Chat with us, powered by LiveChat

Applauz Resources

Committed to helping you build an extraordinary workplace

How an Engagement Program Can Increase your Bottom Line & Save you Money

How an Engagement Program Can Increase your Bottom Line & Save you Money

By: Applauz Recognition
Sep 10, 2018

Facts about Employee Engagement

  • 85% of today’s employees are not engaged or actively disengaged at work. (Gallup)

In any organization, employees can be divided into three categories: engaged, not engaged and actively disengaged. Engaged employees show high enthusiasm, innovation, and performance. Disengaged employees equate their job to receiving a monthly paycheck and are indifferent to their company’s mission and success. In other words, they most likely would be happy working somewhere else. As such, they often and sometimes quite loudly voice their daily complaints about the job. Dissent in the workplace costs a business in time, money, productivity, and future opportunity.

  • On 78% of the companies providing a documented employee engagement strategy, a full 50% have benefited from measurable improvements. (Maritz Motivation)

Employee engagement strategies encompass a wide range of behaviours, activities and benefits that help make the office a better place both for the employees and the employer. From active listening, to lunch and learns and meaningful employee perks, Employee Engagement strategies are proven to drive very positive results in terms of productivity, profitability, and customer experience, to name only a few. Almost ⅔ of companies which have built an employee engagement strategy have measured clear improvement of their business’ bottom line.

  • 72% of small business employees say that an improvement in benefits offerings would make them a happier employee. (2017 Aflac Happiness Report)

No matter the enterprise’s size, Employee Engagement is every company’s business. A large majority of small business employees agree that they would be happier employees if their companies improved their benefits. This fact cannot be overlooked as happy employees are proven to be more productive. Specifically designed for small to medium-sized companies, Applauz Recognition makes it finally possible for them to properly engage, reward and retain their most valuable employees.

The cost of Employee Disengagement

  • Employee Disengagement costs somewhere between $450 – $550 billion each year. (Gallup)

This almost unbelievable figure only applies to the U.S. market, so you can imagine how much money is wasted worldwide due to employee disengagement… Perhaps calculating the cost of employee disengagement could help you better grasp the extent of the problem. Gallup found that on average, 17.2% of an organization’s workforce is actively disengaged; and that an actively disengaged employee who makes $60 000 a year costs their company $20 400 a year.

Let’s take a concrete example. You run a 100-employees small business, around 17 of your employees are actively disengaged. If your workforce makes on average $60 000 a year, each disengaged employees costs you $20 400 on average (that is 34% of their salary, $60 000 X 0.34).

That means that your disengaged employees (17.2 X $20 400) cost YOU nothing less than $350.880 per year. That’s a lot of money, especially for a small business.

How Employee Engagement affects your business

The question might as well be: How does Employee Engagement does NOT affect your business? Employee Engagement is as vital to your company as blood supply is to your body. If one aspect of your business is neglected, whether it is customer experience or productivity, your entire business’ bottom line will suffer.

This Gallup’s research clearly shows that Employee Engagement does affect all key business outcomes.

Companies with high Employee Engagement outperform companies with low Employee Engagement by:

  • 10% on customer ratings
  • 21% in productivity
  • 22% in profitability

And experience:

  • 37% lower Absenteeism
  • From 25%-65% lower turnover
  • 28% lower shrinkage
  • 48% fewer safety incidents
  • 41% fewer quality defects

Employee Engagement means

BETTER…

Annual Revenue

  • Companies with engaged employees see a 26% greater annual increase in revenue. (Aberdeen)

It comes as no surprise that increasing annual revenue is any company’s top priority. Whether a company opts to increase customers, its transaction size or decides to raise its prices, the success of any of these methods highly depends on Employee Engagement. It is proven that companies with higher Employee Engagement levels see significant improvement of their annual revenue.

Profit

Employee Engagement skeptics tend to mock Employee Engagement for being an urban myth. But this figure clearly shows how much a business can gain from an effective Employee Engagement program. Profit, the net income of the business, can significantly improve thanks to an Employee Engagement program. If you do the maths, the benefits of an Employee Engagement program look almost too good to be true. Let’s imagine a small business with a workforce of 50 employees which has built a successful Employee Engagement program for 5 years. Over this relatively short period of time, the said company would have saved nothing less than… $600 000 thanks to its Employee Engagement program only!

Performance

  • Highly engaged workforce are proven to outperform those with low Employee Engagement by a whopping 202%. (B2BCommunity)

202%! This is worth repeating! The success of any company depends on its level of performance in the long run. You might think you can neglect Employee Engagement when starting a new company because the excitement of a new journey might already be a sufficient motivation for your workforce. But this excitement is per definition unsustainable and will ultimately fade away. If you want to remain in the game, your company needs to maintain high levels of performance that only Employee Engagement can provide viably.

Productivity

  • More than 35% of the employees consider lack of recognition of work as the biggest hindrance to their productivity. (TLNT)

If more than ⅓ of employees consider that the lack of recognition they get at their workplace negatively impacts their productivity, it is quite easy to imagine the tremendous consequences this can have on their company’s bottom line. A decrease in productivity is inevitably followed by a decrease in profitability.

Customer Loyalty

  • Companies with engaged employees see 233% greater customer loyalty. (Aberdeen)

No business is viable if it fails to retain its customers. The relationship between a company and its customers is pretty much like any other relationship. If your friends don’t show you any support and are not willing to make things easier for you, you’re not likely to remain close friends for a long time. The same goes for businesses and their customers. Companies with high levels of Employee Engagement see extremely significant improvements in terms of customer service, satisfaction and loyalty. That’s because engaged employees believe in their company’s mission and are deeply dedicated to its success.

Customer Satisfaction

  • 41% of companies that use peer-to-peer recognition have seen positive increases in customer satisfaction. (Globoforce)

Peer-to-peer recognition is a great way to reduce employee turnover, increase morale and customer satisfaction. Employee Engagement programs like Applauz offer companies the possibility to increase peer-to-peer recognition, which is proven to drive positive results in terms of customer satisfaction. If almost half the companies that have used peer-to-peer recognition have seen better customer satisfaction, it’s definitely worth a try!

LOWER…

Absenteeism

Engaged employees tend to take less sick days. Not only are they more productive when they work, but they also are less likely to call in sick (and when they do, they really are). Absenteeism can be a real financial burden and negatively affect your company’s bottom line in the long run.

  • Businesses saw a drop in absenteeism (unearned Paid Time Off) by 41% when teams were engaged in their work. (15Five)

This figure confirms that Employee Engagement does reduce absenteeism and ultimately helps companies save money. As you have already guessed, when absenteeism decreases, productivity increases.  That’s another benefit of building an engagement program!

Turnover

  • Companies can spend anywhere between 16% – 213% of an employee’s salary to cover the costs of finding a replacement (Center for American Progress)

Lowering the turnover rate, that is the percentage of employees leaving a company within a certain period of time, is one of the top challenges of any company. No wonder why it is when you see these figures. Most employees who leave their jobs are disengaged employees and the cost of their disengagement goes much further than their lack of productivity when they were still part of your company. When they leave, it can cost you more than twice as much as their annual salary simply to find them a viable replacement.

Let’s take another concrete example here. If your company employs an employee for an annual salary of $60 000, it can cost you up to $127 800 simply to replace that leaving employee. That’s another reason why employee engagement, by making employees more loyal and dedicated to your business, can help you save money and improve your company’s bottom line.

Employee Engagement Program ROI simulation

Now that you know how much Employee Engagement can do for your business, you’re probably wondering how you can calculate the return on investment of an Employee Engagement program. For you to do this and evaluate how much money you can save thanks to an Employee Engagement program, fill out these simple tables with the help of your HR representative:

Data

Values

Number of employees, beginning of the yearA
Number of employees, end of the yearB
Average employee salary C
Annual company revenueD
Number of employees that quit or were fired during the yearE

Done? Great! Don’t celebrate just yet. Now let’s fill out the table below:

Employee Cost Data

Current

Higher Engagement

Revenue per employee( annual company revenue ) / ( avg. # of employees )

D / ( A + B / 2 ) = F

= F Revenue per employee
( revenue per employee ) + ( 20% increase of Revenue per employee )

F + ( 0.2 x F ) = N

= N Revenue per employee with higher levels of engagement
Cost of Absenteeism per employee *( 1.2% of revenue per employee ) + ( 1.2% of average employee salary )

( 0.012 x F ) + ( 0.12 x C ) = G

= G Cost of absenteeism per employee
T (Cost of absenteeism per employee under higher levels of engagement)

= G - 40% of G
Total cost of absenteeism *( cost of absenteeism per employee ) x ( avg. number of employees )

G x ( A + B / 2 ) = I

= I Total cost of absenteeism company-wide
J (total cost of absenteeism with higher levels of engagement)


= 59% of I (total cost of absenteeism company-wide with high levels of engagement)
Turnover Rate( number of employees that quit or were fired during the year ) / ( avg. number of employees )

E / ( A + B / 2 ) = K

K x 100 = Turnover %

= K Turnover Rate
L (turnover rate with high levels of engagement)

= K (turnover rate) - 40% of K
Number of employees that leave in a year( turnover rate ) x ( avg. number of employees )

K x ( A + B / 2 )
= E (Number of employees that quit or were fired during the year)
Y (number of employees that leave in a year with high levels of engagement)

= E- 40% of E
Average cost to replace an employee( average employee salary ) / ( 12 months ) x ( 9 months )

( C / 12 ) x 9 = W

= W Average cost to replace an employee
W (Average cost to replace an employee)
Total cost of employee turnover( average cost to replace an employee ) x ( number of employees that quit or were fired during the year )

W x E = P

= P Total cost of employee turnover
R (total cost of employee turnover with high levels of employee engagement)

= W (Average cost to replace an employee) X Y (number of employees that leave in a year with high levels of engagement)
  • *On average, 1.2% of total working days are unearned paid time off.
  • *Total cost of absenteeism represents the impact of absenteeism of the scale of your company. Absenteeism can drop up to 41% when teams are engaged in their work (Workforce Institute on Absenteeism)This improvement can vary from 24% in high-turnover organizations to 59% in low-turnover organizations. We kept 59% for this simulation.
  • *On average, highly engaged teams will experience a 40% improvement in turnover. Turnover rates vary by industry. To check yours, click here or visit. In general, it costs between 6 to 9 months of an employee’s salary to replace him/her. Take 9 months for the simulation.

Employee Engagement ROI*

Total ROI

Additional company revenue + Money saved from less absenteeism + Money saved from less turnover

Additional company revenue N (revenue per employee with higher levels of engagement) X (average number of employees)

= S (Company revenue with high levels of engagement)


S (Company revenue with high levels of engagement) - D (Annual company revenue)
Money saved from less absenteeismI (total cost of absenteeism company-wide) - J (total cost of absenteeism with higher levels of engagement)

= Money saved from less absenteeism
Money saved from less turnoverP (total cost of employee turnover) - R (total cost of employee turnover with high levels of employee engagement)

= Money saved from less turnover
Share:

Take the first step to recognize your workforce today!

Most companies struggle with employee engagement but only large corporations can afford the solutions that are currently available. So, we developed an employee engagement software designed for small and medium-sized businesses.

APPLAUZ provides SMBs with a complete tool, including platform and analytics, to fix their engagement problem and become great at recognizing, rewarding, and retaining their employees.


Learn More Join Now