Over the last several years, a developing body of research is revealing the profound impact employee engagement can have on an organization. When employees are in alignment with a company’s mission and feel supported by their employer, they are able to perform at their best. Conversely, those who feel alienated and unsupported not only perform poorly, they can also erode an organization’s overall effectiveness and ultimately hurt the bottom line. According to Gallup, a highly regarded analytics and advisory firm, the total cost of disengagement in the US is estimated at a staggering $450 - $500 billion per year(1).
As employees grapple with changing RTO policies, often plagued by lack of clarity and weak enforcement mechanisms, employee satisfaction has only continued to decline. Today, offices are seeing historically low utilization rates. Faced with these issues, four in ten Fortune 500 companies are looking at reducing their real estate footprint(2). It seems to make intuitive sense - why pay for space that isn’t being used? But when examined alongside recent data on engagement, this tactic may prove to be short sighted. Rather than focusing on real estate reduction to achieve financial goals, now is the time to evaluate the situation through a different lens, focusing on the things that matter most to the people using those spaces.
To better understand what these latest discoveries could mean for individual organizations, we dove deeper into the statistics. What we found painted a sobering picture but also revealed a better way to move forward.
The numbers tell the story of disengagement
Another Gallup survey of workplace trends illustrates how the aftermath of the pandemic affected employees’ outlook. Since 2020, engagement has decreased by 4% and the number of actively disengaged employees has increased, reaching a high of 18% in 2022 and settling in at 16% in 2023(3).
The largest sources of this dissatisfaction were found to be:
· Lack of clear expectations
· Feeling disconnected from the mission or purpose of the company
· Limited opportunities to learn and grow, lack of mentorship
· Not feeling cared about or that one’s opinions matter
· Lack of meaningful friendships
This becomes especially concerning when we consider how rising disengagement can affect a company’s overall performance. According to Gallup estimates, actively disengaged employees result in 18% lower productivity, 15% lower profitability, and 37% higher absenteeism(4).
High employee turnover is another drain on resources, with the cost of replacing one employee estimated at minimum 50% of that employee’s annual salary(5). For knowledge workers, that could mean anywhere from $30,000 – $90,000 per person.
Disengaged employees can also have a negative impact on a company’s customers. Poor service that leads to reduced customer satisfaction, can damage a company’s reputation and result in a direct loss of business.
Gallup’s overall estimate of $450 - $500 billion per year translates to a cost of 34% of the salary of every actively disengaged employee(5). To put this into perspective, consider a medium size company of 1,000 employees whose median employee salary is $80,000. If 16% of those employees are actively disengaged, the company stands to lose approximately $4,352,000 per year.
The Way Forward
While a physical workplace alone can’t solve the disengagement dilemma, providing an inclusive, thoughtfully planned environment with enough space to meet employees’ various needs can have a substantial effect on overall employee satisfaction.
An important consideration is the adoption of desk sharing policies. With the latest advancements in mobile technologies, this idea can seem like an obvious and easy way to address vacancy concerns. But these practices have been tested many times over the years and come with well documented downsides. Not only can they make an office feel impersonal and unwelcoming, but employees can come to resent the additional burdens of finding a new desk every day, carrying belongings back and forth, and being separated from their teams. Furthermore, studies show those who lack their own dedicated desk tend to feel unmoored, disrespected, and less connected to the organization.
Looking again through the financial lens, let’s consider that same 1,000 employee company. Deciding to move from a 1:1 to a 2:1 desk sharing model could result in a space savings of around 24,000 rentable square feet. Factoring in an average cost of $60 per square foot for Class A office space, the company stands to realize a real estate savings of approximately $1,440,000 per year. But when we compare this to the price they pay for disengaged employees, a different story emerges. With disengagement costing a company roughly $27,000 per person per year, alienating just 54 employees (or 5%) could quickly eliminate that entire savings.
1,000 Employee Company
Desk Sharing —
Disengagement Cost —
In addition to a dedicated desk, an engaging workplace needs to accommodate a variety, and adequate quantity, of meeting spaces to support the various ways collaboration happens in the post-pandemic era. Equally important are dedicated spaces for employees to focus, socialize, find respite, engage in recreational activities, connect with nature, or simply change the scenery.
As organizations continue to grapple with meeting the evolving demands of hybrid work, we stand to benefit from a more human centered approach. Rather than focusing on real estate reduction to achieve financial goals, now is the time to leverage that space as a means to inspire and motivate our most valuable resource: our people.
If you are interested in exploring the ways in which space can increase engagement, contact our workplace strategy team email firstname.lastname@example.org
(1) Karlyn Borysenko, How Much Are Your Disengaged Employees Costing You, Forbes
(2) Celia Young, Nearly Half of Companies Will Cut Office Space Next Year, Commercial Observer
(3) Jim Harter, Are Remote Workers and Their Organizations Drifting Apart, The Gallop Organization
(4) State of the Global Workplace: 2023 Report, The Gallup Organization
(5) Shane McFeely and Ben Wigert, This Fixable Problem Costs U.S. Businesses $1 Trillion, The Gallup Organization
(6) Karlyn Borysenko, How Much Are Your Disengaged Employees Costing You, Forbes