The Real Cost Of Employee Disengagement

By Don Rheem

We know the benefits of true employee engagement.

Employees are loyal and dedicated, and offer discretionary effort unbidden. They are inspired to come to work every day because they feel like an important part of something larger than themselves. They are great brand ambassadors and contribute mightily to the bottom line.

Employee engagement is not an accident of nature; it is the result of an intentional management approach that values employees and nourishes their primordial needs for human connections, a sense of purpose and validation.

So what about disengagement – what does that look like? I talk to CEOs all over the country in a variety of industries and business sizes, and I consistently get the same answers. They describe employees who show up late, who are unfocused and negative. They are toxic to the workplace environment. Even if most of an organization’s employees are engaged, the handful of disengaged employees can infect the rest of the staff.

The negative impact is staggering and CEOs recognize it.

When I ask them to consider what disengaged employees are doing to the company, they enumerate a laundry list of outcomes detrimental to their organizations: Lost customers, poor customer experience, higher error rates, degrading of the brand, defection of top performers worn down by the negativity, and so on. I’ve even seen numerous senior leaders frustrated by people who are supposed to be on their team.

When I ask my clients to look back over the last 12 months and give me a cost—a dollar figure or a percentage of revenue—that disengagement represents, they typically estimate between 10% and 20% of current revenue. For companies of any size disengagement costs millions of dollars, and I suspect they are underestimating the full impact because those are merely the hard costs.

There are also considerable labor costs. Disengaged employees are more likely to quit, so there are the transactional costs involved with hiring. Disengaged employees are also more likely to get fired for lack of performance, which puts organizations at risk of legal action. Whether they leave on their own behest or not, the disengaged can do incredible damage to the company’s reputation.

I’ll give you an example. One company I worked with did not score well on my firm’s assessment of employee engagement. Many employees expressed dissatisfaction and resentment. So I checked indeed.com and glassdoor.com to determine what current and former employees were saying to the public about their experience at the company.

What I found were disgruntled, disengaged employees venting online about the company and what it represents. When I showed the comments to the senior leadership team, their jaws dropped. There are companies that search these sites before hiring vendors. They don’t want to do business with dysfunctional companies.

Finally, disengaged employees impose immense behavioral costs upon their workplaces. As working-age adults, we spend more time on the job than anywhere else. When the workplace is unproductive, negative and unhappy, it inflicts emotional pain on fellow employees. For managers who have to deal with the productivity loss and all the distractions from their other responsibilities, the stress and anxiety are metabolically exhausting.

Disengagement in the workplace is simply a show stopper.

Senior leadership teams I talk to sometimes balk at the time and resources they must commit to improve their workplace culture, but getting started is fast and it’s simple. Take a moment to assess your current workplace with the “Are You Nurturing A High-Performance Culture” assessment. The free quiz is designed to ask questions that—for better or worse—could be affecting your bottom line.

When you stop to consider the tremendous amount of energy and productivity that is sapped from an organization by employee disengagement, and the hard costs associated with it, it is quickly clear how large your return on investment can be.


Don Rheem is a former congressional science advisor, CEO, and author of Thrive By Design: The Neuroscience That Drives High-Performance Cultures with ForbesBooks. Learn more at DonRheem.com.

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