Calculating the Cost of Employee Disengagement

Program Design | Best Practices | Employee Experience

Reading time: 6 minutes

This article delineates three ways that employee disengagement costs companies money, and offers suggestions on how Voice of the Employee programs can help business leaders to re-engage their people.

1. Direct Cost to Employers

Gallup has estimated 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. Gartner research has found a 13% increase in the number of high-potential employees desiring to leave their current companies.

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.

Gathering data is challenging enough on its own-- actually taking effective action on employee engagement survey results is nearly impossible, unless you partner with a professional Voice of the Employee provider. Voice of the Employee programs include employee engagement surveys, but the best ones offer much more.

Look for a Voice of the Employee program that prioritizes actions managers can take to boost engagement. You'll also want an online dashboard tool to track engagement and evaluate improvement.

Conclusion

With a Voice of the Employee program in place, you'll have a better understanding of what elements have the greatest impact on improving their overall work experience, and as result, their performance.

Once your employees are engaged, they will pass on their excitement to the customer in the form of extraordinary customer experiences. And you won't have to lose any more sleep over how much your company is losing as a result of disengaged employees.

 

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About the Author

Sean McDade, PhD is the author of Listen or Die: 40 Lessons That Turn Customer Feedback Into Gold. He founded PeopleMetrics in 2001 and is the architect of the company’s customer experience management (CEM) software platform. As CEO, he guides the company’s vision and strategy. Sean has over 20 years of experience helping companies measure and improve the customer experience. Earlier in his career, he spent five years at the Gallup Organization, where he was the practice leader of their consulting division. His company offers CEM software with advanced machine learning solutions and hands-on analytical support to help companies make sense of their CX data. Sean holds a Ph.D. in Business Administration with a specialization in marketing science from Temple University in Philadelphia. He has published eight articles in peer-reviewed scholarly journals and has taught over 25 marketing classes. Sean was named a 40 under 40 award recipient of the Philadelphia region. He is an active Angel Investor, including investments in Tender Greens, CloudMine and Sidecar.

Topic: Employee Experience

Posted on 07-07-2020