Employee Engagement ROI Guide

Everything you need to know to reap the most from your Employee Engagement initiatives

bigstock-happy-sadHow To Measure Employee Engagement

Employee disengagement is often sensed on a gut level by managers and colleagues working closely with an individual. The unmistakable distance and detachment quickly become apparent. They manifest on all levels of life at work: behavioural, emotional, and mental.

Instinct is a valuable global alert system—telling us something is amiss in our environment, in this case—with an employee. Despite being able to sense something is "off," managers can't merely rely on their gut as a barometer for engagement. Despite our instincts usually being correct, they don't help get to a deeper understanding of the source of the issue nor quantify its severity.

Asset 48-1Early signs of employee disengagement

Often, executives only pay attention to employee engagement once there are perceptibly high rates of absenteeism and turnover among their top talent in their workforce. In short, when employee disengagement is obviously symptomatic. At this point, disengagement has likely spread to all levels and evolved into a complex issue that will require a great deal of time and resources to fix.

To avoid this, it's incumbent on executives and managers to keep their finger on the pulse of the workforce satisfaction—to systematically monitor levels of engagement. The goal is to catch early and often subtle signs of dissatisfaction and disengagement before they manifest as full-blown absenteeism or, worse, turnover.

Organizations can achieve this goal by regularly conducting an engagement audit or regularly measuring engagement across their organization.

Conducting an employee engagement audit

If you went to visit the doctor because you are feeling ill, you wouldn't expect a doctor to begin treating you with any medication right away. Most doctors would (hopefully) perform routine examinations first. Before making a diagnosing and assigning a treatment plan, they would ask questions and run tests to judge the current status of your health.

Asset 72Similarly, the process for diagnosing the underlying cause of low engagement should be approached in the same way; by first identifying your most prominent symptoms, their severity, and ultimately assessing the current health of your organization.

Typically, organizations approach an engagement audit by either conducting one in house or outsourcing the task to a third party that specializes in this type of organizational audit. The main drawback of outsourcing the work is the very high cost.

In reality, you can quickly assess the health and engagement of your organization by keeping an eye on a few key figures. The best part, coming up with most of these figures doesn't require surveying your employees at all.

bigstock-280408342Employee Engagement Metrics

Disengagement is something that is felt on an intuitive and emotional level; it's easy to see when an employee's work ethic shifts. But before investing and implementing an engagement plan, it's critical to quantify the degree to which disengagement affects your business. At this point, the following quantifiable metrics come into play.

In short, tracking these key metrics every month will allow you to keep your finger on the pulse of engagement in your organization.

Only the first and last metric, "employee net promoter score," and "employee satisfaction score," require a survey or poll to be administered to employees.

All the remaining metrics don't require formal surveying or your employee's time; this is the most cost and time-effective way to measure engagement rates in an organization.

  • Employee Net Promoter Score (ENPS)
  • Employee Turnover Rate
  • Customer Satisfaction Rate
  • Employee Productivity
  • Employee Absenteeism
  • Employee Satisfaction Score

Employee Net Promoter Score

Asset 11

This metric is based on the "Net Promoter Score," the only difference is, instead of measuring customer loyalty, you measure your employees' commitment and engagement. It's a measure of how likely your customers are to recommend your company to others. As a result, this metric is found to be an accurate measure and predictor of employee loyalty.

Using questions like "How likely is it that you would recommend working at our company to a friend or colleague?" employees respond on a sliding scale of 1-10. Then, employees get classified into three categories: detractors, passives and promoters.

As you can imagine, detractors are individuals who do not recommend working for your organization while this metric doesn't tell you why it does do an excellent job at assessing on a global level, how proud your employees are to work for your organization.

Employee Turnover Rate

Voluntary turnover occurs when an employee leaves a company on their own volition. Measuring your turnover rates will give you an idea of the general health of your company.

Studies show that teams who score in the top 20% in engagement realize 59% less employee turnover. Engaged employees show up every day with passion, purpose, presence, and energy.

To calculate the monthly employee turnover rate, all you need is three numbers:
  • The number of active employees at the beginning of the month (B) 
  • The number of active employees at the end of the month (E) 
  • The number of employees who left during that month (L)

Retention Rate formula

Then, calculate the average (average) number of employees by adding your beginning and ending workforce and dividing by two.

Finally, you should divide the number of employees who left (L) by your average number (average) of employees and multiply by 100 to get your final turnover percentage.

In sum, when employees don't feel fulfilled or impressed by a company's offerings, high voluntary turnover is usually the first symptom. Or they might be unfairly compensated or challenge, and as a result, have eyes for organizations offering a higher salary and more challenging position.

Customer Satisfaction Rate (CSAT)

Happy employees are the foundation of customer satisfaction. So, if you're in the business of managing customer-facing employees, one of the best measures of employee engagement is how satisfied your customers are with their service.

Employees that deliver top customer service intentionally go beyond the minimum of what is expected. Passion and ownership underpin their work. There is a personal and intrinsic motivation to provide excellence.

Measuring customer satisfaction is possible in several different ways. It can be done quantitatively with formal customer satisfaction surveys, or more casually through conversation or feedback. Either way, when you make an effort to gather insights from customers, you'll quickly notice patterns and trends. For example, when the same associate receives negative feedback, complaints, or a poor CSAT score, you know who the common denominator is. And time and energy should be invested in addressing and correcting the issue.

Employee Productivity

In the traditional sense, productivity is about meeting a certain output goal within a given time period. In short, meeting a quota. This is still the case for certain lines of work. However, In our modern work environment, the definition of productivity should take into consideration the value and quality of production as well. Taking into consideration both the quantity and quality of employees’ work.

That said, when quality or quantity of work begins suffers, this can be symptomatic of employee disengagement. For example, an employee consistently misses their daily or monthly quotas, or they begin delivery work of poor quality—with apparent errors and lack of attention to detail. If you've correctly assessed quotas to ensure they are attainable, and productivity still suffers, disengagement is a likely culprit.

As a case in point, an extensive meta-analysis conducted by Gallup, which showed businesses that scored highest in employee engagement, are shown to be 22% in profitability and show a 21% increase in productivity.

In short, productivity and engagement are closely tied. So continuously monitoring employee goals and productivity is crucial to keeping your finger on the pulse of engagement.

Employee Absenteeism

Absenteeism occurs when employees don't show up for work. It can negatively impact productivity, and it's a red flag for employee disengagement. Not to mention, absenteeism strongly affects the company's bottom line. This metric measures the percentage of employees who were absent over a given time. Higher percentages can indicate high levels of employee disengagement.

To measure employee absenteeism you all you need is the following values:
  • Number of employees (E)
  • Number of absences (A)
  • Total number of work hours (H)

Band-aid solutions will not suffice if you wish to lower employee absenteeism in an enduring way. The root cause of employee disengagement must be addressed with a strategically implemented Employee Engagement Program for absenteeism issues to be truly resolved.

In fact, according to a Gallup Workplace report, businesses boasting a highly engaged workforce are shown to have a powerful impact on lowering employee absenteeism by up to 41%.

Employee Satisfaction Score

This metric can only be obtained by administering a survey that contains questions conceived to measure employee satisfaction. You’ve likely heard of and probably taken a survey of this nature in the past. Survey questions often asked are “on a scale of 1 to 10 how happy are you at work?” and “do you feel valued at work?”

Usually, employee satisfaction surveys are administered in a “pulse” form, with only one question asked daily. As a result, on a monthly basis, you should have a global idea of where you’re workforce stands in terms of their satisfaction at work.

bigstock-Money-Savings-InvestmentInvesting in Employee Engagement

Organizations are aware of the importance of employee engagement. But given the abstract nature of the concept, in many organizations, improving employee engagement often takes a backseat. Moreover, data-focused executives may find it challenging to grasp the importance of this "touchy-feely" subject.

And, ultimately, the question "What would be my return on my investment," may appear difficult to answer with precision. The result, executives may relegate engagement initiatives to the bottom of the priority list.

This shouldn’t happen, as industry benchmarks and data have made it easier than ever to calculate the estimated ROI of an employee engagement investment.

Let’s start by exploring the subject of budget—how much should be invested in an employee engagement plan.

How much should be invested in employee engagement

First off, know that you are not expected to immediately dedicate a significant part of your budget to a program, especially if your business is new to employee engagement.

Asset 1Consider the scenario of joining a new fitness studio or gym. You probably wouldn't lock yourself into a year-long membership right away. Fitness studios and gyms assume this. That's why they provide flexible options such as day or month passes; for those commitment-shy people who prefer testing services before investing a large sum of money. They know consumers want to gauge the "worth" of the service before making the maximum investment.

Similarly, when it comes to investing in the health and well-being of your organization, it's reasonable to want to build and determine the ROI or “worth” of an investment before committing the maximum amount of time and money.

That said, based on an important industry benchmark from the 2016 SHRM/Globoforce Employee Recognition Survey showed that a “sweet spot” for values-based rewards and recognition investment is 1% or more of payroll.

When companies make this level of investment (1% of payroll) they are nearly three times as likely to rate their program as excellent, compared to companies that invest less.

What to expect when investing in employee engagement

Research and data analytics shows that engaged employees lead to more profitable businesses because employee engagement isn't just some abstract HR concept; it has a very tangible productivity connection.

Official statistics prove this, time and time again.

Looking at successful companies with admirable achievements such as a high retention rate, low absenteeism, high productivity and profits, what do you think is the common denominator running through these businesses? That's right—a high rate of engaged employees.

Can you calculate the return on investment of employee engagement? YES!


In order to calculate the estimated ROI (return on investment) of employee engagement, we look at some validated statistics to inform our calculations.

Businesses that score high in employee engagement saw a drop in absenteeism by 41%—that’s employees using unearned PTOs—when employees were engaged in their work, according to a Gallup Workplace Report. Lastly, high employee engagement has been shown to experience a 20% increase in productivity, according to a Gallup study.

By comparing these successful companies to their less successful counterparts, we can begin to quantify the precise degree in which employee engagement impacts a company's success.

Using engagement statistics provided by the HR industry, we can deduce a fairly accurate estimation of how much revenue an organization can expect to save by implementing an Employee Engagement Program. In short, implementing employee engagement software like Applauz yields a 4X return on investment.

bigstock-guys-calculatorEmployee Engagement ROI Calculator

Manually calculating the ROI of engagement can sound intimidating. To help make calculating the ROI of engagement a breeze we created a calculator that will do all the heavy lifting for you.

Just plug in three figures: the number of employees in your company, the average salary, and the employee turnover rate, and let the ROI calculator tool do the rest of the work!

The calculator will let you know your expected return based on an increase in productivity and a decrease in absenteeism and turnover.

Employee Engagement ROI Toolkit  Find out your Employee Engagement ROI using our helpful calculator

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