Why the Level of Employee Engagement is So Important

The term “employee engagement” is used to describe a situation where someone is excited about coming to work and working hard.  When employees are engaged with their work, they give most all of their energy, creativity and passion to performing their jobs.  The level of employee engagement is extremely important to the success of a business organization because it’s the primary driver of its financial performance.  For example, consulting firm Towers Perrin looked at 50 global companies over a 12 month period and found a direct relationship between the level of employee engagement and company performance.  They found that the companies with a high level of employee engagement had a 19 percent increase in operating income and nearly a 28 percent increase in earnings per share.  On the other hand, the companies with low levels of employee engagement experienced a drop in operating income of more than 32 percent while earnings per share fell more than 11 percent.

Regarding another dimension of financial performance, Alex Edmans, a finance professor at the University of Pennsylvania’s Wharton School tracked the stock performance of the Fortune magazine 100 Best Companies to Work For in America from 1984 through 2009.  He found that the stock prices of these firms, which have high levels of employee engagement, consistently outperformed the market.

Regarding another dimension of financial performance, Alex Edmans, a finance professor at the University of Pennsylvania’s Wharton School tracked the stock performance of the Fortune magazine 100 Best Companies to Work For in America from 1984 through 2009.  He found that the stock prices of these firms, which have high levels of employee engagement, consistently outperformed the market.

Regarding another dimension of financial performance, Alex Edmans, a finance professor at the University of Pennsylvania’s Wharton School tracked the stock performance of the Fortune magazine 100 Best Companies to Work For in America from 1984 through 2009.  He found that the stock prices of these firms, which have high levels of employee engagement, consistently outperformed the market.

Along these same lines, AON Hewitt found that organizations with high levels of employee engagement outperformed the total stock market index and posted total shareholder returns that were 22 percent higher than the average in 2010.  On the other hand, companies with low levels of employee engagement posted a total shareholder return that was 28 percent below the average.

Clearly, having a high level of employee engagement is a very desirable state of affairs for a business organization to have.

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About Ross Reck

Who am I? I am the author of The Engagement Formula, Turning Your Customers into Your Sales Force, The X-Factor and my popular weekly newsletter: Ross Reck’s Weekly Reminder. I'm also the coauthor of Instant Turnaround!, REVVED! and the best selling The Win-Win Negotiator. I've also spoken at hundreds of meetings, conferences and conventions throughout the United States, Canada, Latin America, Europe and Asia. My consulting clients include Hewlett-Packard, John Deere, American Express, Janssen-Ortho, Inc., Shire Pharmaceuticals, Philip Morris International, the Chicago Cubs, Rolls-Royce and Xerox. I received my Ph.D. from Michigan State University in 1977. From 1975 to 1985 I served a Professor of Management at Arizona State University. During my career at ASU I was the only two-time recipient of the prestigious “Teaching Excellence in Continuing Education” award and was identified by the university as an “Outstanding Teacher.” In 1985 I left my position at ASU to search full-time for a new "Management Model" to replace the current model with it's emphasis on authority, control and formal communication channels. Last February, I found it (it's actually a leadership model) and it's featured in my new book, The Engagement Formula: Three Simple Steps that Guarantee Full Employee Engagement.

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