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Higher Employee Engagement, Higher Profits?

Posted on May 13, 2015

The world of business is a world of hard numbers. The primary question being, "How much did we sell and how much did we spend?" Businesses that sell more than they spend prosper. Those that spend more than they sell die.

Given this stark reality, it makes sense that warm and fuzzy concepts like "employee engagement" may initially seem out of place. Can this warm and fuzzy concept deliver measurable results that help a company thrive?

It certainly did at one Caterpillar dealership. As Gallup reports, investing in employee engagement delivered a return of 600% - specifically $500,000 invested that delivered three million dollars in return.

And those numbers don’t even tell the full story. The $500,000 spent on employee engagement programs reduced capital expenses by $500,000. As the owner, Doug Fabick, explained, "We were spending less money and getting more people what they really wanted. Before, we were buying $1,500 laptops like there's no tomorrow, when all someone wanted was a new $50 office chair."

The Story of Fabick CAT

Founded in 1917, the family run Fabick CAT dealership now has over 560 employees in 12 locations in Missouri and Illinois. When Doug Fabick took over the organization from his father, the company was doing well but wasn't ranked in the top 25% of America's 50-plus CAT dealerships.

This displeased the competitive Fabick as he wanted his organization to be ranked among the best. He looked for ways to change the company for the better, a difficult task given the conservative ways of an 80 year old heavy construction equipment dealer.

Fabick looked around for answers on why some dealerships outperformed others. It was an interesting case because they were all in the same business - namely selling, renting, and repairing Caterpillar construction equipment. Why did some shine and others did not? He called the better performing dealers and got nothing. He sometimes wondered if they even knew why they were successful.

After much searching, he discovered the answer after attending a management summit - it’s all about employee engagement. After this realization, he hired the Gallup organization to train his managers on the concept.

Increasing Employee Engagement at Fabick CAT

The initial report from Gallup was not good. According to their quantification, employee engagement at Fabick CAT stood at 16%. Using this dismal percentage as a baseline, different departments in the organization drew up specific plans to find where the problems areas were, how to fix them, who would lead the charge, and how they would evaluate their efforts.

The organization then actively encouraged employees to provide solutions to various problems. As the employees became more involved in the process, Fabick management stepped back and let them take control.

Fabick found one thing to be true in encouraging engagement, "Communication is key - one workgroup at a time, one location at a time." Two years later after the launch of the program, the percentage of engaged employees more than doubled to 33%.

As communication improved and employees felt they were part of solution, they felt more engaged and productive. And it showed in the bottom line.

Revenues during this time increased only by 15%, but profits went up 100%. Suddenly the organization was producing more with less.

"We're changing our culture from a bureaucracy and becoming more open. It's bringing us together and changing us from a bunch of little kingdoms to one team," Fabick recounted in the Gallup report.

What This Means

Cases like Fabick CAT are further proof that warm and fuzzy concepts like employee engagement have real payoff in the world of cold dollars and cents.

Some time ago, and for whatever reason, it was decided these two ways of doing business should be regarded as two separate paths. As the case of Fabick CAT demonstrates, it makes more sense to place the two together so they can work together.

When employees and management work together in a state of mutual trust, everyone benefits. Communication is key to the process. Employees often have great insight into how to improve operations and only lack a means to communicate them to management.

This is the goal of Vocoli’s employee suggestion software - to encourage communication, unlock hidden value and savings, and drive higher profitability for your organization. If you are interested in making your company more profitable by engaging your employees, please don’t hesitate to contact us at 888-919-5300, 9 am - 6 pm EST.

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