Employee engagement linked to improved financial performance

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 which analysed the annual reports of the FTSE100 Index for each of the last three years (2016-18).

The report 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 percent 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 percent increase in mentions of “employee engagement” from 2016-18, signifying it as an urgent priority for large companies.

The report suggests that 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 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 percent rise from 2016-18) and ‘Listening leaders’ are beginning to emerge – CEOs who value the insight of their employees to drive business improvements.