Essential Leadership Skills: Employee Engagement

Essential Leadership Skills: Employee Engagement  ·

Do you know how engaged your employees are? These statistics tell that you probably don’t.

While doing some research on productivity and high performance in the workplaces, I came across some very interesting stats about employee engagement, and how massive impact it (or rather the lack of it) can have on the bottom line of the company.

When you talk with leaders of different companies and ask what is their company’s greatest asset, the answer, “employees”, “team” or “people” comes up almost without exception. The other top 2 asset most often seems to be “products” or “services”, which are off course built and delivered by the people of the company. This is especially true on modern high tech and high skill industries that don’t need to rely on massive manufacturing plants with highly optimised manufacturing processes.

Here are a few facts about the current employee engagement numbers to open the discussion. Numbers are collected from Gallup.com & HBR reports and are global averages, unless otherwise stated:

  • 18% of employees are actively disengaged from their work.
  • 67% of employees are somewhat disengaged from their work.
  • 15% of employees are engaged in their work.

One finding that surprised me as a Western European was that the percentage of fully engaged people is actually much lower for our region than it is for the rest of the world: The number is dismally low 10%. For example, for the US & Canadian companies, the number is quite a bit better: 31%. Also, Latin America shows better numbers at 27%.

This means that only 1 in 10 people working here is really engaged in his work, and truly enjoys it, and pro-actively seeks to improve his own performance, and the performance of his team and the whole company.  He has probably collected several additional responsibilities and tries to push everyone around him to perform better. He might be also quite frustrated with some of his colleagues for not showing the same level of interest in the work, and he probably wishes that the management above him would figure out ways to get others to join his enthusiasm.

The next 7 people are “satisfied” with their work, meaning they don’t mind it, as long as they get paid, and they don’t have to put too much effort in it. In other words, they are indifferent to their company and work. These people are not particularly interested in improving themselves regarding their work performance, and won’t be pro-actively thinking about ways to improve the results of their own work, their team’s work and much less of the whole company. There are off course varying levels of disengagement here, and other people are somewhat more engaged and active, but still they are not engaged enough to put in their best performance constantly.

Then there are the 2 people in every 10 who pretty much hate their work, and would rather be anywhere else. Whenever they can, they avoid working and they avoid responsibility as much as possible. These people will constantly see unsolvable problems in their work, and give up easily if they face any challenges. They also expect that someone else will come to fix the problems and take the responsibility, if they wait long enough. As you realize, employees with this mindset can be very damaging to the whole culture and productivity of the company if they are left to act as they wish. On top of creating just the minimum expected value, they provide distractions to others, and test the limits of what their company and managers allow them to do (or not to do), and thus risk lowering the standard for the whole company, if their actions and results are silently approved.

What do these engagement numbers really mean for a company?

To put this in correct perspective, it is estimated that the disengagement costs an unbelievable $550 billion in a year for American companies in lost productivity, and that is the cost for a country, that is not even close to the lowest engagement numbers. There are several measurable factors from customer satisfaction to employee retention and revenue growth that seem to be affected by engagement numbers and resulting productivity variances, but for me, the simplest one is profit: The top quartile of the companies on engagement scale turn 21% more profit, than those on the lowest quartile.  21% more profit is quite a significant indication that the engagement truly matters, and that there is a clear relation between engagement level and company success.

To make these numbers a bit more concrete, you could also make a simple calculation for your own team or company of 10 employees:

If each of your employees’ maximum theoretical output would be worth 15.000€ for your company, and you would be somewhere in Western Europe, with average engagement rates, your calculation could look something like this:

  • My (highly) engaged employee                               15. 000€/month x 1 = 15.000€
  • My somewhat disengaged employees                   11.000€/month x 7 = 77.000€
  • My actively disengaged employees                          6.000€/month x 2 = 12.000€
  • Total                                                                           104.000€/month out of 150.000€ (max potential)
  • Loss of value                                                              54.000€/month and 552.000€ /pa
While theoretical and highly simplified, this calculation gives a bit of indication what could be happening inside of your company. Most likely your standard expectation for an employee would be around 11.000€/month, as this is pretty close to the average value that you are currently getting, not the optimal 15.000€/month of the highly engaged employee. The average, however, is set by a standard of engagement and productivity that is nowhere close to the optimal performance, and thus will be miss leading: The target is good only, if you aim to be average. When you stand to lose around 550.000€ of productivity with 10 people, the $550B loss in the USA alone does start to make some sense. While you could argue about the exact difference that the engagement level results in generated value, it is easy to try it out with some different value generations to see how the calculation changes. Also you should note that generated value is not the only factor, and the lack of engagement will correlate for example with employee attrition, which again can cause company significant losses (as discussed in this previous article). This kind of performance measurement through value provided is not even too far-fetched in real business world, and I have seen quite similar numbers and differences on billings with business consultants or software developers. While there are naturally also other factors, such as different skill sets and experience levels of people  affecting those billings, the most engaged employees tend to end up being the most skilled, experienced and wanted by the customers, and thus generate constantly most value.

Food for thought for any company owner or a leader

So, as a leader or a company owner, do you know how engaged your people are, and are you actively leading in ways that promote the employee engagement (or at least know to avoid things that increase the disengagement)? The research data reveals that management’s performance  accounts for 70% of the variance of the employee engagement (Gallup.com). And yet further, another research report tells us that engagement flows from the top of the company downwards: First from the executives to the middle-management, and then through middle-management the employees. And the chain must be complete, it can’t be patched up anyone else in the company, if the top executives do not take care of their extremely important part. What does it tell about you as a leader, if your most valuable asset is constantly working far from its optimal performance and is not fully engaged in the work? If we would be talking about your manufacturing line, I bet it would be your top priority to get it working on full capacity as soon as possible, as you can easily calculate the loss of money for every minute that the machinery is not running as it is supposed to. When talking about people, and especially those doing knowledge work including creativity and problem solving, the engagement level, and resulting productivity, is however, not so easily measured. It is very hard to define what is an optimal performance level for a knowledge worker, and thus the expectations are very fuzzy, and so is too often the engagement level of the employees and the resulting productivity.

What about the employees, aren’t they responsible at all?

While the engagement “energy” flows from the top, there is still a fair share of responsibility on the employees side, and the attitude and mindset of an employee can greatly impact how he experiences his work and the working environment. However, if there are significant factors missing on the management side (such as company vision, mission and targets on company or personal levels, or the worst of all, visible engagement of the management) staying engaged becomes extremely hard, or even impossible. Even the most committed employees just can’t force it out from themselves endlessly without a proper framework and support from the management, even if they wanted to. One interesting fact about engagement at work is, that when asked if people would like to do their best at their work, be successful and make an impact, almost everyone says “yes”. Where does the huge gap from this number to the actual engagement levels come from?

Next article

In the next article I will discuss the deeper anatomy of the engagement, what factors impact it most, and what a massive impact the leadership has on it. I will also give a few suggestions on how you can start attacking this challenge, as you most probably have it also in your company on some level, whether you know about it or not.

A couple of interesting resources for more info:

www.gallup.com (various related articles from the last 10 years)

The State of the Global Workplace (219 pages long  report): https://www.gallup.com/workplace/238079/state-global-workplace-2017.aspx

The State of the American Workplace (214 pages long report): https://www.gallup.com/workplace/238085/state-american-workplace-report-2017.aspx

Determinants of employee engagement and their impact on employee performance (research report): http://student.bms.lk/GDM/Assignment/MPAssignment/15.pdf Do you know how engaged your employees are? These statistics tell that you probably don’t.
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