7 KPIs to Measure Employee Engagement

71% of business executives believe employee engagement is key to success. Learn the key metrics to track in order to measure engagement.

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7 KPIs to Measure Employee Engagement

In 2021, employee engagement dropped for the first time in a decade and the pattern has continued into this year, according to a Gallup Survey. That same survey also shows that barely a third of employees are engaged in their workplace.

That should be concerning to organizations. Providing a positive company culture that creates engaged employees is one of your most important jobs as a business leader. 71% of business executives believe engagement is key to success, according to a Harvard Business Review study.

How important is employee engagement? According to Gallup, an engaged workforce results in:

  • 17% increase in productivity
  • 10% higher customer ratings
  • 20% more sales

What is employee engagement?

The textbook definition of employee engagement is the degree to which employees invest their energy toward meeting company goals and outcomes. It’s not just about working hard. It’s also about being emotionally invested in organizational success.

Engaged employees care about the work they are doing and the company where they work. It’s about more than a paycheck, too. Engaged employees believe in the company’s mission and work to help fulfill that mission.

KPIs to measure employee engagement

When employees are unengaged, you may first see the warning signs in their behavior. For example, employees that are not engaging may decrease productivity, withdraw from participation with their colleagues or managers, show up late, or even call in sick more often.

Some behaviors might be noticeable while others may take some additional investigation to uncover. Your HR software can help you manage the key performance indicators (KPIs) that signal when employees are not giving their all at work.

Here are some of the KPI metrics to examine as part of your employee engagement strategies. The right KPIs can give you ideas for employee engagement.

Absenteeism

Businesses with highly engaged workforces have 41% lower absenteeism than other companies, according to a Gallup Workplace study. So keeping an eye on absenteeism can help you uncover problems with engagement.

Businesses with highly engaged workforces have 41% lower absenteeism than other companies.

Absenteeism formula

Absenteeism = (Number of unexcused absences / measurement period) x 100

Employee turnover rate

When your company has significant turnover, it’s another sign that employees are not engaged. This KPI metric should be part of your regular reporting.

Employee turnover rate formula

Employee Turnover Rate Formula = ( Number of employees who left the company / average number of employees during the measurement period ) x 100

Organizations should keep a close eye on turnover rates and benchmark them against other companies in their industry for context. For example, a turnover rate of 30% may seem very high to you, but contact centers often have annual turnover as high as 50% to 60%, so a 30% employee turnover would be exceptional.

Promotion rate

One of the keys to employee retention and engagement is providing opportunities for employees to grow and advance in their careers. Tracking the rate of internal promotions tells you whether this is a strength or weakness in your organization.

Promotion rate formula

Promotion Rate = ( Total number of promoted employees / Total number of employees ) x 100

Net promoter score

Companies use the net promoter score (NPS) as a tool to gauge customer loyalty. You can also use NPS by doing employee engagement surveys. Engaged employees are often advocates for their company, more productive, and provide better customer service. They’re also more likely to stay with their employer longer.

Employer Net Promoter Scores (eNPS) are simple to administrate. Employees are asked one question on a scale of one to 10: How likely are you to recommend our company as a place to work?

Scores in the 9 to 10 range are considered Promoters. Those scoring 0 to 6 are Detractors. Others that rank your company in the 7 to 8 range are considered neutral.

Net promoter score formula

Employee net promoter score  = [ (Number of total promoters – Number of total detractors) / Total Survey Respondents ] x 100

Anything above zero shows you have more promoters vs. detractors, but a score of 30 is considered good and 50+ is considered excellent.

NPS is a good way to uncover hidden problems within your organization. While this metric won’t tell you specifically what the problem is, low eNPS scores should be taken seriously and lead to more in-depth investigation.

Employee satisfaction index

The Employee Satisfaction Index (ESI) measures how satisfied employees are in the workplace. It differs from NPS by asking several questions. Typically, ESI surveys ask 3 questions on a scale of 0 to 100, such as:

  • How satisfied are you in the workplace?
  • How well does the workplace meet your expectations?
  • How would you compare the workplace to an ideal workplace?

Each question provides insight into how employees feel. The ESI can be expressed overall or broken down by divisions, departments, or work units. Scores averaging 70 or above are generally considered high while scores less than 60 are considered low.

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Goal attainment

An important part of maintaining high levels of engagement is performance management. Highly engaged employees consistently meet or exceed goals. By tracking whether goals are being met, you can often tell how employees are responding to your efforts and staying engaged.

Offer acceptance rates

How your company is perceived by those outside your organization can play a big part in whether employees remain engaged. If you’re offering jobs to candidates and they are turning you down, it might be because your company culture needs some work. This is especially important to track candidates that interact with your employees during the hiring process.

Offer acceptance rate formula

Offer acceptance rate = ( Offers Accepted / Offers Made ) x 100

When your acceptance rates are outside of the normal, it can reveal problems. You may need to revisit your compensation and benefits to make sure they are attractive. It can also signal to current employees., especially your top performers, that there are better jobs out there and cause them to start looking or stop engaging.

Industry review sites

While not technically a KPI you need to measure, you’ll still want to pay attention to what employees and former employees are saying about your company online. While disgruntled employees may write scathing reviews, you can often judge a lot about a workplace from what people write.

Measuring employee engagement

As you can see, there are several ways you can measure employee engagement formally. There are also informal ways. You can often tell just by walking into a workplace unannounced; are employees happy, excited, and working collaboratively to achieve company goals?

So, measure the KPIs carefully but also trust your gut. If something doesn’t feel right, you need to take the time to figure out why. Getting your workforce engaged is crucial to success.

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