Editor’s Note: This post was originally published in April 2013 and was updated for accuracy and comprehensiveness on February 9, 2018.

Employee engagement is the emotional commitment an employee has to the organization and its goals, resulting in the use of directionary effort.
Kevin Kruse, Employee Engagement 2.0

Engaged employees can be some of your biggest brand advocates. They’ll preach the benefits of your products and are enthusiastic in dealing with the public. These employees will make every interaction with a customer a memorable one because they are focused on the wellbeing of the organization.

High employee engagement can increase revenues by up to two and a half times as much as companies with lower engagement.

According to research from a Hay Group study, engaged employees can cause companies to grow revenues twice as much as companies with lower engagement levels. Not only that, but it betters customer experience and leads to improved customer loyalty. Studies have found that companies with high employee engagement scores had twice the customer loyalty (repeat purchases, recommendations to friends) than companies with average employee engagement levels.

Let’s dive into how engaged employees have a direct effect on each of these factors.

Why Employee Engagement is a Must

The statistics above make a convincing case for having engaged employees. Here are my top reasons why having engaged employees is a must for your organization:

1. Improved Productivity

An engaged employee finds their job to be motivating and personally fulfilling. As a result, they tend to be more productive on the job than other disengaged employees. Research conducted by the Hay Group found that office workers who were actively engaged are 43% more productive.

Employees who are actively engaged are 43% more productive at work.

This productivity frees up time for employees to devote to other tasks. This extra time could be used to reach more customers, provide assistance to existing customers, or help a team member complete a difficult task. They can also hone existing skills or develop completely new ones. If this is the case, not only is the employee more effective, but they will also be more engaged as a result.

2. An Engaged Employee is Intrinsically Motivated

Engaged employees find their work to be personally fulfilling, and feel that their position is an important part of who they are as a person. While they do expect to receive compensation, this is not what drives their efforts each day. An employee that is driven because they care about their organization and not about the paycheck is an employee that will always do right by your company.

Engaged employees aren't just working for a paycheck, but are working for personal satisfaction.

Intrinsically motivated employees receive personal satisfaction from a job well done. Compared to employees who only work to receive a paycheck, engaged employees are the type of people you want working for you.

3. Improves Retention and Reduces Absenteeism

When an employee is engaged, they are much more likely to remain an employee of yours for an extended period of time. Studies found that highly engaged employees were 87 percent less likely to leave their companies than their disengaged counterparts. This makes employment forecasting a breeze for your HR department. It also reduces the negative word of mouth spread by former employees, improving your brand’s perceptions in the eyes of consumers and those in your industry.

Engaged employees are less likely to miss work than their disengaged co-workers.

Additionally, engaged employees miss work less than their disengaged co-workers. An unnamed Fortune 100 manufacturing company saw absenteeism drop from 8% to 4.8% and reduced turnover from 14.5% to 4.1%. Reducing absenteeism means that your organization can work at full pace more often, improving your overall effectiveness and the speed with which you can accomplish tasks.

4. Impacts Profitability and Increases Revenue

Having engaged employees can have direct, bottom-line impact on profitability. Sears measured that a 5 point improvement in employee attitudes drove a 1.3 point improvement in customer satisfaction, which in turn drove a 0.5% improvement in revenue.

Employees with positive attitudes create a better customer experience and drive a higher net income.

In additional to this, a study of 64 organizations revealed that organizations with highly engaged employees achieve twice the annual net income of organizations whose employees lag behind on engagement. These findings illustrate just how big of an impact employee engagement can have on profitability and revenue. It is easy way to increase these two metrics without having to attract more customers or cut costs in any way.

How Does Employee Engagement Affect Customer Loyalty?

As we already mentioned, the biggest organizational benefit of employee engagement is that it can help to develop loyalty among your customers.

Here are three reasons why having engaged employees can lead to customer loyalty:

1. Engaged Employees Provide Better Customer Service

Engaged employees provide top-notch customers service and aim to create an amazing experience for customers. They will truly go the extra mile for a customer, making sure that they are pleased with the products they have received and the experience they have had with your brand. These employees don’t mind spending extra time with a customer and making sure that they are completely satisfied before they leave. They set realistic expectations for customers and ensure these expectations are met.

Customers who experience great customer service are 10-30% more loyal than customers who aren't.

Your customers will take notice of the amazing customer service you’re providing, and repurchase from you as a result. This idea is expressed in John Goodman’s book “Strategic Customer Service”, where he found that customers who are delighted by proactive education or superior service are 10% to 30% more loyal than customers who have not been delighted.

2. Engaged Employees Provide a Better Brand Experience

Engaged employees love that products that they are selling. In addition, they are enthusiastic, kind to customers, and willing to promote to others how amazing your company and products are. Their excitement and brand affinity will shine through in their interactions with customers. If a customer sees that an employee (a likely expert on the subject) has so much excitement for your products, they will likely make purchases from you. According to Monetate, 73% of consumers would consider purchasing from a brand again if they had a superior customer experience.

Customers are more likely to buy from employees that are passionate about the products they are selling.

As we stated before, engaged employees are also more productive than their disengaged counterparts. This improvement in productivity means that they will be able to deal with customer inquiries and complaints faster than disengaged employees. People are increasingly busy, and want more time to spend on personal endeavours. The fact that an engaged employee will be able to help a customer in a more efficient manner will stand out in the minds of your customer. They will return and purchase from you again because it is easy and hassle-free. As a result they will become more loyal to your organization.

3. Engaged Employees Make Your Organization More Customer-Focused

Engaged employees truly care about the customers of your organization. They not only want to meet the needs of these individuals, but also make them feel special and valued. These type of employees have a customer-focused approach in all that they do. This strategy of putting the customers in the spotlight is called “customer centricity”. It requires businesses to understand their customers problems, and look out for their interests.

Employees who understand customer-centric business practices will help to increase customer loyalty.

Engaged employees allow you to develop that outward focus that is highly sought after. Customers will become loyal to you if they see that your underlying goal is to serve them. They want to feel valued, be treated as an individual, and receive empathy if they have a complaint.

Focusing on Employee Engagement to Increase Customer Loyalty

Hopefully by now you can see the benefits of having an engaged and motivated workforce. Motivated by their ability to perform well, engaged employees tend to be more productive and can lead to large increases in revenues and profits by making an extremely positive impression on first time and returning customers.

At the end of the day, an engaged team of employees will also cause your customer service to go through the roof. You’ll have happy customers left and right, and they’ll all be coming back in no time.