Better Companies through Better Communications

COST OF POORINTERNAL COMMUNICATIONSA Business Case for Engaging Employees using Effective Internal Communications, 2014

68 Point Swing

• "When employees understand their overall role in the business,

• 91 percent will work towards that success but…

• The number plummets to 23 percent if they don’t."

– Bill Quirke. As noted by Melcrum.

68 Point Swing

Leading indicator of Financial Performance

• Companies that have highly effective internal

communications had 47% higher total returns to shareholders – over the last five years compared to companies with the least effective

internal communications.

ROI Impacts of Poor Internal Communications on:

1. Engagement

2. Payroll Efficiency

3. Communication Barriers

4. Downtime

5. Safety

6. Employee Retention

7. Turnover

8. Managers’ Performance

9. Corporate Change

Employee Engagement

Profits

Internal Communications

1) Engagement

• Every employee that crosses over from being disengaged to engaged

• adds an incremental $13,000 to the bottom line

each year

Gallup Says!

• 70% of U.S. employees are not engaged.

• Actively disengaged employees cost the U.S.

$450 to $550 billion per year in lost productivity.

• http://www.gallup.com/strategicconsulting/163007/state-american-workplace.aspx

Engagement = Opportunity

Operating Income• In 2012, companies with high levels of

employee engagement reported an average improvement of 19.2 percent in operating income– while companies with low levels of employee

engagement declined an average of 32.7 percent.

• http://www.thankgoditsmonday.com/blog/2013/06/09/connecting-engagement/?inf_contact_key=0b72a1e41ec9a7c991710a8b5436c03bd6e45f51d647ba88a542eec43955369b

Engagement = Opportunity

Earning Per Share (EPS)• Organizations with an average of 9.3

engaged employees for every actively disengaged employee in 2010-2011 experienced 147% higher EPS compared with their competition in 2011-2012. – Those with an average of 2.6 engaged employees for

every actively disengaged employee experienced 2% lower EPS compared with their competition during that same time period.

Engagement = Opportunity

• A Work Foundation study showed that organizations that increased practices related to engagement by just 10 percent

• increased profits by an average of $2,400 per employee per year.

• And the engaged organizations grew profits as much as three times faster than their competitors.

2) Payroll Efficiency Factor

• Payroll Efficiency Factor of disengaged

employees is on average 63%

• For every $100,000 spent on payroll

there is only $63,000 worth of work performed.http://resourcedevelopmentsystems.com/seblog/2010/06/the-payroll-efficiency-factortm/

3) Communication Barriers

• $26,041 is the cumulative cost per worker per year due to productivity losses resulting from communications barriers.

– SMB Communications Study. Prepared by SIS International Research, January 2009. Sponsored by Siemens Enterprise Communications.

4) Downtime

• A business with 100 employees spends an

average downtime of 17 hours a week clarifying communication.

• Translates to an annual cost of $528,443.

5) Safety Costs Add Up

• $63 = average cost of a safety incident for an engaged employee.

• $392 = average cost of a safety incident for an unengaged employee.

– engaged employees were five times less likely than non-engaged employees to have a safety incident and

– seven times less likely to have a lost-time safety incident. – By strengthening employee engagement, the company saved $1,721,760 in safety costs

during 2002. – Engagement improved sales performance at Molson Coors: Low-engagement teams fell far

behind engaged teams in 2005 sales volumes. – The difference in performance-related costs of low- vs. high-engagement teams

totaled $2,104,823.

6) Employee Retention

• Employees with the highest level of commitment

perform 20% better & are 87% less likely to leave the organization.

– Paulson Training

7) Turnover

• The U.S. national turnover for

disengaged employees is 23%

Current Reality -- Turnover

• 70% of companies say that retaining talent is their top HR challenge this year.

– (IO Partners, Employee Retention Report, 2013)

• 44% of employees in North America say they may or will leave their current organization within the next 12 months.

– (Blessing White, 2013)

• Losing an employee can cost an organization up to 213% of the employee's salary.

– (Quantum Workplace Survey, 2013)

8) Managers’ Time

• 71% of employees feel managers do not spend enough time explaining goals & plans.

9) Corporate Change = Communication Challenge

• Two thirds of employees do not receive enough information during corporate change.

• 84% of workers are caught up in some sort of change.

• Poor communication during change increases misconduct by 42%.– which affects the bottom line and shareholder returns.

• CEB• http://www.holmesreport.com/expertknowledge-info/13511/Employees-Dont-Receive-

Enough-Information-During-Corporate-Change.aspx#sthash.15F1P1xy.dpuf

Employees Don't Receive Enough Information During Corporate Change

09 Jun 2013

Better Companies through Better Communications

– Updated, January 2014– www.pdpsolutions.com