Understanding the Relationship Between Employee Expenditures and Performance: 3 Key Factors

The years following the COVID-19 pandemic have shone a very bright spotlight on employees and their engagement – or lack of it – in the workplace. First came the Great Resignation, beginning in November 2021. Next was ‘quiet quitting,’ with workers doing the bare minimum necessary to collect a paycheck. That evolved into the employee engagement crisis, which continues to this day. Is ‘crisis’ too strong a word for the current situation? No, it’s not. According to one study by Wellable, as of the end of 2021 some 85% of workers reported not being engaged in their work. To look at that from the positive side, an engaged employee is 87% less likely to leave their employer.

So how does an organization keep its workers engaged? There are multiple factors to employee engagement, and some will require an investment on the part of the organization. That can be a tough ask in the best of times, let alone in the current economic climate. But consider that a disengaged employee costs his or her employer an additional $3,400 for each $10,000 in salary, and think about the roughly 20% of salary it costs to replace a departed worker (source: Wellable), and the ROI for employee expenditures starts to look a lot stronger.

Let’s look at three key employee expenditures and the differences they can make in engagement and retention.

Benefits: Wait, shouldn’t we begin with salary? We’re not saying pay isn’t important, but many studies have shown compensation to be relatively low on the list of factors around job satisfaction. Every employer understands the cost – the rising cost – of benefits, but a solid benefits package is more than an expense. It’s an investment in your team, and a very visible demonstration of management’s commitment to their health and well-being.

Benefits go beyond health coverage, also. Things like flexible work arrangements and wellness programs can have very positive outcomes, and demonstrate an organization’s commitment to promoting work-life balance. Multiple studies have shown a direct relationship between company benefits and employee health and productivity.

Training and education. Career development and advancement opportunities have been shown to be major factors in employee engagement in survey after survey. An organization that invests in regular training, and that really walks the walk of promoting from within whenever possible, will typically have a more engaged and higher-performing team.

This is an area where pushback from management is common, the fear being that the expensively well-trained employee then departs for a new opportunity elsewhere. That’s a very real risk, to be sure. But to the leader who asks, “What if I train them and they leave?” we would respond, “What if you don’t and they stay?” See the statistics above about the financial drain associated with demotivated employees.

The workspace. The physical workspace remains very much in flux as organizations adopt hybrid work arrangements and reduce their square footage. An arrangement where Employee A uses a desk on Mondays and Wednesdays, and Employee B on Tuesdays and Thursdays, might be convenient. However, if Employee A is over six feet tall and Employee B is an even five feet, that arrangement is likely to be less than ideal.

A well-designed, well-equipped and flexible workspace is vital to employee productivity. The opposite is also true … a work area that’s not ergonomically designed will not only frustrate employees, but can lead to neck or back trouble and repetitive strain injuries, and thus higher workers’ compensation costs. So again, there’s a direct cost benefit to this expenditure.

Productivity in the workplace also goes beyond posture and a comfortable working position. The space should be flexible enough to accommodate both individual activities and group collaboration, and should afford areas for privacy when needed.

It should be noted that there are low-cost, and even no-cost, ways to improve engagement. It costs nothing to foster a culture of open communication, one that lets employees know that management is being as transparent as possible, and that their feedback is valued. And things like incentive programs and rewards for job performance can carry a very low price tag, and have been shown to be very effective in boosting productivity.

In the end, though, the effort to improve employee engagement and performance is likely to have costs associated with it. However, it’s important to understand that those costs are investments that should have a direct ROI in greater satisfaction and retention.