Kevin Kruse Blog

Employee engagement is the emotional commitment an employee has to the organization and its goals, resulting in the use of discretionary effort.

An employee’s discretionary effort results in the Engagement-Profit chain. Because they care more, they are more productive, give better service, and even stay in their jobs longer. All of that leads to happier customers, who buy more and refer more often, which drives sales and profits higher, finally resulting in an increase in stock price.

Think that just sounds like academic theory? Think again. Below are 29 research studies that show a correlation between engagement and:

• Service
• Sales
• Quality
• Safety
• Retention
• Sales, Profit and Total Shareholder Returns
• Role of Front-Line Managers

NOTE: Help me to maintain this list! Please contact me with any new research you think should be added to this list.

SERVICE

• Employees’ customer service productivity scores and their employee engagement scores had a correlation of .51. (Source: Linking People Measures to Strategy. The Conference Board)
• Companies with high employee engagement scores had twice the customer loyalty (repeat purchases, recommendations to friends) than companies with average employee engagement levels. (Source: Are They Really ‘On the Job’?, Pont)
• In a major department store chain, customers scored higher in customer engagement measures when they were serviced in departments with employees who had high levels of employee engagement. (Source: Getting Engaged, Bates)
• Teams classified as “high performance zone for engagement” had a 37% net promoter score (NPS) versus 10% NPS for teams “outside of high performance zone for engagement.” (Source: Aon Hewitt European Manager Survey 2011. Aon Hewitt)

SALES

• Fabick CAT improved “percent of industry net sales” by 300% (Source: A Caterpillar Dealer Unearths Employee Engagement, Gallup Business Journal)
• Fabick CAT improved customer engagement scores by 8% (Source: A Caterpillar Dealer Unearths Employee Engagement, Gallup Business Journal)

QUALITY

• Unnamed Fortune 100 manufacturing company reduced quality errors from 5,658 parts per million to 52 parts per million. (Source: Employee Engagement: The Key To Realizing Competitive Advantage, Development Dimensions International)

SAFETY

• MolsonCoors, it was found that engaged employees were five times less likely than nonengaged employees to have a safety incident and seven times less likely to have a lost-time safety incident. (Source: Effective practice guidelines: Employee engagement and commitment. SHRM)
• Study of 23,910 business units compared top quartile and bottom quartile engagement scores and found that those in the bottom quartile averaged 62% more accidents. (Source: Gallup Q12 Meta-Analysis, Gallup)

RETENTION & ABSENTEEISM

• Unnamed Fortune 100 manufacturing company reduced turnover from 14.5% to 4.1%, while absenteeism dropped from 8% to 4.8%. (Source: Employee Engagement: The Key To Realizing Competitive Advantage, Development Dimensions International)
• Employees with lower engagement are four times more likely to leave their jobs than those who are highly engaged. (Source: Driving performance and retention through employee engagement. Corporate Leadership Council)
• 66% of highly engaged employees reported that they had no plans to leave their company, while only 3% of them were actively looking, compared to 12% and 31%, respectively, for disengaged employees. (Source: Towers Perrin 2004 European Talent Survey: Reconnecting with Employees: Attracting, Retaining, and Engaging, Towers Perrin)
  
• There is a negative .43 correlation between a company’s level of employee engagement and their voluntary turnover rate. (Source: Linking People Measures to Strategy. The Conference Board)
• Highly engaged employees were 87 percent less likely to leave their companies than their disengaged counterparts. (Source: Driving performance and retention through employee engagement. Corporate Leadership Council)
• Study of 23,910 business units compared top quartile and bottom quartile engagement scores and found that those in the bottom quartile averaged 31% – 51% more employee turnover. (Source: Gallup Q12 Meta-Analysis, Gallup)
• Engaged employees in the UK take an average of 2.69 sick days per year; the disengaged take 6.19. (Source: Employee Engagement: How to Build a High Performance Workforce. Gallup)
• Engaged employees are 87% less likely to leave the organization than the disengaged. (Source: Driving performance and retention through employee engagement. Corporate Leadership Council)

REVENUE, PROFIT and SHAREHOLDER RETURNS

• In companies where 60 to 70 percent of employees were engaged, average total shareholder’s return (TSR) stood at 24.2 percent; in companies with only 49 to 60 percent of their employees engaged, TSR fell to 9.1 percent; companies with engagement below 25 percent suffered negative TSR. (Source: Employee engagement at double-digit growth companies, Hewitt Research Brief)
• Companies with highly engaged employees beat average revenue growth in their sector by 1 percent while companies with low engagement were behind their sector’s revenue growth by an average of 2 percent. (Source: Working Today: Understanding what drives employee engagement. The 2003 Towers Perrin Talent Report)
• Operating margin was 2.1% in low engagement companies versus 3.75% in high engagement companies; net profit margin was -1.38% in low engagement companies versus 2.06% in high engagement companies. (Source: Engaged employees drive the bottom line. ISR Report)
• A 5% increase in total employee engagement correlates to a .7% increase in operating margin. (Source: Towers Perrin 2004 European Talent Survey: Reconnecting with Employees: Attracting, Retaining, and Engaging, Towers Perrin)
• Sears measured that a 5 point improvement in employee attitudes drove a 1.3 point improvement in customer satisfaction, which in turn drove a 0.5% improvement in revenue. (Source: The Employee-Customer-Profit Chain at Sears, Harvard Business Review)
• Study of 23,910 business units compared top quartile and bottom quartile engagement scores and found that those in the top quartile averaged 12% higher profitability. (Source: Gallup Q12 Meta-Analysis, Gallup)
• Study of 89 companies compared top quartile and bottom quartile engagement scores and found that those in the top quartile had 2.6 times higher earnings per share (EPS) than that of the below-average scores. (Source: Investors, Take Note: Engagement Boosts Earnings, Gallup)
• Companies with high levels of employee engagement improved 19.2 per cent in operating income while companies with low levels of employee engagement declined 32.7 percent over the study period. (Source: The ISR Employee Engagement Report. Towers Perrin-ISR)
• Standard Chartered Bank reported that in 2007 they found that branches with a statistically significant increase in levels of employee engagement (0.2 or more on a scale of five) had a 16 per cent higher profit margin growth than branches with decreased levels of employee engagement. (Source: Engaging for success: Enhancing performance through employee engagement, UK Government Study)
• A study of 64 organizations revealed that organizations with highly engaged employees achieve twice the annual net income of organizations whose employees lag behind on engagement. (Source: The Impact of Employee Engagement. Kenexa)
• A study conducted across 39 organizations indicates that organizations with highly engaged employees achieve seven times greater 5-year total shareholder return (TSR) than organizations whose employees are less engaged. (Source: The Impact of Employee Engagement. Kenexa)

Role of Front-Line Managers

• In companies who administered an employee engagement survey, 27% of managers never reviewed the results at all, and 52% reviewed the results but took no action. (Source: Aon Hewitt European Manager Survey 2011. Aon Hewitt)

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Kevin is a NY Times bestselling author (his latest book is Employee Engagement 2.0) and serial entrepreneur.

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