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How Purpose-Driven Leadership Enhances Employee Engagement

How Purpose-Driven Leadership Enhances Employee Engagement
How Purpose-Driven Leadership Enhances Employee Engagement

Nothing is real until experienced. – Carl Jung

When leaders are truly in touch with their purpose, they don’t just set goals; they inspire and engage. A purpose-driven leader aligns business value with global challenges and high-value strategic projects. They connect this purpose to their core strengths and motivations, fostering a deep sense of engagement—not just for themselves but for their entire team. This kind of engagement is different from merely having objectives or a broad understanding of one’s role in an organization. It’s about feeling a deep connection to one’s work and, through that, to the larger mission of the organization. For more on the misconceptions of purpose-driven leadership, you can read more here.

The Reality of Employee Engagement in Organizations

Employee Engagement in the Netherlands

Employee engagement levels in the Netherlands offer a clear picture of the challenges and opportunities faced by organizations today:

  • According to Gallup’s State of the Global Workplace Report (2023), only 16% of employees in the Netherlands are considered “engaged” at work. This is slightly below the Western European average and indicates that a significant majority of employees are not fully invested in their roles.
  • Effectory’s Global Employee Engagement Index (2022) presents a slightly more optimistic view, reporting that 27% of Dutch employees are actively engaged. Additionally, Dutch employees reportedly enjoy a better work-life balance and job satisfaction compared to some other European countries.

Employee Engagement in Europe

Looking at the broader European context, engagement rates reveal even more variation:

  • Gallup’s State of the Global Workplace Report (2023) states that the overall employee engagement rate in Western Europe is around 14%. Countries like Switzerland and the Nordic nations tend to fare better, with engagement rates often above 20%, whereas France and Italy often lag behind.
  • The ADP Research Institute’s Workforce View in Europe (2023) echoes these findings, noting that only about 16% of European employees feel “fully engaged.” Northern Europe shows higher engagement levels, whereas Southern and Eastern Europe often report lower engagement.

Employee Engagement in OECD Countries

Globally, employee engagement in OECD countries shows a similar pattern of variability:

  • The OECD Better Life Index highlights that employee engagement is closely linked with job quality and overall life satisfaction. Countries like the United States and Australia report higher engagement rates (over 30%) compared to many European nations.
  • Gallup’s State of the Global Workplace Report (2023) notes that across OECD countries, the average engagement rate is around 20%. Countries with strong labor markets and positive workplace cultures, such as the U.S., Canada, and Australia, typically report engagement rates between 25% and 35%.

The Benefits of Putting Purpose at the Core

1. Improved Productivity and Performance

Engaged employees are more productive and deliver better performance. When employees are engaged, they feel a deeper commitment to their work, leading to greater discretionary effort—going beyond what’s expected.

  • Gallup study found that organizations with high employee engagement have 21% higher profitability and 17% higher productivity than those with lower engagement levels.
  • Harvard Business Review reports that engaged employees perform 20% better than their disengaged peers, often contributing innovative ideas and solutions that provide a competitive edge.

2. Reduced Turnover and Retention Costs

High employee engagement significantly reduces turnover rates and the costs associated with hiring and training new employees. Engaged employees are more satisfied and less likely to leave, which ensures continuity and reduces recruitment expenses.

  • A study by the Corporate Leadership Council showed that highly engaged employees are 87% less likely to leave their organizations.
  • The Center for American Progress indicates that the cost of replacing an employee can range from 16% to 213% of their annual salary, depending on the role. Therefore, reducing turnover through increased engagement can lead to substantial cost savings.

3. Enhanced Customer Satisfaction and Loyalty

Engaged employees deliver superior customer service, which enhances customer satisfaction and loyalty. Employees who are committed to their organization’s mission are more likely to provide exceptional service, fostering long-term customer relationships.

  • A study by the Temkin Group found that companies with highly engaged employees have a 233% greater customer loyalty rate than those with disengaged employees.
  • Gallup’s research indicates that organizations with high employee engagement achieve 10% higher customer ratings and a 20% increase in sales.

4. Lower Absenteeism and Health Costs

Engaged employees are less likely to be absent from work and more likely to be in better health, reducing absenteeism and healthcare costs for the organization.

5. Fostering Innovation and Creativity

Engaged employees are more innovative and creative. When employees feel a strong connection to their work and believe in the organization’s mission, they are more likely to think creatively and propose innovative solutions.

  • A study in the Journal of Business and Psychology found that engaged employees are 2.7 times more likely to be high performers.
  • Forbes Insights research shows that companies with engaged employees outperform their competitors by 147% in earnings per share, largely due to the innovative thinking of engaged employees.

Conclusion

Employee engagement is far more than a buzzword; it’s a fundamental driver of organizational success. Engaged employees are more productive, less likely to leave, deliver better customer service, have lower absenteeism, and foster innovation. Investing in employee engagement strategies can yield significant returns, including higher profitability, reduced turnover costs, enhanced customer loyalty, lower health-related expenses, and increased innovation. The data clearly demonstrates that organizations that prioritize employee engagement are better positioned for long-term success. By focusing on creating a purpose-driven culture that fosters engagement, companies can unlock the full potential of their workforce, ensuring sustained growth and competitiveness in the marketplace.

Sources:

  1. Gallup, State of the American Workplace.
  2. Harvard Business Review, The Impact of Employee Engagement on Performance.
  3. Corporate Leadership Council, Driving Performance and Retention Through Employee Engagement.
  4. Center for American Progress, There Are Significant Business Costs to Replacing Employees.
  5. Temkin Group, Employee Engagement Benchmark Study.
  6. Society for Human Resource Management (SHRM), Employee Job Satisfaction and Engagement.
  7. Journal of Business and Psychology, The Role of Employee Engagement in Enhancing Innovative Work Behavior.
  8. Forbes Insights, Driving Growth Through Employee Engagement.

To be continued.

About Tom Oor

I’m a Learning and Development Business Partner specializing in creating and facilitating leadership and organizational development programs with global teams. My focus is on Purpose-Driven Leadership and Organizations. We transform business value gaps into impactful learning solutions such as offsites, journeys, and global hybrid programs.

Core Expertise:

  • Accelerating people development for higher returns and faster results
  • Leading high-performance international teams
  • Purpose-driven leadership and organizations
  • Cultivating high-performance cultures

We have worked with amongst others ABN-Amro, Google, PwC, Booking.com, ASML, Scotch & Soda, and Top Employers Institute to design and deliver transformative programs.