Understanding the impact of employee engagement

Most organizations have faced declining employee engagement over the past several years. Culture Amp research found that in 2024, engagement dropped to pre-pandemic levels. Our latest benchmark data shows that employee motivation (one of the components of engagement) fell for the third year in a row.

If your company sees declining engagement, it’s worth pausing to ask this question: Why?

Why does your organization need highly engaged employees? What do you actually stand to gain? Are employee engagement strategies worth the time, effort, and investment?

Here’s the short answer to that last question: Yes. Absolutely. Without a doubt. But let’s dig a little deeper. This guide covers the real and meaningful impact of employee engagement, as well as how you can reap the benefits by implementing the right engagement initiatives.

Beyond buzzwords: What exactly is employee engagement?

Before you can improve employee engagement, you need to understand it. So, let’s start with a quick definition.

Here at Culture Amp, we define employee engagement as the level of enthusiasm and connection employees have with their organization. It’s a measure of how motivated people are to put in extra effort for their organization and a sign of how committed they are to staying there.

When you boil it down, engagement is an employee’s psychological state. And while it may sound like something you can take direct action on, that’s not really the case.

In reality, engagement is an outcome of your organization’s culture and employee experience. When you roll out employee engagement strategies, you’re actually acting on that culture or experience, hoping that pulling those levers improves engagement.

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Building the business case for employee engagement: Why it (really) matters

When employees are engaged – meaning they’re enthusiastic, connected, committed, and motivated – it makes sense that they’ll have a positive impact on your organization.

But, if you’re going to invest in engagement initiatives, you want more than common sense or anecdotal evidence. Fortunately, there’s plenty of research and evidence that backs up the positive impact of employee engagement on all of the following.

Job performance and employee productivity

According to research from Gallup, employees who are actively disengaged cost businesses a whopping $8.9 trillion in lost productivity. In contrast, when employees are engaged, they’re more focused on their work, connected to organizational objectives, and committed to exceeding expectations.

Satisfaction and morale

Studies also show that engagement is positively associated with job satisfaction. When dissatisfaction can be contagious among work teams, improving satisfaction among even just a few employees can slow the spread of any negativity, boost the entire team’s morale, and even contribute to a high-performance company culture.

Innovation

Today’s companies have their sights set on innovation, with 83% of organizations ranking it as a top-three priority. Research shows that engaged employees are more likely to exhibit innovative behavior, meaning they have the necessary skills and commitment to help push the organization forward.

Employee retention

The math is straightforward: When employees aren’t engaged, they’re more likely to leave. Estimates show that low-engagement teams experience turnover rates that are anywhere from 18% to 43% higher than highly engaged teams. It’s proof that focusing on employee engagement is an effective way to improve employee retention.

Profitability

For most organizations, it’s all about the bottom line. And, while the ROI on employee engagement strategies might seem hard to quantify, your investment really does pay off. Organizations with high levels of employee engagement are 21% more profitable than organizations with low engagement levels. Additionally, in a study of Culture Amp customers, companies that used Culture Amp to support engagement boosted profitability by $963,000.

What are the key drivers of employee engagement?

We’ve covered that employee engagement is an outcome of your employee experience. But your experience captures everything – from employee pay and benefits to the organizational objectives you’re focused on.

So, it raises the question: What actually drives employee engagement? What factors should your employee engagement strategies take into account? In 2024, Culture Amp’s data indicated that the top drivers of employee engagement across industries were:

• Leadership
• Learning and development
• Company performance

There’s an intrinsic link between leadership and employee engagement. When employees’ confidence in leadership is shaken, their engagement levels take a hit. So, if all of your engagement initiatives seem to fall short, it’s worth turning your attention to leadership to see what behaviors leaders are modeling.

Employees are also more engaged when they feel that their employer fully supports their careers. Culture Amp research shows that companies that prioritize career development opportunities as part of the employee experience see 46% higher engagement.

Finally, it’s difficult for employees to be fully committed to and invested in their work if they feel the company itself is struggling. Culture Amp research backs this up, finding that employee engagement is strongly influenced by employees’ perceptions of whether their company effectively directs resources toward organizational objectives.

Of course, there are plenty of other factors – from a sense of purpose to employee recognition – that can have a substantial impact on employee engagement. These drivers and the weight they carry can differ between companies.

That’s where Culture Amp’s Driver Analysis comes into play. This tool helps you identify and understand the factors that have the biggest impact on employee engagement within your organization so you can take the most meaningful action.

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Employee engagement strategies that (seriously) work

From employee retention to employee productivity, it’s almost impossible to overstate the importance and impact of employee engagement. Here’s the inevitable next question: How can you get more highly engaged employees within your organization?

It’s important to note that there isn’t a one-size-fits-all mold for employee engagement. The employee engagement strategies that work for another organization might not have as big of an impact within your company.

That’s why your best first step is to build a solid understanding of your current engagement levels and the factors that influence those. To do this, conduct regular employee engagement surveys that give your workers a chance to express themselves and call your attention to the aspects of their experience that matter most to them.

Your engagement surveys will equip you with insights you can use to craft relevant and resonant engagement initiatives – rather than following a generic how-to.

But, with all of that said, it’s also worth familiarizing yourself with employee engagement best practices that can help push your engagement levels in the right direction. These include:

• Emphasize clear employee communication: 60% of employees say they get ineffective updates from their organization’s leaders. That can lead to confusion and wasted time, and it can also drive employees to leave. In fact, 42% of employees have left an organization because of poor internal communications. Prioritizing clear, frequent, and effective employee communication – and training people leaders to do the same – can help you improve and maintain engagement levels.
• Provide frequent and helpful feedback: Feedback matters, with Gallup stating that 80% of employees who say they’ve received meaningful feedback in the past week are fully engaged. Compare that to Gallup’s average of only 32% of employees who are fully engaged, and it’s proof that a culture of clear and consistent feedback can boost employee engagement. Encourage managers to host frequent check-ins and feedback conversations with employees, rather than saving those remarks for reviews.
• Focus on employee recognition: Adequate employee recognition is crucial for employee engagement. Yet, fewer than seven out of ten employees (69%) agree that they receive appropriate recognition for good work at their company. Confidence in how recognition is handled is at a five-year low, with only 60% agreeing that the right people are recognized and rewarded. To address this, call out and celebrate employee contributions as they come up. Doing so makes people feel appreciated and fuels their commitment to their work.
• Prioritize professional development: Workers are hungry for career development opportunities. Culture Amp research found that employees are 46% points more engaged when they can develop skills relevant to their interests. From personalized career paths to budgets for continuing education, investing in employees’ careers is one of the most powerful employee engagement strategies.
• Offer the benefits employees want: Gone are the days when a pizza party was enough to excite and engage your employees (and, honestly, it probably never was). Whether it’s competitive parental leave or access to wellbeing resources, find out what benefits truly matter to your employees and offer those. A big one worth considering? Flexibility. Research shows a positive correlation between flexible work arrangements and employee engagement.
• Secure leadership buy-in: Employee engagement impacts your entire organization – which means it’s not just an HR initiative. You’ll want to ensure company leadership and people managers are fully on board. Build a business case for employee engagement and educate them on the benefits as well as your intended strategies. The more informed they are, the better equipped they are to implement your initiatives.
• Connect individual contributions to organizational objectives: Employees overwhelmingly want a sense of purpose and value at work. Yet, 80% of workers admit they don’t know what they’re working toward. Connect the dots between an employee or team’s work and your company goals so they can see how and why their work matters.

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How to measure and improve employee engagement over time

Calculating your employee engagement may feel nebulous, but these numbers have value. And the measurements you make today will become a useful benchmark for the engagement data you collect in the future. You can (and should) measure your employee engagement on a regular basis. You can do this by implementing ongoing processes such as:

• Identifying and monitoring key engagement metrics like performance, productivity, retention, absenteeism, and survey participation rates
• Conducting regular employee engagement surveys
• Comparing your data to benchmarks to understand how your organization stacks up
• Complementing your survey data with qualitative insights from focus groups, exit interviews, stay interviews, and informal conversations

Remember that measuring your employee engagement isn’t just about evaluating – it’s about evolving. As you uncover improvement areas, take action to address them.

For example, maybe you aren’t seeing strong employee agreement with the following statement in your engagement surveys: “The leaders at [Company] keep people informed about what is happening.”

That’s an indicator that you need to improve how your leadership relays information to employees. In addition to taking action, communicating your actions to employees is crucial. After all, people don’t get tired of surveys – they get tired of seeing nothing happen as a result of those surveys.

Looking to the future of employee engagement: What’s next?

The strategies we’ve covered in this article will help you foster highly engaged employees. However, the world of work is changing fast – which means employee engagement is too.

What’s coming next? As we look to the future of employee engagement, we expect to see:

• Increased personalization: Consumers have long craved personalization, with 81% of customers saying they prefer companies that offer a personalized experience. We’ll likely see that preference carry over to the employee experience. Particularly as employers get more access to advanced technology and detailed analytics, employees will expect employers to use those tools and data-driven insights to deliver engagement strategies that meet individual needs and preferences – rather than rolling out blanket initiatives.
• Embracing and fueling change: The tools employees use to do their work are quickly changing too. Even though nearly half of employees say they want formal training on AI, only 31% of workers say their employer provides it. Despite understandable concerns around AI, workers are eager to work for cutting-edge organizations – particularly ones that invest in upskilling their employees for the future.
• Encouraging connection: Loneliness likely isn’t the first thing to come to mind when thinking about improving engagement, but it has a big impact. According to Gartner, loneliness decreases engagement and performance. However, it’s a persistent problem, with only 29% of employees saying they’re satisfied with the interactions they have with their coworkers. We expect to see companies focus on fostering a sense of connection and belonging, especially on remote or hybrid teams.

FAQs about employee engagement

Have more questions about employee engagement? Let’s take a look at a few quick and helpful answers to some of the most common questions.

What are the biggest barriers to employee engagement?

The biggest barriers to employee engagement often stem from poor communication, lack of recognition, limited growth opportunities, and unclear expectations. When employees don’t feel heard, valued, or supported, their motivation and connection to their work suffer. Micromanagement, weak leadership, and a lack of purpose or alignment with company goals can also drive disengagement. Ultimately, people check out when they don’t see how their work matters – or when they feel like no one else does either.

How can small businesses improve employee engagement with limited resources?

While it’s possible to invest a hefty amount in employee engagement, a limited budget is not a dealbreaker. Prioritize the things that matter most: trust, communication, and recognition. Even simple actions like regularly checking in with employees, offering flexible work options, and showing genuine appreciation can go a long way. Focus on what you can do rather than stressing over what you can’t do.

How often should companies measure employee engagement?

Here at Culture Amp, we recommend running one employee survey per quarter. That doesn’t mean running the same survey every quarter. Rather, we suggest the following survey cadence:

• Quarter one: Baseline survey that provides the broad baseline for your culture or engagement levels
• Quarter two: Pulse survey that tracks progress on a specific activity resulting from your baseline survey, as well as core engagement questions
• Quarter three: Deep-dive survey that helps you identify and diagnose a specific topic that’s too difficult or complex to dig into in a baseline survey
• Quarter four: Pulse survey that tracks progress on a specific activity, as well as core engagement questions and follow-up questions based on results from your deep-dive survey

What are the best tools for tracking and improving engagement?

The most effective tools for tracking and improving engagement combine feedback collection, data insights, and action planning. Culture Amp can help you run regular employee surveys, access engagement analytics, and use tools to help managers turn feedback into action. The key isn’t just collecting data – it’s acting on it consistently and transparently.

Employee engagement is well worth the effort

Employee engagement (quite literally) pays off. But seeing real, lasting improvements takes more than just good intentions – you need the right tools, data, and support.

Culture Amp gives you everything you need to measure engagement, understand what’s driving it, and take meaningful actions to improve it. From powerful survey tools to real-time insights and science-backed recommendations, Culture Amp can help you turn engagement into a competitive advantage.

Employee engagement has a direct impact on everything from your productivity to your profitability. So, if you’ve been asking yourself if you can afford to invest in engagement, a better question to ask yourself is: Can you afford not to?

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