#2 ROEI Series: The Advantages of an Engaged Workforce

ROEI Series: #1 addressed “cost” versus “investment” and can best be expressed through a quote by James Bertrand “Once we rid ourselves of traditional thinking we can get on with creating the future”

This week, we look at the advantages of having an engaged workforce.

  • Providing HR with the technology and tools to “create” will facilitate in the empowerment of the employees and result in “employee engagement”.
  • Employee engagement is “the level of commitment and involvement an employee has towards their organization and its values”. Establishing trust between the workforce and management and between co-workers creates an engaged workforce and the ensuing benefits.
  • Engaged workers are enthusiastic, generate and contribute ideas, find ways to improve, are optimistic about the future, share ideas with colleagues, are seldom absent, stay longer and are most valuable company ambassadors.
  • Disengaged workers result in extra costs related to low morale, lost productivity, accidents, theft and turnover. “Turnover” is the hidden (rarely quantified) cost. Follow the steps of manually replacing an employee: Recruiting…interviewing…Hiring…Orientation…Training…Compensation and benefits while training…Lost productivity…Administrative costs. Investing in HR technology will eliminate much of the manual human intervention in this process.
  • SHRM (lowest of 17 companies) estimates that it costs $3,500 to replace an $8.00 per hour employee. Other sources expressed these estimates: Calculated on the annual salary; Entry Level 30% - 50%; Middle Level 150% and high level specialized up to 400%.
  • Average turnover rates (US) is 18.7% (slightly lower in the recession). “Best in Class” typically have no more than 5% turnover.

A quick calculation shows that investing in the reduction of employee turnover can result in a significant cost reduction.

Number of Employees: 300/ Average Salary/ Cost to replace

Upper Management: 10%/ $ 150,000/ 300% $450,000
Middle Management: 25%/ $ 80,000/ 150% $120,000
Rest: 65%/ $ 35,000/ 30% $ 10,600

Annual Payroll $ 17,325,000
Turnover Rate Average: 15% $ 2,598,750
Reduce to: 10% $ 1,735,000
Savings: $ 863,750

Watch for our July Article #3 ROEI Series: "Areas of Focus to Minimize Turnover and Increase Retention"