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Employee Disengagement and Its Costly Nature

published: December 9, 2019

Passive employees are some of the worst kinds of people to have in your office as passivity is not only contagious but is very effective at killing the motivation others have to go above and beyond.

What's more, these states of employee disengagement quickly turn employees against business goals and missions, which can lead to employees actively going against company ideals and increasing turnover.

Disengaged employees are not only wasting their salary, but if they are actively going against company values, sabotaging potential sales, and bringing down the demeanor or attitude of other employees (as Gallup describes), they are further reducing the productivity of your team; which only results in further losses.

There are a wide variety of causes of disengagement. And the root causes of employee disengagement can be challenging to pinpoint and treat.

That said, this article is not about the origins of employee disengagement, but rather about what comes after—its tangible and intangible costs.

Let's start by looking at the financial implications of employee disengagement.

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How Employee Disengagement Impacts Business

The numbers don't lie

First off, disengaged employees lead to the inevitable turnover statistics that cost companies anywhere between 450-600 billion dollars a year.

It's costly to retrain and replace employees and depending on their level within the company, the cost only goes up the more seniority they have.

Asset 57Breaking down the numbers mentioned above of 450-600 billion yearly, the average an actively disengaged employee costs their company is 3,400$ for every 10,000$ of salary payments. This breaks down to 34% of lost revenue for each disengaged employee.

As the current hourly wage for employees across Canada is 25.70$ per hour, which equates to a 49344 salary per year, 49344 x .34 = 16776.96$ in wasted funds a year.

According to the Canada Human Resource Centre, 15% of the Canadian workforce is actively disengaged.

So if you have a business of 100 people, that would mean you would be throwing away a little over a quarter of a million dollars a year, 251654.40$ to be exact, just for 15 employees!

Maybe disengagement has dropped over the last decade or so, yet the cost of employee's salaries have gone up. So while businesses may be saving money, there is still a significant loss. Especially in the potential of revenue to be held by those actively engaged employees. This number is astronomical.

Intangible cost of employee disengagement

Managers may notice employees who are actively disengaged, but they will not step in to intervene as replacing that employee may require a great deal of time and resources. Intervening might not be a top priority. After all, disengaged employees are usually still completing their assigned tasks, but not optimally.

Asset 33As a result, managers may not treat disengagement with urgency until the problem has gotten so severe that it escalates to a higher level or begins to impact productivity and morale severely. By then, it's often too late, and employee churn or a toxic work environment has already developed.

Aside from the very exorbitant financial costs, employee disengagement also carries a more intangible or "invisible" cost as well. Disengaged employee's presence can be like a grey cloud over a team, bringing down the energy and the morale of the team. As is often said, misery loves company.

Employee Disengagement Solutions

Compensation isn't the only motivator

New York Times bestselling author and organizational psychologist Adam Grant recently Tweeted some wise words regarding the subject of compensation as motivation.

"Dear managers: Pay isn't a carrot you dangle to motivate people. It's a symbol of how much you value them. Motivate by designing meaningful jobs where people have freedom, mastery, connection, and impact. Appreciate by paying them well."

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In short: stop thinking that a "fair wage" is enough for employees to be dedicated and loyal on a long-term basis. 

Employees view a fair salary as the minimum of what's expected from a job. Listening to employees, offering real job security, giving their voices credence, and valuing their expertise for which you hired them are all ways to begin the deeper long-term engagement process.

Recognize Talent

Regularly recognizing hard work with positive feedback and spontaneous rewards is key to ensuring that employees feel valued and essential to a business.

Up until recently, a cost-effective solution for rewarding and recognizing employees have not been readily available for small and medium-sized business.

Now, several cost-effective Employee Recognition Programs exist, such as Applauz Recognition, allowing SMBs to benefit from the ROI of Employee Engagement.

Modern web-based reward programs like this work by providing your teams with an online platform to publicly recognize and praise teams and individual employees, and also with a gift catalogue where they can browse a wide selection of rewards they will actually appreciate and use.

Get to know your employees

Traditional management philosophies suggest that forming close relationships with your employees might be inappropriate or negatively impact work. 

This is an outdated work ethos. Making a genuine effort to understand your employees and what's going on in their personal life (without being pushy or crossing obvious lines) will significantly contribute to the relationship quality and overall employee satisfaction at work.

Asset 48When people feel like they must wear a "mask" every day to work and conceal their authentic self, they will eventually become burnt out from keeping up this "act" alone.

So, it's necessary for managers to get to know their employees by asking them what types of hobbies they enjoy, movies, music, TV shows, where they have travelled, etc. Sharing personal stories always brings people closer. 

We spend a great deal of time with our colleagues, usually more than our own families and friends! Forming close bonds with them is vital to genuinely enjoying going into work every day.

Final Thoughts

You cannot question the value of employee engagement.

The gains of an engaged workforce result in a significant return on investment when compared with the costs. Working to maintain employee engagement should be a no-brainer for leaders interested in maximizing business performance on all levels.