How to Measure the ROI of Employee Engagement

A highly engaged workforce is more than just content —these workers are passionate, motivated, and deeply invested in the company's mission. The benefits of high employee engagement like this are manifold, from improved productivity to better retention rates, reducing the costs and disruptions associated with high turnover. 

However, quantifying these benefits in financial terms — that is, calculating the return on investment (ROI) — can feel like a challenging task. But it’s actually very doable!

There are clear steps you can take to effectively measure your employee engagement ROI. Mastering this process helps your organization develop engagement strategies that contribute to a positive work environment and bottom line growth.

1. Establish Clear Objectives and Key Performance Indicators (KPIs)

This initial step provides a sense of direction and a benchmark for subsequent analyses. It's important to articulate what successful employee engagement looks like in your unique organizational context — does it mean lower turnover, higher productivity, better customer satisfaction, or all of these? 

Once you've outlined your objectives, you can define quantifiable KPIs to track progress against these goals. These might include metrics like response rates to engagement surveys, scores on engagement-related questions, changes in turnover rates, or shifts in productivity levels. 

2. Implement Employee Engagement Surveys 

These surveys are designed to gauge the emotional commitment and involvement of your employees towards their work and the organization. They serve as a platform for employees to express their feelings, ideas, and concerns, offering invaluable insights into their engagement levels. 

Your questionnaire can include a mix of quantitative and qualitative questions. Quantitative questions — like yes/no or multiple choice — provide easily measurable data, while qualitative questions (think short answers) capture the nuances of employees' experiences and thoughts. Consider regularly conducting these surveys — annually, bi-annually, or even quarterly — to provide a consistent data stream for tracking engagement over time. 

3. Gather Data from Other Sources

In addition to surveys, you can gather data from other reliable sources to obtain a more comprehensive perspective on employee engagement. These sources could include performance metrics, retention rates, absenteeism rates, and productivity data, each offering unique insights into different facets of engagement. 

For instance, lower absenteeism rates and higher retention rates could indicate a more engaged workforce, while increased productivity could suggest that employees are more committed and driven. 

4. Analyze Collected Data

Once you've gathered data from various sources such as surveys, performance metrics, retention and absenteeism rates, it’s time to methodically sift through this information and make sense of it. This transforms raw information into actionable insights, giving you a clear understanding of your employees' engagement levels and its influence on your business. 

Consider using statistical tools to identify trends, correlations, and patterns that reveal the level and impact of employee engagement. For instance, does a rise in engagement scores coincide with an improvement in productivity or a decrease in staff turnover? Such correlations can provide powerful insights into the effect of engagement on your organization. Your analysis will likely also highlight areas that need attention, revealing where your engagement strategies might need adjustments. 

5. Link Engagement Data to Business Outcomes

This step is about drawing meaningful connections between the results of your engagement initiatives and tangible business results. For example, if data analysis reveals that increased engagement coincides with lower turnover rates, the next step is to identify the financial impact of this change. Lower turnover equates to fewer resources spent on recruitment, hiring, and training, translating into cost savings for the organization. 

Similarly, if higher engagement leads to improved productivity, it can potentially translate into increased revenues. By identifying and quantifying these connections, you can glean the real impact and value of employee engagement in financial terms, enabling you to calculate a precise ROI. 

6. Communicate Results

Sharing your findings helps maintain transparency and demonstrates the value and impact of your engagement strategies. Try to be as clear, concise, and focused as possible when highlighting key findings and their implications. You can share it with all relevant stakeholders, including the leadership team and the employees themselves. 

For the leadership team, the results underline the profitability of investing in employee engagement, reinforcing its importance to the organization's success. For employees, understanding the direct impact of their engagement on the organization's performance can be a powerful motivator, driving even greater engagement. This step not only validates the effort put into enhancing engagement, it also paves the way for informed decision-making for future initiatives.

7. Leverage Technology

Today's HR tech tools offer a multitude of functionalities that can significantly streamline and improve the process. They can automate the collection, analysis, and reporting of data, saving time and resources that can be better utilized elsewhere. These tools often come with intuitive dashboards that provide real-time insights, enabling you to track engagement metrics and their impact continuously. 

They can also help manage and analyze complex data sets, highlight trends, and even predict future engagement levels based on historical data. A few examples of these tools include: ADP Workforce Now, Visier, and Lattice. 

8. Repeat the Process

The process of measuring employee engagement ROI is not a one-time task but a continuous cycle that benefits from regular attention. Employee engagement and its effects on business outcomes are dynamic and change over time, so you should try to keep your finger on the pulse. Repeating the measurement process at regular intervals — whether quarterly, bi-annually, or annually — ensures you're always informed about the current state of employee engagement and its impact on your organization. 

It also allows you to monitor the effectiveness of your engagement strategies and adjust them as needed to maximize results. Additionally, by maintaining this regular cadence, you can identify trends, anticipate changes, and make data-driven decisions more swiftly. Regular measurement keeps your strategies relevant, your employees engaged, and your organization agile, driving continued improvement in employee engagement ROI.

Using Wellness to Improve Your Employee Engagement ROI

Wellbeing programs are a cost-effective driver of employee engagement: Nearly half of HR leaders said their wellness initiative reduced the costs of their employee engagement efforts in our 2023 Return on Wellbeing Study.

And employee wellbeing pays across the board, with research showing wellness programs increase productivity, decrease absenteeism, and reduce healthcare spending. Companies with active Wellhub users, for example, have seen a 35% drop in annual healthcare spending. 

If you want to create a healthier and happier workforce, reach out to a Wellbeing Specialist today!

References

• The Benefits of Employee Engagement. (January 7, 2023). Gallup. Retrieved July 19, 2023 from https://www.gallup.com/workplace/236927/employee-engagement-drives-growth.aspx.