement Multiplier is an excellent example of this. Our ultimate purpose is to unlock potential and improve people’s lives. We reinforce these ideas each day – for example when we talk about onboarding a new client, we don’t talk about the number of employees they have – we talk about the number of “hearts” we’re bringing on board.

How employee engagement inspires workplace innovation

There’s no lack of articles, books, and podcasts on the subject of innovation. However, many overlook a crucial component – employee engagement.

At the beginning of this article, we describe an engaged employee who is suffused with purpose, energy, and enthusiasm, feels committed to the company, and cares about its goals. Thinking about this another way, could a person who is uninterested, uncaring, and uncommitted to the organisastion even be able to contribute meaningfully to its innovation? Possibly, but it wouldn’t be likely.

“Management scholars use various terms to refer to what most practitioners consider engagement. For example, an employee might be “tethered” to her role or “embedded” in her job. But ultimately, it all comes down to engagement – how involved and dedicated an individual is to the job they hold,” wrote Mischa Kaplan in his article discussing the link between employee engagement and innovation. “And to be clear, there is now an extensive body of academic research that has demonstrated a clear link between high levels of employee engagement and the frequency with which individuals engage in on-the-job innovation. Put another way; an engaged workforce is more innovative.”

Hallmarks of a culture that supports innovation can be copied straight from a list of core drivers of employee engagement, including:

Employees have a voice, and leaders value employee feedback. So an environment where people can share ideas is crucial for fostering innovation. Crispin Manners, an expert in innovation and the author of our “Kickstart Innovation” survey notes, stated that if the organisation isn’t a listening organisation, they will be met by a wall of disbelief.

Purpose: Innovation depends on the health of the company’s culture, and purpose is at its heart. By connecting people to the mission, people become more receptive to doing things differently. They will buy-in and bring great ideas forward to support the shared purpose.

Employee engagement is chiefly about removing the barriers that prevent employees from doing their best – and most personally satisfying – work. Poor communication, lack of information, micromanagement, and unfair treatment are just a few ways leaders can swiftly quash the energy and enthusiasm most people bring to work.

Boost your team’s engagement with a free Benchmark Assessment.

You can’t improve engagement if you don’t know where you’re starting from. Run a Benchmark Assessment on our platform to get a full overview of your team’s current engagement and track your progress over time. Try it free.

Why employee engagement will change the way we think of work in the future

Every generation of workers wants meaningful work, and the generation taking over the workforce now (Millennials) is no different. But there is a difference between Millennials and previous generations in their willingness to quit jobs that don’t deliver a meaningful experience.

Millennials are twice as likely to quit a job as previous generations, and a 2018 survey from Deloitte found that 43% of Millennials plan to leave their jobs within two years.

What are they searching for in their company culture or environment? Opportunities to learn, grow, and companies that offer a positive workplace culture are engaged.

To be a competitive employer for the best talent, you must display externally and demonstrate that high employee engagement is becoming a must-have. But engagement only works as a two-way street. If you don’t actively work to support their values and priorities, you can’t ask employees to be engaged – to care about your business.

You may have seen the business articles about Amazon testing a 30-hour workweek, Airbnb giving employees a $2000/year travel stipend, and Netflix offering a full year of parental leave to salaried and hourly employees. They’re the frontrunners of a trend that’s reshaping and elevating employee expectations.

What you can do to improve employee engagement right now

Employee engagement begins with showing you care about your employees. Only then will they reciprocate by investing themselves in your vision. According to Glassdoor, Deloitte, and Gallup polls, the opportunities that have the highest impact on employee engagement include:

  1. Encourage and provide opportunities to improve and grow

Gallup reported that 87% of millennials said opportunities for professional development are very important in a job. An organization that supports this finds that their retention rates rise when millennials are satisfied with career development programs. Maybe that means you invest in education and programs for your employees, or perhaps you institute a mentorship system. Ultimately, the question is, “How can I support my employees’ goals and growth?”

  1. Advocate for work-life balance

A Deloitte study on Millennial employees reported that work-life balance was the most important factor, other than salary, in the decision to take a new job (or leave a current position). Helping your employees achieve work-life balance isn’t just about establishing flex-time or work-from-home days – it’s about creating a culture in which leadership visibly supports employees’ hobbies, interests, and family time.

  1. Pledge to focus on better health and wellness for employees

Good health insurance was ranked as an essential employee benefit in recent research from Glassdoor. Yes, it’s expensive, but the investment pays back dividends in employee loyalty, retention, and fewer sick days. But caring about health and wellness goes beyond investing in a high-quality insurance plan. You can also clarify that you support employees taking “mental health days” and sick days and encourage more physical activity by taking walking lunches (or even walking meetings). Making physical well-being part of your company culture can impact the energy employees can bring to the table.