#Strategy

Company Performance: What If Employee Engagement Were "THE" Strategic KPI?

25/03/2026

In an increasingly volatile and competitive economic environment, key performance indicators (KPIs) have long been the compass companies and organizations rely on.

Revenue, customer satisfaction, overall productivity... these quantifiable metrics provide an essential view of an organization's health and operational efficiency, measuring an organization's performance over the medium and long term through rigorous processes. In today's uncertain business environment, however, they measure the past without always explaining its underlying causes or anticipating the future.

Companies are discovering that simply looking at these numbers, while essential, does not always provide the key to understanding the “why” behind success or failure. An often-overlooked factor, an invisible yet omnipresent force, works behind the scenes to amplify or hinder these results: employee engagement.

What if engagement weren't just an HR issue, but the silent driver behind all your team performance metrics?

EMPLOYEE ENGAGEMENT: A KEY PERFORMANCE INDICATOR THAT CUTS ACROSS ALL OTHER AREAS AND DRIVES PERFORMANCE

Employee engagement refers to the level of emotional, cognitive, and behavioral commitment an employee has toward their company. It reflects not only their desire to contribute actively, but also their willingness to go above and beyond minimum job expectations and to fully embrace the collective vision.

This commitment is evident on several levels:

Emotional engagement: The employee feels a strong sense of attachment to the company, takes pride in their work and accomplishments, and is passionate about their mission.
Cognitive engagement: They fully understand strategic objectives, actively seeks solutions to problems, and demonstrates a constant desire to learn and improve.
Behavioral engagement: In practice, this involves going above and beyond, taking the initiative, helping colleagues, and actively promoting the company.

The effects of such engagement are well documented and have a direct impact on a company’s net income. The cost of disengagement is indeed considerable: according to ACPICIL, a disengaged employee costs their company an average of €14,310 per year. This high cost stems from lost productivity, more frequent errors, “hidden turnover” (employees who are physically present but psychologically disengaged), and a negative impact on workplace morale and the overall atmosphere.

For its part, the Gallup study (2023) clearly shows that highly engaged organizations perform significantly better:

+18% increase in productivity: Engaged employees manage their time better, are more focused, and are more innovative.
+23% increase in profitability: This commitment translates into greater operational efficiency and optimized resource use.
-21% employee turnover in organizations with high turnover rates and -51% in those with low turnover rates: Engaged employees are more loyal to their companies, reducing recruitment and training costs.
-78% reduction in absenteeism: improved well-being at work and strong employee engagement reduce sick leave and chronic absenteeism.

A significant improvement in customer satisfaction: Happy and motivated employees are more likely to provide excellent customer service.

Engagement does not replace traditional KPIs; rather, it acts as a powerful driver of them. It is not a standalone KPI, but a true multiplier of team performance that positively amplifies the results of all other indicators.

RE-EVALUATING TRADITIONAL KPIs IN LIGHT OF EMPLOYEE ENGAGEMENT

1. PRODUCTIVITY: +18% ON AVERAGE & INCREASE IN REVENUE

The productivity-to-revenue ratio (revenue divided by the number of employees) is directly affected. An engaged employee not only generates more value, but does so with higher quality and greater efficiency. They work more independently and are quick to suggest continuous improvements. In this way, they actively contribute to better customer service and improved financial performance.

In practical terms, an engaged employee generates additional revenue by:

The quality of their work: fewer mistakes, better task completion.
Customer satisfaction: positive interactions that build customer loyalty and encourage word-of-mouth referrals.
Process innovation: They constantly seek to optimize work methods.
Collaboration: Commitment improves cooperation and reduces internal friction, thereby streamlining processes and increasing the team’s overall efficiency.

Example: A company with €1M in revenue and 20 employees. An 18% increase in productivity would result in total revenue of €1,180,000. Average revenue per employee: Currently, €1,000,000 / 20 employees = €50,000 per employee. With the increase in productivity, if the number of employees remains the same, the new average revenue per employee would be €1,180,000 / 20 employees = €59,000 per employee.

2. ABSENTEEISM: –78% THANKS TO EMPLOYEE ENGAGEMENT

The cost of absenteeism in the workplace is a colossal hidden cost, estimated to average between €3,500 and €4,500 per employee each year. Each day of absence can represent approximately 1.87% of an employee's annual payroll cost. In labor-intensive sectors, such as consulting, absenteeism can even reach up to 10% of revenue. Beyond the direct costs (salaries paid for work not performed, replacement costs), absenteeism disrupts teams, increases the workload of present employees, undermines overall morale, and can compromise the quality of service or products.

Gallup shows that employee engagement can reduce absenteeism by 78%. This reduction has a direct and positive impact on:

Revenue: Fewer operational disruptions, better service continuity.
Profitability: reduced replacement costs and overtime costs.
The bottom line: an overall improvement in economic performance.
Operational efficiency: Stable, committed teams perform better.

Engagement contributes to greater well-being at work, better stress management, and, as a result, improved physical and mental health among employees, thereby drastically reducing sick leave and chronic absenteeism.

Here's an example from our small business with 20 employees:

Average cost of absenteeism per employee: Let's say we use an average of €4,000 per year per employee (the midpoint of the €3,500-€4,500 range mentioned in the article).
Current total cost of absenteeism: €4,000 per employee × 20 employees = €80,000 per year.
Reduction in this cost: €80,000 * 78% = €62,400.

EMPLOYEE TURNOVER & RETENTION: A HIDDEN COST THAT LOW EMPLOYEE ENGAGEMENT CAN REDUCE BY UP TO 51%

Employee turnover also represents a significant hidden cost for companies. According to Gallup, the cost of losing an employee ranges from 0.5 to 2 times their annual salary. This cost includes recruitment expenses (job postings, interviews, hiring processes), training for the new employee, the loss of specific skills and expertise, and a temporary drop in productivity during the onboarding phase.

Companies with high employee turnover see their profitability directly impacted, not only by replacement costs but also by the loss of customer relationships and institutional memory. Turnover also takes a toll on the morale of the remaining staff, who must absorb the additional workload, which can create a vicious cycle of demotivation and permanently undermine the company’s organizational health.

Highly engaged organizations significantly improve employee retention:

-21% in industries with traditionally high turnover (high-growth sectors, industries facing labor shortages).
-51% in organizations where employee turnover is typically low.

Employee retention thus becomes a key KPI, and engagement is its primary driver. A strong sense of belonging, opportunities for professional development, and recognition for a job well done are all factors that encourage engaged employees to stay with the company.

Example of an SME with 20 employees (average salary: €50,000, turnover rate: 15%) : Cost per departure = 1.25 × €50,000 = €62,500. -21% scenario → savings ≈ €39,400 /year. -51% scenario → savings ≈ €95,600 /year.

ENGAGEMENT: A CATALYST FOR INNOVATION AND TRANSFORMATION

Beyond directly improving metrics and ratios, engagement does more than simply optimize existing performance; it profoundly transforms a company’s health and corporate culture, making it more agile and innovative. Engaged employees become key drivers of this momentum:

They offer more ideas: because they feel heard and psychologically safe, they actively share their ideas, which are based on their on-the-ground knowledge and their understanding of customer or internal needs.
They take the initiative: rather than simply carrying out tasks, they constantly seek to optimize processes, solve problems, and create added value.
They cooperate more readily: an environment of trust fostered by commitment encourages knowledge sharing, cross-team collaboration, and collective problem-solving.
They contribute to continuous improvement: proactively identifying bottlenecks and inefficiencies, they identify bottlenecks and inefficiencies and propose concrete ways to improve.
They are more naturally inclined to get involved during periods of transformation: by understanding the strategic vision and embracing the objectives, they become advocates for change rather than resisters, thereby facilitating the company’s transitions and adaptation.

EMPLOYEE ENGAGEMENT: AN ESSENTIAL STRATEGIC AND PERFORMANCE ACCELERATOR

Engagement is therefore not merely a soft metric or an abstract concept, but rather a tangible strategic driver whose impact on overall economic performance has now been supported by extensive research. It acts as a powerful catalyst that amplifies and optimizes all other KPIs, whether they are visible on traditional dashboards or less visible.

Measuring employee engagement is no longer an option, but an essential strategic investment for any company seeking not only to improve its financial results, but also to build a resilient, innovative, and agile organization capable of meeting the challenges of the future. Employee engagement is the driving force that transforms goals into lasting success.

At ACT-ON STRATEGY, we turn engagement into a driver of performance: assessment, action planning, manager support, and KPI management.

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Sources:

Faustine KNEUSS

Consultante confirmée - ACT-ON STRATEGY