If you ask a savvy sustainability manager to calculate the return on investment (ROI) from an efficiency project, they are likely to ask a few follow up questions—because they know that a solid ROI compares all costs to all benefits, and it can take a little digging to get the requisite data.
Calculating the ROI for employee engagement is much the same—you want to be sure you’re including all the benefits.
Calculating ROI
As noted, a solid ROI calculation compares all costs to all benefit. For a lighting upgrade, you’d have the cost of the new fixtures – including installation time – compared to the energy savings – plus any additional benefits associated with the new lighting. New LED fixtures can last up to 25 years, for example, which greatly reduces ongoing maintenance costs. Additionally, the new lighting might be brighter or better targeted to task areas, which can improve productivity. All of that matters in assessing the total ROI.
Sustainability managers need to be similarly thorough when assessing the ROI of engaging employees around sustainability.
Considering Unperceived ROI Benefits of Employee Engagement
The costs associated with engagement are typically easy to identify, because costs are tied to purchase decisions or the allocation of personnel resources. Benefits, by contrast, can accumulate in unexpected places. An accurate ROI requires that you identify all the ways engaging employees around sustainability contributes to your bottom line.
Specifically:
- Direct Resource Savings: If you are inspiring employees to reduce vehicle idling, you will save gasoline, whereas a campaign to turn off computer monitors will save electricity. In either case, one of the benefits is the drop in resource consumption associated with the effort. Too often this is the only benefit sustainability managers count—even though it can be relatively small when compared to the following.
- Human Resource Benefits: When you encourage employees to join the company’s efforts to save energy, you increase awareness of those corporate initiatives and give rank and file staff an opportunity to contribute to a bigger purpose. This matters! More than 7 in 10 employees want to help their companies be more environmentally sustainable. Engaging employees in sustainability efforts can increase employee satisfaction with their jobs, facilitate a deeper commitment to the organization, and give folks a sense of purpose—all of which will have a positive impact on employee retention and job performance. Employee turnover is expensive. In fact, experts estimate that replacing a mid-level position costs 20% of the annual salary for that position, with higher percentages for more skilled positions. When you engage employees, inspiring them to be part of the corporate effort, you reduce turnover and you facilitate…
- Bottom-Line Benefits from Employee Engagement: Studies show that companies with highly engaged employees have higher productivity, better safety records, and are more profitable than their peers with less employee engagement. That means your engagement efforts have a multiplier effect that far exceeds the immediate savings associated with staff efforts.
Many large companies have existing mechanisms to track overall employee engagement. If that’s the case in your organization, pay attention to those efforts and look for opportunities to showcase how your sustainability efforts are contributing to overall employee engagement. And if your organization isn’t tracking engagement, integrate a metric into your own tracking efforts, so that you can show progress over time. In either case, we encourage you to ask questions like, “How valuable is it when our employees brag to their friends and family about our company’s efforts to reduce waste?” The answers will help you calculate an accurate ROI relative to your employee engagement efforts.
Cool Choices measures both pre- and post-program engagement every time we implement a program, helping our clients to articulate the broader value of their engagement efforts to upper management.
To learn more about measuring the ROI of employee engagement, view a recording our our webinar, “The ROI of Engaging Employees on Sustainability.”
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