How employee engagement increase profit

HOW EMPLOYEE ENGAGEMENT INCREASES PROFIT FOR 2021

" This unprecedented degree of stakeholder empowerment presents executives with the realization that the voice of the customer – not the company – establishes deliverable value, and that internal standards of quality and satisfaction are instrumental in shaping these delivery strategies. "

Business leaders face a critical paradox in today’s corporate context that is employee engagement: unique changes and transitions within the business landscape, including digitalization and disintermediation,

have prompted a concession of power over corporate reputation and messaging from an elite group of senior managers to stakeholders,

including employees and customers. This unprecedented degree of stakeholder empowerment presents executives with the realization that the voice of the customer –

not the company – establishes deliverable value, and that internal standards of quality and satisfaction are instrumental in shaping these delivery strategies.

Likewise,

stakeholder empowerment means that measurable customer insights can (and must) be used to develop programming that drives internal priorities, investments, focus and alignment.

This new reality makes finding answers to two key questions (directed at customers and employees, respectively) imperative for business success:

1. Would you recommend this brand, product or service to a friend/colleague for an employee engagement?

2. Would you recommend working for this company with a friend/colleague?

The crux of the challenge for business leaders is establishing a tangible connection between what the answers to these two questions represent: the degree of customer loyalty on an external level, and the degree of employee engagement on an internal level.

The rational, emotional triggers derived from these questions are determinants for loyalty and commitment – both of which define and drive the success of brands.

Research by Towers Perrin indicates that the more engaged employees at an organization are, the more likely it is to exceed the industry average in one-year revenue growth.

Specifically, there is a trend showing that highly engaged employees work for organizations that had revenue growth at least one percentage point above the average for their industry,

while the organizations of the most disengaged employees work for companies where revenue growth falls one or two percentage points below the average (Towers Perrin).

However, it should be noted that there is probably another factor at work here,

in that organizations that are performing better may be more likely to attract more engaged people.

The growing body of research into employee engagement also yields information on how engagement impacts specific aspects of organizations,

as outlined below.

Shrinkage

The amount of profit lost to shrinkage (theft) is also lower when engagement is increased. Harter et al.

(2009) showed that there is a 27% drop in shrinkage when comparing business units scoring in the top and bottom 25% on engagement. This represents a significant amount of money.

Productivity

SHRM Foundation’s research found a significant difference between performances related cost in the sales team of one organisation in 2005.

Low engagement teams fell behind high engagement teams so much that the difference in performance-related costs was in excess of $2,000,000 (Lockwood, 2007).

However it is not just in sales teams that the productivity of engaged employees can affect revenue growth.

They can have a significant indirect effect by breaking new ground in terms of innovations to boost sales, or simply through supporting other employees (Towers Perrin, 2003).

Furthermore, the cost of production is lowered when engagement is increased due to more focused and efficient workers (Towers Perrin, 2003)

Safety

As discussed, there are both human and financial costs of safety incidents in the workplace.

Retention

Retention has a twofold impact on profitability. Firstly, replacing an employee can cost one and a half times their salary.

Secondly, once an employee has been replaced, it takes the new employee a period of time to adjust to the role and start being productive.

The impact of this on profitability is especially evident in sales,

where it can take years for a new employee to generate the same amount of revenue as an established one.

Customer loyalty

It is common sense that having loyal customers who promote a business helps grow and maintain revenue.

Cultivating the employee-customer relationship will enable any organization to be a low-cost provider and achieve superior results

The key to this is having engaged employees.