Employee Engagement

The Financial Cost Of Poor Employee Engagement

By 26th November 2018 No Comments

The Financial Cost Of Poor Employee Engagement

Introduction

In the past having an engaged workforce often fell into the “important but not urgent” category of an organisations strategy. However, with the ongoing development of management information reports, we can now associate costs to particular business challenges caused by poor engagement. As well as adding extra costs to our business, they can also impact the customer experience, performance and business growth.

The purpose of this blog is to highlight some of the financial impacts associated with certain business pain points, caused by poor engagement.

 

What Are The Core Challenges Associated With Poor Engagement?

Attrition – it is widely accepted that a lack of internal engagement can lead to high attrition rates and with that comes an associated cost. Attrition is the process of an employee leaving a business due to: retirement, contract termination or resignation.

It is important to remember that not all attrition is bad attrition. For example, when trying to create an aligned culture, you may naturally lose employees who do not share the same values.

Organisations typically measure attrition as a percentage, over a twelve month period. The sum to do so is…

Number of Employees Left/Average Number of Employees x100

e.g. 26 employees left/120 average number of employees x 100 = 21.6%

When working out the financial cost associated with attrition, it is important to consider some of the following:

  • Loss of productivity
  • Learning and Development costs
  • Recruitment costs

 

Absence – for every single hour that an employee is not present, you incur a cost. Absence is the state of being away from a place or person.

There are many reasons for an employee being absent, these range from: Illness, family related incidents and wellbeing issues. Although many experts would argue that absence rates can increase due to a poor internal culture and lack of employee engagement.

Similar to attrition, organisations tend to measure absence over a twelve month period. A way in which to do so is…

Avg Salary/52/5 = Avg daily salary x no of absence days = X

e.g. 17,500/337= 67 x 100 = £6,700

*There are many other ways to calculate absence, this is of course based on average salary*

Conclusion

The above information provides an insight into the financial impact that organisations can associate with poor Employee Engagement. This is by no means something new to businesses however, many still do not put their employees at the centre of their activities.

If you’d like to learn more about how to improve engagement, retention and your ability to attract, then please reach out.

As usual keen to get your thoughts and feedback, so please like/comment/share.

 

Harry Wright

Client Delivery Consultant

Rencai Group

07341 662232

hwright@rencaigroup.com

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