Disengaged employees is one of the biggest costs that businesses face today. According to a 2023 report by McKinsey, median companies in the S&P 500 lose about $282 million annually from worker disengagement and attrition. And in 2024, Gallup reports that just 31% of US workers are actively engaged in their work. Not paying attention to employee engagement is costing companies money, and investing in them in an effective way to reduce costs.
Employee Engagement = Cost Saving
That’s why improving employee engagement and implementing employee engagement strategies is one of the best investments and cost savings measures you can implement in your business. Companies with engaged employees experience lower levels of absenteeism and turnover rates and enjoy improved productivity, which in turn leads to substantial savings and greater profits. In addition, investing in employee engagement can help businesses get through and even thrive in tough economic times, according to another Gallup report.
Below are some ways that illustrate why implementing employee engagement strategies will pay dividends in the long run, cut costs from your business, and encourage employees to perform their best and go above and beyond for the company.
7 Ways Employee Engagement Provides Significant Cost Savings to Your Company
Reduced Turnover
Engaged employees who have the right level of work life balance are less likely to leave. When employees feel valued, are in a positive work environment, and are highly engaged in their work, they’re less likely to look for another job. For every employee that leaves a company, that business loses one-half to two-times the employee’s annual salary in training and hiring their replacement. And if the company doesn’t change the conditions that cause that disengagement, it’s likely that the replacement will repeat the process and incur substantial costs, which creates what Gallup calls a ‘self-defeating cycle.’
A degree of turnover is inevitable in any business, but companies that pay attention to engagement do tend to experience lower levels of turnover. High-turnover businesses that have highly engaged teams experience 18% less turnover than high-turnover businesses with low engagement teams. Low-turnover businesses with highly engaged teams and employees experience 43% less turnover than low-turnover businesses with lowengagement teams. Decreasing turnover through employee engagement allows the company to achieve significant cost reduction and improve productivity.
Improved Morale
Fully engaged employees are more likely to be invested in their work, which in turn boosts morale and productivity, encouraging a positive work environment. In 2018, Facebook conducted a study on their employee engagement data. Those who stayed at the company (and were highly engaged) found their work to be enjoyable 31% more often, used their strength 33% more often and were 37% more confident about gaining the right skills and experience for them. On the other hand disengaged employees are more prone to burnout and absenteeism, which can reduce morale in a company. Working towards improving employee morale is not only good for your company culture, it can also achieve cost reduction.
Better Efficiency
Companies with highly engaged employees experience higher productivity and operational efficiency. They experience less absenteeism and cause less quality defects, which allows them to be more efficient and perform their work to a higher standard. Having highly engaged employees also saves costs from the time and money that it takes to hire and train new employees, given that businesses with disengaged employees experience greater levels of turnover.
Investing in employee engagement strategies is an effective cost cutting measure as it prevents businesses from having to incur potential costs that come with absenteeism and defects.
Customer Experience and Retention
Customer satisfaction is a critical aspect of business success. That requires companies to deliver on the promises that they made to their customers. Yet according to Gallup, only one in four employees believe that their companies are satisfying customer demands.
Highly-engaged employees understand the importance of showing up positively in customer-centric experience. Because they’re more likely to be invested in and passionate about their work, they’re more likely to create positive customer experience, which will ultimately result in significant cost reduction and enhanced productivity. On the other hand, businesses with lesser-engaged employees are more prone to stress and burnout, which can translate to hostile customer interactions and have a negative impact on customer loyalty.
Greater Safety
Companies with high employee-engagement experience less incidents, which leads to a safer workplace, provides the opportunity for companies to streamline processes to achieve effective business operations and encourages employee productivity. According to Gallup, highly-engaged businesses experience 64% less workplace-related accidents and 58% less in patient safety incidents (including mortality and falls).
The cost of workplace accidents go beyond workers compensation claims. It can erode trust among employees, customers and shareholders, and damage the company’s reputation. Investing in employee engagement can prevent that from happening and reduce waste and costs that businesses incur from accidents.
Lower Levels of Shrinkage (Theft)
Disengaged companies experience 28% more shrinkage (theft), which can have many negative implications for the business. Aside from replacement costs, identifying and investigating perpetrators requires valuable resources that the company can spend on more valuable activities. In addition, it can disrupt morale and trust, leading to higher-disengagement. Investing in employee engagement is an effective cost-cutting measure that breaks companies for repeating this self-defeating cycle.
Profitability
Ultimately, companies that score high on employee engagement metrics are more profitable and cost effective. According to Gallup, they are 23% more profitable than their counterparts with lower employee engagement. Engaged employees are more likely to go the extra mile, identify opportunities and experience job satisfaction. This illustrates that businesses are leaving money on the table and are missing out on potential cost reduction when they’re not investing in employee engagement.
The Importance of Boosting Employee Engagement
Businesses need to view measuring employment engagement (and investing it in it)as a way to reduce costs and improve productivity. Otherwise, they run the risks of having unhappy, stressed out and burned out employees that are disengaged from their work.
There are many employee engagement strategies that businesses can choose to employ to achieve cost savings, such as providing flexible work hours, providing employees with policies that improve work life balance and celebrating employee achievements.
Mentoring and ERGs are two employee engagement strategies that provide the highest return on investment. Doing both effectively can result in significant cost reductions and improve efficiency. That’s because mentoring and ERG initiatives involve creating the framework for employees to cultivate strong professional relationships and provide the opportunity for professional growth.Both are necessary elements of an inclusive and supportive company culture, which is necessary to maximize employee engagement and ultimately results in cost effectiveness.
Chronus can help you with your employee engagement strategies by providing the support you need to launch a successful mentoring program and ERG initiatives in a cost effective way. Partnering with Chronus allows your organization to create mentoring or ERG programs that are suitable for your employee engagement needs and goals, and implement and scale those initiatives as those needs and goals evolve.
Chronus takes care of the administrative work and costs that are required to manage mentoring programs and ERG initiatives, no matter the size of your organization. For example, its AI-powered matching algorithm ensures that you pair the right mentees and mentors together in an efficient but accurate way. With ERG programs, you can create a streamlined and standardized experience, which encourages participation.
Most importantly, Chronus mentoring software and ERG software provides real-time data and metrics so that you can track and tweak your programs accordingly. It can also generate ROI reports that you can present to organizational leaders and stakeholders, which can help with securing the necessary resources to make the programs and initiatives as successful as possible.
Employee disengagement can cost your company, while employee engagement benefits your company in multiple ways, including cost savings. Don’t make the mistake of waiting until employee engagement becomes an issue for your business. Make the investment so that you can start reaping the benefits of cost reduction that employee engagement can bring to your business.
