We teach our clients why and how to attract, nurture and retain the best employees and clients to increase profits. We share our experience so we can duplicate our results – that create a culture of trust, hope, compassion and trust in an organization. That's why we love what we do. – Evolve Performance Group CEO, Jeff Tobaben
Evolve Performance Group research concluded that approximately 95% of Chamber of Commerce members and others that work in small to medium-sized businesses can not define Employee Engagement or explain the effects, positive or negative, on their company or bottom line.
According to AdWeek, 80% of shoppers conduct online research before buying. While the internet is not the end-all for product information, it does answer important questions for the consumer and give them a baseline of knowledge. With that in mind, Evolve compiled a summary of engagement related industry research to save you time, stimulate ideas, and help you and your business better define what you are looking for in an engagement solution.
Our objective is to provide you with a summary of Evolve Performance Group’s performance data and third party industry data to help you quantify the value proposition and return-on-investment for investing in Employee Engagement, Client Engagement, Professional Consulting, and Professional Development.
Evolve Performance Group Background
The Evolve team includes numerous engagement thought leaders with over 20 years of experience in the field of Behavioral Economics, Employee Engagement, Client Engagement, and Professional Development. Evolve Performance Group has implemented over 300 engagement programs and surveyed 1+ million employees in over 47 countries and 26 languages worldwide. The result of these efforts is the Evolve database which is a comparative reference point for individual teams and companies. We can duplicate successes (our why) that validate the business problem (what) and share the benefits of deploying solutions (how). It is our experience, methodology, and data-driven approach that make us a unique, innovative, and successful engagement partner.
Below you will find trade articles, industry studies, and data references discussing Employee Engagement, turnover, customer acquisition, etc. to help with your research and validation of engagement initiatives. While we don’t intend to endorse, validate, or confirm third party research, we believe you will discover there is consensus in the business community about the problems associated with disengaged employees and the benefits of creating a culture driven by engagement.
Evolve Performance Group Engagement Research
Fully Engaged Employees are:
- 4.5 times more likely to recommend their company’s products and services
- 40 times more likely to recommend their company as a great place to work
- 15.5 times more likely to spend their career with the organization
- 4 times more likely to say they plan to be with the company 1 year from now
- 9 times more likely to report they have an excellent work/life balance
Engagement in the Energy Industry:
- 94% of fully engaged employees would recommend their company as a great place to work
- The most engaged work teams are 43% safer
- 25% of employee turnover can be explained by employee disengagement
- Engaged employees are 5.5 times more likely to say they intend to be with the organization one year from now
Engagement in the Automotive Industry:
- For one luxury automotive client, retailers in the top quartile who maintained or increased employee engagement averaged a 77% increase in gross profit per new vehicle sold or $982. For this same client, teams that increased engagement by .1 or more, on a 5 point scale, experienced the following outcomes versus teams whose engagement scores decreased by .1 or more.
- For new cars, this difference represents 51% more gross profit or an additional $480 per new car sold.
- For used cars, this difference represents 23% more gross profit or an additional $301 per used car sold.
“Fully engaged customers represent a 23% premium to a business.” - Bill McEwen, PhD, Evolve Client Engagement Practice Leader
Auto Service Market Share: Groups that grew their Employee Engagement year over year saw an 85% increase in their market share of automotive service clients.
Retail Sales Market Share: Groups that grew their employee engagement, saw a 69% increase in their market share. Those whose engagement remained stagnant or declined, lost market share.
Man Hours Lost: For one organization, employees in the bottom half of engagement lost 8,100 man hours annually for safety. The top half of engagement lost only 936 man hours.
On Time Delivery: On average, sites with higher levels of engagement had a higher percentage of on time delivery.
Worker’s Compensation: Engaged teams experienced a 48% decrease in work related injuries resulting in $47,988 dollars less paid out per worker’s compensation claim.
"Evolve Performance Group Impact." Evolve Performance Group. Web. 25 Feb. 2016. .
Employee Engagement Reference Materials & Business Case Validation
Why is Employee Engagement Important?
Increasingly, workplace studies are pinpointing engagement as the crucial factor in corporate satisfaction and effectiveness. Among compelling findings:
- Organizations with high engagement are 78% more productive and 40% more profitable than companies with low levels of engagement. (Tower Perrin Global Workforce Study – 2007)
- Engaged organizations increased profits as much as three times faster than their competitors. (Corporate Leadership Council)
- Companies with high employee engagement had a 19 percent increase in operating income and almost a 28 percent growth in earnings per share (Hewitt Quarterly Asia Pacific, 2007)
- Highly engaged organizations have the potential to reduce staff turnover by 87 percent and improve their performance by 20 percent.
"By the Numbers: A Psychologically Healthy Workplace Fact Sheet." APA Center for Organizational Excellence. http://www.apaexcellence.org/resources/goodcompany/newsletter/article/44. 25 Feb. 2016.
Engagement and Culture Skyrocketed to the #1 Issue around the World
The Deloitte Global Human Capital Trends 2015 provides a wake-up call for those tasked with Human Resources and Leadership responsibilities. Here are some of the alarm bells:
- The gap is widening between what business leaders want and what HR is delivering.
- Engagement and culture skyrocketed to the #1 issue around the world [in 2015], with 87% of companies rating it important or very important vs 79% last year.
"Human Capital Trends 2015 | Deloitte | Introduction." Deloitte United States. Web. 25 Feb. 2016. .
Who is more important -- Employees or Customers?
Problems don’t begin with customers. They start with you and your employees. When customers expect a fantastic experience but receive a third-rate one, you can lose them forever.
Although 90% of leaders think an employee engagement strategy positively impacts the bottom line, a mere 25% develop one.
"Employee Engagement Is More Important Than the Customer." Entrepreneur. 2015. Web. 25 Feb. 2016. .
A Twofer – Engagement and Professional Development are Key Benefits
Engagement will remain a #1 concern - 87% of companies consider “culture and engagement” top priorities, the predictions note, and this focus is unlikely to change, given that engaged, committed employees are “the core of so many vital components of workplace success.” Given, too, that vast numbers of employees remain disengaged – around 70%, according to numerous national surveys – there’s no shortage of substantive management work to be done here.
Professional development opportunities will be a key factor in turnover rates – “Opportunities for growth will be vital,” the report states, “and lack of them will pop up frequently in exit interviews.” I fully agree. Lack of opportunity is a sure motivation killer. Numerous studies show this to be true. It’s a subject I frequently write about; indeed it’s hard to think of a management function that’s so highly valued (and easy to satisfy), yet so often neglected.
Lipman, Victor. "Key Management Trends For 2016? Here Are 6 Research-Based Predictions." Forbes. Forbes Magazine. Web. 25 Feb. 2016. .
Employee Engagement & The Cost of Employee Turnover
National Economic Loss Due to Employee Turnover
“At enormous costs, it’s worth noting: The Bureau of National Affairs estimates U.S. businesses lose $11 billion annually due to employee turnover.”
Lipman, Victor. "Why Are So Many Employees Disengaged?" Forbes. Forbes Magazine. Web. 25 Feb. 2016. .
The Direct and Indirect Costs of Employee Turnover
The national average cost of replacing one employee is $3,424. Other direct and indirect costs also include:
- Lower productivity with remaining staff
- Lower team morale
- The spread of fear, doubt and disengagement
- Remaining staff is overworked and resentful
- Absenteeism and sick days are contagious
- Rookies make product and service mistakes that lose customers
- Loyal customers notice change
- Loss of customers is contagious
- Loss of institutional knowledge is dangerous
- Social media rants are not always customers
- Loss of Word-of-Mouth referrals is contagious
- Loss of reputation starts with disengaged employees
- Replacement costs are real
- Lost opportunity
Lucas, Suzanne. "How Much Employee Turnover Really Costs You." Inc.com. 2013. Web. 25 Feb. 2016. .
"How to Reduce Employee Turnover." Management RSS. Web. 25 Feb. 2016. .
The Cost of Employee Turnover: $30K per year and up to 2x the Salary
Some studies like the Society of Human Resources (SHMR) predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager making $40,000 a year, that's $20,000 to $30,000 in recruiting and training expenses.
Others predict the cost is even more - that losing a salaried employee can cost as much as 2x their annual salary, especially for a high-earner or executive level employee.
Serwatka, Donna. "Bottom Line: According to the Bureau of Labor Statistics....." LinkedIn. Bureau of Labor Statistics - U.S. Department of Labor, 24 Aug. 2015. Web. 25 Feb. 2016. .
Client Engagement & The Cost of New Customer Acquisition
15 Statistics That Should Change the Business World – But Haven't [Yet]
- Price is not the main reason for customer churn, it is actually due to the overall poor quality of customer service – Accenture global customer satisfaction report 2008.
- A customer is 4 times more likely to defect to a competitor if the problem is service-related than price - or product-related – Bain & Company.
- The probability of selling to an existing customer is 60 – 70%. The probability of selling to a new prospect is 5 - 20% – Marketing Metrics.
- For every customer complaint there are 26 other unhappy customers who have remained silent. – Lee Resource.
- A 2% increase in customer retention has the same effect as decreasing costs by 10%. – Leading on the Edge of Chaos, Emmet Murphy & Mark Murphy.
- 96% of unhappy customers don’t complain, however 91% of those will simply leave and never come back. – 1Financial Training services.
- A dissatisfied customer will tell between 9-15 people about their experience. Around 13% of dissatisfied customers tell more than 20 people. – White House Office of Consumer Affairs.
- Happy customers who get their issue resolved tell about 4-6 people about their experience. – White House Office of Consumer Affair.
- 70% of buying experiences are based on how the customer feels they are being treated. - McKinsey.
- 55% of customers would pay extra to guarantee a better service. – Defaqto research.
- Customers who rate you a 5 on a scale from 1 to 5 are six times more likely to buy from you again, compared to ‘only’ giving you a score of 4.8. – TeleFaction data research.
- It takes 12 positive experiences to make up for one unresolved negative experience. – “Understanding Customers” by Ruby Newell-Legner.
- A 5% reduction in the customer defection rate can increase profits by 5 – 95%. – Bain & Company.
- It costs 6–7 times more to acquire a new customer than retain an existing one. – Bain & Company.
- eCommerce spending for new customers is on average $24.50, compared to $52.50 for repeat customers – McKinsey.
Shaw, Colin. "15 Statistics That Should Change The Business World – But Haven't." LinkedIN. 4 June 2014. Web. 25 Feb. 2016.
Customer Retention: Increase Profits & Save Money
If you invest in sales and marketing – then you should invest in customer retention.
- According to Bain and Co., a 5% increase in customer retention can increase a company’s profitability by 75%.
- Gartner Group statistics tell us that 80% of your company’s future revenue will come from just 20% of your existing customers.
- According to Lee Resource Inc., attracting new customers will cost your company 5 times more than keeping an existing customer.
Lawrence, Alex. "Five Customer Retention Tips for Entrepreneurs." Forbes. Forbes Magazine, 1 Nov. 2012. Web. 25 Feb. 2016. .
Have you defined your cost of new customer acquisition?
Cost to Acquire Customers (CAC). Also known as customer acquisition cost, measures the cost of landing a customer. In simple terms, add up the cost of marketing and sales - including salaries and overhead - and divide by the number of customers you land during a specific time frame. Spend $100 and acquire 10 customers and your CAC is $10.
Haden, Jeff. "4 Business Metrics You Can't Afford to Ignore." Inc.com. 27 Dec. 2011. Web. 25 Feb. 2016. .
“Most businesses put all their marketing efforts into getting new customers, yet it costs between seven and twenty times more to sell to a new customer than it does to sell to an existing customer.”
Kingwill, Ian. "What Is the Cost of Customer Acquisition vs Customer Retention?"LinkedIn. 3 Mar. 2013. Web. 25 Feb. 2016. .
“Customer lifetime value is the dollar value of a customer relationship based on the present value of the projected future cash flows from the relationship.”
"Simple CLV Formula - Customer Lifetime Value." Customer Lifetime Value. Web. 25 Feb. 2016.
76% of companies see customer lifetime value (CLV) as an important concept for their company
Only 40% of companies are able to measure customer lifetime value accurately.
Only 40% of companies and 30% of ad agencies have an equal value on customer acquisition and retention.
Saleh, Khalid. "Customer Acquisition Vs.Retention Costs – Statistics And Trends."The Invesp Blog Conversion Rate Optimization Blog. 23 Feb. 2015. Web. 25 Feb. 2016. .
What is your customer retention budget?
Depending on which study you believe, and what industry you’re in, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. It makes sense: you don’t have to spend time and resources going out and finding a new client — you just have to keep the one you have happy. If you’re not convinced that retaining customers is so valuable, consider research done by Frederick Reichheld of Bain & Company (the inventor of the net promoter score) that shows increasing customer retention rates by 5% increases profits by 25% to 95%.
Gallo, Amy. "How Valuable Are Your Customers?" Harvard Business Review. 15 July 2014. Web. 25 Feb. 2016.
How To Calculate Your Customer Lifetime Value (CLV)
- Source: Wikipedia, https://en.wikipedia.org/wiki/Customer_lifetime_value
- Source: Brad Sugars, Contributor, Entrepreneur Magazine, http://www.entrepreneur.com/article/224153
- Source: Kismetrics, https://blog.kissmetrics.com/how-to-calculate-lifetime-value/
- Source: http://www.clv-calculator.com/customer-lifetime-value-formulas/simple-clv-formula/
- Source: http://www.customerlifetimevalue.co/
Engaged Employees are the Path to Quality Customer Service
- “Customer service is the new marketing.” - Derek Sivers, CD Baby
- “Customer service shouldn’t just be a department, it should be the entire company.”- Tony Hsieh, CEO of Zappos
"75 Customer Service Facts, Quotes & Statistics." 75 Customer Service Stats and Facts You Can't Afford to Ignore. Web. 25 Feb. 2016.
Productivity & Employee Engagement
Proof That Positive Work Cultures Are More Productive
[Employee] disengagement is costly. In studies by the Queens School of Business and by the Gallup Organization, disengaged workers had 37% higher absenteeism, 49% more accidents, and 60% more errors and defects. In organizations with low employee engagement scores, they experienced 18% lower productivity, 16% lower profitability, 37% lower job growth, and 65% lower share price over time.
Seppala, Emma, and Kim Cameron. "Proof That Positive Work Cultures Are More Productive." Harvard Business Review. 01 Dec. 2015. Web. 25 Feb. 2016. .
Employee Engagement Does More than Boost Productivity
Improving employee engagement is not simply about improving productivity — although organizations with a high level of engagement do report 22% higher productivity…high-turnover organizations report 25% lower turnover, and low-turnover organizations report 65% lower turnover. Engagement also improves quality of work and health. For example, higher scoring business units report 48% fewer safety incidents; 41% fewer patient safety incidents; and 41% fewer quality incidents (defects).
Baldoni, John. "Employee Engagement Does More than Boost Productivity."Harvard Business Review. 04 July 2013. Web. 25 Feb. 2016. .