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Getting ‘bang for your buck’ on employee engagement? If you’ve no idea, you’re not alone.

You can expect reduced costs through a 40% reduction in employee attrition and a 37% reduction in absenteeism

Gallup

Employee engagement is a hot topic right now. Businesses left, right and centre are attempting engagement programmes. Discussions industry-wide are being held about how companies could be creating workplaces where every employee happily puts in their best performance, day in, day out. Yet 61% of UK employees remain disengaged, this is despite HR spending an average of 15% of their week1 on employee relations and engagement.

Clearly, something is amiss. Yet those that are getting it right, are outpacing and outperforming their competitors by 10% in customer loyalty/engagement; 21% in profitability and 20% in productivity – so for some, employee engagement is paying big dividends. But for the vast majority that invest in training and engagement – some 92% of companies – they have ZERO idea as to the impact of their programmes, good or bad.

In this blog we’re about to demystify this topic, once and for all.

“Teams who score in the top 20% in engagement realise a 41% reduction in absenteeism, and 59% less turnover”4.

The problems with quantifying ROI on employee engagement (spoiler: there are many):

Fluffiness and difficulties in pinning down facts and figures

Employee engagement involves qualitative data – it involves feelings, opinions and employee satisfaction. It’s about how your teams regard your culture, perhaps their managers and co-workers too. Crunching the numbers around these things can prove intimidating for most. Just how can these things translate into concrete numbers – into pence, pounds and profit? If this sounds familiar, you’re far from alone.

Companies are getting employee engagement wrong, ploughing money into perks that employees don’t want or need. 91%5 of employees say that outings aren’t valuable. Just 5% say that office games are wanted. Worse still, 53% say that employee engagement initiatives are distracting, leading to a decrease in productivity. On top of the difficulties in translating feelings into figures, is also the fact that the cost of unengaged employees must also be factored into the equation.

Employee Engagement isn’t a One-shot Deal

Initiatives take time. Lots of time. This can lead to some companies abandoning programmes before they’ve really had time to kick in. Perseverance and a reliable method of calculation are key to employee engagement success. Because when you do reach optimal employee engagement, you can expect reduced costs through a 40% reduction in employee attrition and a 37% reduction in absenteeism. You could also expect boosted revenue with a 21% jump in productivity.

The Weekly10 Calculation for Employee Engagement ROI

There are four core benefits of employee engagement that your initiative should be delivering in order to be truly effective.

  1. Productivity
  2. Absenteeism
  3. Employee Turnover
  4. Speed of Onboarding

We’ve developed a simple model to arrive at a set figure, based on solid, scientific research. Wrapped into this model are the costs associated with employee turnover and absenteeism.

Let’s take an example for a business with 300 employees who have:

  • An average salary of £35,000 per year
  • An average of three absent days per person per year
  • An employee attrition rate of 15%
  • A hiring/no-boarding cost of 20% of salary

This organisation is facing huge outgoings of:

  • On-boarding – £315,000
  • Absenteeism – £123,529

This organisation is facing huge outgoings of:

  • On-boarding – £315,000
  • Absenteeism – £123,529

With an effective employee engagement programme, this company could secure some much-needed savings…

  • Employee turnover – £126,000
  • Absenteeism – £45,706

Using the savings achieved the company would make savings of £171,706 per year. Assuming an investment in Employee Engagement of £35,000, including a cloud-based platform and resourcing costs they would be looking at a total ROI of 500% on cost-saving alone!

When we add in the 21% increase in productivity, assuming the company revenue is around £15m they could expect to increase in turn-over by £3.2m.

You can crunch your own numbers using our pre-made, super-simple Excel sheet.
Download our employee engagement ROI calculator (GBP) – (USD version)