What does it mean to have engaged employees? According to SHRM, employee engagement is a reflection of an employee’s commitment and loyalty to an organization’s goals. It is the opposite of an employee who is mentally checked out, uninterested, or who simply shows up at work for the sake of presenteeism.
Why is it essential to prioritize employee engagement? To begin with, companies with highly engaged employees are 23% more profitable than their competitors, based on research by Gallup. These companies also reported an average of 81% less absenteeism, and 18% higher productivity compared to companies who have poor engagement.
Furthermore, improving employee engagement has been linked to decreased employee turnover, fewer safety incidents, and less inveotry shrinkage from in-house theft.
The Value of Measuring Employee Engagement
Measuring employee engagement is just as important as making an effort to improve it. After all, how else would we define improvement, or determine success?
That’s where employee engagement metrics come in. Companies use these metrics to understand whether their employee engagement programs are meeting set targets, and to identify more areas for improvement.
The 9 Most Important Employee Engagement Metrics
Let’s have a look at the most important engagement metrics, the reasons why they’re vital to your organization’s success, and how to measure them correctly.
Are Your Employees Engaged Enough to Want to Show Up?
The Absenteeism Rate is the rate of unscheduled absences due to wellbeing issues or other reasons. The metric can be measured for individuals, groups, and for the whole organization.
Why is Absenteeism Rate Important?
Your company’s Absenteeism Rate is a key indicator of how engaged your employees are. If they frequently don’t show up for work commitments without prior notice, it’s a sign of poor engagement, low motivation, declining wellness, and little commitment to the job.
The Absenteeism Rate may also tell you something about the overall employee wellbeing of your organization. If many employees are calling in sick it may be time to review whether they’re overworked.
A study published in the Journal of International Business Research and Marketing points to other possible reasons behind high absenteeism:
Burnout and fatigue
To address these problems, managers need to have one-on-one sessions with such team members to understand what the real issues are and how they can help. For example, many employers provide childcare centers within their offices, others offer flexi-time and work-from-home options. For more ideas, have a look at our detailed guide on the kinds of employee perks and benefits you can offer to improve engagement and, in turn, attendance
How to Measure Absenteeism Rate
The formula for Absenteeism Rate is:
Number of days absent / Number of available workdays in the defined period
According to the SHRM, Absenteeism Rate is typically measured monthly and annually.
Tools to Use for Measuring Absenteeism Rate
In our opinion, the following are among the best software for measuring Absenteeism Rates:
BambooHR: A user-friendly HR software that helps you save time on attendance tracking.
TimeClock Plus: In addition to attendance tracking, TimeClock Plus makes it easy to stay compliant with labor laws and provides top-notch security.
isolved: Super fast and easy to use, isolved offers advanced workforce management features and makes attendance tracking a breeze.
Training Cost Per Employee
Measure Your Investment in Employee Training
Training Cost Per Employee is the average investment in training made for each employee over a given period of time. The expenditures involved are the cost of training materials, hiring trainers, travel, lodging, meals and refreshments, and venue rentals.
Why is Training Cost Per Employee Important?
Among all the factors that affect employee engagement, training is one of the most important. Research suggests around 42% of L&D professionals who indicated their employees were highly engaged in learning were also highly engaged overall at the organization.
Training Cost Per Employee is an important metric to compare with industry benchmarks. It allows you to determine whether you’re investing enough in your employees’ career development. If your calculation for this metric is less than the industry average, it may be a contributor to employee disengagement. Among other concerns, employee disengagement leads to low motivation and high turnover.
How to Measure Training Cost Per Employee
The formula to determine your average training cost per employee is:
Total training budget/Number of employees undergoing training
Employee Turnover Rate
Measure Your Ability to Retain Talent
The Employee Turnover Rate measures your ability to retain talent. The metric is expressed as a percentage and is based on the number of employees that separate from the company over a given period. It’s worth noting that there’s a difference between voluntary and involuntary turnover.
Voluntary turnover consists of resignations and has a more direct relationship with engagement. Involuntary turnover includes employees leaving based on a decision made by the company, due to health concerns, or retirement.
Logically, voluntary turnover has an inversely proportional relationship with employee engagement. If the rate shows an upward trend over time, it is a clear marker of decreasing engagement.
Why is Employee Turnover Rate Important?
The Employee Turnover Rate is a key HR metric, especially when analyzed in combination with your Employee Satisfaction Index. To gain deeper insight, we need to zoom in and be more granular with our analysis.
For example, take the overall turnover rate and then break it down function-wise. Which departments have the highest and the lowest turnover rates? If you see exceptionally high turnover in a department, it could point to a leadership problem. According to Gallup, 70% of the variability in employee engagement is correlated with a direct manager.
You can also check for seasonal patterns in turnover rate fluctuations. Do more people leave at a certain time of the year? A trend analysis of employee turnover rates can help HR prepare an action plan for next year’s staffing budgets.
A thorough analysis of the reasons for employee turnover can suggest the corrective measures necessary to improve overall employee engagement. But for this to happen, remedies for the flagged issues need to be actioned.
It’s also worth taking note of the Employee Turnover Rate before implementing any major policy changes and tracking it afterward to see how the new policies affect the metric.
Improving Your Company’s Employee Turnover Rate
There are multiple measures for reducing Employee Turnover that human resources can take. For example, did you know 50% of employees believe that turnover would decrease if managers recognized their efforts more frequently?
A highly effective initiative is routinely verbalizing recognition. We recommend reading our guide on recognition wordings for employees for inspiration in this regard. You may also want to consider implementing software that can automate and gamify employee recognition across the organization. Our detailed guide on the best employee recognition programs is designed to help you select the best option for your organization.
How to Measure Employee Turnover Rate
The formula for employee turnover rate is:
(Total number of employees who have left / Average number of employees during the period) x 100
Early Voluntary Turnover Rate
Measure the Effectiveness of Your Onboarding Program
The Early Voluntary Turnover Rate, also called attrition, refers to the percentage of new hires leaving their jobs voluntarily, typically within a year.
According to Michelle Smith, Vice President of Marketing at O.C. Tanner, “Up to 20% of turnover takes place in the first 45 days. This number is even higher with ‘emerging adults.” The term refers to workers in their late teens and twenties who have left school, but have not started a family or chosen a permanent career. “They define success differently than other generations. If a job isn’t meaningful to them, they aren’t afraid to leave.”
Early Voluntary Turnover Rate is one of the most important employee engagement metrics to keep track of, because it directly reflects on the organization’s employee onboarding program.
Why is Early Voluntary Turnover Rate Important?
Early Voluntary Turnover is one of the first red flags raised when an organization’s core employee engagement strategies are not working. If you find your organization’s Early Voluntary Turnover Rate to be higher than the industry average, it may be time to review your recruitment and onboarding processes.
A key concern to address is whether candidate expectations are being set correctly during the different stages of recruitment. Once hired, are appropriate measures in place to engage the employee? Were they given enough learning and professional development opportunities? Are the early turnover trends similar across the organization or are they confined to certain functions? The latter may also raise questions about the way those departments are being managed, especially with regards to onboarding.
The best software for employee engagement may reduce early voluntary turnover. These platforms are designed to ensure new employees are engaged right from the onboarding stage. It is also recruitment’s responsibility to set candidate expectations correctly from the onset of their hiring process.
How to Measure Early Turnover
Early Voluntary Turnover can be measured using the following formula:
(Number of employees who voluntarily leave within their first year / Total number of voluntary separations during the same period) x 100
Measure Employee Time Spent at Work
Work Time is a calculation of the amount of time an employee spends working. Typically, this metric applies to organizations with shift-based employment which pays based on hours worked. Common examples of this are restaurants or theme park staff.
Work Time is also useful for organizations that employ remote team members and would like to track the amount of time they were logged on to their devices.
Why is Work Time Important?
Work Time is a great engagement metric in multiple ways. A very high Work Time can indicate burnout, especially for remote employees whose work-life balance is more vulnerable to overtime. It can also indicate disengagement in employees whose Work Time measurement is too low.
How to Measure Work Time
To measure Work Time, we recommend using time and attendance software that records employee working hours. The best tools would provide screen capture features so you can visually track employee activity at any given time. Work Time is typically expressed as the number of hours the employee worked over the span of a week or month.
Work time = the Total number of hours logged within a period.
Measure Actual Work Done
Active Time is a subset of Work Time and is important in measuring remote employee engagement. It is defined as the amount of time a remote employee actively spends on a certain application.
Active Time is related to Focus Time and Total Time. Active Time is the total amount of time an application runs in the foreground while Focus Time is the time duration where the user is interacting with the app. Total Time is the total running time of an application on the remote user’s system.
Why is Active Time Important?
Active Time helps managers measure the engagement level of remote employees. With the advent of remote work culture, monitoring remote employees closely is a rising trend around the world. A 2021 survey by Digital.com of 1,250 US employers found that 60% of them use monitoring software to track employee activity.
Measuring the Active Time metric is specifically useful for employees who have to continuously work with a designated app. Examples of such roles are customer service teams and community managers.
How to Measure Active Time
Active Time is typically measured through software. The software maintains a precise record of the user’s Active, Focus, and Total Time on the system.
Employers should be careful when using these metrics, though. They may work well for well-defined tasks such as customer services. But might not be ideal for roles that involve creativity. For example, a writer may spend plenty of time simply reading from their screen or mulling over information. This is still time spent engaged with their work, although not interacting with it.
The app would count this as Focus Time instead of Active Time even though the creative professional in question may be actively working throughout the period in question.
Employee Satisfaction Index
Employee feedback is essential in the continuous process of measuring workplace engagement. The Employee Satisfaction Index (ESI) metric is an effective way in quantifying this feedback.
ESI scores are calculated with the help of employee responses and can range between zero to 100.This survey-based metric measures employee satisfaction with the workplace. The metric also provides a way for managers to understand how well employee expectations are being met.
Why is the Employee Satisfaction Index Important?
It’s difficult for employees to be engaged if their expectations are not being met at the workplace. These include expectations regarding work environment, company culture, training, and growth opportunities. Measuring the Employee Satisfaction Index, allows you to keep a finger on the pulse of your workforce.
Furthermore, the ESI gives managers a chance to identify issues affecting employee satisfaction, and take corrective measures to improve engagement. Measuring ESI annually can also demonstrate the value of HR’s initiatives to the organization in terms of engagement and overall employee happiness.
How to Measure Employee Satisfaction Index
The Employee Satisfaction Index is calculated with the help of a short employee survey, asking employees the following questions:
1) How satisfied are you with the workplace?
2) How well does the workplace meet your expectations?
3) How is the workplace compared to an ideal workplace?
Employees can indicate their responses on a scale ranging from 1 to 10, where 1 is the worst and 10 is the best score. These scores are then added together.
Even though these are the basic requirements of an ESI survey, these questions can be incorporated into broader employee engagement surveys, or pulse surveys, to ask additional questions about employee satisfaction. This allows HR to identify the pain points that are likely to affect employee engagement metrics the most once they’re addressed.
The formula for measuring ESI is:
ESI= [((sum of 3 scores ÷ 3) – 1) ÷9]*100
The (sum of scores ÷ 3) part of the formula is the average score given for the 3 questions above. In a perfect world where the average score would be 10, the calculation would be: ESI = [((10)-1)/9]*100 = 100
As indicated above, the final answer would be a number between 0 to 100, with 100 indicating maximum employee satisfaction. Therefore, the goal of HR should be to get as close to the 100 mark as possible through the initiatives they take throughout the year.
Employee Net Promoter Score (eNPS)
Measure Employee Loyalty
The NPS or Net Promoter Score system was invented by Fred Reichheld, a partner at the Bain & Co. management consulting firm, to measure customer satisfaction and loyalty.
The Employee Net Promoter Score or eNPS metric is based on the same system and measures employee loyalty to their organizations by asking them a simple question usually through an employee engagement survey:
“How likely are you to recommend this company to your friends or family?”
The answers are recorded on a scale ranging from 0 to 10, with 10 being the highest value you can assign to your answer. The respondents are divided into three distinct categories based on the scores they assign to the answers:
1) Promoters (9-10)
2) Passives (7-8)
3) Detractors (0-6)
The respondents are also requested to mention the reasoning behind their scores.
Why is Employee Net Promoter Score (eNPS) Important?
Employee NPS is one of the most well-known employee engagement metrics. It is an effective way to measure employee engagement because it allows organizations to understand how loyal and dedicated their workers are to the company.
The metric also allows managers to see where the company stands in terms of offering a positive employee experience. This gives management a general idea of expected attrition and employer brand health in the short to medium term.
How to Measure Employee Net Promoter Score
The eNPS score for an organization is calculated by subtracting the percentage of surveyed employees who are detractors from the percentage of of promoters:
eNPS Score = % of Promoters – % of Detractors
The final score can range from -100 to 100. If the score is negative, the organization has more detractors than promoters. Such an organization has a loyalty problem on its hands.
The underlying reasons could be related to the company culture or the levels of employee engagement at the organization. This should be taken seriously by the management and the actual reasons should be identified and addressed as soon as possible.
If the score is positive, it implies that more employees are willing to promote and recommend the organization to their peers than those who are not. Such a business can consider its employee engagement efforts adequate. But the ultimate goal is to convert more of the passive respondents to promoters with more initiatives to improve engagement.
Internal Promotion Rate
Determine Whether You’re Able to Retain and Grow Your Hires
The Internal Promotion Rate is a measure of the percentage of people you’re able to promote from within the company instead of hiring externally.
Why is Internal Promotion Rate Important?
A recent study confirms the idea that internal hires outperform external hires consistently, and stay with the company longer. Therefore, it is in the interest of organizations to measure and improve this metric. More studies have shown that external hires cost 18% more than internal hires. Consequently, improving the Internal Promotion Rate has a direct impact on the profitability of an organization.
In addition, new hires are a riskier bet compared to employees you promote internally. According to Delloite, external hires are 61% more likely to be laid off or fired in their first year of service and 21% more likely to leave. This is a major human resource cost, one that can be minimized with the right internal promotions.
Finally, internal promotions boost engagement and job satisfaction. LinkedIn’s Global Talent Report 2020 says employees stay 41% longer at companies with high rates of internal hiring and promotions. Moreover, the turnover caused by a lack of future career opportunities costs average-sized companies $49 million per year, according to Gartner.
The metric can provide further insight when analyzed by workforce category, tenure type, and function. When viewed in the context of other HR metrics, a healthy Internal Promotion Rate can be a predictor of a declining Cost Per Hire. Similarly, improving this metric would likely reduce Employee Turnover Rate, and improve overall ROI on recruiting initiatives.
How to Measure Internal Promotion Rate?
The Internal Promotion Rate is expressed as a percentage and can be calculated by dividing the total number of promotions in a given time period by the average employee headcount in the same period.
Total Internal Hires / Average Employee Headcount in the Period x 100
Our Conclusion on Employee Engagement Metrics
Engaged employees are the foundation of an efficient and successful enterprise. Quality HR professionals understand this and do their best to prioritize the incorporation of Employee Engagement Metrics and KPIs into the DNA of the company culture.
If you would like to start monitoring employee engagement or improve upon your organization’s employee engagement measurement strategy, have a look at our detailed guide on how to measure employee engagement.