13 Benefits of Employee Engagement, and Why It’s So Important

There is so much talk about employee engagement. From catchy frameworks and models geared towards improving engagement in organizations to studies on employee engagement trends, you’ve likely come across information on the topic.  

But when a management concept turns into a commonly used buzzword, it’s easy to lose sight of what matters the most and how you should be applying it to your team. What is the main benefit of employee engagement? What does employee engagement mean in practice? And does having highly engaged employees really matter all that much?

What is Employee Engagement?

It wasn’t that long ago that work was a much more transactional affair than it is today. Employers were mostly focused on employees delivering output. You got hired to perform certain duties in exchange for compensation. There certainly wasn’t as much focus on your experience while performing said duties, let alone its possible impact on organizational success. 

In 1990, organizational psychologist William A. Kahn published a research paper on the psychological conditions of personal engagement and disengagement at work. He provided the first formal definition of employee engagement in the process – and some call him the “father of employee engagement” because of it. 

Khan defined employee engagement as the harnessing of employees’ selves to their work roles: 

 “In engagement, people employ and express themselves physically, cognitively, and emotionally during role performances,”

What Is Employee Disengagement?

On the other hand, he defined disengagement as the “uncoupling” of self from work roles:

“In disengagement, people withdraw and defend themselves physically, cognitively, or emotionally during role performances.”

Sounds a lot like quiet quitting, doesn’t it? Since Kahn and others pioneered research on employee engagement, organizations have started paying more attention to the level of connection, enthusiasm and commitment that employees feel towards work.

The benefits of employee engagement and the cost of employee disengagement have now been studied extensively.

The Impact of Keeping Employees Engaged

Employee engagement is a critical component of a successful organization. It can make or break performance, as it’s tied to outcomes like productivity and turnover.

According to Gallup, low-engagement teams typically endure turnover rates that are 18% to 43% higher than those of highly engaged teams. Companies with highly engaged workforces also tend to have higher earnings per share.

Engaged employees are passionate about their jobs, feel valued, and enjoy a sense of belonging and purpose at work. It makes sense that they bring more of their whole selves to work, to revisit Kahn’s initial definition of employee engagement.

This devotion has an impact on the way they perform their role and increases employee loyalty. Let’s examine it.

Why is Employee Engagement Important?

Increases Productivity and Revenue

Engaged employees are productive employees. Consider the process of applying yourself to a task. Suppose you felt bitter about having to do it and unappreciated for your efforts. Chances are, you would procrastinate. You would do the bare minimum expected of you. This is what happens to less engaged employees.

On the other hand, when you care about what you do and feel valued for it, you are more likely to go above and beyond what is expected of you. You take pride in your work. You understand how it’s connected to a greater whole and want to do your best. Productivity is a side effect of the positive relationship you have with performing this task.

This dedication not only boosts individual performance and motivation, but also elevates team dynamics and workplace culture. As a result, customer service improves. Sales increase. And profitability has never looked better.

Improves Retention Rates and Reduces Turnover

More than half the world's employees were watching for or actively seeking a new job in 2023, according to Gallup.

But engaged employees are more likely to stay and aim to grow within a company instead of searching for new opportunities. Considering the cost of employee turnover can reach 1.5-2.0 times an employee's annual salary, this also has an impact on your bottom line.

Besides the actual monetary cost of turnover, increased employee retention translates into reduced disruption and more stability.

It allows you to be proactive about your HR strategies instead of reactive. When you’re not constantly recruiting and training new workers, you can use your budget and resources to foster a company culture of engagement and nurture talent.

Strengthens Organizational Alignment

Employee engagement is also beneficial in terms of organizational alignment. Employees who feel a sense of purpose and passion at work are connected to their organization’s goals and values.

This alignment breeds loyalty and a deeper commitment to success. It even turns team members into ambassadors for the company, which boosts your employer brand reputation both internally and externally. This also has a positive effect on retention.

13 Crucial Employee Engagement Benefits

As you can see, having an engaged workforce is a good thing. To help you  make a case for investing in new people and culture strategies and employee engagement ideas, here are 10 benefits of employee engagement across different categories.

Higher Performance and Productivity Benefits

The relationship between employee engagement and productivity is well-documented, ranging from greater employee commitment to better organizational alignment. It translates into higher performance across teams. Here is how these factors influence one another to benefit teams and organizations. 

1. Highly Engaged Employees Lead to Higher-Performing Teams

   You’ve wrapped your head around the fact that engaged employees are more likely to be committed and dedicated. But you may be shocked at how much so. A Deloitte study revealed that companies who invest in culture-building, which includes priorities centered around people and engagement, increased their revenue by a whopping 682%.

   That’s because when people truly believe in your company’s mission and values, they show up differently. They aren’t just clocking in and completing tasks – there is a genuine investment in organizational success.

   As a result, team members strive to meet their goals, knowing that these goals contribute to the larger goals at hand.

   This focus on trying daily work to a bigger picture can be incredibly motivating. People are energized and driven to overcome obstacles and seize opportunities, resulting in a tangible boost in performance.

2. Better Team Performance and Achieved Objectives

   Plus, engaged employees don’t just stop at personal performance. Their enthusiasm is usually contagious – just like disengaged employees can wreak havoc on team morale.

   The more people are engaged, the more you create a positive feedback loop that fuels collective drive and increases performance. Engaged employees can also facilitate effective communication by sharing learnings freely, asking questions and generating new insights.

   Moreover, engaged employees tend to be proactive when it comes to solving problems and supporting coworkers. This contributes to a positive work environment and raises the standard of performance for everyone involved.

   Teams with engaged employees therefore experience higher engagement levels as a collective, and they tend to collaborate more effectively.

   They come up with creative solutions and innovations. And they are more resilient in the face of adversity. This collective engagement leads to excellence and helps these teams consistently achieve goals and overperform, even during uncertain times.

3. Increased Employee Productivity and Job Satisfaction

   Employee engagement and job satisfaction can easily be mixed up, but they are not one and the same. Employee engagement informs job satisfaction: Research shows that the higher employee engagement rate, the higher the job satisfaction rate.

   According to Indeed, overall job satisfaction can be described as being content with what you do at work and who you do it with. It’s a pleasurable state and a measure of your level of contentment in the workplace.

   It has a huge impact on a person’s quality of life outside of work, from their emotional well-being at home to their stress level and physical health.

   Both employees and employers benefit from it. Employees are less likely to miss work due to stress or ailments tied to the negative impact of being unhappy at work. It’s easy to see how this would impact productivity.

   If people are miserable and stressed out, they can’t possibly perform at their best. The opposite is also true. Happy, satisfied employees are also more likely to be positive at work, which further contributes to a healthy, productive dynamic.

4. Improved Employee Well-Being and Health

   On that note, the benefits of employee engagement have a huge impact on employee well-being, from improved work-life balance to lower risk of burnout.

   McKinsey data reveals that one in four workers has experienced symptoms of burnout, which include exhaustion, mental distancing, cognitive impairment, and emotional impairment. It’s a serious problem – and employee engagement strategies can help prevent it.

5. Less Workplace Stress and Lower Risk of Burnout

   Did you know that employee engagement can help lower workplace stress? Engaged team members tend to feel a stronger sense of both control and purpose at work. This allows them to handle pressure and manage their workload more effectively. Additionally, employees in a culture of engagement are more likely to feel valued and supported, which further mitigates stress-related issues.

   Companies that care about employee engagement are also more likely to invest in well-being efforts and mental health resources, which further increases engagement and creates a virtuous cycle.

   More than 9 in 10 workers report that they feel more motivated at work when their leaders support well-being initiatives, according to the American Psychological Association.

   These employees are also more satisfied with their job, less likely to leave, and more likely to recommend their organization as a good place to work. In other words, employee engagement and well-being go hand-in-hand and help combat workplace stress and burnout.

6. Healthier Employees and Better Work-Life Balance

   Employee engagement can also improve well-being and reduce absenteeism by promoting better work-life balance.

   “By strategically and pro-actively using work-life-balance supportive policies and systems, employees can bring not only their authentic self to the workplace but also feel valued/engaged while at work, which in turn helps to achieve more desirable individual and organizational outcomes,” concluded the researchers behind a study on the relationship between engagement and work-life balance.

   People have limited time, energy and bandwidth. Balancing personal and professional priorities is crucial for mental and physical health. This balancing act allows people to recharge and re-engage with work with renewed focus.

   Employee engagement plays a crucial role in maintaining a healthy work environment where workers are treated like human beings with a life outside of work. In turn, organizations benefit from a more resilient and motivated workforce, which drives sustained success and growth.

Enhanced Employee Experience and Employer Brand Benefits

The benefits of employee engagement bleed into your employer brand. HR leaders and organizations have been increasingly focusing on employee experience in the past few years, especially after the COVID-19 pandemic and its impact on the workforce.

Employee experience is about the way team members feel at work as they interact with different touch points within the workplace – and engagement plays a huge role in creating a positive experience. 

7. Strong Ambassadorship and Positive Word-of-Mouth

   Employee engagement has a positive impact on the way external stakeholders and potential new recruits experience your organization too. Engaged workers become advocates for the company and help drive positive word-of-mouth.

   When you love something, you naturally talk about it with enthusiasm, right? This is exactly what happens when employees are satisfied and connected to their workplace.

   This type of word-of-mouth promotion is invaluable because it’s genuine and comes from sources with first-hand knowledge of the inner workings of your culture.

   The authentic positive stories shared by your employees can help differentiate your brand in competitive markets. For example, shoppers nowadays want to spend money on brands that align with their values.

   This is mirrored in the preferences of Gen Zers and millennials when applying for jobs. They want to feel connected to the purpose of an organization. Strong ambassadorship and word-of-mouth allows them to do so.

8. Easier Recruitment and Better Talent Attraction

   A strong employer brand also makes it easier to build a robust talent pipeline. Top performers want to find great workplaces and they are pickier about the offers they accept. They will do their research about the work environment and culture on platforms like Glassdoor. When they do, you want them to find rave reviews.

   It turns out that engaged employees play a crucial role in shaping these reviews. They will leave glowing, detailed testimonials about their experience within the organization and share their enthusiasm for their workplace with people outside of work.

   This not only makes the organization a magnet for top talent, but it can also help with talent retention. It’s less tempting to jump ship when you know that what you already have is exceptional and may be hard to find elsewhere.

   This may be a less obvious benefit, but a strong employer brand can also have a direct impact on your bottom line. Recruiting isn’t cheap. The more time it takes to hire people, the more budget you spend.

   When a company has a good reputation, it attracts a larger and better pool of candidates to choose from year-round. This helps HR teams focus on streamlining processes and selecting the best ones instead of spending excessive time and money on attracting applicants where there are none. 

Business Benefits of Employee Engagement

Caring about people is good for business. Employee engagement is critical to business outcomes ranging from customer satisfaction to greater innovation and profitability. As reiterated a few times, engaged employees are more productive, and disengaged employees underperform.

However, the level of performance of an engaged employee entails more than going above and beyond daily responsibilities. It’s about how committed they are to organizational success and how that translates into concrete results for the company. 

9. Better Customer Satisfaction and Loyalty

   For instance, engaged employees offer better service to your customers because they are more invested in their work and, therefore, more inclined to go the extra mile when serving clients. They are attentive and responsive – engagement, by definition, is a state of involvement.

   In a competitive marketplace, keeping clients satisfied is essential. From attracting new customers to retaining and upselling new ones, delivering exceptional customer experiences can be the differentiator between positive and negative ROI at the end of a quarter.

   The personal investment that engaged employees have in their work extends into their interactions with clients and has a direct impact on key business metrics.

10. Improved Collaboration and Innovation

    Engaged employees are also more likely to collaborate and innovate, which drives tangible business outcomes. According to Forbes, collaborative work environments lead to higher levels of performance and innovation.

    Moreover, a Fierce study revealed that 86% of executives, employees and educators cite a lack of collaboration or ineffective communication as a cause of workplace failures.

    Since engaged employees feel a sense of ownership towards their work, they are more inclined to find ways to work with others effectively and let ideas flow freely.

    When people with diverse skill sets and insights get together to reach a goal, magic ensues. This contributes to further engagement, since it’s satisfying to work with an engaged team and come up with innovative approaches as a group.

    Organizations with high employee engagement are better than others at recognizing and appreciating employees, a practice that is a top driver of engagement.

    When team members see that their contributions are valued – and that they can make a difference instead of being brushed off – they are encouraged to keep taking risks, keep sharing ideas and keep the collaborative spirit alive.

    This propels the organization forward and keeps it adaptable in rapidly evolving conditions.

11. Increased Revenue and Profitability

    Gallup reports that highly engaged business units result in a 23% increase in profitability. That’s huge. The impact of engagement on productivity is well-documented. Increased productivity is synonymous with higher-quality work and increased efficiency.

    When you pair this effect with the decrease in turnover costs and improved information continuity that results from people staying and caring about their jobs, it’s a recipe for stability and long-term financial health.

    Also, since engaged workforces attract better talent and foster customer loyalty, an organization with its ducks in a row in terms of employee engagement is more likely to see sustained growth and profitability. 

Leadership Benefits of Employee Engagement

Based on the benefits above, it’s clear that employee engagement is a cornerstone of successful organizations. It impacts everything from productivity to innovation, employee retention and talent attraction.

If you want a more engaged workforce, you may be wondering where to begin – there are several strategies and tactics to improve engagement, so it can feel daunting at first. 

However, there is one simple starting point: Effective leadership. That’s right – behind every highly engaged culture are highly impactful leaders. Leadership sets the tone for engagement within their teams, and it trickles down through all levels of the organization.

Through their actions and the behaviours they embody, good leaders create an environment where employees feel valued, motivated, and connected to the core values and goals of the company. Here is how they do it and why their role matters so much. 

12. More Effective Leadership and Management

    Since engagement starts at the top, more effective leadership and management is always required when aiming to increase employee engagement. Leaders get to steward the process of keeping employees engaged. They might run employee engagement surveys to keep a finger on the pulse of employee morale. But they also need to be highly engaged themselves.

    Their enthusiasm and energy will cascade down to their teams and enhance overall performance. When people see their leaders walk their talk, they are inspired to mirror the same attitudes at work.

    Besides leading by example, the best team leaders also have a clear vision, which they communicate often and transparently.

    This creates a sense of trust among employees and also helps team members align their efforts with the bigger organizational picture. As a result, they can do their jobs more effectively, which is motivating.

    They also feel safer expressing their ideas and innovating, which, again, is important for engagement. People want to feel that their work matters. It’s rewarding to come up with a creative solution and witness the impact of your idea first-hand.

    Additionally, working towards a clear vision and goals also helps team members feel connected to their jobs.

    According to McKinsey, 70% of employees said that their sense of purpose is defined by their work. This sense of purpose and connection in the workplace is paramount, and leadership and management play a big role in fostering it.

    Great leaders say thank you and appreciate their employees. Outstanding leaders invest in 360-degree employee recognition programs and understand the importance of recognizing and celebrating achievements, both big and small.

    By doing so, they boost morale and create a positive work culture where recognition becomes a daily habit, from peer recognition to employee rewards. This further drives engagement and all benefits associated with it.

13. Boosts Leadership Development and Coaching

    Leadership development is also intrinsically linked to employee engagement. If you manage people – and you manage them well – you make it your duty to help them develop and grow into leaders themselves. For example, you may provide various opportunities for training and development.

    This can fuel employee engagement by allowing team members to pursue advancement opportunities and challenges. Being stimulated in that way is an important human need. According to a Korn Ferry Survey, 1 in 3 professionals leave their jobs because they're bored.

    By equipping employees with the tools needed to evolve, you also show them that you value them and want to invest in their long-term success, which is good for engagement too.

    Plus, those who participate in development programs bring back new skills and perspectives and contribute to a culture of continuous improvement and growth (and engagement!).

    Furthermore, effective leaders give both positive and constructive feedback and offer coaching to team members. This is also an important aspect of driving engagement.

    A Zippia survey showed that a staggering 85% of employees take more initiative when they receive feedback at work, while 73% of workers are better collaborators as a result of feedback.

    In essence, leaders play a big role in fostering engagement through coaching, mentoring, and other efforts that help their reports advance and grow. They create other effective leaders in the process. 

Bottom Line: The Importance of Fostering an Engaged Workforce

An engaged workforce is not a nice-to-have or a luxury. It’s a necessity for organizations that want to survive and thrive for years to come. It influences so many aspects of a company's success, such as performance and profitability and talent attraction and retention. 

Every team is unique. You will need to come up with personalized strategies for improving employee engagement in yours and keep measuring employee engagement trends to track progress and optimize efforts. But no matter what, the first step is involving leaders and making sure they are committed to the process.

It might require time and trial and error, but it’s worth it: Engaged employees are more committed and innovative – and they are the backbone of highly engaged organizations.