Unplanned employee turnover comes at a high price.
Gallup launched the Employee Engagement Index -- its annual survey of the conditions, mood, and motivation in the workplace -- in Germany in 2001. Since then, its findings have been widely discussed by the media and public. Over the years, the survey showed that the percentage of engaged employees -- never high in Germany -- remained stable, while the percentage of actively disengaged employees increased.
Now for the first time in 13 years, the Employee Engagement Index shows a positive trend in Germany. The percentage of actively disengaged workers fell from 24% to 17%. This is good news for German businesses because actively disengaged employees aren't merely unhappy at work -- they act out that unhappiness. Every day, they undermine what their engaged coworkers accomplish. This positive shift indicates that fewer workers are experiencing negative working environments.
But the percentage of engaged German employees remains nearly stable at 16%, while the percentage of employees who are not engaged increased to 67%. This means that most workers remain "checked out," sleepwalking through their work. They may be putting their time into their jobs, but not their energy or passion. This finding suggests that workers are becoming more content -- either satisfied with the status quo or accustomed to going to work in an environment that isn't terrible but that isn't energizing either.
The drop in the number of actively disengaged employees reflects a growing emphasis on organizational culture among German businesses and business leaders. Corporate culture is increasingly recognized as a key factor in attracting and retaining the best employees -- and those top performers are increasingly sought after due to the shortage of skilled labor in Germany. And the rise of rating sites -- such as Squeaker, Kununu, Glassdoor, and Vault -- creates more transparency into the quality of a company's management, workplace, and culture. Given the impact that this level of transparency and the quality of a company's people management have on its employer brand, companies are making organizational culture a priority.
People management has also caught the attention of the German media. Between 2011 and 2013, coverage of management and organizational culture and its effects on business increased by 41% in print media, including daily and weekly newspapers, magazines, and journals. Perhaps as a result, business leaders are rethinking their management strategy. Some human resources departments are evolving -- becoming partners who work alongside managers to improve workplace quality and pushing leaders to make engaging employees a central tenet of their HR strategy.
How engagement affects businesses
Business leaders seem to be paying more attention to employee engagement now that they realize how it affects their business. Engagement is strongly linked to turnover. For example, when we ask employees if they plan to be with their company three years from now, 80% of engaged employees strongly agree -- but only 34% of actively disengaged employees strongly agree. Similarly, 65% of engaged workers strongly agree that they plan to spend their career with their current company, compared with 21% of actively disengaged employees.
Unplanned employee turnover comes at a high price. The most obvious consequences are the costs of ongoing recruitment and assessment, as well as orienting new employees to their job. But workforce fluctuation also leads to a loss of know-how -- and it can even cost a business its most profitable customers if they follow their trusted contact person to a new company.
Employee engagement thus functions as a buffer against unwanted turnover, enabling companies to better manage and plan their human resources. And managing human resources effectively is crucial for business success. When Gallup asks employees if their company has problems finding the qualified workers they need, 18% of workers strongly agree, and only 16% believe that their organization can attract top talent. As Europe's largest economy, Germany faces the challenge of a decreasing workforce, and its proportion of workers aged 50 and up is increasing, while its proportion of younger workers has been shrinking.
In Germany, 70% of the workforce has direct customer contact, and 90% of these workers interact with customers several times a week.
Employee engagement is also a key driver of customer engagement, especially in service industries. Our analysis shows that 70% of the employees we surveyed have direct customer contact, and 90% of these workers interact with customers several times a week. About seven in 10 engaged employees (72%) say that the needs of their customers determine their daily work, but only about four in 10 actively disengaged employees (37%) strongly agree with that statement.
Engaged employees tend to think about how they can optimize service for their customers: 68% of engaged workers strongly agree that "I often think about how we can improve service for our customers," but only 22% of actively disengaged workers agree with this statement.
Engaged employees are also more likely than actively disengaged employees to strongly agree that "Comments and suggestions from customers always lead to concrete improvement actions in our company" (49% vs. 5%, respectively). The same pattern holds true when there are challenges or difficulties in the customer relationship. Fifty-seven percent of engaged workers strongly agree that "Complaints from customers always lead to concrete improvement actions in our company," compared with only 3% of actively disengaged workers who strongly agree.
Engaged workers not only keep customers, they also try to create new ones; 86% of engaged employees would recommend their company's products or services to friends or family members. In contrast, only 14% of actively disengaged employees would do so. Though it is difficult to put a price tag on such recommendations, word-of-mouth is crucial to enterprises. Customers often trust their friends' recommendations more than classic advertising channels, and digital technologies such as social networks play an increasingly significant role in influencing purchasing behavior.
Recommendations also have an impact on a company's employment brand: 66% of engaged workers would recommend their company as a place to work to friends and family members, but only 4% of actively disengaged workers would do so.
Changing people management
How can companies boost their employees' engagement? Today's managers know this is one of their main challenges. Employee engagement is primarily driven by how supervisors -- from team leaders to line managers -- manage people. When employees leave a company, in three out of four cases, their reason is related to the person who leads their team. New workers don't start a job actively disengaged; on the contrary, they're usually highly motivated. But they become increasingly frustrated over time if their needs and expectations at work are ignored.
Gallup's latest analysis in Germany shows that fewer employees feel that their workplace is demotivating and frustrating, indicating changes in the entrenched culture of poor people management in German companies. Notably, the feedback culture has improved, and more employees feel that their opinions play a role in work-related decisions, helping them feel like they are an integral part of the company.
As the German population shrinks and ages, employees need to extend their working hours and working lives. For that reason, employees' physical health and mental fitness are important to a company's competitiveness. Research shows that employee engagement serves as a buffer that protects against the effects of stress. When Gallup asks employees "During the last 30 days, did you feel mentally burned out because of work stress?" 58% of actively disengaged employees answer "yes," but only 29% of engaged workers do.
Stress at work is a serious problem because of its negative effects on employees' private and family lives. Forty-two percent of actively disengaged employees report that stress at work had resulted in them behaving poorly with their family and friends on three or more days in the last 30 days, compared with only 13% of engaged employees.
This is an alarm signal for companies. They should be interested in the well-being -- and therefore the health and productivity -- of their workforce. The Employee Engagement Index revealed some positive tendencies. One-quarter of employees (25%) strongly agree that their company is interested in their general well-being. And about six in 10 workers (57%) report that their companies have health promotion offers, but only four in 10 (40%) take part in these programs.
To encourage use of health promotion programs, managers need to actively participate and be role models for their employees. Specifically, to reap all the benefits that employee engagement brings to a workplace, business leaders must seriously consider doing these three things:
- Provide managers with support, training, and coaching to help them understand what employees need from their workplace. Companies must set engagement goals, hold managers accountable for meeting those goals, and include rewards for meeting engagement targets in recognition and incentive systems.
- Use a selection system that ensures the right people are chosen for manager roles. Too often, workers are promoted to management roles based on seniority or outstanding personal performance in a non-management role. But the talents required to produce excellence are different from those required to inspire excellence. Companies should select managers based on their ability to engage, care for, and focus on each employee as an individual.
- Rethink manager education at universities, colleges, and vocational training institutions. Most programs focus almost exclusively on educating managers on business economics, administration, and classical management theories. But learning to manage business strategies and processes is not enough. These programs should place an equal emphasis on the skills needed to manage and engage workers, because strategies and processes are only as good as the people who execute them.
Employee engagement in Germany shows signs of improvement. But have all German business leaders learned to value engagement, and have all managers learned how to promote it? At present, too few have. In a world of harsh global competition, employee engagement is crucial -- and not just for a company's success, but for the country's economy. Actively disengaged employees cost Germany between 99 billion and 118 billion euros per year due to lost productivity at work. Germany's companies are on the right path, but they still have a long way to go.
Results are based on telephone interviews conducted April 30-June 26, 2013, and November 4-25, 2013, with a random sample of 1,393 employed adults. All respondents were living in Germany and were selected using random-digit-dial sampling. Interviews are conducted with respondents on landline and cellular phones. Samples are weighted by gender, age, education, region, profession (blue-collar worker, employee), employment status (full-time, part-time), and adults in the household. Demographic weighting targets are based on the most recently published data from the German Statistics Office.