The ROI on Employee CONNECTION
Let's talk about the ROI of Employee Connection
A vital component of a successful organization. It refers to the sense of belonging, value, and well-being that employees experience in the workplace, resulting in a feeling of fulfillment and a sense of purpose. Think about your favorite job or hobby; it probably made you feel connected and motivated to do your best.
Productivity
Employee connection is a top priority for executives worldwide. Unfortunately, only about 30% of employees feel connected in their work, meaning that 70% are not maximizing their potential. While it's normal to disconnect sometimes, being disconnected for long periods can lead to distractions and even unhappiness.
As a leadership development consulting firm, we know that disconnected employees can negatively impact an organization's financial bottom line. Suppose we consider the average annual salary in the US, which is about $55,000. In that case, an average employee generates around three times their annual salary. Even with conservative estimates, the financial impact of low employee connection is staggering. Imagine the revenue generated if you were to connect the remaining 70% of disconnected employees regularly. It's clear that employee connection is a critical aspect of a successful organization.
You're probably aware that employee connection is pretty low all around, but how can you change that? We've found the simplest way to improve employee connection is through recognition, rewards, and appreciation. If you've ever received a sincere "thank you," you know that it can make a huge difference in your day. But connection-boosting recognition programs also impact productivity, turnover, absenteeism, and ultimately your organization's bottom line.
One of the drivers of employee connection is productivity. Companies that don't invest in employee connection efforts are losing out on potential returns each year in sunk costs and lost opportunities—all because employees are actively checked out from work. A strong connection strategy boosts employee productivity, which can generate over $37,800 per employee annually! Sounds great, but how did we get to that number?
Let's break it down for an organization of 100 employees:
According to a 2017 study by the consulting firm Bain & Company, the average employee generates around three times their annual salary in revenue for their employer. (Source: Forbes, "Employee Engagement Isn't Enough: Create A Culture Of Connection" by Tracy Brower, 2018)
A 2018 report by the research firm Gartner found that employees who are highly engaged generate 21% more revenue than those who are disengaged. (Source: Forbes, "The Business Case For Employee Engagement" by Brent Gleeson, 2019)
Productivity Model:
1 employee with a salary of $60,000 should generate a revenue 3 times their salary.
1 Employee at $60,000 X 3 = $180.000 Expected Revenue
Highly connected and therefore engaged employees produce 21% more revenue that other employees. (Assuming 3 X revenue is an average connected employee)
$180,000 X 21% More Revenue for connected and engaged employee= $37,800 Improvement
If 100 employees were connected using a designed process, we would expect an adjusted improvement of $3.78 million of revenue.
X 100 Employees = $3.78 mm Estimated Overall Revenue Improvement
Turnover
We know that turnover can be a significant challenge for companies, as it can be costly and disruptive to business operations. According to a report by the Work Institute, on average, most companies experience 15% turnover in their employee base each year. When an employee leaves, it costs the company approximately (33%) one-third of that worker's annual salary. The same report states that this includes expenses such as recruiter fees, temp workers, and lost productivity.
At our firm, we believe that proper employee connection strategies, such as robust onboarding, going beyond the traditional performance systems, and powerful employee development programs, can help reduce turnover rates significantly. The Work Institute report concludes that with these strategies, companies can reduce the turnover rate by nearly 40%. This reduction in turnover provides incredible cost savings, as you'll retain more employees, they'll be more productive, and you'll save on turnover costs. It's a win-win-win situation!
Let's return to our 100-person organization to examine the effect of proper employee connection on turnover costs. With an average annual salary of $60,000, the average cost of turnover per employee annually is $19,800. Consider turnover is 15% for our organization of 100. Turnover cost is $297,000. By reducing the turnover rate by nearly 40%, the organization can save $118,000 in turnover costs. This does not take into account if employees are sales oriented roles and a loss in sales. It's clear that proper employee connection strategies can have a significant impact on the financial bottom line of any organization.
Workplace Absence
We know that workplace absence can be a significant issue for companies, as it can lead to lost productivity and revenue. Workplace absence means not being present at work without good reason, and often without providing a reason at all, which can have a negative impact on business operations.
According to labor statistics, the national average for workplace absence is 2.8%. This equates to about seven working days per employee per year and can result in $4,620 per year per employee in lost productivity. However, businesses that invest in employee connection strategies typically see a 41% reduction in workplace absence, which would save companies $1,894 per employee each year.
At our leadership development consulting firm, we believe that employee connection strategies can help reduce workplace absence and boost productivity. By creating a positive and supportive work environment, employees are more likely to feel connected to their work, which can lead to higher engagement levels and fewer absences. With a 41% reduction in workplace absence, companies can save significant amounts of money and increase their bottom line.
Let's consider a 100-employee organization to illustrate the potential savings. With an average annual revenue generated per employee of $165,000, the national average of workplace absence (2.8%) results in $462,000 in lost revenue annually. However, with proper employee connection strategies, workplace absence can be reduced, resulting in a savings of $189,420 per year for the organization. By investing in employee connection, organizations can not only reduce workplace absence but also improve productivity and increase revenue.
Workplace Absence Model:
1 employee with a salary of $60,000 should generate a revenue 3 times their salary.
1 Employee at $60,000 X 3 = $180.000 Expected Revenue
Average absence is 2.8%
$180,000 X 2.8% Loss In Revenue = $5,040
If 100 employees with average workplace absence cost of $5,040
$5,040 X 100 Employees = $504,000
Employee connection reduces workplace absenteeism by 41%
$504,000 X .41 = $206,640 improvement to revenue
So what does this all mean?
We believe that companies that choose to invest in employee connection improvement efforts reap the rewards on everything from an improved culture to increased revenue—and that's just the beginning. Many organizations are recognizing the need for a powerful connection program, one that provides rewarding recognition, opportunities to support teams, and facilitates a culture of thanks. The great thing about connection is that it can start small, even with a simple, heartfelt appreciation of effort. When something so easy has such a huge impact, the question then becomes: can you afford NOT to invest in something that will immediately increase your bottom line? We didn't think so.
At our firm, we help organizations develop and implement effective employee connection strategies that can have a positive impact on the bottom line. By creating a culture of appreciation and recognition, employees are more likely to feel valued and engaged in their work. This, in turn, can lead to increased productivity, reduced turnover, and decreased workplace absence.
Investing in employee connection doesn't have to be complicated or expensive. Even small gestures of appreciation, like a sincere thank-you, can go a long way in boosting employee morale and connection. With the right connection strategies in place, organizations can see immediate results in terms of increased revenue and improved culture.
So, if you're wondering whether you can afford to invest in employee connection strategies, the answer is clear:
Improvement for the exaMple 100 person companY in:
Productivity: $3,780,000
Turnover: $118,000
Workplace Absenteeism: $206,640
Total left on the table by NOT doing anything: $4,104,640
A company's leadership can't afford not to invest in CONNECTION. At our leadership development firm, we can help you develop a connection program that works for your organization and delivers real results for your bottom line.
Resources:
https://www.gallup.com/workplace/236927/employee-engagement-drives-growth.aspx
https://www.gallup.com/workplace/229424/employee-engagement.aspx
https://www.shrm.org/hr-today/news/all-things-work/pages/to-have-and-to-hold.aspx
https://www.workinstitute.com/2017-employee-retention-report
