Employee engagement is the emotional commitment an employee has to the organization and its goals, resulting in the use of discretionary effort.
An employee’s discretionary effort results in the Engagement-Profit chain. Because they care more, they are more productive, give better service, and even stay in their jobs longer. All of that leads to happier customers, who buy more and refer more often, which drives sales and profits higher, finally resulting in an increase in stock price.
Think that just sounds like academic theory? Think again. Below are research studies that show a correlation between Engagement and Service, Sales, Quality and Profit and Total Shareholder Returns.
Employees’ customer service productivity scores and their employee engagement scores had a correlation of .51. (Source: Linking People Measures to Strategy. The Conference Board)
Companies with high employee engagement scores had twice the customer loyalty (repeat purchases, recommendations to friends) than companies with average employee engagement levels. (Source: Are They Really ‘On the Job’?, Pont)
In a major department store chain, customers scored higher in customer engagement measures when they were serviced in departments with employees who had high levels of employee engagement. (Source: Getting Engaged, Bates)
Fabick CAT improved “percent of industry net sales” by 300% (Source: A Caterpillar Dealer Unearths Employee Engagement, Gallup Business Journal)
Unnamed Fortune 100 manufacturing company reduced quality errors from 5,658 parts per million to 52 parts per million. (Source: Employee Engagement: The Key To Realizing Competitive Advantage, Development Dimensions International)
REVENUE, PROFIT and SHAREHOLDER RETURN$
In companies where 60 to 70 percent of employees were engaged, average total shareholder’s return (TSR) stood at 24.2 percent; in companies with only 49 to 60 percent of their employees engaged, TSR fell to 9.1 percent; companies with engagement below 25 percent suffered negative TSR. (Source: Employee engagement at double-digit growth companies, Hewitt Research Brief)