The Cost of Shutting Down HR

As dozens of companies, especially in the tech industry, conduct layoffs, many DEI and HR professionals have found themselves on uneasy footing. With HR costing employers in the US nearly five trillion per year, many companies are anxious to cut back in times of economic uncertainty. Yet, data and research show these companies, in an effort to save money, could be making a fatal mistake.

The Danger of Turnover

It is no secret that poor employee experience leads to low engagement, the consequences of which can be detrimental in the long run. For one, poor employee experience leads to turnover. According to HuffPost, the cost of turnover is high—ranging from tens of thousands of dollars to 2X an employee’s annual salary. Without HR and DEI teams to monitor key employee satisfaction metrics, such as inclusion and belonging, companies could begin to experience high levels of turnover, and sequentially, financial stress.

Promoting Engagement

In addition to attrition, companies without effective HR and DEI programs may suffer due to low employee engagement and productivity. The 2020 McKinsey Employee Experience Survey found that employees with a positive experience had 16X the engagement rate as those with a negative experience, and were 8X more likely to stay at the company. Creating a positive work environment, with the help of robust HR and DEI programs, can help ensure employees are engaged, thus leading to more productivity overall.

Happy Employees, Happy Customers

As company ambassadors, employees are often on the “front lines” when interacting with customers. Disgruntled employees not only create negative experiences for customers but negative perceptions of the brand as a whole. An article published in Harvard Business Review found a “strong statistical link” between employee satisfaction, as reported on Glassdoor, and customer satisfaction, especially in industries driven by customer interaction. When companies decide to invest in the well-being of their employees, they are also investing in their customers. 

Effects on Revenue

Without effective data analytics tools, companies often struggle to place a dollar value on the ‘soft’ work of their DEI and HR teams. However, though these contributions can be hard to measure, recent research has found a quantifiable correlation between employee experience and revenue. According to the researchers, if an organization moves from the bottom to the top quartile in performance, it could experience a 50% or greater increase in revenue. Though this research does not represent all the value created by HR and DEI teams, it does help quantify the value of prioritizing employee satisfaction. 

Employee experience has a monumental impact on organizational success. In turn, so do the teams that facilitate this experience. Through diversity, inclusion, and employee well-being, DEI and HR teams ensure that companies make use of their greatest assets—employees. As events such as the Great Resignation have come to prove, employees need more, not less, support during times of economic distress. If companies want to ensure competitiveness in the long run, they need to support the efforts of HR and DEI teams during times of uncertainty and provide resources to help them as they confront the challenges of a constantly changing world.