Employee engagement: is the investment worth the return?
Published on 9 May 2024 • Written by Dr Lisa Colledge
Yes, it is. And I’ll prove it to you.
On average, 77% employees are disengaged from your organization’s mission, and not contributing as much as they can or, probably, as much as they’d like, to your success. This wastes operating expenses, because of quietly disengaged workers who are just doing the minimum, disruptive actively disengaged employees who voice their frustrations and whose behavior pulls others down with them, or those who resign and gift you with a hefty price tag to replace them that extends far beyond the direct expenses of recruitment.
The financial consequences of employee disengagement are hefty and will probably shock you, but if you act and actively design and shape your organization’s culture, you can unlock this wasted money for big investments.
Three key takeaways
77% employees are disengaged. If you’re lucky, they might decide to leave your organization so you won’t waste 34% of their salary each and every year on absenteeism, and lost productivity and profitability. For a Technical Specialist, you’d only have to pay 100–150% of their annual salary to recruit a replacement who will enter the same culture, likely becoming disengaged after a while so that you can again start to waste 34% of their new salary every year.
Would you rather have people leave, or stay and be disengaged? To be honest, the choice is meaningless because these two states apply to the same people. You’ll have been losing money for years on the disengagement of someone who eventually decides to leave your organization, and then you also have to invest in finding their replacement.
“People are the only appreciating asset you have on your balance sheet,” commented Josh Bersin, but creating an environment where they are fully engaged and you’re getting the most from their knowledge, expertise and enthusiasm won’t happen on its own. But it is achievable with focus and effort. Kick off the process firstly by establishing engagement as a strategic priority. Then, seek help: people have done this before and can get you to your destination a lot quicker and more directly than you can alone. You’ll easily cover your program costs by retaining or re-engaging just a couple of your employees.
You have 77% disengaged employees who are either trying to leave your organization for what they perceive as a better job, or sticking around. Disengaged employees are those who don’t feel connected to your mission. They might be quietly disengaged, doing as little as possible to be certain of receiving their salaries. Or they may be actively disengaged, voicing their frustration; they disrupt meetings and undermine success, and their toxic behavior drags others down with them (see my earlier article about this).
What is the cost to you?
A comprehensive look at the costs of replacing an employee
We all know that recruiting a replacement for someone who has resigned costs a lot of money, effort and time. I think that most of us would rather not have to do it, and, while we whole-heartedly congratulate our excited colleague on their imminent new position and opportunities, we are quietly dreading what lies ahead.
Let’s be honest with ourselves. It’s not only the process of advertising, narrowing down applications, and interviewing that we don’t love. It’s not even only the investment needed by the manager and whole team to onboard the new person and help to familiarize them with their new organization that causes our internal groan. It’s a lot of intangibles as well.
As the new person learns their way around the team and organization, indirect costs are incurred through their lower productivity and skill in solving problems compared to the team member who left.
This combines with the lost knowledge and experience of the employee who resigned; the most diligent handover document never fully compensates for their in-person expertise. And if that person has been in the organization for a long time, it takes correspondingly longer for their replacement to build up the knowledge to fully compensate for the systems and project experience that was lost.
But the true impact of someone leaving a team is much more widespread. Others ask why they left, and will come to a conclusion, regardless of whether it’s right or not. Employees remaining in an organization with a high turnover may become despondent and demotivated, disengaging from the mission which leads to lower productivity, profitability, innovation, and customer satisfaction. Someone leaving can impact the team and organizational culture which, it suddenly turns out, is not as stable as it was assumed to be.
What is the actual cost of replacing someone who has resigned?
The true cost of an employee leaving is tricky for most organizations to calculate because the different activities tend to be recorded in different systems and departments, and, as just discussed, they are not all tangible.
But studies consistently report that the combined tangible and intangible costs of replacing an average waged worker are at least 6 to 9 months of their annual salary (references are at the end).
The average US worker earns just under $60,000.
Replacement cost of the average US worker: $30,000–45,000.
Of course, the average worker doesn’t exist. Let’s take a couple of specific examples.
For a technical specialist, the cost will be 100–150% of their annual salary. An average technical specialist in the US earns just over $100,000 a year.
Replacement cost of an average technical specialist: $100,000–150,000.
If we are talking about a C-suite employee, the cost is more than 200% of their annual position. The average US C-suite employee makes just over $140,000.
Replacement cost of an average C-suite employee: >$280,000.
Employee disengagement needlessly burns money every day
OK, you may say to yourself, there is always some turnover, it is part of business, and a few disengaged employees can’t cost that much.
Think again! A disengaged employee costs you on average 34% of their annual salary, each and every year that they hang around in your organization, because of higher absenteeism, and lost productivity and profitability.
And remember that 77% employees are disengaged.
77% of your average workers are costing you $20,400 each, per year.
77% of your technical specialists cost you $34,000 per person, each year.
77% of your C-suite cost you $47,600, per employee, per year.
Let’s recap those costs
Table summarizing the costs of recruiting different roles, and the annual cost of disengagement
Pay for disengagement or pay to find new talent? It’s Hobson’s choice
Perhaps you’re now doing the sums for your organization, to work out whether you’d rather replace people who leave, or tolerate disengaged employees.
This reminded me of a phrase I learnt at school: Hobson’s choice. It looks like you have a choice, but it is an illusion.
The reason is that you’ll have been losing money for years on the disengagement of someone who eventually decides to leave your organization, when you then need to invest in finding their replacement. You need to pay both costs for anyone who resigns.
The worst thing is that if you don’t invest in designing and implementing an engaging culture, your new recruits will also quickly join the ranks of the disengaged and start costing you 34% of their annual salaries.
What’s the alternative?
The alternative is to reduce the amount of money you’re wasting in this way, by spending a little of it on an engagement program, and the rest on whatever big investments you want.
I have written before about the steps you can take to start on this journey, but here’s a quick summary.
First: accountability. Appoint someone in your leadership team to be accountable for your organizational culture, and make improving its health a strategic priority. The situation we’ve described will not fix itself.
Second: seek help. You’re not the only organization to have been in this situation, and there are people who have experience solving it that they would like to share with you. An expert can find the shortest, most direct and effective route to boost your employee engagement. My approach, for instance, is based on neurodivergence inclusion backed up with healthy doses of change management and psychology.
References
Costs relative to salary of replacing an employee: taken from the summary presented in the PeopleKeep blog ‘Employee retention: the real cost of losing an employee’ (2024).
Average 2024 US annual salary from Forbes.
Average US technical specialist salary from Indeed.
Average US C-suite salary from Glassdoor.
Disengagement costs 34% annual salary (2019): ‘How Much Are Your Disengaged Employees Costing You?’ from Forbes.
I'm Lisa, and I help leaders create inclusive cultures that embrace all neurostyles. By empowering every team member to contribute at their best, while fostering mental well-being, you will boost innovation, retention, and talent acquisition—leading to enhanced business performance.
Click here to learn more about how my services can transform your team.
