The High Cost of Disengagement

Do you wonder how many of your employees are just showing up to pick up a paycheck? PeopleMetrics’ Employee Engagement research found that 12% of all employees are actively disengaged at work. Twelve percent may not seem like such a big deal, until you consider the myriad costs this 12% brings to your organization. According to The Economist, 84% of senior leaders say Disengaged Employees are 1 of the 3 biggest threats facing their business. Yet only 12% of them report regularly tackling the employee engagement problem—perhaps because it can be difficult to assign costs to under-performance.

This article delineates three ways that employee disengagement costs companies money.
1. Direct Cost to Employers.
Gallup has estimated that that employee disengagement costs the overall US economy as much as $350 billion every year. That’s a staggering number, but it’s hard to get motivated to tackle such an endemic problem. Instead, think about what each company loses per year: at least $2,246 per disengaged employee.

The specific expenses contributing to those numbers vary by company, but a few costs generally associated with employee disengagement include:
*Disengaged employees take more sick days and are tardy more often.
*Disengaged employees undermine the excellent work their more engaged colleagues accomplish. Constant complaining is a common characteristic of disengaged employees.
*The decreased productivity of each disengaged employee costs each employer $3,400 to $10,000 in salary, according to Gallup research.
*Missed deadlines and poor sales results are common characteristics of disengaged employees.
*Customer complaints often rise with employee disengagement. Disengaged employees create disengaged customers because frustrated workers can’t help but pass on their cynicism and negativity.

2. Low Employee Engagement and Low Company Performance. Employee disengagement definitely contributes to inadequate company performance. Dozens of linkage studies have compared companies’ employee engagement rates and business performance levels. Our own research has demonstrated that:
Highly profitable companies have 50% more Engaged employees versus unprofitable companies
Teams with high levels of Engagement sell over 20% more than teams with low Engagement
Bottom line: disengaged employees drag down overall company performance.

3. Turnover Costs to Train New Employees.
As employee disengagement grows, so does the risk of talent loss. Corporate Executive Board research has found a 13% increase in the number of high-potential employees desiring to leave their current companies in 2011. Another metric to calculate a portion of the cost of employee disengagement in your organization is to consider how many of your talented employees left in the last year. How much did you spend on training those employees? And how much will you spend to train new employees?

Conducting an Employee Engagement survey is a good way to begin evaluating engagement levels in your ranks. but it’s not enough. In fact, many employee engagement surveys end up stranded on some executive’s desk.

Has your organization taken an employee survey? What has happened since you've receieved the results?

Author: Kate Feather
*This post originally appeared on PeopleMetrics Industry News