Employee engagement gives big boost to the bottom-line

Jun 27 2006 by Brian Amble Print This Article

It is no surprise to hear that a highly engaged workforce improves an organisation's performance. But as new global research has highlighted, the sheer scale of the improvement in bottom-line results can be remarkable.

A new employee engagement study by ISR has found a gap of almost 52 per cent in the one-year performance improvement in operating income between companies with highly engaged employees versus companies whose employees have low engagement scores.

High engagement companies improved 19.2 per cent while low engagement companies declined 32.7 per cent in operating income over the study period.

The study, gathered from surveys of over 664,000 employees from around the world, analysed three traditional financial performance measures over a 12-month period, including operating income, net income and earnings per share (EPS).

Other findings include a 13.2 per cent improvement in net income growth over a one-year period for companies with high employee engagement, while seeing a 3.8 per cent decline in net income over the same period for companies with low employee engagement.

Companies with high employee engagement also demonstrated a 27.8 per cent improvement in EPS growth, while companies with low employee engagement reported an 11.2 per cent decline in EPS over the same period.

"Our research continues to show that a well-substantiated relationship exists between employee engagement - the extent to which employees are committed, believe in the values of the company, feel pride in working for their employer, and are motivated to go the extra mile - and business results," said ISR Global Research Director Patrick Kulesa.

"This data reaffirms the remarkable ability of an engaged workforce to impact a company's bottom line."

A previous ISR study of 41 companies over a period of 36 months revealed that the high engagement companies realized a 5.75 per cent difference in operating margin and a 3.44 per cent difference in net profit margin versus the low engagement companies.

"These latest findings are consistent with ISR's three-year study and demonstrate that both a one-year change and lasting performance gains are obtainable through an engaged workforce," said Kulesa.