The High Cost of Employee Disengagement

By John Wright

During these challenging economic times, organizations are looking for ways to improve productivity and ensure they are sustainable over the long-term. Attracting and retaining engaged employees who are known to contribute a disproportionate amount of profitability – by their commitment and willingness to go above and beyond – can provide a competitive advantage. According to 2009 Towers Perrin-ISR research, companies with highly engaged workforces have an average 19 per cent higher net income and a 3.74 per cent higher operating margin.

For almost 50 years, Canadian Management Centre has been working with organizations and leaders to help them outperform in the workplace by delivering impactful leadership, management and professional development solutions. In our interactions with thousands of Canadian companies, we have seen the direct link between employee engagement and organizational performance: successful organizations also have high employee engagement scores. Moreover, companies who are successful over the long-term, sustain their elevated engagement scores.

Employee Satisfaction Insufficient

The Conference Board of Canada defines employee engagement as “a heightened emotional and intellectual connection that an employee has for their job, organization and manager that in turn influences them to apply additional discretionary effort to their work.” It is a leading indicator of performance and competitiveness, but it is not to be confused with employee satisfaction. Employee engagement goes much deeper and relates to how each employee connects emotionally and intellectually with your company, your leaders and with your customers. An engaged employee is passionate, committed, fully involved in, and enthusiastic about, his or her work – and they, in turn inspire others. They care about the future of the organization and are willing to invest on their own initiative to see that it succeeds.

Surprisingly, only a small percentage of employees in the workforce are highly engaged.

Accounting For Disengagement

According to the October 2011 Gallup Daily tracking series, almost three-quarters of employees are disengaged; within this group, 19 per cent are “actively” disengaged. Research has also shown that disengaged employees cost the U.S. economy $350 billion every year. They negatively affect the workplace in a number of ways, including:

  • Absenteeism—Productivity suffers as they take more sick days and are late more often.
  • Negative work environment—They tend to complain and demotivate their colleagues, and yet it is the motivated employee who eventually leaves – not the disengaged employee – as morale declines.
  • Turnover—With the loss of talent so too goes valuable experience and there are added costs associated with recruitment and training new staff.
  • Loss of customers —When customer service satisfaction declines, it hurts profitability and there is also potential damage to the brand as customers and/or ex-employees take to social media to air their grievances.

What if more disengaged employees could be inspired to do their best work on a daily basis? Imagine the tremendous impact it would have on an organization’s marketplace and financial performance, competitiveness and reputation?

Management Key to Process (Either Way)

Employee disengagement doesn’t just happen, but is a process that takes place over time. Moreover, an employee typically leaves their manager – not the organization. The manager is the single most influential person in an organization: someone who creates the culture of employee engagement (or disengagement), inspires employees to higher (or lower) levels of performance and enables (or prevents) them to achieve goals that are linked to organizational objectives.

Managers can help to foster a culture of engagement by removing persistent irritations and barriers that frustrate an otherwise self-engaged employee to enable them to do their best work. This may include making them feel valued by:

  • listening to an employee’s concerns and ideas;
  • aligning their individual contribution to organizational business objectives;
  • supporting their career growth and development by fostering training opportunities,
  • providing access to resource; and
  • regular feedback on their performance.

Engagement is a Shared Effort

Although a manager plays an important role, everyone within the organization can contribute to this effort:

  • Employees need to know that engagement is a shared responsibility and own their part of engagement. They should be encouraged to take accountability for their performance and reach out to their manager for support in a productive way. For example, taking the time to discuss how their manager can support them, sharing what is important to keep them motivated and offering solutions to barriers that stop them from doing their best work.
  • Senior leaders can provide organizational resources and support to their managers. They also should monitor levels of engagement within the organization and hold managers accountable to ensure they have the critical interpersonal skills that are required to foster a culture of engagement.

How HR Can Unleash the Potential

HR professionals, as the champions of employee engagement, play a central role in helping to identify and promote the drivers to address the problems associated with disengagement. The following are some ideas that range from simple to more long-term solutions, depending on the unique needs of each organization:

  • Enable Employee Feedback by fostering an environment where employees can share their views and solutions. Enabling employees doesn’t have to cost anything and is as simple as just being heard and responded to.
  • Recognize individuals, managers, teams and departments who are positively contributing to the organization’s success through effective employee engagement practices.
  • Keep Employee Engagement Top of Mind and show organizational commitment by promoting ‘best practices’ in regular employee team or company information sharing meetings, lunch and learn sessions, or in other communications, such as newsletters or an intranet site.
  • Track Employee Engagement across the organization with a regular survey. This gives people a voice, identifies any issues and gives senior management an objective view of their workplace “reality”. Ensure you have a feedback mechanism to openly share results and solutions. Benchmark for trends and report on progress to show employees you are listening.
  • Reinforce Engagement Drivers with High Performers particularly around career development to retain talented individuals. Managers should be encouraged to consider providing opportunities for job shadowing, stretch assignments, professional development and cross-training across departments. Educate and Train Managers to create a culture of employee engagement by offering group leadership training and individual development for particular areas of focus. Canadian Management Centre for example, has a number of leadership development programs that are offered in an open enrolment or onsite training format such as our “Go Beyond: Creating Extraordinary Leaders” program to build essential leadership skills required for success.
  • Take Disciplinary Action through a performance management process to address ongoing challenges with managers who don’t support engagement or who are barriers to success.

Although successful organizations may take their own unique approach to creating employee engagement, what they do share is a commitment to creating work environments that inspire their people to make a meaningful contribution and help them understand their value to the organization. You may not be able to re-engage all the unhappy employees, but engagement is an ongoing cycle and high performing organizations will tell you that it starts with the courage to initiate the conversation in your organization, make the commitment to listen to the feedback and take the necessary action.

Clearly the costs of allowing and not fixing low employee engagement or total employee disengagement are high. You are putting at risk the operational, financial and competitive sustainability of your organization. Ignore employee engagement at your peril.

John Wright is President and Managing Director of Canadian Management Centre. He has over 25 years of senior leadership experience in B2B and B2C professional services. For John, cultivating engagement creates a positive company environment that boosts both individual commitment and organization-wide performance. For more information about Canadian Management Centre, visit the website at or call 1-877-262-2500.

(PeopleTalk: Fall 2012)

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