As I closely studied the growth of my company, one of the most interesting observations I made was the profound impact that employee engagement had on the overall performance of my team. Better engagement and communication between the team members did not only make our work environment more pleasant and fun, but it also had a direct connection to the productivity, efficiency, and the annual revenue that we made.

How exactly does the Employee Engagement impact performance in the workplace?

An “engaged employee” is not only skilled at their craft but also passionate and is willing to make extra efforts to further the interests of their workplace. A higher quality of employee engagement shows better communication, interpersonal skills and positive collaborations between employees. Therefore, improving the overall performance of the entire company. Higher employee engagement rates also lead to higher job satisfaction levels, which motivates employees to perform at their highest potential at all times.

The concept of employee engagement is all about understanding how well the employees communicate and maintain a relationship with the company and amongst themselves. In the theory of management practices, many different terms have been used over the years to describe this same concept with slight nuances.

In the early 90s, there was a lot of discussion on improving the “morale” of employees when it comes to human resources management which draws parallel to improving employee engagement that we speak of now. More recently, terms such as employee experience and employee satisfaction have been used to describe similar concepts.

In this article, I will try to take you through the basics of how employee engagement impacts the performance of your team. Then, I will dive deeper into understanding more about factors that directly affect employee engagement, how it is connected to the retention of employees, and what you can practically do to improve the employee engagement levels in your company.

The Impact of Employee Engagement on Performance

The concept of Employee Engagement was popularized by Gallup Inc., a well-reputed management consulting company in the early 2000s. According to surveys they conducted on over 30,000 employees across the US from the year 2000 to 2004, only 29% of employees were found to be truly “engaged” at work. These findings led companies to increase their efforts and investments on improving Employee Engagement with the use of strategic activities and technological tools such as software and apps. According to the most recent survey by Gallup Inc. in 2016, the overall Employee Engagement among employees in the US has increased up to 34%, which is the highest level since they started reporting the national figures.

Studies show that companies with higher levels of Employee Engagement outperform their competitors by 147% in earnings per share. They also perform better in customer engagement which leads to higher revenue, higher productivity among employees, customer retention, low turnover, fewer workplace accidents and also a staggering 21% higher profitability. These employees are also reported to be in better mental and physical health. (Harter, 2018)

When you have a highly engaged team of employees, you stand out from your competition by outperforming them because your employees do not work simply to get a paycheck at the end of the month. Engaged employees add enthusiasm and true passion into what they do, and they are self-motivated to go that extra mile needed to reach or surpass a target without having to be told. Following are some of the characteristics that you can see in an engaged workforce.

– Genuine job satisfaction

– Enthusiastic and good quality job performance

– Taking up challenges

– Setting up and meeting targets without the need of an added pressure by superiors

– Mutual trust between employees

– Credible leadership

– Positive attitude

– Creativity and innovation

– Resourceful problem solving

Job satisfaction is the genuine feeling of fulfillment and happiness one derives from their job. An engaged workforce experience this than those who are disengaged and working paycheck to paycheck doing the bare minimum to keep their jobs. When job satisfaction is high, employees do their work not because they are obligated to, but because they take pleasure by doing them. They set up challenges for themselves and pursue them without having to be pressured and constantly monitored by their superiors.

Engaged employees set up work-related targets and challenge themselves to exceed them. Due to their good communication and collaborations amongst fellow colleagues, they have higher levels of mutual trust. When working in teams and groups, they are aware that everybody pays the same level of effort and ingenuity into what they do.

In work environments where employee engagement is high, the credibility and the likability of the leadership also tend to be greater than the most. Research indicates that at least 70% of the discrepancy in any kind of group of team engagement is explained by the quality and the credibility of the team leader. When employee engagement is high, the relationship between the leadership and the other employees will thrive because of the way everybody takes a self-motivated approach to deliver their best at work, without having to be constantly pushed by their leader.

Being resourceful is one of the most important characteristics of an engaged workplace that directly impacts the quality and also the capacity of performance within a company. There are too many employees that delay or perform tasks poorly because they are not handed the ideal tools or the environments to successfully do a work assignment. An engaged employee is always resourceful due to their mindset of genuinely caring and putting their best effort into getting things done. They tend always to find quick and clever ways to overcome difficulties. When problems occur as they work, they always focus on finding a solution, rather than using it as an excuse to do a subpar job.

Furthermore, higher employee engagement is an indicator of an overall better economy in the country as well. When the economy thrives, employers tend to provide better working conditions, better wages, and better job security for the employees, which lead to better employee engagement in the workplace that ultimately leads to better performance.

Potential Contributors to Better Employee Engagement

Before looking at the ways employee engagement impacts different aspects of a company, and how you can effectively improve the overall engagement levels, it is important to understand the drivers or the contributors that affect employee engagement in a company. These contributors apply across industries and different ways and natures of work which shows that employee engagement impacts the positive performance of employees regardless of where they work and the kind of work that they do.

Employee involvement and decision making

In 2000, Eileen Appelbaum did a study regarding employee involvement covering several companies in the apparel industry, electronic equipment manufacturing industry and insurance industry. (Konrad, 2006)

She and her colleagues studied two different kinds of work environments – the traditional production systems that did not have strong employee involvement practices and more contemporary company production systems with a better involvement by employees in decision making, training practices, and incentive pay systems. The study concluded that companies with better employee involvement showed better engagement and productivity levels.

Commitment

Another important contributor to having a high employee engagement rate is their commitment levels towards the company. Employees who do not have long term career plans with a company naturally show low engagement levels. According to an article published in HR Magazine titled Leveraging Employee Engagement for Competitive Advantage by Nancy R Lockwood, people with a strong sense of commitment for the place that they work perform 20% better than employees who do not show a discernible commitment.

Empathetic Employers

This is a strong contributor to higher employee engagement levels that often gets overlooked. Researches have shown that less than 50% of employees in the US believe that their employers are empathetic towards them. This is a key reason for the low engagement levels in the US workforce. Interestingly, it has been shown that employees tend to tolerate more working hours and even lesser pay if employers tend to show genuine empathy towards them. This way of thinking is especially prominent among millennial workers who seek more emotional fulfillment in the work that they do rather than mere monetary incentives.

Individual Differences

When it comes to studying employee engagement, it should not be forgotten that every single employee cannot be generalized and put into a single box. The way people work is connected to the way they live their lives. Different employees have different personalities, things that motivate them, life goals and needs that drive them to do better at work.

Therefore, when looking at contributors for employee engagement, the ways to influence the engagement levels of different employees can be drastically different from each other. There will always be employees who are naturally more engaged and easily motivated than others, which is why it is important to understand the way you can influence your company can be highly different from another company who has had success applying certain tactics.

See also: 52 Employee Engagement KPI’s

Impact of Employee Engagement on the Retention of Employees

Employee retention is the ability for a company to retain its employees or keep them from leaving. Employee engagement has a direct correlation to retention simply because engaged – happy, enthusiastic and involved – employees are less likely to leave a company. High employee turnover rates not only affect the smooth operation of a workplace, but it also has a significant impact on the company finances as well. It is estimated to cost over 1.5 times an employee’s salary in order to replace one once they leave. It takes a toll on the overall resources of the company and can set back the efficiency of operations since new employees take time in order to fully adapt and gain enough experience to perfectly execute their tasks and fulfill responsibilities.

A study was conducted regarding the association between employee engagement and employee retention levels by Wilmer B Schaufeli and Arnold B Bakker in 2004. Their research paper titled “Job Demands, Job Resources and their relationship with burnout and engagement: A multi-sample study” confirms that higher employee engagement levels have the ability to lower employee’s intention to leave regardless of the incentives offered by another company. Employee engagement is all about the strong emotional commitment that employees have for their workplaces. When there is no such commitment, they naturally tend to leave the moment they get an attractive offer with a better remuneration package or more flexible working conditions. (Wilmar B Schaufeli, 2004)

Moreover, according to research, the “100 Best Places to Work” in the US, which notably have high employee engagement rates has only a 13% of turnover rate when compared to the 28.5% average turnover rate in similar facilities in the same industries. Therefore, investing in increasing employee engagement levels in a company is always a smart decision to make.

The rapid globalization, economic growth due to new and flourishing industries and the shortage of skilled labor has increased employee turnover rates for many industries. Skilled workers have more choice and flexibility now, which make them seek newer and better opportunities at all times. More and more companies are now actively working on employee retention by practicing newer and more effective methods such as increasing employee engagement.

By taking measures to increase the engagement of employees, workplaces create a personal or emotional connection with the employees. This way the employees feel committed to staying in a company without being attracted to other offers because they are given opportunities to actively engage in the decision making and the operations of their departments. It also involves getting proper employee performance evaluations and comprehensive assessments that motivate the employee to grow within their companies, knowing that they have space and the opportunities to climb up the career ladder to a better life within the company, rather than having to seek better opportunities in other places.

Performance Management and Employee Engagement

The greatest strength and the asset of any company is the performance of its employees. Regardless of what skill or management level they are, each and every task done by employees contribute to the ultimate success or failure of a workplace. This is why most companies invest a substantial amount of their profits towards attracting skilled talent and also retaining them.

Performance management of employees includes a set of activities which are done to ensure the workforce of a company are consistent with meeting the shared goals efficiently and effectively. It simply focuses on the performance of each employee, each team, each department and the company overall and make sure that everybody is given the best resources and the environment to perform to the best of their abilities. Following are some of the common performance management practices placed in order to achieve and maintain consistently good performances from employees.

Setting Goals

Setting clear goals for the employees help define what is important, set priorities, give motivation and also give a measure of success. It brings clarity and focus. Clearly communicating the Key Result Areas of a company and also the required standards expected to be met minimizes any confusions and frustrations, allowing the employees to focus.

Giving Feedback

It is important that the employee feedback process is not carried out in a way that makes them feel stressed and criticized, but as a way to give timely feedback in order to help them reach success. The feedback should be on-going, rather than trying to catch up on many months’ worth of work in one day which is done in traditional performance reviews.

Rewards Systems

Having a transparent rewards system helps employees feel that their work is valued. This increases productivity and also the quality of their work due to the enthusiasm added to their work knowing that they will be properly rewarded for good work. These rewards may include compensation plans, recognition, and promotions.

With regard to the topic that we are discussing in this article, employee engagement is considered one of the best and the easiest ways to drive performance management regardless of the industry or the size of the company. When approaching the enhancement of performance management with the use of employee engagement tools, more focus is given to setting clear expectations and goals rather than making formal performance appraisals.

Gallup reports that only less than 50% of employees in US workplaces have a clear understanding of what exactly is expected of them at work. Employees with a clear understanding of the key objectives of a project that they work intend to be more involved, making them engaged employees and hence positively driving performance management.

Practical Tips to Increase Employee Engagement

Increasing employee engagement authentically includes motivating the employees of a company to be more,

– Productive

– Proactive

– Passionate

It is not something that can be easily quantified or measured real time. However, an engaged employee exudes their enthusiasm, show that they are happy to be working, and they demonstrate it in their attitude towards work and the quality of performance. Investing in increasing employee engagement is an investment to increase the overall growth of a company.

Following are some of the practical ways that you can increase employee engagement in a company.

Creating a sense of belonging

A sense of belonging is an important human need. It helps one feel valued and also makes employees of a company have an emotional attachment towards their work. Researches focusing employee retention show that a strong sense of belonging to a company has the biggest impact when it comes to their performance and retention. This is the reason most companies nowadays create a “family-like” environment within their company culture, making the employees feel that they are more than mere employees at the company.

For example, Amazon Inc. calls its employees “Amazonians,” making them exclusive. They follow a set of Amazon Leadership Principles that recognizes every employee as a leader regardless of their position in the company hierarchy. Moreover, an important part of their remuneration package is the stock compensation as a proportion of the total pay, making the employees technically part owners of the company, further intensifying their sense of belonging.

Practice integrity

Most traditional companies often have an invisible barrier between the management and the rest of the employees. There is no transparency when it comes to the decision making processes, and employees are hardly trusted with the sensitive information of the company. Modern workspaces, on the other hand, practice high levels of integrity and transparency from the top to the bottom in every aspect of the business. This takes away the “us vs. them” mentality between the management and employees.

The modern work environments tend to be more open and cooperative rather than the management in corner offices and the majority of employees working from small cubicles. Meetings have expanded to include employees from all the working departments to get their perspective on decisions, rather than having closed-door meetings where a few people in the management makes all the decision. This transparency gives employees a deeper sense of investment in the company. They know how and why the decisions are made and that everyone’s opinions are valued, making them be more actively engaged at work.

Training and development

There is a popular conversation between a CFO and a CEO of a company that is often mentioned when speaking of training and the development of people.

CFO asks CEO: “What happens if we invest in developing our people and they leave?”

CEO to CFO: “What happens if we don’t, and they stay?”

Investments that a company makes on the training and development of their employees is always a good investment. It increases their quality of work, their productivity and also the employee satisfaction knowing that the company that they work in has invested in their professional development. A happy and well-trained employee is naturally more involved in their work, going that extra mile needed when they want to get something done – making highly engaged employees.

Newest Trends of Employee Engagement in Workplaces

Since its first recognition as a workplace requirement back in the 1990s, there have been many trends when it comes to employee engagement that companies follow. These trends change as industries and nature of work go through changes.

Here are a few newest employee engagement trends that you can see practiced by businesses.

Compassionate leadership

As the saying goes, “People do not get quite their jobs, they quit their bosses.” The opposite of this also remains to be true, which means that people would rather work under a compassionate manager over changing a workplace to pursue an opportunity that may have otherwise liked. One of the biggest and quite effective employee engagement trends that you can see is companies putting more resources into practicing compassionate and empathetic leadership. They train their leaders or the manager to be more available, accountable and show integrity in the workplace.

Workplace Flexibility

Due to the development of information and communication technology, more and more skilled workers now prefer to have the option to work from when and where they want rather than having to be restricted into a cubicle. Having workplace flexibility is reported to be particularly important to the millennial and younger generations since they link their careers with freedom and emotional fulfillment more than their previous generations. Both startups and larger organizations are becoming more flexible in their working arrangement, hiring remote workers and allowing employees to work from home as a way of improving employee engagement.

Risks of Disregarding Employee Engagement

Employee engagement practices are often overlooked thinking that they are just “common sense,” and that any good company automatically have them in place. Keeping it simple is always a good approach to take when it comes to this. However, it should be noted that completely avoiding employee engagement practices can affect a company in disastrous ways. It is not an exaggeration to tell that significantly low levels of employee engagement can sooner or later fully destroy a business.

Following are some of the common risks that you may have to face if you disregard employee engagement in your company.

– Losing talented employees and not being able to attract good new talent

– Losing clients

– Low productivity levels

– Low income

– Losing client and employee trust

– Lack of innovation

– Difficult to get investors

As discussed above as well, your staff is your most valuable asset as a company. When your employee engagement levels are low, it leads to poor job satisfaction for your employees that will eventually make them leave. When you get a reputation as a company that has a high staff turnover, it is less likely for you to attract good talent that will commit to your company. A staff that lacks enthusiasm then affect customer satisfaction. No client who spends money on a service or a product does not like dealing with disengaged employees. Your competitors will take advantage of that and work on taking away your clients.

Even if your employees do not directly work with your clients, the lack of productivity and efficiency resulting from a disengaged staff will affect the quality of the product or the service that you offer. The next obvious risk that you will face is losing your revenue. It takes motivated employees to go out of their way to make sure your sales and other targets are met, which creates revenue. When you have employees who are putting their best into what they do, you are only losing money by paying their salaries.

A company cannot stay aloft in this competitive market by doing the same thing over and over. You need innovation, creativity, and resourcefulness from your employees. All those qualities come only from an engaged employee who truly enjoys and is motivated to do what they do. The final nail in the coffin will be your investors leaving you due to the low progress levels and the high costs of having to sustain a disengaged set of employees. Therefore, employee engagement is not a fancy term that makes your company look trendy, but an important requirement to have a successful business.

How does Employee Engagement Impact Performance and Practical Tips to Improve It