Employee disengagement is costing the Australian economy $211 billion per year

A recent report from Gallup has highlighted the significant economic impact of employee disengagement. By making simple changes to management behaviours, HR can turn this challenge into an opportunity for growth.

A new report by Gallup has revealed that a staggering four in five employees in Australia are feeling disengaged and disconnected from their work.

According to Gallup’s 2023 State of the Global Workplace report, two thirds of the workforce is passively disengaged, while 13 per cent is actively disengaged – i.e., taking actions that directly harm the organisation and its goals. Just one in five reported that they were engaged and thriving at work.

HRM recently joined Gallup’s CEO, Jon Clifton, and Rohit Kar, Regional Business Development Director for Australia, New Zealand and India, for an executive lunch to unpack the results further.

“There are millions of workers all over the world who are emotionally detached from work, and that largely isn’t improving,” says Clifton. 

“There is a rising detachment from many institutions. And I think one of the reasons that that’s taking place – this is true in America, and I think this is true in many OECD countries as well – is that there is a loss of trust in institutions, and that [can] create a great deal of apathy.”

This detachment is taking a heavy economic toll. The findings show that low engagement costs the global economy $US8.8 trillion each year, or nine per cent of global GDP. In Australia alone, the cost of low engagement is estimated at AU$211 billion annually. 

While this figure may be cause for concern, it also means that engagement strategies have enormous potential to drive growth and greater productivity.

Based on input from over 1000 Australian employees, Gallup’s report offers a number of insights on how organisations turn this challenge into an opportunity. Before we unpack those opportunities, let’s first explore some of the driving factors behind this billion-dollar problem.

What’s driving employee disengagement?

A key takeaway from Gallup’s report is a sharp upward trend in employees’ stress levels. Forty-eight per cent of Australian employees said they had experienced high levels of stress the previous day, exceeding the global average of 44 per cent.

The findings showed that the single biggest predictor of stress was whether or not people had the tools they needed to do their jobs effectively. Just 40 per cent of employees strongly agreed that this was the case.

“So many of the issues right now are basic management things,” says Clifton. “People are trying to get their work done, but they don’t have the basic things they need.”

“I think management fears those conversations because they think [employees] are going to say they need something new, something that’s very expensive. And that’s not necessarily always the case.”

He recalls working with a manufacturing organisation where employees were surveyed about what they needed to do their jobs more effectively. The standout request was not expensive tech or company cars; it was ‘gloves that fit’.

“This wasn’t a money problem, because they were already spending the money to buy gloves that don’t fit. So, from a psychosocial or physical safety perspective, the barrier here was listening. Nobody took an interest in whether or not the gloves fit. It [would have been] really easy, because all you’d do is walk down to the floor and go, ‘How are things going?’”

“We haven’t adjusted the very practices of management at the speed at which technology is moving.” – Jon Clifton, CEO, Gallup.

This disinclination to listen means employers are too quick to jump to conclusions about what will improve engagement and alleviate stress. For instance, some organisations are rolling back remote work and issuing return-to-office mandates in the hopes that proximity will equal productivity. However, Gallup’s findings show that overall engagement has almost four times as much influence on employee stress as work location.

During the research, Gallup asked disengaged employees what they would change about their workplaces to improve engagement and company culture. 

Some responses included: 

• For everyone to get recognised for their contributions
• Clearer goals and stronger guidance
• Giving everyone a fair chance in getting promoted
• I would like it if the managers were more approachable, and we could talk openly.
• I’d like to learn more things, but the work I do is quite repetitive.
• They should grant more autonomy in the work to stimulate everyone’s creativity.
• I just wish they respected me more.

Although employees’ needs and wants will vary significantly depending on the organisation in question, Clifton says the majority of these issues can and should be addressed through listening and changing management behaviours.

Gallup’s research suggests the most significant driver of low engagement is the quality of management. The report identifies management as the ‘linchpin of engagement,’ attributing 70 per cent of team engagement to the manager’s influence.

This means that manager development should be at the centre of every organisation’s engagement strategy.

Employees who are passively disengaged are the low-hanging fruit for productivity gains, says Clifton, as this cohort has the most potential to be inspired and re-invigorated if changes are made to the way they are managed.

Read HRM’s article on the four different types of listening.

An engagement strategy fit for 2023 and beyond

As leaders consider how best to empower managers to drive engagement, it’s crucial to consider the context of today’s hybrid world of work.

“So much now is moved to asynchronous forms of communication,” says Clifton. “And nothing’s wrong [with collaboration platforms] – these communication [tools] are amazing, and have helped empower and advance society in tremendous ways. But we haven’t adjusted the very practices of management at the speed at which technology is moving.”

According to Kar, the difficulties associated with remote work and asynchronous communication are especially present for younger employees.

“The newer generation is still building that relationship with companies,” he says. “They’re [trying to] build a relationship with their jobs and their work. When they start off remotely and continue working remotely, it changes the possibilities of what they can do.”

To help younger workers build these relationships, he suggests reframing the way that employees view the time they spend working on-site.

“It’s not just about the quantity, it’s also about the quality,” says Kar. “It’s not [about] your company promising that if you come to the office three days a week, you’ll get pizzas and you’ll go scavenger hunting, or whatever. It’s a promise you make to each other. How do you respect what you’re spending time together on, and the value of that time together in terms of the relationships and the outcome it creates?”

It might also be necessary to reframe the way that managerial relationships are perceived. Employees’ desire for greater recognition, guidance and career development means a traditional ‘command-and-control’ managerial style is unlikely to nurture engagement.

Instead, Kar suggests managers see themselves as coaches, who value employees as individuals and help them understand and build their strengths.

“If you have a manager who is encouraging you, giving you ideas, shaping the way you’re building your career, then, suddenly – if you were sitting on the fence with respect to the organisation – you’ll start leaning in,” he says.

“When you have that chance to lean in, when you have the right environment to lean in, it creates magic. It helps you see what you are capable of, and what you can do for your organisation.”

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