The High Costs of Employee Disengagement and Why Action is Needed

12 Nov

Employee engagement is now one of the most critical issues affecting organisations. While fostering a culture of engagement brings numerous benefits, the costs of disengagement are equally powerful but profoundly negative. Disengagement impacts an organisation’s bottom line, team morale, and overall productivity.

In my recent webinar, Unlocking the Power of Employee Engagement Surveys, I highlighted the financial and operational effects of disengagement and set out some tips for improvement. The simple calculation below will help you to understand the broader impact of disengagement.

Calculating the Cost of Disengagement

Gallup research suggests that “not engaged” employees cost organisations approximately 18% of their annual salary in lost productivity, errors, and missed growth opportunities. To illustrate, consider the average monthly salary in Northern Ireland, which was £2,258 as of October. According to Gallup’s estimate, each disengaged employee costs a business roughly £406.44 per month, or £4,877.28 annually.

Let’s apply this figure to a hypothetical organisation to show the broader financial impact. Suppose a company has 50 employees and an estimated 30% disengagement rate. In this case:

Number of disengaged employees: 50 * 30% = 15 employees
Annual cost per disengaged employee: £4,877.28
Total annual cost of disengagement: £4,877.28 * 15 = £73,159.20

In this scenario, the organisation loses more than £73,000 per year due to disengagement, a figure that most companies can’t afford to ignore.

The Hidden Consequences of Disengagement

The financial losses associated with disengagement are only part of the story. Disengaged employees create a ripple effect that impacts the entire organisation in several critical ways:

Increased Turnover and Recruitment Costs: Disengaged employees are more likely to leave their positions, driving up turnover and recruitment costs. Replacing and training new employees requires time and resources, which only adds to the expense.

Higher Absenteeism Rates: Disengaged employees are more likely to have higher absenteeism, often taking prolonged leave. This absenteeism places additional pressure on the rest of the team, leading to burnout and reduced productivity.

Lowered Team Morale: Disengaged employees can negatively affect team morale. When engaged team members see others not fully contributing, it can create resentment and reduce trust, which can damage overall productivity.

Decreased Innovation: Disengaged employees rarely go above and beyond, stifling the innovation and creativity that comes from a passionate and dedicated workforce. This lack of initiative can reduce the organisation’s competitive edge.

With the clear and tangible costs of disengagement, the need for organisations to take action is pressing.

Here are some effective steps:

Conduct Employee Engagement Surveys: A well-designed engagement survey provides valuable insights into employee morale, satisfaction, and the overall health of your workplace culture. The feedback from these surveys can help organisations create targeted strategies to boost engagement.

Develop Strategies for Improvement: Based on survey results, organisations can address specific concerns and create tailored strategies that boost motivation, foster growth, and improve the employee experience.

If your organisation would like to conduct an anonymous employee engagement survey or needs support in taking the next steps, please reach out. A strong engagement strategy can not only prevent the heavy costs of disengagement but also help create a vibrant, innovative, and motivated workplace.