Cultures of Engagement Drive Profitability

According to Gallup, only 35% of U.S. managers are engaged in their jobs. This shocking statistic infers that 65% are not engaged, or worse, actively disengaged. One of the primary roles of managers is to motivate and engage their employees. A disengaged manager who doesn’t care about his or her job or organization directly affects the disengagement of their employees.

This cascade effect, as Gallup calls it, has shown that managers who work for engaged leaders are 39% more likely to be engaged themselves, and their employees are 59% more likely to be engaged. How can disengaged employees add value to a company and drive profitability? These employees have higher absenteeism and turnover, and dangerous amounts of presenteeism, all of which creates a huge negative financial impact on an organization. Gallup estimates that this lack of management engagement can cost U.S. organizations a whopping $398 billion annually.

In his seminal article in the Harvard Business Review, “Putting the Service-Profit Chain to Work,” James Heskett and his colleagues support the argument that in order to increase market share and profitability, customers and front-line employees must be your top priority. Citing cases from Xerox, Southwest Airlines and Sears, they point out that employee satisfaction – through loyalty, value creation and customer satisfaction – ultimately drives profitability and growth. The basis for their argument is that internal organizational quality, meaning how employees are treated, creates the employee satisfaction and loyalty that subsequently creates the increased profit margin.