Several sources state that the cost of an actively disengaged employee is $3,400 for every $10,000 of salary. In my previous post, I explained I couldn’t find the original source of this figure and that it caused me some perturbation.
Well, I have now tracked it down and since doing so I’ve found it referenced in many places. The original source appears to be a book copyrighted by Gallup titled Follow this Path: How the World’s Greatest Organisations Unleash Human Potential, 2002.
In the book, the authors (C. Coffman, G. Gonzalez-Molina) state:
Using very conservative estimates, our study shows that on average, the lost-productivity cost of active disengagement represents a full $3,400 per $10,000 of salary.
There are no descriptions of the calculation methods and no explanation of whether that refers to economic cost or corporate expense, although the sense of other parts of the book seem to suggest the former.
Two other things are worth noting: (i) the estimate is now at least 15 years old and therefore the underlying measures (GDP, wages, engagement) may be qui te different and (ii) it is stated in dollar terms which in my mind associates it with the US workplace, so estimates for other countries may vary as demonstrated previously.
It is also worth noting that the cost is associated only with actively disengaged employees. As already described in the previous post, some in the field are associating this figure to the collective group of actively disengaged and the not-engaged. This has a dramatic impact on the estimated cost of disengagement. For example, 83% of employees fall into this collective group in the UK compared to an average of 26% of employees that are actively disengaged. Erroneously using the collective group would lead to estimates of the cost of disengagement being a huge three times higher. While it is clearly in every company’s best interest to deal with the engagement crisis in the workplace, we shouldn’t be tipping the scales to this extent through the mis-use of statistics.
Given the age of the original statistic and the fact that it is based on US data which matches well with the calculations detailed previously, I am still inclined to favour my own calculation for the UK. Consequently, the average cost in the UK would be a full £1,800 per £10,000 of salary of every actively disengaged employee.
Since salaries often make up the largest expenditure for most companies, increasing margins by a reducing costs due to disengaged employees may still represent one of the highest value strategic opportunities available to many companies. Improving the engagement of employees is simply the right thing to do. These kinds of statistics just make it fiscally responsible too.