Skip to Content
Author's profile photo Former Member

How HR Can Triple Profit Margins

Being unhappy costs money – it does for employers at least. Regardless of what their salaries may be, your unhappy employees are very expensive.  High absenteeism, chronic turnover, quality control problems and lost productivity are just some of the overheads associated with unhappy staff.  In the US alone, Gallup estimates that this is costing companies up to $550 billion a year.  That’s a huge price tag for people being unhappy in the workplace.

We hear a lot of talk about “employee engagement,” with various scholarly definitions being kicked about, ranging from emotional engagement to rational engagement.  In simple terms, employee engagement all boils down to a person’s attitude to work. The feelings employees have about their job, their line managers, their value to the organisation, and whether or not anybody is actually listening to them pretty much reflect the sense of personal commitment someone has toward their work and their company. Another Gallup study also concluded that globally, only 13 per cent of the world’s wage earners define themselves as engaged.

Personally, I don’t believe employees need to be fanatical or evangelistic about their jobs or companies in order to be effective or valuable. But a negative attitude hurts everyone – the employee, their co-workers, and the organisation itself.  It’s not something you want to let fester and it’s certainly not something you want to spread. On the flip side, companies with high employee engagement and enablement enjoy significantly higher profit margins than those with low level engagement.

A Towers Watson study found that profit margins of such companies were about three times higher than those of low-scoring employers. So given that employee engagement can either cost you money or triple your profit margin, how do you go about measuring it? If you think about what we as employers actually want, it’s not to simply measure the engagement itself, but rather the things that engagement affects – productivity, loyalty, attrition, and alignment with strategic goals. Ever heard the phrase, ‘Ask a better question, get a better answer’? The same applies here. Rather than asking if employees are engaged, it’s better to measure if they are productive, if they have the right goals, and if they are achieving those goals. But what are the things that actually influence engagement (and the all the things that engagement affects)? Actually, it’s surprisingly simple. Do people feel respected, do they have clear job definition, are they recognised for their contributions, and is their work tied to a broad corporate mission they care strongly about.

Like I said, it’s not exactly rocket science. So why aren’t we all excelling at it? Typically HR departments lack either the skills or the time to create a better climate for employee engagement. That’s where technology and automation can step in. The right tools can prompt managers to provide visibility, awareness, and lay out the steps to trigger action items. Talent management applications, for example, can also provide key suggestions while giving guidance on how to set goals including examples of best practices-based goals used by similar organisations. Automation is also a great means of improving efficiency for those who have too much on their plate.

Improving employee engagement and the resulting productivity it brings is absolutely mission-critical. It’s easy to forget just how important engagement related activities can be, but the lasting improvement in workforce productivity and the huge potential impact on profit margins are powerful reminders.

HR LoB CTA.png

Assigned Tags

      Be the first to leave a comment
      You must be Logged on to comment or reply to a post.