The Engagement-Productivity Equation to Build a Thriving Workplace

Highly engaged employees are not just satisfied, they’re invested in the company’s success. This translates to a multitude of benefits, including a significant boost in productivity. 

There’s no denying that employee engagement increases productivity, which is important to any business. The more productive your employees are, the more successful you will be as a business. Research proves that highly engaged teams are much more productive and they have considerably less internal theft than those with low engagement.

Microsoft’s 2023 Work Trend Index Special Report, The New Performance Equation in the Age of AI, shows how Productivity x Engagement = Performance. Furthermore, it states that “Employees at highly engaged organizations are 46% more likely to see their organizations as strong communicators.” 

The report presents a framework for understanding the factors that drive employee engagement and performance in the modern workplace. It also explains that the New Performance Equation is a more nuanced and comprehensive approach to understanding employee performance, taking into account the complexities of the modern workplace and the role of technology in it.

Additionally, it highlights the potential benefits of AI in the workplace and acknowledges many of the potential challenges and concerns about AI in the workplace. 

“Amid economic uncertainty and the transition to flexible work, leaders are under pressure to increase productivity in flexible work and do more with less. At the same time, next-generation AI is changing the game for how organizations gain a competitive advantage. In this dynamic environment, employee engagement may not seem like a priority. New research tells a different story.”

Microsoft 

We’re going to break down the key concepts — employee engagement and employee productivity — and tell you more about the engagement-productivity equation. Then we’ll explore how you can leverage AI to cultivate a thriving and productive work environment.

What is Employee Engagement?

Employee engagement refers to an employee’s emotional commitment to their organization and its goals. Engaged employees are passionate, motivated, and dedicated to their work. They go the extra mile, take ownership of their tasks, and actively contribute to the company’s success. There is no doubt that when employees are engaged and happy, they are less likely to quit their jobs.

According to Work Institute’s 2024 Retention Report, Decoding the Emerging Workforce to Accelerate Retention, Engagement, and Profits, 45 million workers in the U.S. (27% of all workers) opted to quit their jobs in 2023. Alarmingly, this figure is 37% higher than it was in 2014. Why? Work Institute reveals some of the many reasons, pointing out that there is no single approach to employee retention. But the top reasons are preventable, they say. 

“It’s obvious that workers want to continually evolve, spend quality time with family away from work, and to do the work they enjoy for people who treat them properly.”

Work Institute

Engagement is recognized as one of the most important employee attitudes. It is often referenced in the Service-Profit Chain to explain the return on investment (ROI) realized when engagement is improved. 

The concept was developed in the 1990s by James L. Heskett, W. Earl Sasser, and Leonard Schlesinger of the Harvard Business School. Their book, The Service Profit Chain – How Leading Companies Link Profit and Growth To Loyalty, Satisfaction and Value, was published in 1997. Essentially, it’s a framework that explains how companies can create a competitive advantage by focusing on customer satisfaction and loyalty. It’s as relevant today as it was when the idea was first introduced — maybe even more so. 

How Does the Service-Profit Chain Apply to Employee Engagement?

The Service-Profit Chain connects several elements that are vital for business success:

• Employee satisfaction: Happy and engaged employees are more likely to provide excellent service to customers.
• Customer satisfaction: Satisfied customers are more likely to become loyal customers, leading to increased customer retention.
• Customer loyalty: Loyal customers are more likely to recommend the company to others, leading to increased word-of-mouth marketing.
• Revenue growth: Increased customer loyalty, positive word-of-mouth marketing, and effective referral programs can lead to increased revenue growth.

As Work Institute points out, many organizations conduct annual employee engagement or satisfaction surveys to gather feedback from all staff members, with the goal of using the insights gained to develop effective strategies for boosting employee engagement and retention.

Furthermore, organizations often reference the Service-Profit Chain when they undertake annual engagement surveys to explain ROI when employee engagement is improved. This enables them to get feedback on core drivers, look at employee attitudes and employee outcomes, and then relate these to business results.  

Our graphic is based on the approach exemplified diagrammatically by Word Institute. 

“However, there is a consensus that employee engagement is an employee state of mind, influenced by the employee’s motivation to do their work.” There is also general agreement that employee engagement depends on individual personalities and conditions of different workplace, which change constantly.

For this reason, when attempting to measure employee engagement, it’s vital to ask questions that are important to employees. But Work Institute maintains that employee engagement cannot be measured. Instead, they advocate identifying barriers to employee engagement rather than trying to measure it. These relate directly to the core drivers of engagement: the organization, manager, team (or employees they work with), and the job itself. And the only way to discover what these barriers are is by undertaking a relevant employer engagement survey. 

Benefits of a Highly Engaged Workforce

The benefits of a highly engaged workforce are undeniable, leading to increased retention and productivity, innovation, and improved customer service. 

Reduced Absenteeism and Turnover

Disengaged employees are more likely to be unhappy and unproductive, leading to absenteeism and a desire to leave. A high-engagement work environment fosters loyalty and satisfaction, resulting in a more stable and committed workforce.

Increased Productivity

Engaged employees are more focused and efficient, leading to a significant rise in output. They’re problem-solvers, not just task-completers, constantly seeking ways to improve processes and achieve better results.

Enhanced Innovation

When employees feel valued and empowered, they’re more likely to share ideas and think creatively. This fosters a culture of innovation, leading to groundbreaking solutions and a competitive edge.

Heightened Customer Satisfaction

Engaged employees take pride in their work and are genuinely invested in providing excellent customer service. They’re proactive in addressing customer needs, leading to higher satisfaction and loyalty.

What is Employee Productivity?

Employee productivity refers to the efficiency and effectiveness of an employee in completing their tasks and achieving their goals. It is a measure of how well an employee is able to accomplish their work responsibilities and contribute to the organization’s overall performance.

But, how will employee engagement increase productivity?  

Productive employees are able to complete tasks quickly, accurately, and efficiently, without wasting time or resources. They can meet deadlines and deliver results on time, which helps to ensure that projects are completed successfully. They can prioritize tasks, manage their time wisely, and avoid procrastination.

When employees are productive, they can maintain high standards of quality in their work, which helps to ensure that the organization’s products or services meet customer expectations. They are also able to identify opportunities for improvement and implement changes that increase efficiency and productivity.

Ultimately, employee productivity is all about working efficiently and achieving goals with minimal wasted time or resources. Highly engaged employees will be able to do this. 

Benefits of Increased Productivity

Productivity is a significant factor that leads to better business performance. Boosting employee productivity benefits both the organization and its staff. Key advantages include improved efficiency, enhanced job satisfaction, a better work-life balance, reduced turnover, enhanced customer satisfaction, and improved morale, leading to a competitive advantage and increased revenue.  

Improved Efficiency

Increased productivity enables employees to complete tasks more quickly and efficiently, freeing up time for other tasks, and reducing the risk of burnout. When employees are focused and efficient, the quality of their work improves. There’s a reduction in errors and rework and an increase in streamlined processes that lead to overall cost savings.

Enhanced Job Satisfaction

When employees are productive, they feel a sense of accomplishment and fulfillment, leading to higher job satisfaction and engagement.

Increased Output and Revenue

A productive workforce gets more done, leading to higher production volume, faster project completion, and ultimately, increased revenue. It stands to reason that as employees complete tasks more efficiently, organizations can take on more projects, leading to increased revenue and business growth.

Better Work-Life Balance

With increased productivity, employees can manage their workload more effectively, allowing for a healthier work-life balance and reduced stress.

Competitive Advantage

Organizations with highly productive employees are better equipped to respond to changing market conditions, stay ahead of the competition, and drive innovation.

Improved Morale

When employees feel productive, they’re more motivated. This leads to improved morale and a more positive work environment.

Reduced Turnover 

When employees are productive and engaged, they are more likely to stay with the organization long-term, reducing turnover and recruitment costs.

Enhanced Customer Satisfaction 

As employees complete tasks more efficiently, they can focus on delivering exceptional customer service, leading to loyal, satisfied customers.

Cost Savings 

When productivity increases, it reduces absenteeism and turnover rates, and improves efficiency. All these factors contribute to significant cost savings for the organization.

What is the Engagement-Productivity Equation? 

This big question is, How does employee engagement increase productivity? Research in Microsoft’s Work Trend Index Special Report (quoted above) confirms that employee engagement impacts the bottom line.  

An analysis of surveys involving more than three million employees at hundreds of companies clearly showed that high employee engagement correlates with stronger financial performance. Furthermore, companies with high employee engagement outperformed the Standard and Poor’s (S&P) 500 after a year. 

This research led Microsoft to define a new performance equation. In short, “Both engagement and productivity drive performance — and they are mutually reinforcing.” 

“The analysis shows that employee engagement is a key part of the performance equation. To move the bottom line, we need more than productivity alone. Think of engagement and productivity as mutually reinforcing, with one multiplying the other: When you are engaged in your work, you are more productive. When you are productive, you are more engaged in your work.”

Microsoft

The equation is Productivity x Engagement = Performance

• Productivity represents the efficiency and effectiveness of an individual or team in completing tasks and achieving goals. 
• Engagement represents the emotional, cognitive, and behavioral state of being invested in and committed to one’s work.
• Performance represents the overall outcome or result of an individual’s or team’s efforts, encompassing both quantitative and qualitative aspects.

Unwrapping its Productivity x Engagement = Performance equation, Microsoft reveals three key findings.

#1 Employee engagement matters to the bottom line – especially amid economic uncertainty

During times of economic uncertainty, companies that prioritized employee engagement saw remarkable financial results, outperforming those that neglected it by a significant margin. The most engaged organizations surpassed the S&P 500’s performance by the end of the year. Moreover, they found a striking correlation. For every additional point of employee engagement, the market capitalization per employee increased by a substantial $46,511.

#2 Clear communication unlocks employee engagement 

Employees working at organizations that are highly engaged are 46% more likely to see their organizations as strong communicators, and 37% more likely to express their confidence in leadership.

#3 To sustain engagement, build a feedback flywheel

Employees working at highly engaged organizations are 40% more likely to have confidence that their feedback will lead to action. They are also 56% more likely to say their organizations continually improve processes.

The Role of AI in Employee Engagement and Productivity

AI can be a powerful tool for boosting employee engagement and productivity. Several predictors of employee engagement such as quality of work life, diversity and inclusion, and communication are facilitated by AI. AI helps enhance the quality of work life, leading to positive organizational outcomes like increased productivity, employee well-being, and decreased attrition rate.

The New Performance Equation in the Age of AI suggests ways that organizations can take action related to each of Microsoft’s key findings. Next-generation AI plays a critical role in each action plan, working with all the other elements to improve productivity. 

Ensure Employee Engagement Impacts Your Bottom Line Positively

The message here is that employee engagement is critical to your bottom line. The research shows that highly engaged companies predictably outperform those that aren’t engaged. Take action by:

• Measuring and reporting on employee engagement
• Adopting a manager framework to help leaders develop employee engagement skills 
• Communicating that employee engagement is imperative for business 
• Helping managers take action to improve communication, employee engagement, and productivity by giving them access to data
• Adopting a digital employee experience that leverages data-driven insights and next-generation AI

Focus on Clear Communication and Goals to Boost Employee Engagement 

The role of AI can be powerful when it comes to internal communications. The research indicates that at the least engaged organization nearly one in four employees aren’t sure what they should focus on.  

Their advice is for leaders “to provide intentional communication that meets people where they are — in the flow of work.” Furthermore, clarity is key. Take action by:

• Creating clear priorities at leadership level
• Making sure leaders have modern communication tools that meet employees where they are in the flow of work
• Using next-generation AI and data-driven analytics to increase the effectiveness of communications

Sustain Employee Engagement By Building a Feedback Flywheel

Traditional linear feedback systems aren’t good enough any more. Instead, the key is to combine behavioral data with employee feedback. A feedback flywheel will create a self-reinforcing cycle of feedback, action, and improvement within an organization. Additionally, you can take action by:

• Ensuring you have a comprehensive listening strategy
• Leveraging AI to analyze the data you collect and gain a better understanding of patterns, as well as accelerate time to take action
• Empowering managers to create their own feedback flywheels so they can drive meaningful change, keep key metrics in place, and measure impact
• Setting up accountability measures that help employees to trust that action will be taken
• Being transparent about how employee feedback will be used

By leveraging AI strategically, organizations can create a more efficient, engaging, and ultimately, more productive workplace.

How Cerkl Broadcast Breaks Down Barriers to Workplace Productivity

When employees are better informed, they will be more productive. Cerkl Broadcast will help you overcome information overload, avoid organizational silos, and make your employees feel that they really are being heard. Key features include:

• AI-powered content creation and omnichannel distribution
• Time savings for communicators
• Better engagement for employees

What’s Next?

We have shown you how productivity and employee engagement combined the right way will result in increased employee performance. At the same time, measuring performance is an essential step in improving productivity. By tracking and analyzing performance metrics, organizations can identify areas for improvement, optimize processes, and make data-driven decisions to boost productivity.

Cerkl Broadcast’s ROI Calculator is a great tool for you to measure the ROI of internal communications and employee engagement initiatives. It is designed to quantify the financial impact of improving employee engagement and internal communications on an organization’s bottom line. Take action now with our free ROI calculator.

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