Tag Archives: reducing the cost of disengagement

The Ripple Effect of Disengagement

Our previous post focused on ways of reducing the costs associated with disengaged workers. While the most obvious course of action might simply be to increase the percentage of engaged workers, doing so is no easy feat! It’s also important to recognize the specific ways in which disengaged workers impact an organization’s bottom line or, stated another way, to identify and quantify the waste!

During meetings with our Partners in Improvement, these costs were discussed in detail. The Partners concluded that disengaged employees create a negative and expensive ripple effect throughout an organization, and drive-up costs in numerous ways:

Higher turnover: Disengaged employees leave their employers as soon as they see a better opportunity. The turnover increases the costs of recruiting, on-boarding, and training, (1.5-2x annual salary as explained in a recent post), and significantly more for higher-level executives based on a Center for American Progress study. Every new hire brings a risk of a bad fit, and every employee leaving an organization takes with him or her some organizational knowledge that might have been helpful to that organization in future decisions.

Lower productivity: Disengaged employees don’t go the extra mile; they do not make an extra effort when faced with a challenge, and don’t put forth the same discretionary effort that an engaged person will make. A 2013 article from the Harvard Business Review concluded that organizations that cultivate high employee engagement yield a 22% increase in productivity over the norm.

Lower profitability: Similarly, McBassi & Company has compiled data which shows that the Engaged Company Stock Index (comprised of 43 companies with high engagement scores), outperformed the S&P 500 by 21.4 percentage points since it’s inception in 2012.

Little or no process improvement: Improvement requires engagement — a willingness to design and conduct experiments, a willingness to take risks to try something new and potentially better. Often times, disengaged employees focus on their personal agendas and see little upside in trying something new to forward the organization’s goals. The associated cost of lost opportunities is difficult to calculate; but it is significant and probably far greater than the direct replacement costs outlined above.

Higher pay: When we say about someone, “They are only in it for the money,” we are observing disengagement. While money is important to nearly everyone, if that is the only motivation, there is no genuine engagement. As the behavioral economist, Dan Ariely, said, “Money is the most expensive way to motivate someone.” Organizations that are unable to create an environment that intrinsically engages their employees must pay them more to keep and motivate them.

5 Ways to Reduce the Cost of Disengagement

Our previous post shared data on the various and real costs associated with disengaged workers.

Here are five proactive steps that can be taken to avoid these costs and the collateral damage to team morale and brand that is a regular side-effect.

  1. Enhanced recruiting and on-boarding — A good first step toward increasing employee engagement and retention can be taken at the recruiting stage. This might involve the inclusion of the organization’s mission and vision into interviewing conversations, and a more conscious effort to identify and hire people with aligned goals. Adding a mentor program to the on-boarding process can help new hires assimilate faster so they become more productive in less time as well.
  2. Consistent performance management and communication — As expressed in a Forbes article by Victor Lipman, “People leave managers, not companies.” People need to have meaning in their work, and understand how their work aligns with organizational objectives. If managers communicate a shared purpose or sense of direction, and encourage employees to openly share their perspectives and input, then they can increase employee engagement. This communication works best when systematized as part of structured, proactive approach to performance management. This methodology includes frequent feedback rather than annual performance appraisals and reviews, ongoing engagement surveys with real-time feedback loops, and protocols for keeping people aware of how individual work impacts organizational goals and how it aligns with mission and vision.
  3. Learning and development — Forward thinking business leaders understand that the path to sustainable employee engagement is to drive productivity, and to do so through ongoing education and empowerment. In support of this perspective, a recent article in Human Resource Executive magazine identified “continuous learning opportunities and personal development” as being two of the four key criteria (scheduling flexibility and social responsibility being the other two) recent graduates value most as they evaluate career options. But expanding workloads and limited resources can make it difficult to provide initial and refresher training for senior leaders, associates, and new hires. Learning management systems (LMS) enable many organizations to maintain training and development programs in a manageable way.
  4. Recognition and rewards — Recognizing and rewarding employees is not a new concept, but if the goal is to engage people rather than simply acknowledge milestones (such as length of service), then the approach must be aligned with what is meaningful to each recipient. The Enterprise Engagement Alliance suggests stepping-back from the traditional monetary rewards.
  5. Flexibility and work/life balance — Employer/employee relationships, expectations, and engagement criteria have evolved significantly over the past decade. Data from a PwC survey of 44,000 workers who had become less-engaged indicated that “71% said their jobs interfered with their personal lives, and 70% said they wanted to be able to work from home.” Employees can also become disengaged when they feel their managers “only care” about the bottom line. More than one-third of U.S. employees (39%) don’t believe their bosses encourage them to take allotted vacation days, and almost half (45%) say their bosses don’t help them disconnect from work while on vacation, according to a Randstad survey. Employers who proactively maintain positive relationships with employees and encourage them to utilize allotted vacation time are more likely to boost company morale, reduce turnover and increase productivity.

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