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Employee Engagement Performance Management

The Impact of Employee Engagement on Performance and Productivity

January 25, 2024
6 min read

Create A Culture of Highly Engaged Employees With These Resources


Employee engagement is defined as the measurement of how included and excited your employees feel about their jobs and the company. It’s about more than just whether or not they like their jobs. Engagement rates tell you if your people feel supported, heard, and valued. They’re a window into what your employees need to thrive —and an opportunity for you to give it to them.

When your employees are engaged and thriving, you’ll see the results in their productivity and performance. Engaged employees get more work done —and it’s higher quality. They’re more invested in their work and motivated to do their best, leading to better business outcomes. High rates of engagement rub off on the work environment, too, increasing retention, decreasing safety incidents, and reducing absenteeism.

In today’s post, we’re digging deeper into the impact of employee engagement on employee performance and productivity. Keep reading to learn why engagement is such a reliable indicator of business success.

🏆 Why is employee engagement a reliable predictor of business success? Find out how it impacts performance and productivity:

The Relationship Between Employee Engagement and Performance

There’s no shortage of research available about employee engagement. It’s a top initiative at Gallup, an analytics and advisory firm that measures engagement worldwide, studying its impact and how to improve it. Gallup research has found that there are significant measurable differences in performance at companies with highly engaged employees versus those without.

These findings from Gallup demonstrate some of the most significant ways engagement impacts employee performance and how that reflects in business results. Compared to those with lower engagement, companies with high employee engagement levels see results like:

  • 18% higher sales productivity
  • Up to 43% higher employee retention
  • 41% fewer product defects
  • 64% fewer safety incidents and 58% fewer patient safety incidents
  • 28% less shrinkage
  • 10% higher customer loyalty

But what’s likely the most significant finding of all? Engaged workforces drive 23% higher profitability. You can’t deny the clear correlation between engagement and business success.

Did you know engaged employees drive 23% higher profits? 🚀 Learn more about how engagement impacts performance:

Engagement’s Impact on Productivity

Those highly engaged, high-performing companies we discussed are crushing their goals thanks to increased productivity. But how does engagement enable productivity?

Think about the last time you were facing a productivity roadblock. Was it a mundane manual task that you could complete faster if you had the right equipment? Maybe a big project that’s stalled because your team needs feedback from an unresponsive stakeholder? In any case, not having that equipment or the lack of communication hinders your productivity —and if it’s a common occurrence, it can gravely impact your feelings of engagement.

Now imagine that those roadblocks vanished. You check in with your manager at least once a week during your regular one-on-one, so there’s ample opportunity to ask for help —and when you do, you get it. Your supervisor gets you a new tool so you can complete that mundane task faster. You let them know why the big project is stalled, and after thanking you for your hard work so far, your manager quickly gathers the feedback you need.

You can imagine how the second scenario leads to much higher engagement —and this is just one example of how productivity is affected by a few of the key factors in engagement. Having the materials you need, along with reliable support and recognition, are huge productivity boosters.

Let’s take a look at what Gallup has identified as the most important contributors to engagement and how they impact productivity:

  1. Knowing What’s Expected: Clear expectations and goal-setting can make employees up to 22% more productive.
  2. Materials and Equipment: If this need isn’t met, it’s the biggest cause of stress for employees.
  3. Doing What You Do Best: One of the top reasons employees look for a new job —and why they stay — is the chance to use their natural talents.
  4. Receiving Recognition: If employees don’t feel valued, especially top performers, they’re twice as likely to say they plan to quit their jobs in the next year.
  5. Someone Caring at Work: Employees are more engaged when they feel seen as people first.
  6. Someone Encouraging Development: This is the #1 reason employees look for a new job — and the number one way to retain them longer.
  7. Opinions Counting at Work: When employees feel their voices are heard, they’re more invested in their work and inclined to look for creative solutions.
  8. Mission/Purpose: Helping employees find meaning in their work is a top driver of retention.
  9. Commitment to Quality Work: Employees are more engaged when they trust that their coworkers are just as committed to delivering good work as they are.
  10. Best Friend at Work: Having deeper work relationships means employees are more likely to take positive action in ways that benefit their teams.
  11. Talking About Progress: People are more productive when they know how they’re doing and have a line of sight into their future.
  12. Learning and Growing: This one is simple —when employees grow, companies grow.

Now that you have a better understanding of its impact, let’s look at some ways you can improve employee engagement rates at your organization.

Strategies for Fostering Engagement

The most effective engagement strategies depend on factors like the industry you’re in and the types of jobs your people have. Fortunately, we know there are many proven ways that performance management can drive engagement. You can adapt these strategies to fit your workforce.

Employee Engagement Resources for HR

Download ClearCompany’s employee engagement bundle for three valuable HR resources:

  • Infographic on employee unhappiness and how to beat it
  • How to get executive buy-in for employee surveys
  • 30 ways you can show employees they’re appreciated now

Get the bundle >

1. Employee Recognition Programs

Research shows that regular employee recognition is one of the best ways to engage your people. 37% even say it’s the single most important thing their company could do to motivate them. But unfortunately, 70% of employees have not received recognition in the past week —and 29% say they’ve never been recognized. It’s a glaring area for improvement for most companies.

You can make this part of your performance management and engagement strategy in easy, organic ways that don’t cost a dime. Managers can start by giving shout-outs in team meetings and sharing messages in Slack channels about their team’s big wins. Train your managers to say thank you to employees as often as possible.

You can also look for software solutions equipped with tools to support employee recognition programs. Look for software with recognition features, including:

  • Automated announcements to celebrate employee milestones, like birthdays and work anniversaries
  • Peer recognition tools that encourage colleagues to give public kudos —which can be tied to employee performance reviews for easy reference
  • Integration with Slack so praise and celebrations can be shared company-wide

2. Professional Development Opportunities

Employee development and growth opportunities are one of the five main drivers of engagement. They’re an excellent way to motivate and retain your most curious, driven talent. 94% of people would stay at their jobs longer if they had more opportunities to grow. It’s especially important to the youngest generation of workers, in addition to clear paths for advancement.

Putting real effort into employee development also puts you a step ahead of most other employers. Although 83% say it’s important to develop future leaders, just 5% have programs in place to do so. Expand learning opportunities and create career paths for a reliable route to increased engagement.

3. Open Communication Channels

When we talk about engagement, we inevitably talk about communication. That’s because you need good communication to create that sense of belonging and connection that is required for engagement. It won’t work if your people don’t know what’s going on and don’t feel comfortable talking to their managers and colleagues.

There are many ways you can foster open communication and encourage engagement:

  • Implement weekly one-on-ones with managers and their direct reports
  • Give employees opportunities to connect with their peers, whether through internal clubs, mentorship programs, or cross-departmental collaboration
  • Send employee surveys to get actionable feedback on a variety of topics, including company policies

There’s no question that engaged employees produce better outcomes for businesses. When employees are excited about their work and empowered to do their best, that means the organization is doing its part to meet their needs. You can expect to see that effort reflected in the company’s bottom line.

Your HR team is key in driving engagement initiatives. HR helps shape company culture, which includes creating a work environment that fosters employee engagement. With the right employee engagement software, you’ll have a robust toolkit with everything you need to bake engagement into the employee experience.

Looking for an engagement software solution backed by more than two decades of client success? Sign up for your free personalized demo of ClearCompany Employee Engagement.

Employee Engagement Matters More than Ever. Download the bundle.

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