Uncovering the Hidden Costs of Unengaged Employees

It’s usually a pretty gradual process. A once top-performer starts putting in the bare minimum. They stop replying to emails and start showing up late to meetings. Their calendars start filling up with vague appointments that require them to be out of the office. Mistakes and errors pile up in their work. They stop interacting with the team and chatting with others during lunch. All of these signs point to an employee that has “ checked out .”

According to the State of the American Workplace report from Gallup, only 33% of the country’s workers are actively engaged. It’s obvious that unengaged employees can be a drain on morale and make it harder to get things done, but they actually pose a much more serious threat.

In a recent survey conducted by The Economist , 84% of executives listed unengaged employees as one of the top 3 threats to their organizations. The truth is that unengaged employees are more than just an inconvenience; they can directly impact businesses where it hurts the most — their bottom line.

What is employee engagement?

Employee engagement is not the same as happiness or satisfaction . An employee may love their office perks and get along great with their teammates but still be zoned out when it comes to their actual work. Engagement is the personal commitment an employee has to their organization’s goals and overall success. It’s the amount of passion they have and the willingness to put forth effort into their work. Engaged employees go the extra mile to get things done. Employee engagement can be classified into three basic levels:

How unengaged employees directly impact your bottom line

Unengaged employees chip away at profit in all kinds of ways, making it difficult to measure accurately. One study by ADP put a dollar amount on the issue: $2,246 per disengaged employee . McLean & Company up the ante and estimate it to be $3,400 per year per $10,000 in salary. While not everyone can agree on specific dollars and cents, nearly everyone agrees it’s significant enough to be detrimental to their business.

On the whole, Gallup estimates the problem costs U.S. business between $450-$550 billion a year . But where do these costs come from? How are they calculated?

1. Unengaged employees use more sick time.

The Gallup report mentioned previously revealed that unengaged employees have 69% higher absenteeism rates. It’s estimated that in a 10,000-person company, absenteeism by unengaged employees can cost the organization $600,000 in salary paid for work that was not performed.

Study after study has identified poor employee engagement as a key factor in absenteeism . The Chartered Institute of Personnel and Development’s guide for HR directors states plainly that engaged employees are  “less likely to be sick.”

2. Unengaged employees bring down morale and impede hiring.

The latest research is proving that stress, anxiety, and other negative emotions are highly contagious . Just a single person’s actions or even thoughts can infect a group and cause all kinds of surprising results.

In his book “ Focus ,” psychologist Daniel Goleman discovered that one person’s bad attitude can slowly destroy what was once a well-functioning group. It’s called Bad Apple syndrome and it can bring down performance 30% to 40%.

These bad attitudes can even affect hiring. “When the unengaged people are leaders and cultural touchstones, their negative attitude can ripple beyond their immediate team,” explains Megan Barbier, VP of Human Resources at UDN Task Manager . “When people go into job interviews, they observe their potential future coworkers. If they look out into a sea of people that are unengaged or led by an unengaged leader, that raises red flags. Top performers steer clear of negative cultures because they know how harmful they can be.”

3. Unengaged employees are less productive.

The Gallup report revealed that unengaged employees are 18% less productive than their engaged counterparts. While that number is already sobering, the truth may be much worse. Engaged employees go beyond expectations in ways that are not always easily quantifiable.

In a recent article on CIO.com, Adam Ochstein, founder and CEO of StratEx explained the difference between engaged and unengaged employees this way: “When employees are engaged, they want to stay an extra hour to finish up a project or read industry-specific content to learn about the latest techniques. They want to get to know their coworkers and clients better. Engaged employees make the office a fun place to work, and positive attitudes are contagious. When employees genuinely enjoy coming to work, the entire business improves.”

4. Unengaged employees put others at risk.

According to Gallup, unengaged employees have 49% more accidents, and their work has 60% more errors. When employees are no longer engaged with their work, it can result in negligence and a lack of commitment to safety standards that can put others in physical danger.

A survey from the Society for Human Resource Management (SHRM) found that engaged employees were five times less likely to have an accident on the job.

In high- risk industries or those where heavy machinery is in use, a lack of engagement not only puts profits at risk but also the lives of all involved.

5. Unengaged employees increase customer complaints.

Employee satisfaction is directly linked to customer satisfaction . According to a study by GuideStar Research, client perception is heavily influenced by the perceived dedication of your employees. In the minds of customers, employee attitudes are directly tied to the quality of a company. Poor attitudes chip away at customer trust in the organization as a whole.

In an article for McKinsey & Company , Jeff Cava, CHRO for Starwood Hotels and Resorts Worldwide, directly connected employee attitude and performance with customer satisfaction:

“Increased collaboration between departments in the hotel, self-reported by employees, was very predictive of reduction of customer complaints and associated increases in occupancy rate. We intuitively knew that employees’ attitudes had a massive impact on client satisfaction, but this time it was real data!”

6. Unengaged employees cost you if they stay but also if they leave.

In periods of recession, unengaged employees don’t leave. They stay and slowly infect your workforce with negativity. While having unengaged employees leave may sound like a good thing, it can be more expensive than you think.

It can cost a whopping 21.4% of an employee’s annual pay to replace him or her. The Society of Human Resources Management puts that number even higher, estimating costs between six and nine months’ salary to replace a position. To illustrate, an employee that makes $40,000 a year can cost your organization $20,000 to $30,000 to replace. That doesn’t even include revenue lost because of poor productivity.

Engage your employees to increase your bottom line

The financial blow unengaged employees can deal to their organizations is undeniable. They cost businesses billions of dollars a year in lost profits and wasted resources. Fortunately, out of all of the challenges businesses contend with today, keeping employees engaged is one they have the most control over.

“Even if someone has become disengaged, there is always a spark you can re-ignite,” says Barbier. “One element of your culture could be off, but that one element could easily look different in a month. It could be a particular person, a role, or even just an intense growth period. The landscape of an organization is always changing. A great leader should be truly tied into their teams and sensitive to any disturbances. By building trust with your team members, you can help them stay engaged even if you hit a few rough spots.”

There are specific tactics and strategies organizations can pursue that have real, impactful results. All companies should consider an investment in human resource optimization as one of the best they can make for the long-term health of their business.