Employee engagement and the bottom line: HR can help make the business case

If you’re looking to boost funding and support for your employee engagement program, you may want to look at your company’s stock price as a starting point. 

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According to Microsoft’s Work Trend Index Special Report released Thursday, researchers at the software giant’s Viva Glint employee experience operations found a correlation between a company’s stock performance and whether its workforce was in the top or bottom 10% of highly engaged employees.

The stock of companies with high employee engagement performed twice as well as companies with low engagement, according to a 2022 analysis of more than 3 million employees at 226 large global companies that trade on U.S. stock markets, the report found. Some companies with the highest level of engagement even outperformed the S&P 500 at the end of the year, according to the report.

See also: Insights from Josh Bersin: How to hire in a cooling market

To drive this point further, each additional point of engagement employees reported was valued at over $46,500 in market cap difference per employee, researchers found.

“I think what these organizations are doing well is that they are regularly seeking and acting on employee feedback to understand what their people need within the workplace,” says Jaime Gonzales, head of strategic development, people science at Microsoft.

And when companies double down on engagement, it translates into really understanding what employees need to feel happy and successful in the workplace, Gonzales says. It also entails equipping leaders and managers with actionable insights to ensure they can drive improvements and actually manifest a positive employee experience.

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Related: How LMS platforms can help solve 5 employee engagement problems

When employee engagement takes a backseat to financial performance

Although employers are beginning to recognize the importance of employee engagement as it relates to the financial performance of the company, only 11%-12% have made a substantial investment into this area, says Josh Bersin, founder and CEO of The Josh Bersin Company. 

For instance, Bersin notes, Gallup’s employee engagement surveys consistently find a third of employees hate their companies and a third are semi-satisfied—leaving just a third who are highly engaged.

“There’s always two-thirds of companies that aren’t very good at this,” says Bersin. 

And for those companies that excel in employee engagement, it is often the result of an organization having a “near-death experience,” Bersin says.

How to connect the dots between engagement and financial performance

Connecting employee engagement to a company’s financial performance requires HR leaders to take a strategic approach.

For HR leaders who face challenges convincing the rest of the management team of the importance of employee engagement, Bersin advises that they first connect the issue to broader business problems or opportunities. 

For example, ask fellow leaders questions like, “Why do you think we’re not growing fast enough?” or “What do you think we can do to outpace our competition?” Bersin notes the answers will likely all have to do with people issues, such as the company needs more employees, more employee training or more innovation.

“That’s the opportunity for the HR leader to say, ‘That’s the reason we’re doing this [engagement work]. It will allow what you want to have happen to happen,” Bersin advises. “That’s the No. 1 conversation that has to happen.”

HR may also need to take a bold stance and push back, Bersin says—emphasizing that even if an approach to those business problems may seem cost-effective, if it doesn’t center employee engagement, the company will have to pay for it later due to a loss in retention. 

“The employee engagement problem isn’t a problem of benefits or pay or development,” says Bersin. “It’s a problem of designing jobs at the company so employees can be successful.”

Ravin Jesuthasan, global leader of Mercer’s transformation services business, says HR leaders have to build a business case for employee engagement in terms of economic impact on the company—while simultaneously fighting operational fires associated with employee retention, attracting talent and other HR issues.

Creating connective tissue is key to helping business leaders understand the importance of employee engagement, Jesuthasan says.

“You need to make the science clear,” Jesuthasan says. “Make that connective tissue from employee engagement to productivity to financial performance and to market performance. Create a chain, if you will, so it’s explicit and clear and not a black box between engagement and the company’s stock price.”

Dawn Kawamoto, Human Resource Executive
Dawn Kawamoto
Dawn Kawamoto is HR Editor of Human Resource Executive. She is an award-winning journalist who has covered technology business news for such publications as CNET and has covered the HR and careers industry for such organizations as Dice and Built In prior to joining HRE. She can be reached at [email protected] and below on social media.