Employee engagement, performance and profitability
A new analysis by Aon Hewitt found that high levels of employee engagement can dramatically influence an organization's growth rate, operating income and total shareholder return.
In 2012, Aon Hewitt examined the relationship between employee engagement and financial performance using data from 94 global companies representing nearly 9 million employees over the years spanning 2008 to 2012. The analysis uncovered a strong positive correlation between increased employee engagement and sales growth in the years following. Each incremental percentage point of employees who became engaged translated into an additional 0.6 percent growth in sales.
For example, a $5 billion organization with a gross margin of 55 percent and operating margins of 15 percent increased operating income by $20 million with just a 1 percent improvement in employee engagement. With a 5 percent improvement in employee engagement, operating income jumped to $102 million.
"The economic recession of 2009 put significant pressure on corporate spending on talent–and engagement took a significant hit in the following year," said Dr. Ken Oehler, Aon Hewitt's Global Engagement practice leader. "Our analysis concludes that companies that managed higher employee engagement relative to their peers throughout the economic downturn are now seeing dramatic, positive impacts to their revenue growth."
Aon Hewitt's analysis also found a strong correlation between employee engagement levels and Total Shareholder Return (TSR). Organizations within the top quartile of employee engagement levels (where 72 percent or more of employees are engaged) attained a TSR that was 50 percent higher than that of the average organization. Likewise, companies in the bottom quartile engagement group (where less than 46 percent of employees are engaged) had a total shareholder return that was 50 percent lower than the average.
"The link we found between engagement and financial performance validates the theory that engaged and productive employees are a critical ingredient in the success of an organization," said Oehler. "Employers need to recognize the incredible financial opportunity behind their investments in talent and develop a long-term strategy for keeping their employees engaged and productive at work."
Additional details on Aon Hewitt's analysis of engagement and financial performance can be found in its 2013 Global Employee Engagement report.
About Aon Hewitt Aon Hewitt empowers organizations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organizational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness. Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide. For more information on Aon Hewitt, please visit www.aonhewitt.com.