Why Do We Measure Employee Engagement Metrics?
We all know the benefits of having a highly-engaged workforce: improved productivity, enhanced innovation, and lower employee turnover.
But you wouldn't know if your employees are engaged or disengaged with their jobs and your organization just by looking or talking to them. You also wouldn't know whether your existing employee engagement strategies are working. So you need data to substantiate your findings.
Employee engagement metrics allow you to measure how engaged your employees are. Knowing your KPIs are critical for putting all the information gathered into proper perspective so you can address issues before they escalate.
Common Employee Engagement Metrics And How To Measure Them
Now that you know why we measure employee engagement metrics, let's review some of the most common metrics. We'll also highlight the formulas and data you need to measure each of these metrics.
One of the easiest ways to measure your employee engagement level is by conducting an Employee Net Promoter Score (eNPS) survey. It offers information regarding your employees' thoughts and feelings about your organization. Specifically, eNPS measures how satisfied workers are with you as an employer and the likelihood of them promoting your organization as an ideal workplace to their friends and colleagues.
Data is gathered by asking employees the question:
“Based on your experience as an employee of this [company], how likely are you to recommend applying to [company] to others?”
Employees answer this question on a scale from 0 to 10 – from 0 (very unlikely) to 10 (very likely). The scores are divided into three categories:
- 0–6 are Detractors: Employees feel negative about working in the organization and won't recommend the company to others.
- 7–8 are Passives: Employees are neutral. They would neither promote nor discourage potential employees from working in the organization
- 9–10 are Promoters: Employees are enthusiastically promoting the organization as a place to work
Then, you need to look into how many employees you have in the promoters and detractors column and their share of the total number of employees. This is the formula to compute your eNPS score:
eNPS = % Promoters – % Detractors
eNPS Calculation Example:
You have 50 total employees.
- 20 are promoters
- 15 are passives
- 15 are detractors
Your eNPS would be 10 because you have 40% promoters and 30% detractors.
Mirroring the benchmark for NPS, a good eNPS score is between 10 and 30. Organizations that receive an eNPS score of 50 and higher are considered excellent. On the other hand, any negative score means employees are likely disengaged or not enjoying their work.
The relationship between wellbeing and engagement shouldn't be overlooked. How a person experiences work influences their personal life and vice versa. Toxic company culture, unrealistic workloads, or employee burnout could affect a person's health. As a result, they are more likely to take time off work. Absenteeism negatively affects work quality, reduces productivity, and causes the organization to miss important deadlines, which ultimately leads to profit losses.
The International Organization for Standardization defined the formula for absenteeism rate by dividing the number of absent days by the total number of available work days in a given period. Then, multiply that by 100 to get an employee's absenteeism percentage.
For instance, if an employee is absent for 3 days and there are 63 work days in the given quarter, the employee's quarterly absenteeism rate is 4.76%.
According to the Bureau of Labor Statistics (BLS), the national average absenteeism rate in the US is 3.2%. But experts said the ideal absenteeism rate should be around 1.5%.
3. Employee Retention
Employee retention refers to the ability of the organization to keep its employees.
It is deeply connected to employee engagement because if employees are satisfied and happy at work, they are more inclined to stay loyal to their organization.
Employee retention rate is computed by subtracting the total number of employees who left the company from the entire employee population, then dividing it again by the whole employee population multiplied by 100.
For example, if 20 people leave your organization and you have 200 employees, your employee retention rate is 90%.
A good retention rate is 90% or higher. On the other hand, a low retention rate could indicate poor work conditions, lack of career development opportunities, or low pay.
4. Employee Performance
Employee performance measures how an employee contributes to helping the company meet its objectives. Highly-motivated employees are also considered high performers in the organization. They are committed to doing their best because they care about their employers.
Employee performance is split into four groups:
Quality Of Work
The quality of an employee's work is critical to delivering excellent products and services.
Here are different ways of evaluating an employee’s quality of work:
- Product defect rate: This is a standard KPI for people working in the production and manufacturing industries. It is calculated by dividing the total number of defective units by the total number of units produced multiplied by 100.
- Error rate: This is commonly used in the software sector. For example, the manager could measure the software engineer's errors per thousand lines of code or the number of bugs in a software code.
- 360 feedback: Offers a comprehensive idea of the individual's performance, skills level, and areas for improvement using feedback collected from managers, team members, and customers about a specific employee.
Quantity Of Work
Highly-engaged employees are motivated to produce more. And the company rewards them with promotions, salary increases, or bonuses. The rewards motivate them to be more productive.
This is a straightforward metric, measurable by:
- Number of sales: The total number of products sold or deals closed, ex., the number of cars sold by a car sales executive.
- Number of leads: This is often used for marketing and sales executives. The number of leads may demonstrate their overall productivity. Or it could be performing lead generation activities like the number of people on phone calls or sales presentations that could lead to potential sales.
Efficiency means doing the job to achieve the best outcome while making the most out of available resources.
When employees are deeply engaged with their work, they perform better. One way of measuring efficiency:
- Count the number of tasks completed in a given period which is the output
- Measure the output against the standard set by the company
- Count the number of hours an employee works, which is the input
- Divide the output by the input to know the efficiency rate
This KPI focuses on company-wide performance.
One example is the revenue per employee. It is a critical employee performance metric because it reflects, on average, how much a single employee earns for the organization.
To calculate, divide the company's total revenue by its number of employees. Companies with high revenues and fewer employees generate a high revenue per employee average. In contrast, companies with many employees and low revenue generate a low revenue per employee average.
5. Glassdoor Ratings
Employee engagement has a significant effect on employer branding. What employees post on employer review sites like Glassdoor reflects their thoughts and feelings about their company. Highly-engaged employees are more likely to present their organization as an ideal workplace and recommend them as the employer of choice.
Glassdoor is considered the number one employer review site, with 55 million monthly visitors as of this writing. It rates employers based on a 5-point scale:
- 0.00 – 1.50 Employees are “Very Dissatisfied”
- 1.51 – 2.50 Employees are “Dissatisfied”
- 2.51 – 3.50 Employees say it’s “Okay”
- 3.51 – 4.00 Employees are “Satisfied”
- 4.01 – 5.00 Employees are “Very Satisfied”
In addition, employees can also put comments to support their ratings.
Using its unique algorithm, Glassdoor rates companies based on the most recent employee feedback. The more recent the review, the heavier it impacts the overall rating. This approach gives candidates and employees the latest information on what it's like to work for the company based on what employees say. For employers, Glassdoor ratings and reviews offer a glimpse into the company's level of engagement, so they'll know what is working and what needs to be improved.
6. Employee Satisfaction
Employee satisfaction refers to employees' happiness with their jobs and workplace. Many things contribute to employee satisfaction, such as:
- Work-life balance
- Positive work environment
- Career development
- Relationship with management
- Company culture
When employees are satisfied with their jobs and employers, they are more likely to be deeply engaged in the workplace.
HR managers can conduct surveys and one-on-one meetings to measure employee satisfaction. You can combine ratings (for surveys) and questions (close-ended and open-ended). Some of the questions you can ask:
- Do you find purpose in your job?
- What tools do you need to do your job well?
- On a scale of 1-5 (1 with 'strongly disagree'' and 5 with 'strongly agree'), do you feel the company prioritizes your health and wellbeing?
- On a scale of 1-5 (1 with ‘strongly disagree’’ and 5 with ‘strongly agree’), do you feel the company supports your growth and development?
- Do you have a good working relationship with your manager?
To process the results, you can use statistics to analyze ratings and quantitative questions (close-ended) and the correlations between questions. For instance, does employee satisfaction correlate with wellbeing or career development opportunities?
Qualitative open-ended questions require a more rigorous approach to data analysis. Answers are categorized to find trends, giving you more in-depth data into your employee satisfaction level: what is working and what needs improvement.
There are many tools available to help HR teams conduct employee surveys. Companies like Qualtrics, SurveyMonkey, and Typeform are great places to start if you're looking for effective software with built-in analysis tools.
7. Voluntary Employee Turnover Rate
The voluntary employer turnover rate is the percentage of employees leaving the company on their own. There are many reasons why employees resign: relocation, going back to school, or personal reasons (starting a family, taking a hiatus). But usually, the number one factor for people quitting is finding a job with another company. Employees who don't feel supported, developed, or challenged at work are more likely to leave and search for another employer.
To calculate the voluntary employee turnover rate, divide the number of employees who voluntarily quit over a period of time by the total number of employees in the same period multiplied by 100. For example, if five employees voluntarily left the organization with 75 employees, your voluntary turnover rate is 6.67% (5/75 x 100).
According to Prasidio, the average employee turnover rate across all industries for 2022 is 9.31%. A higher turnover rate could mean the absence of career advancement, low pay, or mismanagement, so tracking this KPI is critical to keep your business running and competitive.
8. Customer Happiness
Is customer happiness related to employee engagement? On the surface, it might not seem like it, but it is.
Highly-engaged employees tend to be 100% focused on their work. They're enthusiastic about their jobs and committed to delivering rewarding customer experiences. So if employees feel their leaders are taking care of them by prioritizing their wellbeing and happiness, they're likely to give it back by taking care of their customers. And the higher the customer happiness, the higher the company's performance.
Measuring customer happiness or satisfaction is a standard approach to determining if employees meet or exceed customer expectations. Customer satisfaction is usually measured with NPS and customer surveys.
Please note that this KPI needs to be considered with other metrics. For example, there are instances where customers are happy, but employees are suffering from burnout. So it's important to check with other metrics to get a complete picture of your employee engagement.
Highly-engaged employees are one of the most important assets any company can have.
And knowing your employee engagement metrics can help you understand how your employees think and feel about their jobs and employers. It will also give you insights into the effectiveness of your current employee engagement strategies so you can make adjustments that will yield positive results in the long term.
If you're noticing a lapse in engagement, there are many employee engagement strategies you can use to improve company sentiment.
For example, why not give employee recognition a try? In a recent employee recognition survey, 81.9% of employees agreed that recognition for their contributors improved their engagement.
If recognition is on your radar this year, request a demo of Nectar to see how we can help.