The Cost of Poor Employee Engagement
Employee engagement may not seem like a measure for the FD or CFO of a business to care about but it is. Poor employee engagement can lead to high staff turnover, poor performance, wastage, loss of business and more – all of which can hit the bottom line significantly. Here’s a guide to totting up the cost of poor employee engagement and how to fix it.
1. Staff turnover
Build an engaged workforce and they’ll never want to walk away from your business. But leave them uninspired, unclear about their role and responsibilities, and with no incentive to work hard, and you’ll find them with one foot out the door.
According to research, 54% of disengaged employees are considering leaving and each departure costs a business £30,614 on average. This “cost” comes from the following:
– Dip in productivity while person leaving works their notice
– Recruitment fees to replace staff member
– Onboarding and training costs to get the new team member up to speed
– Any drop in revenue caused by a gap in resourcing
Say you have 200 people in your workforce. Let’s assume that half of them are disengaged and over the next 36 months 54% of those 100 (54) are considering leaving, which if they do will amount to 54 x £30,614 = £1.5million in costs to your business.
Potential cost of poor employee engagement: £1.5 million over 3 years.
2. Productivity and efficiency
If people aren’t engaged, they’re not going to give you their very best. This may mean they work more slowly or less diligently than you’d expect.
If you know how many man hours an order should take and you price it so that you make a margin of 20%, a slow or careless team could end up eating into that margin. They could also cause delays to the fulfilment of other orders.
To make things worse, in order to speed things up and meet clients’ expectations, you may be forced to hire expensive temporary staff, eliminating the profit margin altogether.
Potential cost of poor employee engagement: Any profit you hope to make
3. Customer complaints
It’s often possible to tell when you speak to a company representative if they love their job or not. Even over the phone, you can “hear” their smile. If your staff are disengaged, they won’t be sharing positive vibes with customers, nor will they be ensuring that every product or service they provide is 100% perfect. This behaviour can lead to errors and complaints.
When a customer complains, it’s normal for a business to redo the order free of charge. And that cost isn’t a big deal if it’s a one off occurrence. However, if your staff are disengaged, poorly trained and making mistakes on a frequent basis, you could be facing multiple complaints. That means a big cost to make it up to them or a loss of business altogether.
How much business can you afford to lose?
Potential cost of poor employee engagement: Some retained contracts and a proportion of your sales pipeline
No matter how big your company is, you’ve established a reputation among your customers and the industry you operate in. If there are one too many of the complaints mentioned in the previous section, your reputation will suffer and this could affect how much new business you bring in.
Furthermore, if some of the issues caused by poor employee performance lead to injury or legal action, you may find yourself having to suddenly invest in crisis communications support to handle the media interest.
A crisis communications consultant typically costs a hefty £1,000 a day.
What’s more, once that consultant has done the work of minimising the bad press, it’s likely you’ll need to spend a further few thousand pounds with a communications agency who can restore your public reputation by pumping out positive news stories to the press.
Potential cost of poor employee engagement: £5,000+ in PR fees (and possibly some legal fees)
What’s worse than staff resigning? Employees that don’t turn up for work even though you’re paying them.
UK businesses lose an average of 6.9 days a year per employee due to absenteeism – that’s £554 per employee. For a business of 200 staff, that’s £110,800. If your workforce is disengaged, the figure will be much higher.
And unlike annual leave or resignations, where you get notice that you will be short of staff, absenteeism can hit you at any time and affect your operations significantly. Again, you may be forced to hire expensive temporary staff to keep up with orders.
Potential cost of poor employee engagement: £110,800+
So what can you do to fix this problem quickly?
The first step is to look for signs of an employee engagement problem. This will show you just how bad the situation at your company and help you address it quickly.
Next, try this savings calculator to calculate how much you could save in costs by investing in a new employee engagement programme. To see the savings potential for your business is breathtaking.
As for an employment engagement system, you need something that does the following:
– Records sickness, holiday and absenteeism for every member of staff using their smartphones – provide the fundamental HR tools on all devices
– Gives staff adequate (and rewarding) training and records their progress into a timeline – see the complete picture of their engagement
– Tracks performance and flags issues or recognises good work where appropriate – one2one objectives, reviews, awards & rewards features are important
– Keeps staff informed of company news in a format that they can access and review easily, ie. effective multi-channel personalised internal communications
– Captures employee sentiment and feedback to ensure that issues are addressed promptly – happy or not sentiment capability is a must
– Contains a straightforward and efficient on-boarding system to speed up training for new starters
A system such as this can cost as little as £400 a month. Compared to the potential annual cost of £500,000 for doing nothing, it’s a no brainer.
For more information, contact us for a demo.