Fall is finally here and that means cooler weather is on the horizon, pumpkin spiced lattes are back, and schools are in session again. As we enter this new season and the realities of the “new workplace,” employee engagement initiatives are top of mind - even for executives.
Unfortunately, these exciting changes and initiatives fall flat without executive buy-in. Did you know that 90% of leaders think an engagement strategy has an impact on business success, but only 25% of them actually have a strategy? Scary, right? There’s a huge opportunity here!
Executive buy-in is one of the major roadblocks to success, but it’s NOT because executives don’t think they’re important. There’s a fine-line between agreeing with an initiative and supporting an initiative. Employee engagement is critical right now because not all offices are back in “session” yet and the verdict is still out on how employees are feeling with all the changes. It’s time to convert more action, but it often falls on HR to make that happen.
While the role of HR has changed drastically in the past few decades, transitioning from administrative in nature to more of a strategic role, many HR leaders instead find themselves drowning in COVID and remote-work policies. That leaves little time to pursue the much needed engagement initiatives that will help them ensure the organization is turning over a new leaf, and not employees. That’s why we wrote this blog.
We want to help HR leaders get the executive buy-in they need to overcome these post pandemic hurdles. Are you ready to be equipped to show the correlation between HR initiatives and the company’s bottom line? Great! Let’s get started.
Organizational leaders have been focused on beating the Great Resignation, but now they’re also facing the Great Wait as more and more companies are delaying office re-openings due to different COVID variants. These changes impact any existing strategies and it’s costing millions of dollars, so your executive team is likely hyper-focused on the bottom line right now.
Without executive level buy-in, many organizational initiatives rarely, if ever, reach their full potential. And that’s if they even get off the ground! It’s imperative to have full support from the top to not only launch your engagement strategies, but take action to be successful. We understand that gaining buy-in can be challenging, so we’ll share how you can overcome this roadblock.
Outside of credible research studies it’s been difficult for executives to clearly see how increased employee engagement will impact their bottom line, until now. We developed an ROI Analysis Calculator so you can see what that is for your organization in seconds. However, you may just want to do this on your own. Either way, we have you covered.
To get your executive team's attention, we recommend starting with these four areas where they’ll see the largest financial savings with increased engagement:
To show you how to speak your executives' language and gain their support for your engagement initiatives, we'll break down these four secrets using the sample company data below.
Here's a "cheat sheet" with all the following calculations to determine increased revenue, absenteeism savings, turnover savings, and increased productivity. Click to download and follow along!
When it comes to ROI, revenue is at the top of the list for many executives and calculating your projected revenue increase will certainly grab their attention. Engaged employees are more committed and productive, which drives revenue and efficiency. This has been proven time and again.
A study by Aon found a direct correlation between engagement and revenue. Companies that increased employee engagement by a mere 5% directly increased their revenue by 3%. Not too bad, right?
Here’s the formula to calculate your projected revenue:
Company Annual Revenue x 3%
$63,000,000 x 3% = $1,890,000
Increased Revenue = $1,890,000
When we calculate this section, we multiply $63 million dollars by 3%, which is $1,890,000. This is the projected revenue increase if employee engagement is boosted by just 5%. Great start, right?
The second area to present is absenteeism. This section is really focused on the expenses and lost productivity that comes with absenteeism. The most important thing to highlight in your conversation here is that an increase in engagement can reduce the number of “sick days,” which therefore increases productivity and saves money.
Engaged employees take an average of 2.7 sick days per year while disengaged employees double that with an average of 6.2 sick days. Again, this is important because when someone takes a “sick day,” you are paying for their time off while losing their productivity. Lost time and money are never desirable!
Luckily, increased engagement saves about 37% in absenteeism costs by converting those disengaged employees into more committed and engaged individuals who won’t take as many “sick days.” This shift creates an opportunity to save money and increase productivity by keeping your employees excited about their work and invested in the organization. Here’s a high-level overview of the equation to determine absenteeism:
First, determine the total absenteeism costs.
Absenteeism Costs for Engaged Employees + Absenteeism Costs for Disengaged Employees
$723,523 + $355,660 = $1,079,183
Absenteeism Costs = $1,079,183
Then you can determine the projected absenteeism savings.
Total Annual Absenteeism Costs x 37%
$1,079,183 x 37% = $399,298
Projected Absenteeism Savings = $399,298
In this example, this company has almost $400,000 in potential savings for absenteeism alone!
Note: For brevity, we jumped to the last few calculations. The Sparck Calculator will populate the values for you, click HERE to download!
Turnover is the third section where you will get the greatest return on your investment in employee engagement. Most often, great employees leave companies because their needs are not being met...yet! This presents an incredible opportunity to personalize your strategies and retain this talent to save money, time, and productivity.
It’s painful, mentally and financially, when someone leaves. In fact, it takes an average of 42 days to fill a vacant position, and that doesn’t even include the time it takes to get a new employee trained and up to speed. There’s so much time that's wasted when losing an employee, and not to mention stress for the team.
But here’s the silver lining: 65% of the employees who quit do so voluntarily. This presents remarkable financial savings by uncovering what needs aren’t being met and how to better engage these employees to keep them committed and invested. Understanding how this large population ticks can have a huge impact on business outcomes!
To calculate, first determine the average turnover cost by employee.
[(Entry Level Salary x 50%) + (Technical Salary x 250%)] / 2
[($31,200 x 50%) + ($135,500 x 250%)] / 2 = $177,175
Average Turnover Cost by Employee = $177,175
Next, determine the average employee turnover.
Turnover Rate x Number of Employees
7.55% x 290 employees = 21.895 employees
Average Employee Turnover = 22
Then you can determine the total turnover costs.
Average Turnover Cost by Employee x Average Employee Turnover
$125,025 x 22 employees = $3,879,247
Total Turnover Costs = $3,879,247
This company is losing $3.8 million dollars in turnover costs. Using this number, you can now determine the turnover savings.
Average Turnover Cost x Voluntary Employee Turnover Savings
$3,897,247 x 65% = $2,521,510
Turnover Savings = $2,521,510
If 65% of employees are leaving voluntarily, there is a huge financial upside of nearly $2.5 million dollars in savings for this company. Think that would get your executives' attention?
Here we are on the last section — time to wrap it up! Let’s talk about the financial impact of disengagement in your workforce.
Unfortunately, Gallup has found that an average of 17% of the workforce is highly disengaged. YIKES! These are the employees who are most likely showing up late, missing deadlines, and surfing the internet for open positions at work.
This probably won’t come as a shock, but disengaged employees aren’t working as hard as those who are engaged and on average, they are costing companies 34% in lost productivity.
Here’s the equation to calculate employee disengagement for your organization:
(Average salary x 34% in lost productivity) x Number of disengaged employees
($83,350 x 34%) x 49 disengaged employees = $1,397,113
Employee Disengagement Costs = $1,397,113
Lost productivity is costing this company about 1.4 million dollars a year! The great news is that there’s an opportunity to turn that around. Engagement strategies can capture your employees’ commitment and excitement again.
Now that you have these four numbers, you can put them all together and determine the total financial opportunity based on the impact that increased engagement will have on Revenue, Absenteeism, and Turnover costs for your executive team. This is a great way to wrap up the projections section to summarize the potential financial opportunity and then lead into engagement solutions to capture these financial upsides. Using the examples above, here’s what this would look like:
Revenue Increase + Absenteeism Savings + Turnover Savings
$1,890,000 + $399,298 + $2,521,510 = $4,810,808
Total Business Opportunity = $4,810,808
The total business opportunity here is $4.8 million dollars! If you make employee engagement a part of your organization’s business strategy, what do you think the impact will be? Luckily, you don’t have to do these calculations.
Our free ROI Analysis Calculator will help you align HR initiatives with company objectives with a simple one-page summary to get executive buy-in by showing the savings on the table for your organization with increased engagement.
This tool is an invaluable resource to initiate the conversation with your executive team (without having to show all the calculations). With this data, you can clearly show that you can’t afford to lose your top employees and let disengagement take over. With the Great Resignation and the Great Wait threatening your strategic roadmap, the only answer they can have at this point can be “Yes”.
We know a lot of data can be overwhelming. So if you have any questions or would like to walk through your ROI Analysis in preparation for an upcoming meeting or purely to get a better understanding, we’d be thrilled to set up a time to chat. Or, if you’re short on time, no problem. Click HERE and we’ll put together an ROI Analysis for you. Just let us know how we can best support you to increase employee engagement in your workplace. We’re here to help!
Links to Free Resources: