Expert Opinion

New research links employee engagement to higher turnover

Photo Credit: Sideways 6

Companies which make employee engagement a strategic priority may be more likely to perform better financially, according to research released today.

An analysis of the UK’s biggest companies found that those which frequently reference “employee engagement” in their annual reports also perform better financially.

The findings were released by Sideways 6, an idea management firm, which analysed the annual reports of the FTSE100 Index for each of the last three years (2016-18).

The London-based tech firm looked for the frequency with which certain key terms such as “employee engagement” and “innovation” appeared in the reports and combined this with data on annual turnover, industry sector, number of employees and ratings on independent review site, Glassdoor.

Their research found that the 53 companies with five or more mentions of “employee engagement” had average profits 27% higher than the 47 companies who mentioned it less frequently – a difference which on average equates to over £4.3bn in monetary terms.

It may well be the reason behind a 41% increase in mentions of “employee engagement” from 2016-18, signifying it as an urgent priority for large companies.

Sideways 6 says the increase in focus on engaging employees over the past three years by some of the world’s biggest companies should make the rest of the business world take note. And while the report does not show any direct link between the level of employee engagement and annual profits, there is growing evidence that engaged employees are happier and more productive.

The industry with the highest scores for both “employee engagement” and ”innovation” was pharmaceuticals and biotechnology, with GlaxoSmithKline and AstraZeneca ranking among the top examples.

Other key findings of the research were that innovation is on the increase (a 33% rise from 2016-18) and ‘Listening leaders’ are beginning to emerge – CEOs who value the insight of their employees to drive business improvements.

Will Read, CEO of Sideways 6, said: “From employee idea initiatives to opening channels of communication directly between leaders and their employees, what this FTSE Innovation Index shows is the importance of utilising a company’s biggest asset – its employees.”