The document discusses how employee engagement impacts business success. It states that engagement affects key business factors like productivity, advocacy, absenteeism, turnover, innovation, quality, and customer relationships. Research shows highly engaged companies have higher earnings, operating income, and stock performance than less engaged competitors. The document argues senior leaders should understand this connection between engagement and results in order to prioritize engagement strategies and ensure the resources needed to create a highly engaged workforce.

1. The Importance of Engagement!
How and Why Engagement Affects Business Success
HOW ENGAGEMENT
IMPACTS BUSINESS
How and Why Engagement Affects Business Success

2. HOW ENGAGEMENT IMPACTS
BUSINESS
(How and Why Engagement Affects Business Success)
Senior executives and leaders many times don’t fully understand the impact
engagement or conversely disengagement has on their business operations and
organization. Simply stated, employee engagement can affect virtually every aspect
of a successful company including profit.
Engagement is really about people and positive emotions and ultimately is one of
the critical drivers of high performance. I am sure everyone has heard the
philosophy “Emotions control behaviors and behaviors control actions and actions
control results!” This theory has been discussed, explored and researched in a
variety of psychological and human behavior studies and journals over the years.
Examples include Daniel Goleman’s work in the field of emotional intelligence.
Related Research (that explores the connection between emotions and
performance).
Links/Articles/Books:
http://hbr.org/2004/01/what-makes-a-leader/ar/1
http://www.businessballs.com/eq.htm
http://www.danielgoleman.info/
http://www.danielgoleman.info/topics/emotional-intelligence/
Positive emotions such as motivation, desire, commitment, inspiration,
determination, creativity, enthusiasm, pride, caring, perseverance…… all have
significant impact on the attitudes and actions required for high performance and
results. Similarly, negative emotions such as anger, frustration, annoyance,

3. hopelessness, depression, insecurity, negativity, selfishness, resentment, jealousy
….decrease productivity and performance.
Senior leaders must understand it is an organization’s employees, who create and
produce products and services sold into the marketplace, plan and implement
business strategies, overcome difficult obstacles and challenges and generate
business results. Their actions and performance, either directly or indirectly,
influence costs, processes and the behavior and attitudes of customers, and it is
customers who drive an organization’s profitability through their purchases. It is an
employee who commits to high productivity and quality work! Is it an employee
who is inspired to innovate, improve and find new solutions…..you get the picture!
But what do these emotions actually have to do with business and company
success. Let’s take a closer look. Here are several performance related factors that
are affected by emotions and engagement, that play a key role in business success.
1. Productivity- When employees perform their responsibilities with energy,
enthusiasm and motivation higher productivity will result. Productivity can be
described as the amount of output for any given goods or services produced
per man hour or comparable metric. Higher productivity will lead to lower
costs to produce goods and services and make any business more
competitive in their marketplace. Engagement levels not only affect
productivity but also impact the extra discretionary effort that can make a
significant difference in desired outcomes. Engaged employees are 20%
more productive that the typical employee. Corporate Executive Board
2004 ‐ http://www.gaebler.com/Employee‐Engagement‐Statistics.htm
2. Advocacy for One’s Company- In this day and age when negative comment
can spread like wildfire on the internet, social media channels or blog articles
negative comments from employees can cause serious harm to any
company. How? By reducing the potential to attract employees and top
talent, by influencing customers that may not now try your product or service
due to negative publicity, by community and corporate
responsibility/sustainability programs and results. Alternatively positive
comments can help create a very positive image for any company that
can impact the bottom line. Consider recruitment costs alone.

4. Companies like Google (who annually ranks amongst the best
companies to work for in the world) receive thousands of applications
for a few job opportunities every year. Imagine how this improves their
ability to select the candidates with the proper skills and qualifications
they need.
3. Absenteeism-Research indicates that absenteeism costs companies
$2,000.00 per employee per year. Unfortunately studies indicate that
employees will often call in sick in many cases when they are not sick or ill at
all. They may feel they need a day off or are tired of the issues, conflicts with
other employees, politics, pressures and demands of their daily
responsibilities. Even if this represents only 10% of actual absenteeism costs
for a 200 employee company this would represent $40,000 per year. Highly
engaged performers miss 20% fewer days of work and are almost 80
percent more likely to be top performers. Towers Watson 3/09 ‐
http://www.watsonwyatt.com/render.asp?catid=1&id=20884
4. Turnover and Retention- In many cases companies can face significant
challenges in loosing key employees. Not only is there retraining and
potential lost productivity involved but there can be a significant costs and
financial losses resulting from turnover. It is
estimated a lost employee can costs anywhere
from 50-150% of their annual salary to replace.
No company can realistically eliminate
turnover, and this is not really the goal, but
even if you can reduce turnover and retention
issues by 10-20% or more it can have a
significant impact on your bottom line. We
have all heard the phrase “employees don’t leave their job or the company
but instead leave their manager” The manager-employee relationship needs
to be strong, productive and benefit both parties. A- The Society of Human
Resource Management recently reported that are either actively or
passively job searching (41% passively and 31% actively). B- Companies
with large numbers of dis-satisfied workers experienced turnover that
was 51% higher than their peers.

5. http://www.gaebler.com/Employee‐Engagement‐Statistics.htm (quoting a
Gallup poll)
5. Innovation-How important is innovation to your organization? For many
businesses and industries this is the lifeblood to success and bottom line
results. Yet in order for employees to commit to improvement, finding new
efficiencies, innovation and creativity they must be in the proper frame of
mind and must be engaged. Would someone really invest their full energy
and potential in solving a difficult problem and improving an existing product
if they were angry, frustrated and upset with a manager, colleague or the
company in general? Not Likely! Engaged workers are 3 times more
creative. Gallup 2006 ‐
http://gmj.gallup.com/content/24880/Gallup‐Study‐Engaged‐Employees‐Inspi
re‐Company.aspx
6. Quality- Whether clients are internal or external, high quality is important to
business success. Mistakes and defects can lead to customer complaints,
increased scrap, wastes and rework, affect your brand and reputation
and more. Studies show employees who are engaged produce higher quality
products and services.
7. Presenteeism-When employees are on the job but their mind is elsewhere
this has a negative impact on results. People who show up to work and are
physically or emotionally distracted or not engaged in achieving keys
tasks and objectives or unable to function at 100% can affect several
operational factors including communication, mistakes, costs, service issues,
sales and more.
8. Stress and Mental Health- If the working conditions, atmosphere and culture
at your company are stress filled from work overload, demanding deadlines,
lack of required tools and resources to accomplish goals the organization will
suffer. Organizations need to create a work environment that fosters a
productive work experience and the teamwork necessary for success.
9. Customer Relationships and an Organization’s ability to meet client’s needs.
Do your employees have and exhibit an “eager to please” attitude (this
was cited as a very important criteria that leads to customer
satisfaction and repeat customers and potential for additional sales to
customers) when dealing with clients and customers? Or do they

6. sometimes show their frustrations? The sale of products is not always about
price. Relationships, a high service commitment and customers being treated
properly (with an eager to please attitude) also play very important roles. As
well, customer referrals and/or “word of mouth” can help promote your
products and services to other potential customers or, if negative, hurt your
organization.
10.The correlation between “Engagement” and Business Results- A few facts:
Lost productivity of actively disengaged employees is estimated to cost the
US economy over $300B annually on an average year. Gallup 2006 ‐
http://gmj.gallup.com/content/24880/Gallup‐Study‐Engaged‐Employees‐Inspi
re‐Company.aspx
Organizations with high levels of employee engagement have 2.6x earnings
per share growth rate versus others in the same industry. Gallup ‘06 –
http://gmj.gallup.com/content/24880/Gallup‐Study‐Engaged‐Employees‐Inspi
re‐Company.aspx
High engagement companies improved their operating income 19.2%.
During the same period, companies without high engagement saw a decline
of 32.7%.http://chiefexecutive.net/are‐your‐employees‐engaged (Quoting an
ISR study‐www.isrinsight.com)
Best Buy found that for every 10th of a point increase in a store’s
employee‐engagement scores, it saw a $100,000 increase in operating
income. Liebs, Scott. “Measuring Up.” CFO.com. 1 June 2007. CFO
Acquisitions LLC. 22 June 2012
http://www.cfo.com/article.cfm/9214066/1/c_9277557
Sirota Research

7. Using overall satisfaction as our measure we divide the companies into high morale
(75% favorable) Moderate morale (between 74 and 60 % favorable) and low morale
(less than 60% favorable). The stock market performance in 2002 of each company
was determined and the average performance for the three morale categories was
calculated. Since the different industries perform differently on the stock market
over the course of a year, and the companies in our morale categories differed
considerably by industry, it was necessary to compare the performance of each of
our companies with the performance over the year of its own industry. The Table
Below shows the average changes in the stock market price of the companies in
each morale category, the average changes in the industries of those companies
and the difference between the two.
Average Stock Market Performance
Of companies in Of Industry Comparison Difference
Each category Companies
Morale Category
High +1.80% -18.23% +20.03%
Moderate -14.41% -9.19% -5.22%
Low -24.92% -19.93% -4.99%

8. Similar findings are found for other standard measures (for example Return on
Investment ROI, Return on Assets ROA). Research from the
Sirota Group
Some costs are more difficult to identify and measure or even establish required
metrics. However they cannot be discounted. Executives need to not only look ROI
(Return on Investment) with specific metrics and benchmarks but also VOI (Value
on Investment) factors. Can you actually measure the financial impact of teamwork
and what it means to your business? Probably not, however any astute executive
would certainly appreciate that teamwork does have a positive impact on business
results. When you combine all of these factors above depending on high or low
engagement there will be either a substantial positive or negative influence on
business success.
Why is this so important to understand how employee engagement impacts
business success? For any company or executive once they realize how high
engagement supports business success and low engagement often leads to
problems and challenges that increase costs and decrease bottom line profit they
can make strategic decisions on why, what and where to invest in engagement
programs.
Strategy execution is important to any company and high employee performance
plays a key role and is critical to achieving the organization’s desired goals and
objectives. For any organization that desires to
maximize performance of their staff and
workforce engagement is important to make this
is a reality.
Using the above criteria will help any organization
not only justify the need for development of
engagement strategy but also secure the necessary budget and funds for the tools,
services and resources required to create and sustain a highly engaged workforce.

9. Investing in strategic engagement programs is important for any business needing
to optimize employee productivity and contribution as they develop plans for
future success.
Doug Brown
Doug Brown is President of Engaged2Perform.
www.engaged2perform.ca
Phone 519-656-1066
Engaged2Perform provides strategies and solutions to companies that engage with
employees and increase productivity.