We're taking a deep dive into why employee engagement rate is declining, what it means for the companies, and what you can do to retain your talents.
Team Building Expert & Writer
I've been working remotely across 5+ countries since 2019 and write about my experience in remote work and home office life.
Team Building Expert & Writer
I've been working remotely across 5+ countries since 2019 and write about my experience in remote work and home office life.
The job market has seen better days. We are struggling with worldwide inflation, the "great recession" continues, and employee engagement rates hit a new low. And we have the infamous pandemic to thank for that.
But as you know, it's always better to tackle one thing at a time. So let's focus on employee engagement for now. After all, it might be the most critical indicator of the situation we're finding ourselves in.
Employee engagement shows how the majority of workers feel about their current employment situation, allows to forecast the profitability of a given industry, and even highlights the most promising trends and benchmarks in a global market.
That's right! Simple statistics on how attached employees are to their current work might answer some of the most pressing questions from the global labor market.
But let's start with a simple one:
Does employee engagement really make a difference?
Employee engagement is the driving force behind employee retention, which is paramount for every company's success. But that's not the only reason why employee engagement matters.
Different statistics presented in this article demonstrate the devastating state we, as employees, find ourselves in after the Covid-19 outbreak. According to the latest research published in Harvard Business Review:
53% of employees feel more exhausted from work now than before the pandemic;
57% experience enhanced anxiety caused by work-related factors;
and 75% of workers report feeling socially isolated.
But that's not all.
Why employee engagement statistics matter to companies
71% of top-level executives recognize employee engagement as the key element of a successful business strategy. It's a powerful indicator of the company's productivity, customer satisfaction, and organizational culture.
Engaged employees are more productive
Overall, all the data sources arrive at the same conclusion: there is a direct correlation between the employee engagement rate and the company's productivity.
Employee engagement correlates with customer service
You know the value of excellent customer service if you work in an industry that relies on customer support a lot. And these days, that's nearly any industry.
Just like a happy shopping assistant will be more likely to persuade a customer to try a new pair of boots they don't really need, an engaged employee will do their best to solve your customers' problems.
That, in turn, will improve the customer experience, encouraging the person to return to your company repeatedly. You can see where I'm going with this.
Employee engagement drives brand loyalty
A happy employee will gladly promote the company in their spare time. And there's no more effective and authentic form of marketing with a higher ROI than word of mouth. Employee advocacy is repeatedly mentioned among the most powerful tools for improving brand recognition.
79% of companies reported improvements in online visibility after implementing a formal employee advocacy program.
But forget promotion. Brand loyalty also shows how likely the employee is to change jobs for a better offer. As you can imagine, a highly engaged person is far less likely to abandon a ship than their dissatisfied counterpart — more on that in the next section.
Engaged employees mean lower turnover
Employee turnover rate generally describes the percentage of employees who quit the organization year over year. Of course, people leave their companies for various reasons. Yet most of these factors also have something to do with their engagement rate.
That, in turn, leads to unpredicted costs to the company. In the United States, the average cost for hiring and onboarding a new talent amounts to $5,000, not to mention the financial losses caused by losing a qualified employee.
Companies with highly engaged employees are 21% more profitable
There are lots of hidden costs that come with high turnover rates. For example, low employee engagement costs companies $450-500 billion annually in the United States.
At the same time, highly engaged workers are likely to drive profits from the most unexpected revenue channels.
This brings us to the actual state of employee engagement.
Employee engagement statistics for 2022 you must know
We’ve already covered many numbers. But this is where things get truly interesting!
46% of the global workforce is planning to change careers
Microsoft Work Trend Index revealed that almost half of all employees globally consider changing careers in the nearest future. When discussing career change, we must emphasize that it usually refers to abandoning an entire branch a person qualified for or shifting from one industry to another.
As such, this data doesn't simply reflect the people's tendency to change jobs. Instead, it implies that some specializations or areas of work may be left severely understaffed in the next few years. As employee engagement directly correlates with employee retention rates, focusing on one to improve another may be a step in the right direction.
Why it is important: 46% is a significant number. Suppose the dissatisfied employees decide to follow through with their plans. In that case, entire market niches will lack highly qualified performers, leaving a massive gap in the companies' abilities to deliver compelling products and services.
Over 75% of Americans are planning to quit in 2022
Joblist's employee engagement statistics claim that more than 3 out of 4 Americans seriously consider quitting their current jobs. While this data is less alarming than the global tendency of employees to abandon their career paths, it is still a red flag for many corporations that still haven't recognized the importance of their recruits.
Why it is important: As we've already established in the previous section, turnover is costly for the company, as retaining a qualified professional will always be more beneficial than recruiting, onboarding, and training a new one. But it's not just about the money.
A single unhappy employee can severely damage the company's reputation on the job market with one well-crafted LinkedIn post. That, in turn, can lead to further difficulties in filling the positions and finding worthy candidates in the future.
The number of engaged employees in the U.S. annually drops by 2%
Is employee engagement declining? It is a common question you get to hear after the post-pandemic office return has begun. And unfortunately, the answer is "yes".
As Gallup's research suggests, prior to the most active phase of the pandemic, we've seen a stable growth in the employee engagement rate:
However, their later research confirms that there's been a stable 2% drop in employee engagement every year since the end of 2020:
Employee engagement rate, %
At the same time, this data only accurately demonstrates the trend for the United States. Globally, the situation looks slightly different. As such, the global employment rate barely reaches 20%. Moreover, there is a severe lack of longitudinal data to track the development of the situation.
Why it is important: The disparity among the employee engagement statistics in the United States and the rest of the world shows that some of the organizational processes typical for American companies work well for creating inviting company cultures and friendly environments. From here, we should analyze which practices encourage employee engagement and which fall into the typical toxic corporate procedures category.
The number of actively disengaged employees is on the rise
Employee engagement statistics from 2021 and the previous years reveal another negative trend: back in 2019, the number of actively disengaged employees hit the lowest mark of the decade - 13%, yet now it is growing again. As such, in 2021, it was already at 15%.
Actively disengaged employees, %
This tendency doesn't look very promising. The term “actively disengaged employee” describes people that aren’t just unhappy with their jobs and may have decreased productivity. It refers to those team members that actively undermine their colleagues’ efforts at work, complain a lot, and spread their negative attitudes around the company. That’s why it is particularly important to keep these numbers to a minimum.
Actively disengaged employees don’t just underperform themselves. Instead, they actively jeopardize the overall productivity of the entire organization.
Why it is important: We are currently facing an evident 2% decline in employee engagement rate, followed by the annual 1% growth in actively disengaged talents. That reflects on the overall productivity of the teams (and hence, companies), businesses' overall profitability, etc. More importantly, it actively demonstrates that people are losing interest in their jobs, and it is up to us as business owners and talent or P&C specialists to change these negative trends for the better.
Team building activities designed with Coventry University
Microsoft Work Trend Index 2022 revealed that in 2022, 52% of Gen Z and Millennial employees considered changing companies. Last year, the number was 49%. Gallup names several reasons for that:
Gen Z and Millennial employees reportedly demonstrate lower stress resistance at work;
These groups of workers put particular emphasis on work-life balance and mental well-being in the workplace (more on that further in the article);
But most importantly, younger professionals were more likely to be laid off during the pandemic:
This data suggests that 49,5% of employees under 40 years old were affected by the Covid-19 pandemic in 2020. At the same time, only 41% of older workers have experienced severe struggles when it comes to employment.
Why it is important: these findings raise two vital concerns:
Firstly, there seems to be a distorted understanding of ageism in the workplace. We often hear that older employees experience exclusion and professional hardships due to various psycho-social factors. At the same time, studies like Gallup's clearly demonstrate that younger workers face more brutal consequences in case of a crisis.
Secondly, the younger generation of professionals will soon take over the job market, and they will be dictating the rules. Businesses won't have much choice but to face a new reality, in which companies will experience turnover because of their inability to provide decent working conditions.
53% of all employees are more likely to prioritize health and well-being over work now
In this case, the findings cover employees across all age groups. The study compared pre-pandemic results to the post-Covid reality. The respondents had to assess how they personally estimated the importance of the work-life balance ratio offered by their companies and the overall satisfaction with their work environment. Unsurprisingly, the two variables had a direct correlation.
What is more, 69% of employees believe they'd work harder if they felt more appreciated. These findings mark empathetic leadership and dedicated feedback systems as crucial elements of positive company cultures.
An interesting case study was published in Forbes, presenting the results of a research that lasted 11 years. It studied companies that did and did not have corporate cultures that "facilitate adaptation to a changing world":
Companies with performance-enhancing cultures in place have driven a 500% higher increase in revenue growth and more than 755% net income growth compared to those without.
Why it is important: We must pay closer attention to the causes of declining employee engagement rates. Younger workers have a less pleasant experience because organizational cultures rarely meet their expectations regarding well-being. So by saying that "employees aged 40 and over have higher employee engagement," we are actually saying that "employees over 40 are more likely to tolerate a toxic work environment".
Companies will eventually be forced to adapt to the growing demand for healthy work cultures. After all, the tech startups known for leading this sort of change already actively promote a human-first approach in all the organizational processes.
With that, just one question remains: how to drive employee engagement effectively?
5 main drivers of employee engagement
By now, you should have a perfect understanding of why employee engagement is essential and why it's in your best interest as an employer to ensure your team is happy. What you need to focus on next is how.
There are many similarities among the most common factors that affect employee engagement. In the end, it all comes down to three core drivers of engagement:
Employee-oriented organizational culture;
A positive relationship between the team and the senior management;
Functional operational processes within the company.
And here are five actionable strategies to bring them to life:
1. Revise your pay strategies and employee engagement initiatives
The days when "Pizza Fridays" and "Private medical insurance" could be considered a valuable work bonus are over. Today, you need to understand what drives your employees' private lives and see how your company can improve that experience.
Car allowance may be a redundant benefit if you allow working from home. Instead, your team could really benefit from physical and mental well-being perks, such as therapist consultations, lunch allowances, etc.
Your total rewards program needs to take into consideration how all of the program's components affect employee perceptions and behaviors. Pay structures need to build up from there.
A recent study by ConsumerAffairs revealed that 47% of employees leave in pursuit of higher pay, and 41% quit because of insufficient pay raises:
But, yet again, it's not all about the money. Another study by Flexjobs highlights financial compensation as just 1 out of 5 top reasons for quitting. Other drivers mainly revolve around company culture and the inability of the organization to ensure a healthy work-life balance:
As a result, most solutions for improving your employee engagement rate should also originate from sources other than financial compensation.
2. Create a pleasant workplace environment
People report that "it's less an industry, role or pay issue than it is a workplace issue" that causes the "great resignation"". As a result, improving your team's day-to-day experiences directly with your company is the best way to boost employee engagement (and save yourself some recruitment headaches).
As a good team lead, you should know the difference between mentoring and micromanaging. After all, your entire team is working towards a common goal. And if some people come up with their own ways to achieve the best results, you might want to nurture their motivation instead of clipping their wings with formal, often dated procedures.
Giving your employees a little flexibility in their day-to-day can go a long way in improving the quality of their work experiences.
For example, you can start by allowing employees to choose the most convenient work mode for them: remote, hybrid, or on-site. Research shows that hybrid mode allows for the highest productivity:
% of highly engaged employees
Check in with your team: many people are eager to return to the office after the pandemic, but many are perfectly happy with their home-office setup.
You can also rely on verified team building activities for on-site and virtual teams that will bring your team together without feeling like a chore. Of course, you can come up with the form of your team building exercises on your own, but if you don’t want to spend too much time on planning, there are plenty of employee engagement solutions, applications, and dedicated platforms that will take care of it for you!
transparency in career planning and remuneration policies;
clear job description for a specific position;
well-regulated feedback system in place on a company-wide level;
internal possibilities for a career change.
On top of that, employees greatly appreciate having access to learning resources, being invited to international conferences, and other opportunities for boosting their professional skills.
Taking care of these core processes for your team, department, or entire organization can significantly boost the levels of employee engagement in your company.
4. Invest in open communication and empathy
Interact/Harris Poll has shown that 91% of respondents feel that their managers lack communication skills. That is reflected in their inability to provide clear instructions for a given project, deliver constructive feedback, or simply communicate with their coworkers in a professional and polite manner on a daily basis.
What is more, Edelman Trust Barometer has revealed that almost 33% of employees don't trust their employers. At the same time, whooping 96% of employees recognize empathy as a crucial part of emotional intelligence necessary for practical cooperation in a workplace.
The company's leadership needs to recognize the overpowering importance of open communication in the workplace. You must implement processes that encourage unbiased performance reviews for each level of seniority, ensuring every employee feels welcome and included regardless of their professional or cultural background.
But more importantly, you need to care.
5. Build a company culture you would be proud to be a part of
stable working schedules without shifts and unpaid over-hours;
But at the end of the day, it all comes down to the people you work with. As a team leader, it is your job to ensure your coworkers are happy with their surroundings. And it doesn't matter if they work from home or come to the office every day.
There is no one-size-fits-all strategy to boost your employee engagement rate because every situation is different. The only sure thing you can do is stop thinking about it in terms of People & Culture and start thinking about Culture for People.