Tag Archives: the cost of disengaged workers

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.

Lost Opportunities: The Hidden Cost of Disengagement

We all know that engaged workers are more productive and loyal. Conversely, disengaged workers are less productive and are among the first to “turnover.” And we all know that turnover can be costly considering it involves hiring, onboarding, training, ramp time to peak productivity, the loss of engagement from others due to high turnover, higher business error rates, and general culture impacts.

But how much does turnover “really” cost?

A 2017 Deloitte study stated the cost of losing an employee can range between 1.5–2.0x the employee’s annual salary. But the costs can be even higher based upon skill level. For example, a paper from the Center for American Progress determined that the average economic cost to a company of turning over a highly skilled job is 213% of the cost of one year’s compensation for that role.

Then there are some of the less tangible considerations, as illustrated by the following example: A young, seemingly fast-rising junior executive had been working at a large bank for just over six years. When he was asked about his job and how he felt about it he said, “The job’s OK.”

His lack of enthusiasm was evident, and when pressed to say more he added, “Well, I’m not really learning much anymore.”

When asked if he was fully-engaged he said probably not but went on to say that he still did a great job. “I still give 100% and consider myself to be a great employee,” he said. Then, after a short pause, he added,” But I don’t give them 110% and there’s a big difference between 100% and 110% — at least for me.”

When asked if he was out looking he responded, “No…, but I’m listening.”

When asked whether he told his boss how he was feeling he said, “Yeah, but….”

How many people in how many places feel like he does? He is bright, educated, skilled, well-liked, and might be an ideal candidate for a senior leadership position…if he stays.

But is he being made to feel like an important part of the team? Does anyone realize that he could be giving more? Is he being engaged?

As stated above, among the many documented advantages of an engaged worker is loyalty. But so too is the discretionary effort that they put forth; going the extra mile; the above-and-beyond attitude… giving 110%! How many innovative ideas might that extra 10% yield? How much more productivity? What impact might it have on customers or coworkers?

And if he doesn’t stay, the simple replacement costs are not the real issue. He is a potential super-star! He is a known-entity… trustworthy, dependable, low-risk.

What are the real (or hidden!) costs associated with disengagement; the costs of not getting 110%… the costs of not only lost workers, but also of
lost opportunities? As we’ve discovered over the years, the biggest waste in most businesses is the lost opportunities…

The Real Cost of Disengagement

A young, seemingly fast-rising junior executive had been working at a large bank for just over six years. When he was asked about his job and how he felt about it he said, “The job’s OK.”

His lack of enthusiasm was evident, and when pressed to say more he added, “Well, I’m not really learning much anymore.”

When asked if he was fully-engaged he said probably not but went on to say that he still did a great job. “I still give 100% and consider myself to be a great employee,” he said. Then, after a short pause, he added,” But I don’t give them 110%… and there’s a big difference between 100% and 110% — at least for me.”

When asked if he was out looking for a new position he responded, “No…, but I’m listening.”

When asked whether he told his boss about how he was feeling he said, “Yeah, but….”

How many people in how many places feel like he does? He is bright, educated, skilled, well-liked, and might be an ideal candidate for a senior leadership position…if he stays.

But is he being made to feel like an important part of the team? Does anyone realize that he could be giving more? Is he being engaged in an intentional or formalized fashion?

Among the many documented advantages of an engaged worker are loyalty and the discretionary effort that they put forth; going the extra mile; the above-and-beyond attitude… giving 110%! How many innovative ideas might that extra 10% yield? How much more productivity? What impact might it have on customers or coworkers?

The Real Cost of Disengagement

And if he doesn’t stay, the simple replacement costs are not the real issue. He is a potential super-star! He is a known-entity… trustworthy, dependable, low-risk. What are the real (or hidden!) costs associated with disengagement; the costs of not getting 110%… the costs of not only lost workers, but also of lost opportunities?

Engagement vs. Disengagement – What’s at Stake?

Recent posts have focused on various ways of promoting workforce engagement, which has been among the most popular topics among business leaders over the past 12-24 months.

However, it is less common to hear people speak in specific terms about the real, often hidden, costs associated with disengagement.

During recent meetings with our Partners in Improvement, a group of Improvement specialists from across North America, these costs were discussed in detail. The Partners’ conclusions were well-aligned with those published by numerous sources, including the Enterprise Engagement Alliance and Gallup.

Simply stated, disengaged employees create a negative and expensive ripple effect throughout an organization, and drive-up costs in five specific ways:

Higher turnover: Disengaged employees leave their employers as soon as they see a better opportunity. This turnover increases the costs of recruiting, on-boarding, and training, which typically range between 16% – 22% of salary for low-to-mid-level employees, and significantly more for higher-level executives based on a Center for American Progress study. In addition, every new hire brings a risk of a bad fit, and every employee leaving an organization takes with them some organizational knowledge that might have been helpful to that organization in future decisions.

Lower productivity, lower profitability: 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. An article published by the Harvard Business Review said that organizations with high levels of employee engagement yield a 22% increase in productivity over the norm.

Similarly, the Engaged Company Stock Index, which tracks the long-term results of companies with high levels of customer, employee, and community engagement as determined by independent data sources compiled by McBassi & Company, has outperformed the S&P 500 (including dividends) by 36.2 percentage points since October 1, 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. However, disengaged employees tend to focus on their personal agendas and see little upside in trying something new to forward the organization’s goals.

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.

The associated cost of lost opportunities is difficult to calculate; but our experience and data surfaced over the past three-plus decades has consistently shown that, of the four primary forms of waste (capital waste, lost time, material waste, lost opportunities), the “lost opportunities” are the greatest.

Considering the above-listed realities, it is not surprising that ISO 10018, which provides guidance on engaging people in an organization’s quality management system, has become more prominent and a new certification created.

Our next post will focus on specific ways to reduce or eliminate these real costs of disengagement.

The Real Cost of Disengaged Workers

While employee engagement has been the topic of several posts, including our previous one, it is less common to hear people speak in specific terms about the real, often hidden, costs associated with disengagement.

During recent 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 five specific ways:

  1. Higher turnover: Disengaged employees leave their employers as soon as they see a better opportunity. This turnover increases the costs of recruiting, on-boarding, and training, which typically range between 16% – 22% of salary for low-to-mid-level employees, and significantly more for higher-level executives based on a Center for American Progress study.In addition, 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.
  2. Lower productivity, lower profitability: 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.
  3. 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. However, disengaged employees tend to focus on their personal agendas and see little upside in trying something new to forward the organization’s goals.
  4. 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. The associated cost of lost opportunities is difficult to calculate; but it is significant and probably far greater than any of the direct costs outlined above.

In our next post we’ll share five ways to reduce these costs.

More Hidden Costs of Disengaged Workers

hiddencostsIn an earlier post we discussed the direct and “hidden” costs of disengaged workers.

Carrying-on with this theme, a recent discussion among a group of Continuous Improvement leaders included some additional perspectives on the real-but-often-hidden costs associated with disengaged workers:

  • Higher turnover: Disengaged employees leave their employer as soon as they see a better opportunity. The turnover increases the costs of recruiting, on-boarding, and training.
  • Greater risk: Every newly-hired person comes with the risk of being a bad fit, or worse!  Every employee leaving an organization takes with him some organizational knowledge that might have been helpful to future decisions.
  • Lower productivity: A disengaged employee does not go the extra mile or challenge the status-quo.
  • Little or no process improvement: Improvements require engagement, a willingness to design and conduct experiments, a willingness to try something new and potentially better.  Disengaged employees focused on their personal agendas see little upside in risking trying something new in an effort to forward the organization’s goals.
  •  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.  Organizations that are unable to create an environment that intrinsically engages their employees must pay them more to keep and motivate them.

Possibly you have some ideas we might add to the list?

The Cost of Disengaged Workers – Part 2

hiddencostsContinuing with our previous post’s topic about the  often-hidden costs associated with disengaged workers, we found some very telling statistics published by the Enterprise Engagement Strategies Media

As you’ll see, the premise that disengaged workers are, in fact, very costly is clearly an accurate one.

For example, more than half of managers (52%) consider their employees less loyal than five years ago, according to a survey of more than 1,200 executives and managers by the American Management Association (AMA). Just over one-third (37%) perceive employees to be about as loyal as they were five years ago. The most telling statistic: Only 11% view employees as more loyal.

This trend is even more pronounced among organizations with more than 1,000 employees. Just over 60% of respondents at large organizations consider employees to be less loyal than five years ago, compared to 44% of respondents at firms with fewer than 1,000 employees.

Other highlights from the survey:

  • Declining employee loyalty is thought to harm organizations by causing low morale (84%), high turnover (80%), disengagement (80%), growing distrust (76%) and lack of team spirit (73%).
  • One-third (33%) of senior leaders believe employee loyalty has a direct link to profits.

Clearly it is in the best-interests of all (management, workforce and customers) for business leaders to put the proper focus on the value of engagement and the impact it has on the work as well as the workplace.

The Hidden Cost of Disengaged Workers?

wordleengage4A young, seemingly fast-rising junior executive had been working at a large bank for just over six years. When he was asked about his job and how he felt about it he said, “The job’s OK.” His lack of enthusiasm was evident.

When pressed to say more he added, “Well, I’m not really learning much any more… ”

When asked if he was fully-engaged he said probably not but went on to say that he still did a great job. “I still give 100% and consider myself to be a great employee,” he said. Then, after a short pause, he added,” But I don’t give them 110% and  there’s a big difference between 100% and 110% — at least for me.”

When asked if he was out looking he responded, “No…, but I’m listening.”

When asked whether he told his boss how he was feeling he said, “Yeah, but….”

How many people in how many organizations feel like he does? He is bright, skilled, and might be an ideal candidate for a senior leadership position…if he stays.

But is he being made to feel like an important part of the team? Does anyone realize that he could be giving more?

Is he being “engaged?”

Among the many documented advantages of an engaged worker is the “discretionary” effort that they put forth… going the extra mile; the above-and-beyond attitude… giving 110%!

How many innovative ideas might that extra 10% yield?  How much more productivity? What impact might it have on customers or coworkers?

What are the real, (or hidden!) costs associated with not getting that extra 10%?