A couple of weeks ago I went to a presentation at the Dunwoody Business Forum by Jim Bulger, the president of WorkThrive (www.workthrive.com). The topic that he discussed covered employee engagement and its justification. Having an interest in the financial side of the matter I found the following item of particular interest since I am always trying to show the ROI (return on investment) for soft expense items like employee engagement.
On average an employee can give a certain amount of effort over the course of the day and it is unreasonable to assume that even the most engaged employee will give 100% every day. Additionally not every employee is the most engaged. While you could assume that out of 5 employees, 1 will be less engaged, 3 will be averagely engaged and 1 will be highly engaged. If the highly engaged gives 90% on average then the others would give lower levels of effort. Lets assume the following:
So on average if your employees give you 75% effort and if their average cost including salary, benefits and other costs (rent, equipment, computers etc…) is $45,000 then their true cost for 100% engagement is $60,000. That’s a pretty big amount left on the table ($45,000 vs $60,000).
I was doing the math during Jim’s presentation (sorry Jim) and realized that using the above math, if you improve an employee’s engagement by 5% to 80% on effort, your total cost per employee would drop by $3,750. This means that if you can find a way to make your employees more engaged (by 5%) for a cost of less than $3,750, you make money and they are happier! There are many things that you can do for far less than $3,750 that will make your employees far more engaged. Consider training, events, travel, contests, volunteering and more.
In future posts, I will try and cover this subject more, but meanwhile, if you found this post helpful please pass it along to someone else that would benefit and if we can help your business please let us know.
The Shared Finance Center provides outsourced accounting, bookkeeping and fractional CFO support to small business owners and in doing so we heavily focus on maximizing cash flow. We are headquartered in Roswell, Georgia and work with clients across the United States. If you think that this post would be helpful to anyone you know, please pass it along. Also please follow our blog for regular tips to grow your business.