Employee Engagement Metrics
Voluntary Employee Turnover
An engaged employee is less likely to leave voluntarily. Employee turnover is costly for any organization. Lower turnover leads to less disruption, greater productivity, and more cohesion. The more satisfied an employee is, the less likely they will resign.
A reasonable employee retention rate cuts down on the costs of onboarding a new employee. It also increases productivity. The longer someone is with an organization, the better their understanding of how things work. Therefore, longer service employees typically equate with greater productivity.
Absenteeism is an indicator of many things, including poor working conditions, weak leadership, or work-life balance—absenteeism rates are inversely correlated with employee satisfaction. Absenteeism unbalances an organization and disrupts the workflow. As a result, it causes more workplace stress and leads to higher job dissatisfaction.
Employee Net Promotor Score (NPS)
The employee engagement or pulse survey includes questions about the likelihood an employee will recommend the company as a place to work. You design the question as a forced ranking, with ten highly recommended. The NPS score is determined by tallying the percentage of “promoters” (all 9-10 scores) and deducting the percentage of “detractors” (all 0-6 scores).
Highly engaged employees are more effective than less engaged employees, so performance metrics are relevant when measuring employee engagement. Consider four categories of employee performance metrics:
- Work quality metrics include the number of errors, NPS (see above), or 360 survey feedback.
- Work quantity metrics include sales or profit per employee, units produced, or dwell time in an operation.
- Work efficiency metrics include on-time delivery, first-pass good, lost time incident rates, and other measures of efficient processing.
- Organizational performance metrics include sales or profit per employee, days sales outstanding, workplace grievances, and human capital ROI (see below).
Engagement impacts employer goodwill. What stakeholders say about the company online provides essential feedback when evaluating engagement and retention. In addition, potential employees will view online ratings before seeking employment. Glassdoor is a popular employer review site, a leading authority on reviewing workplace satisfaction. Consequently, employee engagement and retention impact internal efficiency and are also critical to winning the war for talent.
Many companies correlate and document higher engagement scores with greater sales and profits. Best Buy is one example. They have shown that a mere 0.1% improvement in worker engagement leads to a $100,000 or more increase in profit. In addition, Gallup has documented in its polling that engagement scores are directly correlated with improvement in financial metrics like sales per employee.
Mark Richards is the retired Chairman and CEO of Appvion, Inc., headquartered in Appleton, WI.
Mark is now President of Meade Street Advisors, LLC, a boutique consulting business focused on board governance, strategic planning, and executive coaching, headquartered in Fort Lauderdale, FL.