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The Cost of Disengaged Employees: Understanding the Impact on Your Business

Swetha Bhattacharya

Last Updated: 2 August 2023

As you step into your office, you are greeted by a sea of blank faces and weary eyes, instantly sensing the stagnant energy and heavy air of indifference that hangs in the atmosphere. It's a telltale sign of employee disengagement: a silent but powerful force that can have far-reaching consequences that impact not only their own well-being but also their business as a whole.

So, what exactly is employee disengagement? It is the state where employees feel disconnected, uninvolved, and uninspired in their work. They show up, do the bare minimum, and lack the motivation to go the extra mile. Why is it important? What causes it and what can you do to reduce employee disengagement to drive business growth and revenue? We answer all this, and more, in this article.


Factors Contributing to Disengagement


Employees are no longer interested in reporting to the office and going through the motions. In a study by McKinsey, 70% of employees agreed that their sense of purpose is defined by their work. They’re demanding more intangible and tangible benefits of being associated with an organization. Let’s explore the factors that have been linked with disengagement:

1.Work-life balance and workplace flexibility

Employees crave a balance between their personal and professional lives. When they feel overwhelmed by excessive work demands or lack the flexibility they need, their engagement levels plummet. This is even more applicable to women in your workforce: Deloitte’s Women @ Work: A Global Outlook 2023 report shows that an organization’s ability (or inability) to offer women flexibility around when their work gets done is a top lever of engagement and retention.

2. Career growth opportunities

Gartner HR research finds that employees are leaving their current jobs for better professional development opportunities (45%) at similar rates as they leave for higher compensation (48%)! Employees want to feel that their work is contributing to their personal growth and professional advancement. Without clear paths for development, they can quickly become unengaged.

3.Manager support and management style

The relationship between employees and their managers plays a significant role in engagement. When managers fail to provide the correct support, guidance, and recognition, employees can become disengaged. For instance, connector managers can bring about enhanced employee performance, while always-on (micro)managers can, in fact, degrade employee performance by up to 8%, according to Gartner.


4. Compensation and benefits

While financial rewards are not the sole driver of engagement, they do play a role. When employees feel undervalued or under-compensated, their motivation and commitment suffer.

5. Physical and mental well-being

The WHO recognizes that “Work can be a protective factor for mental health, but it can also contribute to worsening mental health” When employees are physically and mentally exhausted or face challenges related to health and safety, their engagement declines and burnout may set in. For every dollar spent on the mental well-being of its workforce, organizations can expect a return of 4.25x!

6. Lack of appreciation and recognition

Mckinsey found that up to 55% of employee engagement is driven by non-financial recognition— adding up to become the most significant driver of employee experience. Employees thrive on recognition and appreciation for their contributions. When their efforts go unnoticed or unacknowledged, it erodes their motivation and commitment.

The Consequences of Disengagement: A Wake-Up Call

Gallup reports that disengaged employees are costing global businesses $7.8 trillion in lost productivity — that is 11% of the world’s GDP! But, the impact of disengaged employees can be staggering in both financial and non-financial terms and directly translates into the business’ output.

Financial Consequences:

  1. Higher employee turnover and recruitment costs
    Disengaged employees are more likely to seek opportunities elsewhere, leading to increased turnover rates. The cost of lost productivity, hiring and training new employees can be significant, impacting your bottom line and business growth.

  2. Impact on customer satisfaction and retention
    Disengaged employees are less likely to provide exceptional customer service, which can result in lower customer satisfaction and increased customer churn.

  3. Training and development investment
    When employees disengage, the investment made in their training and development goes to waste. It becomes difficult to upskill and reskill employees, hindering your organization's ability to adapt and grow.

Non-Financial Consequences:

  1. Negative impact on team dynamics and collaboration
    Happy and healthy employees are more productive, take fewer sick days, and are more likely to be creative. Disengaged employees can bring down the overall morale of a team. Their lack of enthusiasm and motivation can spread negativity, impacting the productivity and cohesion of the entire team. 

  2. Reduced employee loyalty and advocacy
    Engaged employees are more likely to be loyal to their organizations and act as brand advocates. Disengaged employees, on the other hand, may speak negatively about their workplace, damaging your enterprise’s brand and reputation. 


In the image: Glassdoor reviews are used by disengaged employees to vent or speak about their organization, tarnishing its reputation. 

Strategies to Combat Disengagement and Unlock Discretionary Effort

While the cost of disengaged employees is concerning, there is hope. Organizations can take proactive steps to address disengagement and foster an environment where discretionary effort thrives. Here are some practical strategies to consider:

1. Recognize signs of disengagement

Keep an eye out for declining productivity, decreased quality of work, frequent absenteeism, or lack of enthusiasm. These signs can indicate employee disengagement and early intervention is crucial. Leverage continuous listening tools and AI-powered chatbot solutions to monitor your employees’ sentiments, and get real-time alerts on critical individuals.

2. Encourage discretionary effort in the workplace

Discretionary effort refers to the extra energy, time, and commitment employees voluntarily invest beyond their job descriptions. It is the willingness to go above and beyond. The easiest and quickest way to get this right is to ask your employees what they need to go the extra mile. Three of the most proven methods to unlock and encourage discretionary effort include:
  1. Help employees understand how their individual contributions align with the larger organizational goals and make a positive impact on customers, colleagues, or society. 
  2. Enable employees to have a say in how they approach their work, make decisions, and contribute their unique skills and expertise. When employees have a sense of ownership and control over their work, they feel empowered and motivated.
  3. Recognition and rewards play a significant role in encouraging discretionary effort. Celebrate milestones, accomplishments, and contributions both privately and publicly. 

3. Develop a culture of meaningful feedback and recognition

1. Schedule one-on-one meetings

Set aside dedicated time for meetings with employees to discuss their individual progress, challenges, and career aspirations. By actively engaging in these conversations, you can gain valuable insights into employees' motivations and help them feel valued.

2. Leverage predictive analytics
Using predictive analytics through solutions such as Amber’s People-to-Meet (PTM) dashboard equips you with valuable insights about employee performance, engagement levels, and potential flight risks. By proactively identifying areas of improvement and addressing potential concerns, you can effectively nurture discretionary effort.


4. Develop a continuous listening strategy

More often than not, your employees will tell you exactly what they need. Once such insights are collected, Amber’s dashboard helps you gain science-backed insights you can trust and make data-driven decisions based on your employee's pulse. From knowing exactly how effectively your managers are leading employee engagement to learning what inspires your employees to do their best work – closing the loop on employee feedback is simplified with Amber’s timely actionable nudges.

  1. DIY pulse surveys
    Empower leaders to create their own pulse surveys. These surveys offer full autonomy, allowing leaders to customize questions and gather feedback specific to their teams. By providing a quick and easy way for employees to share their thoughts and suggestions, you create a culture that values their input and actively seeks to address their needs.

  2. Moments that Matter by Amber
    Make your employees feel heard and valued during significant professional milestones. Amber triggers intelligent conversations during key milestones such as 30, 60, and 90 days, manager changes, performance reviews, and even exit interviews. By actively monitoring and addressing any changes in employee mood or engagement, you can ensure a smooth transition and maintain discretionary effort.

  3. Provide a safe space for your workers to share concerns or frustrations
    Encourage dialogue and feedback even when it isn’t initiated by your team or managers. A culture of candor helps your employees feel safe, honest, and share sensitive information. Amber’s anonymous surveys have been designed keeping this requirement in mind. 

Find out how Amber’s Anonymous bat feature helped identify a suicidal employee before it was too late.


5. Implement a recognition program

Rewards and recognition are a great way to acknowledge and appreciate employees' efforts and achievements — encouraging them to go above and beyond what’s expected. Celebrate small milestones and personal events too, ensuring your employees feel valued even outside of work.

6. Offer development opportunities

Invest in your employees' growth by providing training programs, workshops, mentorship opportunities, and clear career paths. Show them that you are invested in their professional advancement, and that it is a two-way street when it comes to growth and development.

7. Promote work-life balance

Support work-life balance initiatives, such as flexible work arrangements, remote work options, and policies that encourage time off when needed. Consider implementing practical offers such as childcare at work, so your workers can enjoy lunch with their children. 


McKinsey: “Companies must also invest in building “sticky” workplaces—listening to employees, anticipating and addressing their concerns, fostering psychological safety and a sense of community, and measuring outcomes. Rather than conducting only exit interviews, for example, has your company implemented “stay” interviews, asking people in the most critical roles how they are doing and what they need to continue in those roles?”

Build a thriving employee engagement strategy, at scale

The cost of disengaged employees cannot be overlooked. So, let's take a human-centric approach to employee engagement. Let's listen to our employees, provide meaningful feedback and recognition, offer growth opportunities, and promote work-life balance. 

The pandemic has propelled a systemic re-think, but as an organization grows and adapts to a new work model, Human Resources often lose the human touch - it's simply impossible to maintain a one-on-one with each employee as you scale past 1000 employees. It takes more effort and deliberate research to truly feel the pulse of your workforce and understand what makes a difference. 

This is where AI-powered conversational bots such as Amber can help you overcome the challenge at scale. With textual analytics, engagement drivers, early warning systems, and real-time engagement scores, your HR team is empowered with meaningful insights that matter. Want to give Amber’s Conversational Employee Experience Platform a try? Schedule a demo with our expert today.

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