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Why it’s risky not to track engagement and retention

Failure to realise if and why there’s a problem can be costly for organisations.

Employee engagement is not a management fad. One factor that helps the recruitment industry remain fluid is that many businesses just underestimate the importance of employee engagement. They focus too much on attracting talent and not enough time retaining it. The fact of the matter is, engaged employees who want to stay at an organisation are critical to its success. This makes tracking employee engagement and retention a must for a business of any size. Companies that fail to monitor employee engagement run a lot of risks that impact on their ability to succeed and build a competitive advantage.

Here are eight risks you take if you fail to track employee engagement and underestimate your investment in employee retention:

1. Higher costs

It’s expensive to hire and train a new employee. Failing to hire the right people and then retain them leads to both direct costs in the form of advertising and agency fees, as well as the time that management spends recruiting. It also leads to the indirect costs of a less productive team while a replacement is found.

2. You won’t know how many people are leaving or why

This means you won’t be aware of the core problems that are driving people to exit your business. Without taking the necessary actions, the problem will persist. An exit interview at a minimum can help better track specific issues.

3. You will develop a reputation as a poor employer brand

Companies that have high turnover are likely to have a harder time finding employees. When word gets out that a firm is not a great place to work, and this is evidenced by high employee attrition, the employer brand is affected. The reputation of the company will then drop, which makes it even harder to attract and retain talent. Since people are increasingly seen as key to competitive advantage, this is highly problematic. These problems have been exacerbated by online review sites where employers can be ranked and rated, meaning that stories of low employee engagement can spread faster than wildfire.

4. Higher levels of absenteeism

People that aren’t engaged take more sick leave. A Gallup study of employee engagement found that organisations that had higher levels of engagement had less absenteeism. In contrast, a study by the CIPD showed those who are less engaged have lower levels of wellbeing as a result, which may be a cause of this absenteeism.

5. More health and safety incidents

The Gallup survey found that businesses with the highest levels of engagement had 48 per cent fewer safety issues compared to companies with less engaged employees.

6. Lower customer satisfaction and loyalty

Many studies have shown that customer satisfaction is higher when employees are engaged and retained. It makes sense that happier employees are better able to sell to customers. Dealing with a new employee each time due to a lack of retention can be a frustrating experience for a client.

7. You could develop a “toxic workforce

Actively disengaged employees can be poisonous. They become miserable, and as a consequence, they then try to make everyone around them miserable too. They are not just watching the clock, but actively causing damage to the company. If you don’t know you have an employee engagement problem, actively disengaged employees will be spreading negativity throughout the business. This means engaged employees could be dragged down by them, making any issues much worse.

8. Less productivity and profitability

For all the reasons already mentioned, companies with lower levels of engagement are naturally going to be less productive, and ultimately less profitable. There are also some other factors that feed into this. Companies with a less participative workforce have higher levels of quality issues and mistakes, which lowers productivity. In the end, all the costs add up and profitability is impacted.

The bottom line is that your bottom line will suffer if you underestimate the importance of engaging employees and retaining top talent. If you fail to track employee engagement and retention, it will become harder and harder to understand if you have a problem, and what the extent of the issue is.

Nick Day is the director of recruitment at JGA Recruitment.

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Max Underhill
Max Underhill

The above generic measures can be defined as quantifiable hard measures. Recruitment retention rates I guess is inferred in the turnover but this can be quite high in some of the management/executive recruitment. At a recent conference an executive recruiter complained that the 40% retention was the clients fault as they did not know what they wanted. The corporate measures like TEC/Total Revenue (or Total costs) is going to be interesting as the productivity increases through technology and labour costs flattens off as it has done in Australia since 2012 (this gap is expected to increase dramatically). Establishing projected corporate… Read more »

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