Is Employee Engagement a lead indicator of business performance?

Hester Gras
Cathy Brown
Cathy Brown

According to the latest research numbers, the UK has an Employee Engagement deficit and the widest productivity gap since 1995. Can we link this productivity deficit to the lack of employee engagement? To explore this question, we spoke to Cathy Brown, Executive Director at Engage for Success, an industry-led movement committed to the idea that companies should release more of the capability and potential of people at work.

Can you share more background information on the employee engagement and productivity level in the UK?

The UK currently has an Employee Engagement deficit. Survey after survey indicates that only around one third of UK workers say they are engaged – a figure which leaves the UK ranked ninth for engagement levels amongst the world’s twelve largest economies as ranked by GDP (Kenexa 2009). The UK also has a productivity deficit. The most recent ONS survey found that output per hour in the UK was 15 percentage points below the average for the rest of the G7 industrialised nations in 2011. On an output per worker basis, UK productivity was 20 percentage points lower than the rest of the G7 in 2011. This represents the widest productivity gap since 1995.

Happy employees are more productive. Source: Hollandse Hoogte.
Happy employees are more productive. Source: Hollandse Hoogte.

How do you think employee engagement links to performance and productivity?

As our “Nailing the Evidence” paper demonstrates, there is a firm correlation between employee engagement and high organisational productivity and performance, across all sectors of the economy. Employee disengagement is therefore clearly contributing to our disappointing productivity figures. Analysis indicates that were the UK to move its engagement levels to the middle of the top quartile, such as that for the Netherlands, this would be associated with a £25.8bn increase in GDP (Kenexa).

“Nailing the Evidence” highlights the evidence for the effectiveness of employee engagement strategies in improving performance, productivity and profitability in the private sector. The cumulative effect of different studies – and our own experiences – leaves little room for doubt about the statistical importance of engaging employees and the effect that has on performance.

High employee engagement levels increase productivity and performance. Source: Hollandse Hoogte.
High employee engagement levels increase productivity and performance. Source: Hollandse Hoogte.

Are there other positive side effects of employee engagement?

As well as performance and productivity, employee engagement impacts positively on levels of absenteeism, on retention, on levels of innovation, on customer service, on positive outcomes in public services and on staff advocacy.

It is also clear that engagement impacts more on performance than the other way around. A study in a leading retail bank found that employee engagement levels predicted subsequent business level performance over a three-year horizon while business unit performance predicted engagement only over a single year. It’s no wonder that 94% of the world’s most admired companies believe that their efforts to engage their employees have created a competitive advantage!”

Do you think employee engagement is critical for productivity and business success? Let us know in the comments and read 4 Keys to Employee Engagement about Engage for Success’s 4 Enablers for employee engagement.












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