How much does disengagement cost your business?

You know disengagement is bad for your people, culture, and business – but do you know how bad? And can you explain this clearly to senior stakeholders so they understand the need to prioritise engagement? If you’re not 100% confident here, this is the article for you. Keep reading and we’ll run through the true costs of disengagement, and what you can do to solve it for your organisation. 

If you’re currently building a case for pitching an engagement tool, you can use this bullet-proof workbook that will land you a “YAY” instead of a “nay”.

Employee engagement – a global challenge

Gallup’s State of the Global Workplace: 2023 Report finds that 23% of employees globally are engaged at work (and that's a record high!). And obviously there're differences across countries; South Asia has 33% and the highest engagement in the world, while most countries in Europe are ranked as low engagement countries with only 14%.

This isn’t even a post-pandemic issue. Global engagement has been terrible for years – this is the norm, not the exception. The harsh reality is the majority of workers worldwide are counting down days to Friday, only happy to see their pay check.

And this is probably the same for your employees. Even though you’ve got an amazing purpose, awesome employer brand, yoga classes and offer free lunches. These engagement stats have business leaders everywhere worried. But perhaps not worried enough. Let’s talk about what disengagement might be costing you.
  

Breaking down the costs

Overall low engagement costs the global economy $7.8 trillion, but let's break down the costs.

 
1. Increased absenteeism  

There’s plenty of proof that high disengagement increases absenteeism dramatically (Gallup say by 81%). And that’s an expensive problem that can appear in the following costs:

·     Highover time costs

·     Expensive temps to cover

·     Admin costs to manage absence

·     Reduced team productivity

·     Safety and quality issues (inadequate training; overburdened staff; fatigue)

·     Declining team morale and engagement

Overall, estimates suggest unscheduled absenteeism costs $3600 annually for each hourly worker and $2660 annually for each salaried employee.

Let’s do some simple maths…
500 employees = $1.3M in wasted spend annually(!!).

2. Lower productivity

Disengagement affects both individual productivity and team productivity too. According to Gallup, the amount equals to your annual performance targets slashed by 18%. Imagine if it was the other way around - we bet you’d be super happy if it was +18%! 

Disengagement is also linked to managers and the impact on direct reports. If you’ve an engaged manager, you’re 59% more likely to be engaged yourself.  

A great manager creates happy, high-performing teams – and a disengaged manager can quickly ruin engagement and productivity. (That’s why developing managers to deliver is something we at Winningtemp offers.)

3. Increased turnover

Now, let’s talk about turnover. Gallup’s research shows that disengagement increases turnover by 18% for high-turnover organisations and 43% for low-turnover organisations. Even at the lower end, that’s a major cost.

In other words, this cost estimates turnover costs at 1.5x to 2x an employee’s annual salary, depending on seniority and length of tenure.  

But there’s hope. Winningtemp customers on average enjoy 30% decreased turnover after one year. Using the example figures above, that could represent a saving of $900,000 to $1.3M. And if you're curious to see why employees decide to leave in the first place, the report Fighting Turnover: What matters the most to employees in 2023 is for you. Without giving too much of a spoiler alert, trust is key.

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4. Increased recruitment costs

Disengagement also spirals into long-term cultural issues, which damage your employer brand and could increase recruitment costs. In 2022, 3 in 4 employers struggled to find the talent they needed. These shortages mean it’s becoming more expensive and time-consuming to hire.

Let’s play with numbers.

LinkedIn research finds that companies with a poor employer brand have a 46% higher cost-per-hire than companies with a good employer brand, and the cost to hire an employee can be 3x to 4x the position’s salary.

Taking our average $40,000, that would mean you’re spending upwards of $120,000 for every hire. With a 46% uplift, that’s an additional $55,200 per hire. Know think of how many people you normally you hire a year.  

5. Declining customer lifetime value

But the consequences of disengagement don’t only affect your employees – it also affects your customers. Less productive, unorganised teams are normally serving delayed deliveries, including low quality and errors.

And what cost does that translate to? Well, poor customer service is expensive. And if you were to lose a customer, acquiring a new customer is 5x more expensive than retaining a current customer. Having an engaged, happy workforce of employees is better.
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So what does disengagement cost YOU?

By now, you’ve hopefully got a good sense of the scale of the engagement issue and opportunity. But when you’re building your business case, it’s more compelling to translate benchmarks, estimates, and averages into hard numbers for your organisation.

Use our disengagement calculator now to get started. Then chat to us, when you realise what a no-brainer Winningtemp is 😉

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