How Much Profit Can An Engaged Employee Drive For You?

A Business Case For Employee Engagement

A Hard Business Case For Engaging Your Employees

For the past four years I’ve been working to convince business leaders that focusing on their people — inspiring them, teaching them, letting them lead — is the surest path to sustainable revenue growth.

Sometimes the conversation felt “fluffy” and emotional. But only recently has the market undeniably proven this out…

“Since 2009, a portfolio of Fortune’s ‘Best Companies to Work For’ companies outperformed the S&P 500 by 84.2 percent, while a similar portfolio of Glassdoor’s ‘Best Places to Work’ outperformed the overall market by 115.6 percent.”

“Firms with high employee satisfaction outperform their peers by 2.3% to 3.8% per year in long-run stock returns — 89% to 184% cumulative — even after controlling for other factors that drive returns. Moreover, the results suggest that it’s employee satisfaction that causes good performance, rather than good performance allowing a firm to invest in employee satisfaction.”

How then can HR leaders begin to calculate the financial effect of engaging employees on their own businesses?

A Business Case For Change

Employee engagement isn’t a fluffy, feel-good thing. It drives top-line revenue through improved quality of work, productivity, and customer satisfaction, while reducing bottom-line costs through more efficiency and higher retention — all by inspiring and motivating your people.

The business case begins with a simple metric: Revenue Per Full-Time Employee (FTE).

Imagine a company with 10,000 full-time employees and annual revenues of $1 billion. Using simple math you can calculate a revenue per FTE of $100,000.

Top-line Drivers:

The company can increase its Revenue/FTE by increasing:

• Productivity: How much you contribute (revenue/expense)
• Quality: How well you contribute
• Customer Satisfaction: How much value your contribution creates

Bottom-line Drivers:

The company also increases Revenue/FTE by increasing:

• Efficiency: How quickly you contribute (or decrease cost of your contribution)
• Retention: How long you contribute (and don’t contribute somewhere else)
• Advocacy: How positively you speak and write about the Company

Let’s look at just one of these variables — Retention: A CAP study found average costs to replace an employee are up to 213 percent of annual salary for highly educated positions.

If the company can increase Revenue/FTE by just 5% by inspiring the right talent the effects are substantial:

• Increase in Revenue/FTE: $5,000
• Total Increase in Revenue: $50,000,000

Even conservative increases in drivers result in substantial value. Now just imagine if drivers were increased by 10%.

Employee engagement isn’t a fluffy, feel-good story. It’s the new path to growth. Only companies with an army of engaged of employees who believe in what they’re doing can turn a profit in this disruptive new world. Stop looking for the silver bullet — it’s in the office next to you.

ABOUT ANDREW OSTERDAY

Andrew is a founding partner and the Chief Creative Officer at Local Industries. His career spans both agency and client-side, crafting marketing solutions and digital experiences for some of the world’s most popular brands, such as Airbnb, Coca-Cola, The Home Depot, Delta, Porsche, and Jack Daniels before moving to Coca-Cola’s Global group where he led Cannes award-winning digital creative for Coke Zero.

His work at Coca-Cola also included real-time social content and production for the 2014 FIFA World Cup in Brazil, leading the world’s largest user-generated photo contest ever and crafting Coca-Cola’s employee engagement program spanning all 206 countries Coca-Cola serves.

Andrew is a pioneer of Change Marketing and a frequent mentor, writer, and speaker.

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