The One Reason Why You Need to Invest in Employee Engagement, According to Research

Editor's note: This post was updated in January, 2019.

We’ve been talking about employee engagement since the 1990s; for decades before that, we talked about employee satisfaction.  Whatever the name, we've definitely spent a fair amount of time on the topic. In fact, many companies invest significant effort in measuring and reporting on employee engagement, and building programs and activities to enhance it. 

But that's not why you need to invest in it.  

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You need to invest in employee engagement because your company's success depends on it.

​Yes, employee engagement is that big a deal.

Let's look at the proof. 

The Research: The Best Make It a Priority

• The Service-Profit Chain.  In 1994, Harvard Business Review first reported on the relationship links among employees, customers, and profits. The article had such impact that it was reprinted in 2008.  Heskett, Jones, Loveman, Sasser, and Schlesinger presented a model called the Service-Profit Chain, which demonstrated how employee engagement (then reported as satisfaction) affected the bottom line.  Their model explained how job design and leadership practices affect employee satisfaction, which in turn creates superior customer service, driving customer satisfaction and loyalty, resulting in greater revenues and profits. ​

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• Results from the World's Greatest Managers. Buckingham and Coffman further explored this phenomenon when they were with the Gallup organization.  In First, Break All the Rules, they reported on more than 25 years of data from 18 studies across 24 companies in various industries.  Once again, they found that engaged employees led to lower employee turnover and higher productivity, resulting in greater customer satisfaction and loyalty, and ultimately higher profitability.

• Competing on Talent Analytics. In a 2010 study published in the Harvard Business Review, Davenport, Harris, and Shapiro wrote that "leading-edge companies are increasingly adopting sophisticated methods of analyzing employee data to enhance their competitive advantage." Why? Because these companies have learned that if you want to perform better in any area, you have to know more about that area. As they've placed more emphasis on employee engagement, they've begun to see the dramatic impact that engagement has on their financial results. For example, Best Buy discovered that the value of a .1% (that's one-tenth of one percent) increase in engagement at a particular store is an additional $100,000 in operating income.

The Trend: Millennials Demand It

If greater profitability isn't enticing enough, how about being able to attract and retain the workers of today and tomorrow?

By now you've certainly read about or even personally experienced the shift in job expectations among younger workers. In fact, 2012 research by Shuck and Herd emphasized that “the age of leader as position is quickly fading” and will be replaced with workplaces that emphasize how the work gets done rather than how much work is accomplished.  Millennials seek workplaces that understand their unique needs and offer meaningful work experiences.  In short, they expect a culture that is foundational to an engaged workforce.

With Millennials now edging out Baby Boomers as the largest group represented in the American workforce, employers have no choice but to design workplace practices that will attract and engage this important group. 

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The Reality: Current Engagement is Abysmal

"OK," you say, "I agree that employee engagement is important. But our engagement levels are fine!"​

Think again. Especially if you're a senior leader.

In a 2017 blog post, Gallup Chairman + CEO Jim Clifton wrote about Gallup's recent discovery that just 33% of the American workforce are engaged. The majority are not engaged (51%) or are actively disengaged (16%). In addition, Bain and Company reported in 2013 that engagement declines at the lowest levels of the organization, suggesting that senior leaders might be underestimating the discontent on the front lines.  Even more concerning, the sales and service team employees who interact with customers every day experience the lowest levels of engagement.

The Remedy: Make These Investments

While employee engagement is a serious business topic that warrants strategic investment, getting started is simple.

Engaging your workforce comes down to a few core practices that must become part of the organization’s culture and leadership personality in order to move the dial toward higher engagement.

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1. Be brilliant at the basics.  Herzberg famously introduced his model of employee motivation in 1968 in the most-ever-sold issue of Harvard Business Review, with a second publication of the same in 1987, and again in 2003.  In his two-factor theory of motivation, Herzberg emphasized the importance of ensuring that the basics are in place for every employee, or dissatisfaction will ensue.  Employees expect things like safety and comfort (physical and emotional), a livable wage, job security, reasonable company policies, and effective administration. Their presence won’t motivate, but their absence will dissatisfy.  Have you ever had an employee approach the benefits department to thank them for a flawless open enrollment?  Probably not.  But if employees have problems when enrolling, you hear about it. Don't let breakdowns in your basics detract from your efforts to create greater engagement.
2. Prioritize daily practice over promotional activity. The company picnic won't drive engagement. Having pizza parties, contests, and "engagement days" prior to your employee engagement survey does not lead to real, sustainable engagement.  Yes, these activities can be a fun, social departure from everyday challenges in the workplace, so go ahead and sponsor them.  But be aware that they’re only effective when employees already feel valued, respected, and cared for in the first place.  That comes from everyday interactions they have with their managers and co-workers.
3. Focus on improving relationships at work, and the work itself.  The results of a 2010 meta-analysis conducted by Harter, Schmidt, Asplund, Killham, and Agrawal showed once again that when an employee has adequate tools to do their job, can contribute skillfully to the work at hand, feel acknowledged for that work, and feel otherwise cared for by their colleagues and supervisor, they will report higher levels of engagement. 

Start with Yourself!

You don't have to be a senior leader or begin a major company initiative to improve your team's engagement. You can start with a few simple steps today! 

​The leaders with the best engagement spend the majority of their time on these four things:

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1. Learning about their employees
2. Understanding and customizing solutions for their employees' needs
3. Ensuring that each employee can do their best, every day
4. Acknowledging each employee for their work 
   

If you're spending most of your time attending meetings, addressing what’s not working, leading projects, and reporting on a variety of metrics, you're likely neglecting the crucial activities of just being with your employees to help them excel. 

What's your experience? Have you seen better results when either you or your team are more engaged? What practices were in place? Share your perspective below!