About a month ago we introduced a weekly feature, By the Numbers. We start off each week (or most weeks, anyway) with a statistic that is noteworthy, alarming, misunderstood or misinterpreted, or otherwise deserving of explanation, comment, or clarification. We accompany it with thought-provoking questions or commentary for reflection and discussion.
To date we have explored the extent of disengagement in the workplace (scroll down to September 14), the frequency of projects that fail (August 31), the link between employee disengagement and absenteeism (August 24), the myths around the impact of nonverbal communication (August 17), and the fear of recrimination in the workplace (August 10).
Today we explore the economic impact of disengagement in U.S.-based companies.
There is no universally accepted definition of workplace engagement. Nor is there an objective, standardized process for identifying it or measuring it.
However, there is a common, if casual, sense that full workplace engagement reflects a high degree of focus and passion for one’s work and for the patrons and stakeholders of one’s employer. As regular readers know, I add curiosity and courage to the recipe.
When we speak of disengagement, we’re simply referring to the opposite of all this. If the measurement of engagement is imperfect, the typical results are not strikingly at odds with intuition. In fact, most employees at U.S.-based companies are disengaged, in key respects.
Disengagement takes many forms, and it has many costs. It can appear as easy distraction from duty. It can be a blind eye to defects in a product or a service that cause customers to flee to competitors. It can be inattention to safety precautions that leads to workplace injuries and even fatalities. It can be laxity on procedures that result in all kinds of problems. It can be frequent tardiness or absenteeism.
It can also be the use of texting or email or telephone as self-defeating efforts at multitasking. Or it can be the use of alcohol or illicit drugs before work or even on the job. More commonly, it can be the lack of intense focus. Often it looks and sounds like the retreat from asking a critical question or offering up vital information from a production line or a service detail.
To begin getting a handle on all that, let’s try calculating the cost of one aspect of disengagement: physical absenteeism alone, in the United States alone. (We’ll leave emotional, social, and intellectual absenteeism for later, and we’ll let our offshore readers run their own numbers.) For starters, we can use the incremental 4.05 more days of work missed by disengaged employees per year (scroll down to our August 24 post), and we can assume a work year of 240 days after vacation, weekends, and excused absences. We can also plug in the median wage or salary paid to U.S. workers ($53,483 for 2008, the most recent year for which data is available). That gives us a figure of $902 per disengaged employee for physical absenteeism.
(In the event you doubt the figure of 4.05 more days missed by disengaged employees, remind yourself that engaged employees have few if any unexcused absences from work. They want to be at work.)
Next, taking at face value the broad estimates of disengagement offered by well-regarded consulting firms like Towers Perrin and survey research concerns like Gallup, we can figure that between 56 and 72 percent of employees at U.S.-based companies are not fully engaged in their work. We’ll use the midpoint 64 percent, to determine the number of disengaged employees in the non-farm private sector, which totals a little more than 130,000,000. Do the arithmetic, and you reach a total cost of a little over $75 billion per year—for physical absenteeism alone. That inefficiency comes straight off the bottom line.
When you add in other forms and consequences of disengagement—everything from ignoring product defects in a manufacturing plant to neglecting customers in a retail environment—you have vastly greater figures. Many estimates put the total cost of disengagement at between $300 billion and $350 billion per year. That’s somewhere between 2.1 and 2.5 percent of the U.S. gross domestic product.
As a consultant who sees the inside of many companies, I find that many management teams wring their hands over disengagement but do little or nothing about it, more or less like the weather. Yet there are simple, straightforward actions that any management team can take to improve workplace engagement. High-performing companies have a small fraction of the disengaged employees that low-performing companies routinely tolerate. As always, the kind of organization you get is the kind of organization you probably deserve.
Here are some questions to think about:
- Does the figure of 2.1 to 2.5 percent of GDP strike you as realistic? Too high? Too low?
- As a collaborative exercise, explore with other managers the relative level of engagement and disengagement in your organization: the enterprise, a division, a site, or a team. Try to put a percentage on it.
- If you apply that percentage to the revenue stream of your own organization, what is the loss in dollars per year attributable to disengagement?
- How much of it do you think is recoverable?
- Disengagement has many root causes, which vary from organization to organization. What do you think explains most of it in your own organization? How much of it can be laid at your own doorstep?
- What are you doing to change the situation?
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