What is the High Cost of the Lack of Engagement?

Is your company’s payroll an investment or an expense? In many companies a lack of employee engagement is costing the organization anywhere from 35% to 50% of payroll. Employees are paid 100% of their pay and benefits, but 35% to 50% of that money, if not more, is wasted because employees are not giving the organization 100% of what they are capable of producing. Companies that have learned the value of employee engagement are reaping the reward – turning 100% of their payroll into an investment.

Since The Gallup Organization released the book First, Break All the Rules, the subject of employee engagement has gained the attention of many business leaders. It is well understood that an increase in employee engagement is highly likely to contribute to an increase in productivity, staff retention and customer satisfaction... and, ultimately, profitability.

Yet, despite the attention this subject has received, very few organizations have made the investment of time or money to improve their engagement levels. Maybe if business leaders understood how much a lack of engagement is costing their organization, they might be more inclined to do something about it.

What is the real cost of a lack of engagement?

Let’s look at an example of how organizations can benefit from higher employee engagement.

According to recently published figures from The Gallup Organization, the American workforce consists of 29% Engaged employees, 55% who are Not-Engaged and 16% who are Actively Disengaged. That is a total of 71% of the workforce who are not “switched-on” when they are at work, are not paying full attention, or perhaps are even working against the organization’s goals.

While these are average numbers for the whole of America and your organization might be better off than this, it would make sense that many organizations are actually operating with engagement levels worse than this average.

So what is the cost of having 70% of employees disengaged? One way to estimate it is to think about the return an organization gets from employees for the investment they make in payroll and benefits.

What percentage of their capabilities are the different types of employees contributing to the organization? When we ask people that question, the best response we get for the Not-Engaged people is 50%, and for the Actively Disengaged people is 20%. Some people believe that the Actively Disengaged people in their organization are a negative factor... they are taking away from what the Engaged employees are doing.

For the sake of this example, let’s be conservative and assume that all Not-Engaged and Actively Disengaged employees are giving you 50% of what they are capable of, and we’ll assume that the Engaged employees are giving you 100%. We’ll also assume an average pay and benefits per employee of $50,000, and that you are paying all employees 100% of their pay and benefits with the expectation that they will give you 100% of what they are capable of.