If you’re an HR leader, you’re constantly thinking about engagement. Your objective is to figure out how to get the best results out of your workforce, and studies show that highly engaged employees produce the best work.
But there’s no way you can speak to employees one by one. You’d never finish any other work and given the scale of such a project, the conversations wouldn’t be that rich.
Instead, there are several strategies and tools HR leaders can use to measure employee engagement.
In this article you will find:
Why you should measure engagement?
You don’t need to tell upper management that employee engagement is important. They know that it is. What they don’t know is how to generate, and then to turn that data into concrete actions.
Your organization can’t interpret data if there’s no context.
Scoring an average of 70% for “satisfaction with professional growth” doesn’t mean much on its own. It may seem good. But if last year’s average score was 90%, you know you’ve got a problem.
This is why it’s important to measure frequently to establish trends. Measuring employee engagement once a year or once every two years isn’t enough. You need to understand changes in employee engagement from one period to the next.
Think about it this way.
You wouldn’t measure your sales metrics once a year. You wouldn’t even measure them twice a year. You measure them per sales period or per financial quarter. The same logic should be applied to measuring employee engagement.
Why? Because what gets measured gets managed.
What is Employee Engagement
Almost everyone can agree that engaged employees lead to higher performing, more resilient organizations. Organizations with highly engaged employees are 20% more productive, 21% more profitable, and have 25% lower turnover than their peers with disengaged employees.
However, measuring employee engagement is hard because not as many people can agree on how to define employee engagement.
Industry leaders each have their own interpretation:
- Willis Towers Watson defines engagement as the “employees' willingness and ability to contribute to company success.”
- Gallup defines engaged employees as: “those who are involved in, enthusiastic about and committed to their work and workplace.”
- Aon Hewitt defines employee engagement as: “the level of an employee’s psychological investment in their organization.”
We prefer this much simpler definition from the Harvard Business Review:
Employee engagement is when "People want to come to work, understand their jobs, and know how their work contributes to the success of the organization"
Important: If you conduct an employee engagement survey, you need to be ready to act. There’s nothing worse than asking your employees for their opinion and not doing anything with their feedback. Make sure that your managers are ready to act before starting the survey process.
How to measure engagement
The best approaches are proactive. This is why the best way to measure employee engagement is through surveys.
Annual employee engagement surveys and pulse surveys identify problems before people want to leave.
These smaller surveys are distributed more frequently and used to get a real-time view of how employees are feeling.
They can be distributed on a quarterly, monthly, or even weekly basis.
By finding a regular way to ask five to ten questions about how your employees feel and what could be improved at work, you learn easy ways to make meaningful changes.
HR leaders can also use pulse surveys to compare them to the results of their annual employee surveys to gauge how much progress they’ve made since identifying goals for improvement.
Individual meetings with employees are another way for you to measure employee engagement. Having an informal chat regularly scheduled with your team provides a real sense of what's happening. The advantage of these hour-long meetings is that it's in person, and because it's safe and confidential, employees are more likely to share detailed feedback about possible issues. Ensuring your employees feel confident and removing that fear and nervousness is a great way to get them to open up to you.
Most organizations conduct exit interviews, but an idea that should be done more often are stay interviews.
Instead of waiting until after an employee resigns to ask why they’re unhappy, stay interviews try to get a conversation going before an employee even considers leaving.
The aim is to learn what makes employees remain with the organization (what you’re already doing well) and how you can improve employee engagement.
Sparkbay allows us to get honest employee feedback. The insights we get around employee engagement enable us to be more proactive and fuel quality conversations.
How Exegy® used a data-driven approach to improve engagement with Sparkbay
Employee Net Promoter Score (eNPS)
Employee Net Promoter Score (eNPS) is based on the Net Promoter Score (NPS), which was developed to measure customer loyalty.
eNPS assess employee loyalty by asking the following question:
how likely are you to recommend this company as a great place to work?
Employees respond anonymously on a sliding scale of 1-10 with 1 meaning they're highly unlikely to recommend the company and 10 meaning they're very likely to recommend it.
Based on their responses, employees are classified into three categories: detractors (0-6 scores), passives (7-8), and promoters (9 and 10).
Detractors are the employees who would not recommend working for the organization to somebody else, while promoters are the biggest supporter of the company.
While this eNPS doesn’t explain why employees don't recommend your organization, it does an excellent job of producing a snapshot of how dedicated your workers are.
Voluntary Employee Turnover Rate
Voluntary turnover occurs when an employee leaves a company on their own. Most of the time, turnover is a bad thing, and a high turnover rate equals low levels of employee engagement.
The turnover rate measures how many employees are leaving your organization over a defined period of time.
You need the following 2 numbers to calculate your turnover rate:
- Average number of employees during the year (E)
- Departures during the year (D)
The average number of employees during the year (E) can be calculated by adding the number of employees at the start of the year to the number of employees at the end of the year, then dividing the sum by two.
Then divide the number of employees who left the company (D) by the average number of employees during the year (A) and multiply this by 100 to get the annual employee turnover rate.
Employee Absenteeism Rate
Absenteeism occurs when employees regularly fail to show up for work. Absenteeism is a red flag for employee disengagement.
This metric measures what percentage of employees were absent over a period of time. A high employee absenteeism rate indicates a high levels of employee disengagement.
To calculate the absenteeism rate, you need the following numbers:
- Days of absences (A)
- Total workdays for the period (W)
Then you divide days of absence (A) by the number of workdays (W) and multiply by 100.
Top drivers of employee engagement
Engagement Driver 1: Alignment with your organization’s strategy
Do your employees understand your company’s strategy?
Managing every single move of knowledge workers is impossible. So if they have a solid grasp on the organization’s strategic roadmap, they can make day-to-day decisions that are aligned.
Industrial-organizational (I/0) psychology researchers refer to workers who understand and honor the company’s strategy as “embedded” employees. These are some of the most engaged employees.
So how can organizations increase the number of engaged employees?
One strategy is to ditch the cascade method of communication.
Traditionally, senior management communicates important information to their direct reports with the understanding that they’ll pass the details on to their team. Studies suggest that this may not be the most effective way to communicate company values.
Instead, senior business leaders should communicate directly to the workforce through emails and townhall-style conversations where employees have an opportunity to engage and ask questions.
Engagement Driver 2: How recognized employees feel for a job well done
Appreciation is an important part of any company’s culture.
When an employee goes beyond the black and white requirements of their contract, appreciation from managers reinforces that behavior and makes it worthwhile.
Otherwise, an employee will question why they’re putting in so much effort.
To ensure workers stay engaged — and that they remain with the company — business leaders have formalized workplace appreciation into employee recognition programs.
Employee recognition programs have a demonstrably positive impact.
Productivity, engagement, and performance levels in companies with recognition programs trump companies without recognition programs by 14%.
In turn, a 15% increase in employee engagement levels can cause a 2% increase in profit margins.
What’s more, Deloitte’s Talent 2021 Survey found that recognition is among the top three most effective non-financial methods of retention.
Employee recognition is also important due to the changing work landscape.
This makes employee recognition programs more and more important for engaging and retaining employees.
Driver of Employee Engagement 3: Opportunities for personal and professional growth
Technology is evolving at a rapid pace. This is disrupting standard procedures in organizations.
Companies no longer have a firm understanding of future needs, so it’s harder to design linear career paths.
Instead, they need to quickly pivot every few years to hire employees who possess a set of skills that weren’t even on the radar a couple years back.
Ambitious, proactive employees are not content to rest on their laurels.
They want to “future proof” their careers by equipping themselves with skills in the latest technologies.
A company that provides internal development opportunities demonstrates to its employees that they’re thinking about their long-term career progression and job security.
Plus, they can show how these learning opportunities tie into career opportunities. For instance, a specific management program may be one way individual contributors can move into team lead roles.
Employee Engagement Driver 4: Positive and supportive manager-employee relationships
Did you know that your company’s growth is tied to the quality of your managers?
This is according to a decade’s worth of employee engagmeent research at Gallup. In fact, the study showed that it accounted for up to 70% of the variance in productivity and engagement levels.
If you’re trying to build a winning organization, hiring great managers means most of your work is done.
Great managers learn about their team’s goals and ambitions and what’s important to them outside of work. In fact, employee engagement research shows that managers who get to know their team members on a personal level help prevent toxic work environments.
They do this by practicing what industrial-organizational psychology researchers at San Diego State University call “ethical leadership”. This is a form of management that prioritizes two-way communication, providing positive reinforcement, and serving as a source of emotional support.
The presence of supportive managers affects your culture and employee engagement, so it’s worth checking in to see how supported your employees feel.
Driver of Employee Engagement 5: Strength of the relationship to colleagues
When an employee has a positive relationship with colleagues, they’re seven times more likely to feel engaged at work.
Any job has its ups and downs, but having a supportive group of colleagues to turn to helps employees stick it through.
They are also a trusted sounding board for employees embarking on an exciting project, preparing for a challenging conversation with their manager, or navigating a challenging assignment.
Meaningful relationships are a critical component of employee engagement, but they take time to cultivate. With most of an employee’s time spent on work, it’s only natural that their level of engagement will correlate to the quality of the relationships they have at work.
Driver of Engagement 6: Level of autonomy
Did you know leaving your employees alone may actually be a good idea?
It goes against all the traditional notions of workplace dynamics. It’s expected that a supervisor or manager keeps a close eye on workers to ensure they complete a certain amount of work in a specific amount of time.
Today’s workplaces are much different. Two people in the same role, particularly knowledge workers, may not get things done in the same way.
One may prefer to work with limited interference from their manager.
Another may enjoy the social aspect of the workplace and seek frequent touchpoints with their team lead.
Generally speaking, employees should be able to have control over their day-to-day work so long as it’s aligned with the larger strategy and key information is communicated. When employees have this freedom to use their judgement and expertise, they have what’s known as worker autonomy.
Workers with sufficient autonomy are more engaged, committed, and productive in their roles. They appreciate the fact that they’re trusted to complete deliverables on their terms.
On the flip side, leaders who are overly critical, untrusting, and commanding undermine a worker’s sense of autonomy. Employees feel less ownership over their work and undervalued as a contributor. As a result, their engagement levels and sense of loyalty decrease.
Engagement Driver 7: Sense of accomplishment
Do your employees feel a sense of accomplishment at work? According to Robert Half, it’s the most important factor that drives engagement in employees under 35.
From where do employees derive a sense of accomplishment?
Usually by accomplishing goals that have been clearly articulated by their manager and that are aligned with larger company goals.
Of course, it’s not enough to simply assign tasks. These tasks must have specific incentives assigned to them or play a meaningful role in an employee’s overall career progression.
Projects and big assignments are not the only way to instill a sense of accomplishment. Offering training opportunities can also help by giving employees a chance to level up and develop their skills.
At the end of the day, you want that professional stimulation and validation to come from your organization, so people don’t look for it elsewhere.
Driver of Employee Engagement 8: Compensation
Calculating compensation is a tricky activity. One the one hand, you have to take the market and your projected growth into consideration.
On the other hand, your employees’ salaries dictate a big part of their lives. If they don’t earn enough money to feel stable and secure, this impacts their productivity.
Plus, it determines how engaged they are to the organization.
If their salary is too low, your company may just be something to hold them over until they find something better.
Use your annual employee engagement survey to directly ask employees whether they’re happy with their salary. People are more honest than you’d think.
A low salary and infrequent raises signals to employees that their job is undervalued. The most proactive employees - the ones you want to keep - will find a way to raise their salary. And as we discussed earlier, the fastest way to get a raise is to find a new job.
In some cases, keeping salaries low is an example of being a penny wise and a pound foolish. You save money in the short term, but you may wind up spending more to recruit new workers if turnover becomes too high.
Importance of employee engagement
87% of organizations say that employee engagement is one of their top challenges, and it’s because there are tangible benefits of employee engagement.
While employee engagement focuses on employee happiness, satisfaction, and well-being, employee engagement programs are also closely tied to tangible metrics like retention, turnover, absenteeism, profit, discretionary effort, and productivity.
An overarching focus on employee engagement helps human resources accomplish several goals.
- Prioritize employee satisfaction and well-being and creating employee engagement initiatives to support this
- Articulate a strategic vision for human resources’ role in supporting the company’s greater business objectives
- Establish a “seat at the table” and speak the language of business leaders by tying human resources policies and objectives to metrics like “money saved” through high retention and low turnover, new products developed thanks to increased innovation, and increased market share due to enhanced reputation of the company
Overall, employee engagement helps HR leaders shake off many of the stereotypes about HR.
Here a few points to help you articulating the benefits of employee engagement and why employee engagement is important:
Employee Engagement Benefit 1: Fostering innovation
What’s something that the most innovative companies have in common?
They have a positive workplace culture that engages their employees and allows them to thrive.
Let’s dive a little deeper.
When you gather a company’s values and behaviors together, you get its company culture. At a high-level, you can describe different cultures in a single world.
That word may be “competitive”, “high-performance”, “customer-centric”, “sales-driven”. The list goes on.
In any case, an organization’s culture is indicative of a few key factors:
- Which behaviors lead to promotions, raises, and recognition for employees
- Where senior leadership invests most of the organization’s resources (e.g. operations, product development, sales, customer service)
- Whether employees believe their time at a specific company is an integral part of achieving their life goals or just a paycheck until a better opportunity arrives
- How individuals within the organization approach specific business, product, and customer problems
- Whether employees feel comfortable enough to pursue innovative projects and solutions and challenge the status quo
When there’s a positive workplace culture that gives a microphone to different voices, encourages innovative projects (even when success isn’t guaranteed), and gives managers the employee engagement tools they need to succeed, employees are more engaged.
Two things that boost both employee engagement and company culture are:
- Encouraging employees to pursue passion projects, even if it doesn’t relate to their core job and responsibilities
- Supporting employee efforts to pursue upskilling and professional development
- Recognizing and promoting star players
- Encouraging and facilitating connections between different areas of your organization so employees can build cross-functional relationships
Unsurprisingly, these exact activities lead to greater innovation within organizations.
In the early days of the company, Google encouraged employees to spend 20 percent of their time on projects outside of their core responsibilities.
Its encouragement led to successful Google products like Gmail, Adsense, and Google News.
Google is known for a culture that follows well-known employee engagement best practices such as:
- Hiring, compensating, and promoting employees based on skills and abilities, not rigid pay scales and outdated rules
- Providing the resources required for continuous learning, improvement, and skills development
- Creating a culture whereby managers coach and empower employees rather than micromanaging them
In this way, Google wound up with an engaged workforce with enough investment in their workplace to share their innovative ideas.
Engagement Benefit 2: Boosting productivity
Productivity refers to how well inputs are converted into outputs. There are several possible inputs including time, equipment, materials, and of course, people.
Since productivity is such an important part of a healthy economy, experts are always monitoring factors like government regulations that may have an impact on it.
Now, business leaders are interested in the impact of employee engagement on productivity.
Engaged employees are happy, invested in the organizational success of the company, and motivated by the company’s work and mission.
How does this lead to greater productivity?
In the knowledge economy, the most significant inputs are people (aka their skills) and time.
Engaged workers want to discuss projects with colleagues, make connections with others in the company, and spend time solving interesting problems.
When you’re interested in the work that you’re doing, it’s easier to stay on task.
As a result, the time that the company invested in is spent on work-related tasks rather than non-work tasks.
In addition, the importance of engaged employees is shown through lower rates of absenteeism or presenteeism (being physically present at work but not mentally productive due to illness, exhaustion, or low morale).
Notably, health care costs at companies with a lot of pressure and stress (which is not conducive to employee engagement) are almost 50% greater than health care costs at other companies.
So employers take two hits. They take a hit on health insurance costs (which may not even cover employee’s needs to begin with) and they take another hit in terms of reduced productivity.
Engagement Benefit 3: Reducing turnover
Employee turnover costs organizations a lot of time and money. It can cost a significant portion of a worker’s annual salary to replace them.
Turnover also affects the productivity of the other people on your staff.
While you’re looking for a replacement, other employees have to compensate for the missing employee by adding their tasks to their workload.
And if it’s a small team, that work may disproportionately fall on the shoulders of one employee.
If this isn’t handled properly, it can impact employee engagement creating a dangerous domino effect.
Why is employee engagement important for reducing turnover and improving retention rates?
First, consider what makes people want to leave an organization:
- Lack of opportunities for upskilling and professional development
- Unclear career progression plan or career trajectory within the company
- Poor relationship with manager that lacks trust, support, and open communication
- Feeling overworked and underappreciated
- Micromanagement from managers and minimal role autonomy
It’s interesting considering that the best drivers of employee engagement are:
- Skills training and professional development opportunities
- Clear career progression plan and achievement milestones
- Managers who provide constructive feedback, solicit employee feedback, and listen to employees’ needs and aspirations
- Managers that appropriately distribute workloads and recognize and reward outstanding employees
- Work environments that treat employees like they are adults and gives them freedom to work in the way that’s best for them
In other words, the benefit of employee engagement is its ability to address the factors that make employees want to leave.
And by addressing these factors, employers reduce their turnover rate.
Employee Engagement Benefit 4: Increasing referrals for open positions
Referrals are the best source of new employees. Your employees have the skills you already need, and chances are the people in their network have similar skills and experience.
This gives employers access to an indirect talent pool of passive candidates (candidates who are already employed and not actively looking for a new job).
When a position opens up at your company, you want these individuals to consider your company.
If your current employees are disengaged, they won’t recommend your company or worse, they’ll actively discourage people in their network from applying.
A formal or informal referral program is one of the benefits of employee engagement. With incoming referrals:
- Your hiring cycle shortens
- Your recruiters can focus on a smaller list of roles
- Your existing employees quickly get the support they need (and no longer have to pick up the workload of the employee who left)
- Your retention rate improves since referred employees receive support and candid information from their friend or acquaintance from day one
One of the best ways for companies to measure this is through their employee net promoter score (eNPS).
eNPS surveys measures how willing employees are to recommend their company to others as a great place to work.
There’s a tangible benefit of employee engagement here since highly engaged employees recommend your company to their friends, which effectively reduces your recruiting costs and minimizes the impact of turnover.
Engagement Benefit 5: Increasing customer service and customer loyalty
You know what they say: engaged employees equal happy customers.
In today’s hyper-fragmented market, this is more important than ever.
Companies have a lot working against them like fickle customers, countless competitors offering similar products and services, and a generation of consumers accustomed to customization and personalization.
As a result, the best way to compete is by offering outstanding customer service.
Companies today need to make customers feel special by cultivating a company-customer relationship that doesn’t feel transactional.
Of course, companies are complex organizations and it’s difficult to have one-on-one interactions with every customer.
To solve this problem, companies have invested in technology to seamlessly interact with customers across multiple digital platforms.
That said, while these help facilitate interactions, they can’t replace quality human interactions.
And no amount of technology can simulate an engaging and compassionate customer service representatives.
There are studies that back up the notion that engaged employees create happy customers.
A Glassdoor study found that a one star improvement in a company’s employee ranking on the site corresponded to a 1.3 (out of 100) improvement in customer satisfaction levels.
The study found that the impact was even greater in companies with frequent interactions with customers.
An engaged workforce that feels respected, appreciated, and recognized feels the need to go the extra mile for customers. They aren’t simply going through the motions.
They show empathy, actively listen to customer problems, and proactively seek solutions. As a result, they turn even the most contentious customer interactions into positive experiences.
Employee Engagement Benefit 6: Creating a culture of continuous improvement
Throughout this article, we’ve discussed many of the ways companies engage employees.
They provide upskilling opportunities, so employees keep up with the changes in the market and avoid stagnation.
They give employees clear metrics and goals tied to business strategy and then promote and compensate them accordingly.
They encourage managers and employees to have open and honest dialogues and regular touchpoints.
This alerts managers to issues early on and gives employees the feedback and coaching they need.
Notice a pattern? All of these traits focus on improvement.
When workers feel like their organization is investing in them, they match that investment by looking for ways to improve the organization, too.
This is a big reason why employee engagement is important. It creates a culture of continuous improvement.
When employees believe that their opinions are welcome and their efforts will be recognized, they’re eager to look for areas where they can improve processes and add value.
These improvements could be related to processes or customer service interactions.
Building a continuous improvement culture gives companies a competitive edge since they make meaningful changes on a frequent basis.
Track the right metrics, so you know where to devote your employee engagement efforts
When companies focus on employee engagement, they tend to get back more than they give.
Asking the right questions ensures your work as an HR leader is as impactful as possible. Instead of starting “one-size-fits-all” employee engagement projects, you can launch focused, data-driven initiatives that focus on the most urgent areas for improvement within your company.
Interested in learning how technology can help you improve employee engagement? Learn more about our employee engagement software.