- Lack of engagement costs Germany up to 275 billion euros a year
- Traditional management culture makes it hard to engage workers
- Managers need talent, skills and support to turn things around
Gallup has been continuously measuring and reporting German workplace engagement since 2001. One of our key findings is that, in any given year, fewer than one-fifth of employees in Germany are engaged in their jobs. Right now, only 15% of employees are engaged and 15% are actively disengaged.
This has serious effects: Actively disengaged employees aren't merely unhappy at work -- they undermine what their engaged coworkers accomplish every day. This actively disengaged group costs the German economy 73 billion to 95 billion euros annually in lost productivity, according to Gallup estimates. Add the damage caused by workers who are not engaged -- who put time into their jobs but not energy or passion -- and the financial impact jumps to 210 billion to 275 billion euros lost.
Employee engagement is primarily driven by how supervisors -- from team leaders to line managers -- manage people. Given the state of employee engagement in Germany today, it's evident that most managers aren't creating environments in which employees feel motivated. That lack of motivation has significant implications for businesses.
How Low Engagement Hurts German Companies
One effect of low employee engagement can be seen in the absenteeism rate, which is 132% higher among actively disengaged employees compared with engaged workers (8.8 days versus 3.8 days). Absenteeism among actively disengaged workers has a substantial impact on companies, given that each day an employee is away from work costs a business in Germany 252 euros on average.
Failing to engage employees also has an impact on a company's employment brand: Only 7% of disengaged workers strongly agree that they would recommend their company as a place to work to friends or family members, compared with 68% of engaged employees. Actively disengaged employees also take less pride in their company's products and services. About one in four actively disengaged employees (24%) would recommend their company's products or services to friends or family, while about eight in 10 engaged employees (82%) would do so.
Positive word-of-mouth from employees is crucial to companies because people considering a product purchase -- or a job change -- often trust their friends' recommendations more than job advertisements in newspapers or on the Internet. Digital technologies, such as social networks, also play an increasingly influential role in purchasing and job-search behavior.
Companies also suffer from lower employee loyalty and retention when their workers aren't engaged. When Gallup asks employees if they plan to be with their company three years from now, 81% of engaged employees strongly agree, compared with 33% of actively disengaged employees. Similarly, 76% of engaged workers strongly agree that they plan to spend their career with their current company, while only 14% of actively disengaged workers do. Last but not least, 19% of actively disengaged employees are actively looking for a new job, while only 1% of engaged employees are actively seeking new employment.
Now, you might be asking yourself: Shouldn't companies be pleased that actively disengaged employees are thinking about leaving? The problem is that these employees can be highly trained experts, practitioners and professionals -- in other words, employees whose skills are desirable and needed. Studies have shown that costs related to replacing an employee can be as high as 1.5 times the employee's annual salary. Many employers in Germany would prefer to decrease employee turnover and avoid the related recruitment and training costs, as well as the loss of talent and organizational knowledge that comes with turnover -- especially in light of the persistent shortage of skilled professionals.
Low employee engagement is not only a serious problem for companies but also for workers themselves: Engagement levels affect the extent to which people enjoy their lives. More than eight in 10 engaged employees (83%) say they had fun at work during the last week, compared with only 5% of actively disengaged employees. And actively disengaged workers are significantly more likely than their engaged counterparts to say that they felt burned out due to work stress in the last month -- 60% versus 21%.
Signs of Positive Change
The clear message to leaders is: You can directly influence your company's performance -- and the lives of your employees -- by managing employee engagement. The most important step to increasing an organization's engagement levels is to improve the quality of management and leadership. Gallup research has demonstrated that a team's immediate manager is responsible for a large part of his or her team members' engagement. A great manager can create the motivation and energy a team needs to perform well, while a bad one can destroy that motivation and spread discontent among employees.
More and more leaders understand this message, it seems: For the second consecutive year, the German Engagement Index shows a positive trend. The percentage of actively disengaged employees, which was 24% in 2012, fell to 17% in 2013 and further to 15% in 2014.
This decrease reflects a growing emphasis on organizational culture among German businesses and their leaders. Corporate culture is increasingly recognized as a key factor in attracting and retaining the best employees. Business leaders are paying more attention to employee engagement now that they realize the shortage of skilled labor in Germany is not just a short-term phenomenon, it's a long-term reality as Europe's largest economy faces the challenge of a decreasing workforce.
For example, it took 77 days to fill a vacancy with a qualified employee in 2014, on average, according to the Bundesagentur für Arbeit, Germany's federal job agency. That's 12 more days than it took to fill a vacancy in 2008. The number of unfilled positions in 2014 was 490,310, on average, according to the same source. Estimates place the gap in the labor force at 10 million people by the year 2030. This underlines the importance of retaining employees and avoiding unwanted turnover in the future. Engagement offers a potent lever for companies to use to retain top workers as the skill shortage becomes even more severe.
The increased use of employer 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 can have on an employer's brand, companies are taking a close look at their organizational culture to ensure it retains -- and doesn't repel -- workers. In addition, people management is a consistently hot topic in the German media, according to Gallup's study of 21 leading 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. This approach seems to be working -- the number of actively disengaged workers is dropping.
Yet the percentage of engaged workers is not growing -- and that's the category German business leaders need to grow. Workplaces that implement engagement strategies have achieved a ratio of 3.5 engaged employees for every actively disengaged employee, compared with a ratio of 1:1 among the German employee population overall. This shows that it is possible to foster an engaging workplace culture in Germany -- and this culture, in turn, offers a strong competitive advantage.
And it's a big advantage: Work units in the top quartile in employee engagement outperformed bottom-quartile units by 10% on customer ratings, 22% in profitability and 21% in productivity. Work units in the top quartile also saw significantly lower turnover (25% in high-turnover organizations, 65% in low-turnover organizations), shrinkage (28%) and absenteeism (37%), as well as fewer safety incidents (48%), patient safety incidents (41%) and quality defects (41%).
What German Companies Can Do
Here are steps German companies can take to improve employee engagement:
Update their company culture and people management. Managers in Germany are valued because they are reliable, efficient, straightforward and structured. But people management is not yet one of their strengths -- and managers are already aware of this, a recent study by the Bundesministerium für Arbeit und Soziales, Germany's federal ministry of labor and social affairs, revealed. Half of the managers in Germany are convinced that the management culture in Germany requires a fundamental shift.
The same study also shows that more than three-quarters of the surveyed managers believe that the German economy will not draw on its full potential unless the present management culture is fundamentally overhauled. That means those who hold management positions themselves are highly critical of the current management culture. For this shift to occur, leaders must remove managers who consistently fail to engage their employees, must hire and promote for manager talent, and must provide more opportunities to develop and reward people management skills.
Improve management education and preparation. A key problem is that the curriculum of most MBA programs emphasizes managing finances and processes; it pays little attention to actually managing people. And in far too many companies, employees with high performance in a role are moved into management regardless of whether they have demonstrated talent for managing people. When Gallup asked German managers why they believed they were hired for their current role, about half cited their expertise and tenure in their company or field (51%) or their success in a previous non-managerial role (47%).
These reasons don't take into account whether a candidate has the necessary talent to thrive in the manager role. Being a successful employee or having significant subject-matter expertise is no guarantee that someone will be adept at managing others. Experience and skills are important, but talent -- naturally recurring patterns in the way people think, feel and behave -- predicts the areas in which they will perform at their best. To gain the benefits of an engaged workforce, companies should select managers based on their ability to engage, care for and focus on each employee as an individual.
Develop new and better strategies to overcome barriers to engagement. These barriers include command-and-control culture (and its related hierarchical thinking), silo mentality and rigid social formalities. (It's not uncommon in Germany, for example, for people who have worked together for decades to address each other with the formal "Sie" rather than the informal "du.") Leaders also should foster engagement through empowerment and accountability, a culture of open and honest dialogue and frequent collaboration.
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.
The more engaged employees a company can create, the better the organization will be. None of this is easy, nor may it even appear necessary -- export quotas are up, unemployment is down and disengagement isn't getting worse, after all. But all that good news disguises the fact that Germany isn't as productive, profitable and healthy for workers as it could and should be.
Results are based on telephone interviews conducted April 1-May 6, 2014; Oct. 15-24, 2014; and Nov. 4-Dec. 3, 2014, with a random sample of 2,212 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.