Employee Engagement is a Competitive Advantage
Updated: Oct 22, 2019
I recently heard an interview with Professor Rita McGrath of the Columbia Business School. Dr. McGrath caught my attention when she said, “the sustainable competitive advantage that used to be the Holy Grail for business is now growing increasingly elusive.”
Her point was that it is growing more and more difficult to sustain a competitive advantage, so companies must learn to capitalize on what she calls "transient advantage." This means companies must be able to respond quickly and efficiently mine for ideas among the entire organization. (You can read more in her book, The End of Competitive Advantage).
What I found most fascinating was her suggestion that workplace culture and health would become an increasingly important competitive advantage because it would be critical to gaining transient advantage.
Management expert Patrick Lencioni echoed this sentiment in his book The Advantage: Why Organizational Health Trumps Everything Else in Business. Lencioni writes, “The single greatest advantage any company can achieve is organizational health. Yet, it is ignored by most leaders.”
But this isn’t just the musings of popular management gurus. More and more hard data is being gathered showing how employee engagement really is a competitive advantage.
For example, the research giant Gallup found that business or work units that score in the top quartile in employee engagement have nearly double the odds of success (based on a composite of financial, customer, retention, safety, quality, shrinkage and absenteeism metrics) compared with those in the bottom quartile. Those at the 99th percentile have four times the success rate of those at the first percentile.
Tower Perrins found that companies with high levels of employee engagement improved 19.2% in operating income over the observed year while companies with low levels of employee engagement declined 32.7%. This comes to a 52% performance gap between high a low engagement companies!
The Hay Group conclude that engaged employees generate 43% more revenue than disengaged employees. And, Kenexa Research found that the most engaged companies (i.e. the top 25%) had twice the annual net income and returned seven times more to shareholders over a 5-year period compared to the least engaged companies (i.e. the lowest 25%).
These statistics represent only a few of the ways that engagement matters to organizational success. Highly engaged employees also positively affect revenue, shareholder value, productivity, innovation, employee resiliency, and decision making.
On the other hand, low employee engagement results in increased costs to the organization associated with employee turnover and retention, absenteeism, the cost of conflict, complaints and lawsuits, and employee health and safety.
Finding ways to care for the relational and emotional health of organizations is becoming increasingly vital for organizations. It is a competitive advantage that will be enjoyed by those organizations that deliberately develop and nurture it.
Founder and President, Remedium Solutions LLC