I remember an old television commercial that showed dollar signs floating out of a house as they tried to sell insulation, or furnaces, or some such thing. We can easily measure the cost of certain inefficiencies in our homes by looking at our utility bills. But is there a way to know if money is flying out the window in our companies?
Yes, there is. (calculator below!)
One potential source of huge lost dollars is disengaged employees.
You may have heard about the importance of an engaged workforce and feel you've already done enough. Or perhaps you're one of the many people who feel the word “ENGAGEMENT" has become an overused cliché and you don't even want to entertain the conversation.
But what if you had a way to figure out whether engagement was a problem in your company, and whether it was worth taking another look?
What matters gets measured. What gets measured gets done. If you can’t measure it, it has a hard time winning any attention in the ever-evolving list of business priorities. So how can you quickly and easily put a number to this problem so you can decide what, if anything, to do about it?
I’ll show you a calculation in a moment, but anecdotally we know that highly engaged people bring time, energy, and creativity to work every day. We also know that disengaged people bring negativity, conflict, and stress to the workplace.
Engaged employees are positive, passionate, predictable people committed to doing a great job. They are your reliable ‘A’ players who are ready, if not eager, to take on challenging tasks. They are your cheerleaders and motivate others around them to increase their engagement.
Disengaged employees show up with their bodies, but not necessarily with their hearts and minds. Highly disengaged employees are the negative Nellies and Neds who just want to punch the clock and be left alone, or want the rest of the world to be as miserable as they are.
But the folks in the disengaged group are the ones that do the most damage and can be difficult to get rid of in certain organizational cultures. So instead, we pass them around from Manager to Manager or we put them off in a corner where they can do the least amount of damage.
Why do we do this?
Because it can just be more trouble than it’s worth to go through the hoops required to fire someone for cause. It's easier to bide your time and let the next person deal with it.
We can assess the engagement of our workforce using 4 categories:
- fully engaged
- engaged
- somewhat disengaged
- actively disengaged
But how much, exactly, is disengagement costing you?
I found a fabulous way to measure the cost of disengagement when I was doing some research on the topic of employee engagement a few years ago. The calculation made a lot of sense to me, even though it was quite simple and obviously not an exact science. I’ve been using it ever since.
The calculation comes from Human Capital Institute (HCI) and what I like about the model is that it assumes a person’s salary as a level of value. In other words, if you pay me $80,000/year, the value I return to you is $80,000/year. If I work harder, you get more value for that same money, but if I’m a slacker, you get less. Makes sense to me.
So let's talk percentages.
HCI suggests that if I’m giving you 100% value for my salary, you can consider me to be engaged. If I’m highly engaged, you get 120% value. I think that’s conservative, but we’ll go with their numbers.
But on the lower end of the scale, things get a little scary. If I'm slightly disengaged, you're getting 80% of the value of my salary. But on the lowest end, actively disengaged people give only 60% back in value. If that sounds bad, it is.
Next, we need to determine how many people we have in our company in each of these categories. If we aren't sure, Aon Hewitt’s 2017 Trends in Global Employee Engagement gives us some averages that we can use in the meantime. Depending on which source you use, the percentages can be slightly different and the labels might be modified, but the generalities are the same.
- 15% fully engaged
- 22% engaged
- 39% slightly disengaged
- 24% actively disengaged
Let’s now take those numbers and run them through what might be considered a typical organization.
If you have a mid-sized company with 1,000 employees, where the average salary is $80,000 (frontline staff to CEO), the total annual salary expense is $80,000,000.
If the engagement levels in this company are average, then using the numbers listed above, we can calculate the value we’re getting for that $80MM to be $68,480,000.
This means you’re losing over $11.5 million in value… money floating right out the window… EVERY YEAR!
I'm sure most folks would agree that in a 1,000 person organization, $11.5MM is nothing to sneeze at. I'm also fairly sure that if you have that much money leaking out of your coffers every year, you'll want to do something about it.
A critical step in increasing employee engagement is to ensure you have a team of leaders who are both skilled and actively engaged themselves. The leaders in your organization have a direct, and major, impact on your engagement numbers, and therefore the amount of money you're losing through disengagement.
What are you doing to develop the leaders in your company? How are you focusing efforts on ensuring they have the greatest positive impact on their teams?
If you would like some help developing your leaders so they know how to increase employee engagement, Athena Business School might be right up your alley. Call us today to see if an in-house or outsourced solution might be right for you.
In the meantime, use this Estimator to calculate how much disengaged employees might be costing you.
