(This is the first of three posts where I will focus on employee engagement.  Subscribe to be notified of new posts!)

A recent Gallup study proved a causal relationship between employee engagement and financial performance.  Why is the outcome of this study so important?  Because the results indicate we must invest in our employees to reach our financial goals.

The study actually observes a two-step relationship as Dr. Harter relates:

“What we’re able to do in this study is look not just at engagement and financial performance but also look at two mediating variables: employee turnover and customer perceptions. We’re able to look at the path from employee engagement to those two outcomes that then lead to financial performance.”

Engaged Employees

  • Show Up (mentally and physically) – Engaged employees stay at their jobs longer creating low turnover costs.
  • Show Off (please customers) – With low turnover comes improved customer relationships, deeper product experience and a better understanding of how customers use products in their environment.
  • Show Results (produce higher quality products) – Engaged employees do a better job because they have more experience and because they are more financially/emotionally vested in the company’s brand, reputation, and performance.

None of this should be surprising since the result is analogous to investing in a business.  In this case we invest in employees in order to reap financial rewards.  What is surprising is how often short term gains “won” through aggressive cost-cutting (e.g. salaries, benefits, training time, staff) actually undermine the very health and financial strength they are designed to support.

Beware the next time your company is planning to cut past the fat and muscle into the bone.  Before you implement or endorse an idea which looks great on paper, consider the pivot point – whether or not it actually harms future profitability.

Employee Engagement and Profit – Which Comes First?
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