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The ultimate guide to employee engagement

Engaged employees can lead to company success. Here’s what you need to know about employee engagement—what it is, why it’s so important, and how to improve it.

The ultimate guide to employee engagement

[Source Photo: rawpixel]

BY Gwen Moranlong read

Imagine a crew team out on the river where three people are rowing their hearts out, five are taking in the scenery, and two are trying to sink the boat.

If the crew team were a company, that would translate to about a third of the staff being engaged employees passionately driving business outcomes, about half kind of coasting along, and a small contingent of workers actively impeding their colleagues’ efforts and undermining organizational success. That breakdown might sound far-fetched, but it’s just about accurate in describing the state of employee engagement in the U.S. and Canada these days.

It’s hard to conceive how businesses can thrive when so few people are working to move them forward. Which is why organizations need to work to foster employee engagement and motivate employees, focusing on company culture just as much as key performance indicators. Because investing in engagement efforts will ultimately drive company success.

In other words, when you do get everyone rowing, no one will have time to rock your boat.

What is employee engagement?

William Kahn, a professor of organizational behavior at Boston University‘s Questrom School of Business, introduced the term “employee engagement” in the 1990s based on his observation that people have a choice as to how much of themselves they’re willing to invest in their jobs.

When Kahn conducted in-depth interviews with employees at two organizations, he discovered they were far more emotionally and physically engaged when they experienced psychological meaningfulness, safety, and availability. Nearly 25 years later, these three elements remain at the core of most theories of employee engagement (more on these drivers of employee engagement in a minute).

The academic definition of employee engagement refers to “an individual’s sense of purpose and focused energy, evident to others in the display of personal initiative, adaptability, effort, and persistence directed toward organizational goals.” In other words, engaged employees invest their personal, cognitive, emotional, and physical energies into their work. Lisa H. Nishii, an expert in organizational psychology at Cornell University, emphasizes in her research that the investment of these active energies nets out in behaviors that are more focused and mindful.

In contrast, when employees are unengaged, they tend to withdraw. They can become robotic in their work, apathetic or detached, and burnt out. “When people disengage and become defensive, they hide their true identity, thoughts, and feelings; people go through the motions of work but do not give of themselves in their work. They are driven more by what they have to do than by what they want to do,” Nishii says. They tend to be happy with “good enough.” 

What drives employee engagement?

Kahn’s theory establishes three dimensions that drive employee engagement:

Psychological meaningfulness

Meaningfulness refers to engaged employees’ sense that their work was worthwhile and made a difference.

This dimension involves making sure jobs are structured so that they’re challenging and meaningful, providing motivating opportunities to reach potential. If you give people this kind of work and set them up for success, Nishii says, they‘ll respond by stepping up to the plate.

Psychological safety

This means feeling valued, accepted, and respected—and able to perform in a positive work environment. Employees look for signs to determine whether it’s safe for them to share their thoughts.

The frequency and quality of feedback that managers seek and act upon, the transparency an individual experiences, and managers’ willingness to own up to and learn from their mistakes all play a significant role in building trust and creating psychological safety, which in turn can help engage employees.

Availability

Engaged employees need to routinely feel secure and self-confident while possessing the emotional and psychological bandwidth to do their jobs.

The Journal of Occupational and Organizational Psychology highlights that engagement from the previous day carries into the next and is also influenced by one’s personal life. Psychological availability means allowing employees to renew their energy through work-life balance.

In her teachings, Nishii adds that psychological availability is also about providing learning opportunities that promote confidence and a desire to improve.

Employee engagement vs. employee satisfaction

Employee engagement should be a mutually beneficial exchange between the employee and the employer, whereas employee satisfaction measures what employers should do for their employees without any expectations in return.

While the concepts are related, only employee engagement has been linked as a predictor of performance. As Nishii explains in her Diversity and Inclusion course: “You don’t want a satisfaction ring from your partner, you want an engagement ring.” The same is true for the employer-employee relationship.

While engaged employees are curious, seeking, and passionate, satisfied individuals are content with their present state. When you conflate measuring employee satisfaction with employee engagement, it tells you nothing about their work-related energy or behaviors. It definitely doesn’t measure performance or improve business outcomes

“In reality, companies should be striving for engaged employees, not just satisfied employees,” says leadership consultant Abbey Louie. “You can have a satisfied employee who is happy doing nothing, but an engaged employee feels an emotional connection to the organization and/or the organization’s goals.”

Why is employee engagement so important?

In short? Employee engagement leads to business success because engaged employees are more likely to contribute to company growth and profitability. 

There’s research to back it up. In an extensive meta-analysis conducted in 2016—looking at 82,248 business units across 49 industries that included 1.8 million employees in 73 countries—Gallup found that business units that score in the top half of employee engagement have double the odds of success of those in the bottom half. Not only that, but those at the 99th percentile of employee engagement have four times the success rate of those at the first percentile.

Breaking out the impact of employee engagement on nine key performance outcomes, Gallup found that business units in the top and bottom quartiles showed median percentage differences of:

  • 10% in customer loyalty/engagement
  • 21% in profitability
  • 20% in productivity (sales)
  • 17% in productivity (production records and evaluations)
  • 24% in turnover for high-turnover companies (those with more than 40% annualized turnover)
  • 59% in turnover for low-turnover companies (those with 40% or lower annualized turnover)
  • 70% in safety incidents
  • 28% in shrinkage
  • 41% in absenteeism
  • 58% in patient safety incidents
  • 40% in quality (defects)

So if you want to see higher profits and productivity, more customer loyalty, less employee turnover and absenteeism—the list goes on—it’s time to think about your employee engagement strategies and initiatives.

Levels of employee engagement

In its latest State of the Global Workforce report from 2023—which measures employee engagement annually—Gallup found that 31% of employees in the U.S. and Canada were engaged, 52% were not engaged, and 17% were actively disengaged.

Here‘s what each of those categories means:

Engaged employees who are “thriving at work”:

Gallup defines engaged employees as those who “are highly involved in and enthusiastic about their work and workplace. They are psychological ‘owners,’ drive performance and innovation, and move the organization forward.”

Employees who are not engaged, as in “quiet quitting”:

These employees “are psychologically unattached to their work and company,” Gallup says. “Because their engagement needs are not being fully met, they’re putting time but not energy or passion into their work.” In other words, they’re quiet quitting.

Actively disengaged employees who are “loudly quitting”:

Beware of these folks who “aren’t just unhappy at work. They are resentful that their needs aren’t being met and are acting out their unhappiness,” Gallup says. “Every day, these workers potentially undermine what their engaged coworkers accomplish.”

How can organizations measure employee engagement?

A surprising number of companies have no employee engagement metrics in place, and leave managers in the dark on how they can more effectively support employees.

“A lot of leaders understand the essential importance of improving engagement,” says Jim Harter, chief scientist for Gallup’s workplace management and wellbeing practices. “Many people see the macro engagement numbers and dismiss them as not relating to them or their firm. But when you show an organization their own results, it tends to shock them. And that’s when they tend to want to do something to correct it.”

Gallup long ago created a 12-question diagnostic tool called the “Q12” survey that measures employee engagement. Leaders can identify the key causes of employee dismay and work to remedy them.

As an incentive for putting measurements like these in place, Harter confirms he’s seen many organizations greatly exceed the national average for engagement. “Some have moved as high as 70%. They didn’t start there, of course. They worked on it and got there in time.”

But Gallup’s isn’t the only survey or tool you can use. Many organizations run other employee engagement surveys as well as pulse surveys and/or use surveys at key points in the employment lifecycle—after onboarding, for example, or before leaving the company—to understand how engaged employees are.

14 ways organizations can improve employee engagement

If you’re looking to increase employee engagement, try these tips:

1. Start with employees’ goals.

The first step in keeping employees engaged and ready to grow with your company is to get clear on their career goals and then match them with your organization’s needs, says performance improvement consultant Julie Winkle Giulioni, coauthor of Help Them Grow or Watch Them Go: Career Conversations Employees Want.

Those kinds of employee engagement conversations should focus on three areas:

  • Hindsight: This includes the employee’s background and what they’ve accomplished in their careers so far.
  • Foresight: This is about looking outward and forward at the needs of the organization, as well as asking questions like: Where is our industry going?
  • Insight: Explore where the first two conversations intersect. Where do the employee’s skills and interests intersect with where the company and industry are going? Where does it make sense to focus development efforts to ensure the two are aligned?

2. Set clear expectations.

If you want to see highly engaged employees, they need to know what success looks like to their managers, leaders, and company.

Information can get muddled as it moves from the top through an organization, causing confusion and stress along the way. But organizational direction—as well as expectations and potential changes—should be clear and conveyable.

“Unfortunately, a lot of organizations forget about that, or mess it up by not communicating effectively when changes happen,” Harter says. ”It comes down to showing people how their work and contributions impact the success of the entire firm. Disengagement starts with having a confusing job.”

3. Give employees what they need to succeed.

When employees don’t have the equipment, support, or knowledge to do their jobs effectively, they quickly conclude their organization isn’t paying attention to them. Once people begin to feel their work isn’t important, or that they’re not personally valued, they head down a slippery slope of diminishing employee engagement.

Conversely, Harter notes that giving people greater autonomy and control over their workday has profoundly positive effects. It leads people to feel trusted, and influences them to do much more for the organization.

You can also give them tools, including AI tools, to help them increase efficiency, improve performance, and encourage balance.

4. Show them a way up.

“The first thing that any employer needs to ask potential hires is where they want to be in three to five years,” says workforce retention expert Jeff Butler. ”The reason people leave is that they’re not set on their paths to where they want to go.”

Artist and entrepreneur Keba Konte, who opened his Oakland, California-based Red Bay Coffee in 2014, believes career paths are critical. Even as a small business owner, he’s helped some team members move into managerial positions or move from the retail side to quality assurance positions with overseas travel.

“People need to see where they’re going in the organization,” he says. As a result of this “career pathing,” he says he’s been able to retain employees at rates well above the industry average. 

5. Encourage meaningful contributions.

To encourage employees to share their great ideas for implementation, business-and-technology consultancy West Monroe Partners developed an internal version of Shark Tank, where its employees can pitch ideas to executives to apply for funding. One project that was funded has brought in $10 million in revenue over three years.

Programs like the firm’s Shark Tank–esque competition, as well as a culture that encourages employees to act like owners and allows them to develop their careers, are a big part of why the firm has less than half the turnover of typical consulting companies, says Reva Busby, cofounder of West Monroe’s Intellio Labs.

Giving employees the freedom to find meaning in their work and make an impact pays off, says Michael C. Mankins, a partner at Bain & Company’s San Francisco office, leader in the firm’s organization practice, and coauthor of Time, Talent, Energy: Overcome Organizational Drag and Unleash Your Team’s Productive Power.

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“It’s very dependent on how much autonomy and impact that individual feels they have in their job,” Mankins says. “If you have no autonomy, and you’re having no impact, you’ll probably burn out at 40 hours a week.”

6. Create a culture of development.

Career consultant Beverly Kaye, coauthor of Love ‘Em or Lose ‘Em: Getting Good People to Stay, suggests looking for stretch assignments as well as mentoring, shadowing, and other learning opportunities for employees.

Connections with peers, executives, and other colleagues throughout the organization keep information and knowledge flowing, and create a culture in which development is not only encouraged, but also expected.

Your organization likely has many opportunities on a day-to-day basis for employees to grow within their current roles, says Diane Belcher, managing director of product management at Harvard Business Publishing. For example, when she and her team come out of a meeting, she asks them what they learned, and how it can be applied to their roles. “Even when there’s not a budget for a formal learning program, you can think about every opportunity as an opportunity to learn,” she says.

7. Give employees paid time to grow.

Of course, while all of these stretch assignments and extra work can be great learning opportunities, it’s important to ensure employees don’t feel like you’re simply getting extra work out of them without the trappings that come with advancement, such as new titles, raises, and bonuses.

“Managers have to be realistic as they’re inviting new responsibilities and activities into someone’s role,” Giulioni says. “They have to figure out how to offload other things to make room for it, so it doesn’t become punitive.” That way you can help create the job they want instead of watching them find it at another company.

8. Put the right people in management and leadership positions.

Harter insists that nothing is more important to an organization’s health and well-being than ensuring everyone selected into a leadership position has the talent to be an inspiring and effective manager. “If you get that wrong, it’s really an uphill battle.”

“Workplaces in general have paid a lot of attention to process and much less to people,” he continues, “and too often employees are given managerial roles tied to success in a previous role, or as a reward for their tenure,” rather than because they can effectively support and positively manage human beings.

Employees, it turns out, don’t want to work for bad bosses—a 2022 survey from GoodHire found that 82% of workers would quit their jobs because of a bad manager.

Harter describes the most effective managers as being deeply caring and capable of seeing, supporting, and adjusting to the differences in people. “They help people build jobs that fit them as an individual person, while still helping them get to the outcome they need from an organization perspective.”

They bring workers together in collaboration, provide clear direction, and accept responsibility for maximizing each employee’s full potential. Ultimately, they understand that “doing what’s right for people proves to be right for the organization,” Harter says.

9. Be extremely generous with praise and recognition.

One of a human being’s greatest needs is to feel appreciated and valued. According to Harter, many people in leadership roles underestimate how much recognition lifts employee spirits. When people feel their contributions and efforts are overlooked or taken for granted, employee engagement suffers.

Harter advises managers to lean in the direction of over-appreciating people, and to devote greater attention to praising good outcomes.

“People need recognition frequently,” he stresses. “We know there’s a physiological response when we get recognition. A boost of dopamine makes us feel good in the moment. This lasts a while; but if we do good work, we have a continued need to be lauded for it.”

10. Give employees flexibility.

With people spending most of their waking days at work, many have the additional stresses of raising children, caring for elderly parents, and dealing with long and tedious commutes.

Allowing people flexibility around when and where they work and being willing to accommodate individual needs all have proved to have very positive impacts on performance and job satisfaction, according to a  2015 Conference Board CEO study.

“More and more, people are looking for that flexibility because it gives them the ability to exhale, and come at work very differently,” says Rebecca Ray, executive vice president for human capital and engagement research at the Conference Board.

11. Consider employees’ entire lives.

As the line between work and life becomes more and more blurred, it’s important to consider employees’ overall well-being. If workers are stressed in other areas of their lives—socially, financially, physically—that could factor into their experience at work and hurt employee engagement.

Research has demonstrated that when employees have a greater sense of satisfaction with their work and their personal life, they tend to contribute more discretionary effort to their work, and the company benefits from this energy.

12. Guard against burnout.

Recent research from management consulting firm McKinsey found that roughly half (49%) of employees report feeling at least somewhat burned out. And the report speculates that the percentage is likely an underrepresentation. What’s causing the problem? Lack of clear communication, the need for flexibility, and remote or hybrid work environments are among the top concerns. Employees want a renewed emphasis on mental health and well-being too.

Managers also need to be aware of how much they’re expecting of employees, says Mankins. Helping employees manage their energy to enhance productivity includes reducing the organizational drag of email overload and meetings—“ineffective collaboration” that crowds out more important and effective work. Digital tools can help track workload and help managers spot employees who are overworked.

Having the ability to make some decisions about how you spend your work time also can help prevent burnout, says Joyce Maroney, former director of the Workforce Institute at Kronos. As long as wages are not substandard, the ability to make decisions about job roles and have choices leads to higher employee engagement.

“Generally speaking, the data says engaged employees do a better job for your customers, they’re more loyal to your company, and they’re going to stay longer,” says Maroney. “All good things flow from that.”

13. Review compensation and benefits.

Employees can be tempted by bigger salaries at other jobs. The McKinsey report found that fair compensation was also a top priority for talent.

To ensure it was paying employees appropriately in an environment where job titles didn’t necessarily match job roles, Zappos brought in a consultant to review worker pay levels and make recommendations to ensure fairness, says Bhawna Provenzano, former head of benefits. The company also shared findings with employees to help them understand how their compensation compared to market data.

Benefits have increased in importance since the pandemic. A recent survey by Prudential Insurance found that 4 in 10 people surveyed would leave their current job for one with better benefits, and 80% said they were more likely to stay with an employer that showed commitment to helping them achieve financial resiliency. They consider benefits such as retirement plans, health, disability, and life insurance, paid family medical leave, and emergency savings programs to be critical to that resiliency. 

As Fast Company has reported in the past, mental health benefits have also become increasingly important in the wake of the pandemic, as employees have struggled with anxiety, depression, and other mental health issues.

14. Keep the door open.

Part of maintaining employee engagement is also letting them know that you support their need to explore leaving the company sometimes.

From the day employees start at Jellyvision, an employee-benefits software company, they also learn about its “graceful exit” program. When employees begin to look for a new job, they’re encouraged to share that with their managers, who will support them in the search. Kelly Dean, former chief people officer, took over an HR role after a predecessor’s “graceful exit” process, which lasted roughly two years. Those who inform their supervisors at the start of their search still get their raises, end-of-year bonuses, time off to interview, and other benefits without the awkwardness of trying to hide their actions. 

This approach helps keep the relationship amicable and also leaves the door open in case an employee does decide to test the waters elsewhere but then boomerangs back.

How can employees stay engaged at work?

As an individual employee, it can feel like you don’t have a lot of sway when it comes to shaping your work environment. But you can still take steps to get or stay engaged—even if the circumstances around you are challenging or if you feel like you’re heading toward burnout. For example: 

Know why your work is important. 

Feeling like your work makes a difference is key to staying engaged. So make sure you understand how your particular tasks and assignments contribute to overall team and company goals, as Tracey Wik explains in the Harvard Business Review. If you’re not sure, put it on your one-on-one agenda and ask your manager. And then prioritize accordingly, so that you’re investing more time and energy in the to-do items most directly tied to larger goals. 

When you consider how you and your work impact others and invest in your shared success, it’s easier to see the importance of your contribution to the big picture and stay engaged. “Imagine coworkers who are waiting for your outputs and relying on your results,” writes Tracy Brower for Fast Company. “Think about the people downstream and the internal and external customers who benefit from your brilliance.” 

Share your achievements.

It’s one thing to know how the tasks and projects you’re working on ladder up to bigger goals. But if you don’t feel like anyone else sees what you’re accomplishing—and why it matters—you might struggle to maintain your engagement, Wik explains. So make sure to share your wins with your boss, team, and other leaders. This kind of “bragging” doesn’t have to feel gross. You can talk about your accomplishments without turning people off—or get others to brag for you

Learn something new. 

“Sometimes, a lack of motivation is the result of too little stimulation. If you’re not adequately challenged in your work, it can be tough to put in a lot of discretionary effort,” Brower says. So challenge yourself to learn something new—whether that’s by taking on a stretch assignment at work or signing up for a class outside of your job. “Stretching your skills tends to contribute to your self-esteem, confidence, and drive,” Brower writes. 

Seek out energizing, inspiring people.

“Sometimes you meet people who reinforce the best in you. They make you think, provide alternative points of view, and help you grow,” Brower writes. “When you’re with these colleagues and friends, you’re motivated about the future and all you can be.” So seek them out and spend time with them. 

Ankita Bilolikar Callahan, Mark C. Crowley, Elise Hannum, Tracy Brower, and Julie Moreland also contributed writing, reporting, and/or advice to this article.


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ABOUT THE AUTHOR

Gwen Moran is a writer and author specializing in business and finance. Her work has appeared in many leading business publications and websites, including Entrepreneur, Kiplinger.com, Newsweek.com, The Los Angeles Times Magazine, and others More


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