Everyone knows that employee burnout is expensive. Chronic stress, low morale, and absenteeism can silently erode productivity and motivation, ultimately leading to widespread disengagement across the organization. Factor in the related health issues for companies that provide health benefits, and the cost can skyrocket even more.
The problem is that few organizations realize just how expensive it really is. We know from Gallup that disengagement costs companies roughly $8.8 trillion globally in lost productivity per year. But that number is abstract and huge beyond comprehension.
What does that look like on a micro level? What does burnout and disengagement cost YOUR organization?
The fact is, it’s not just emotional exhaustion and productivity loss. Burnout also results in lost opportunity costs: operational inefficiencies hiding in plain sight, stalled projects, slowed innovation, waning sales, and a softening competitive edge.
All of these translate to measurable, bottom-line impact, draining profit, energy and momentum from even the most successful companies.
Learning to calculate that cost in real dollars and cents is critical for your organization. Putting real, hard numbers to the problem can serve as both a wake-up call and a benchmark for measuring improvement.
Competitive Edge’s Cost of Disengagement Formula offers a clear, data-driven way to calculate how disengagement and burnout erode profitability. By using your own numbers to calculate the Cost of Disengagement you can translate into data how much burnout is costing your organization. It may just be the harsh reality check that can help motivate action to begin getting a handle on disengagement and turn the tide.
The Employee Engagement Lifecycle
In most organizations, employee engagement follows a predictable four quadrant pattern, similar to a rocket’s trajectory.
- Liftoff — Motivated, not yet competent. Fresh employees have high motivation but low productivity. They’re enthusiastic but still learning and need time to acclimate to reach peak productivity. Organizations plan for this in their onboarding and probationary period—they know it takes time to learn the ropes.
- Peak orbit — Competent and Motivated. If all goes well, employees reach peak motivation and productivity. They’re in the sweet spot, firing on all cylinders, contributing and driving the organization forward with skills and enthusiasm.
- Danger zone – Demotivated but still competent. Things are starting to unravel. Employees have the skills, know their job but for whatever reason have lost their spark. They might start to negatively influence their peers and spread the “Ain’t it Bad Here” virus, dragging down workplace morale. Here’s where Performance Improvement Plans typically enter the chat, but they can be resource-intensive and not always effective.
- Crash and Burn – Demotivated and incompetent. Employees are burnt out and checked out. Their performance and motivation have waned to the point that, in many cases, they’re dismissed and replaced (or they should be). The cost of trying to turn them around is just not worth it.
Most organizations know the cost of turnover when someone lands in the Crash & Burn quadrant—the expense of recruiting, training, and onboarding all add up. But what’s often overlooked is the enormous, ongoing cost of those in the Danger Zone. These employees are showing up, drawing full salaries and appear busy, but they’re coasting, operating far below their potential—and dragging others down with them.
Turning Disengagement into a Dollar Figure
The Cost of Disengagement Formula translates this invisible loss into hard numbers. Here’s how it works, step by step:
- Identify disengaged employees. Be realistic and brutally honest.
Example: A 100-person company estimates 70% of its workforce has slipped into the Danger Zone. - Determine their average monthly pay. (Here’s where it gets real.)
Example: With an average salary of $5,000 per month, that’s $350,000 in payroll for disengaged employees. - Estimate their productivity level. Depending on their role (in manufacturing, for example), you might have an empirical way to measure this. Otherwise, make an educated estimate.
Example: If those 70 employees are performing at roughly 60% of their capacity, that’s a 40% loss in productivity. - Calculate the monthly cost of the productivity loss.
Example: $350,000 × 40% = $140,000 per month in lost productivity. If that’s not shocking enough on the surface… - Project the potential loss over a typical recovery period.
Example: A performance improvement plan (PIP) can take six months to show results. That means $140,000 a month lost × 6 = $840,000 in potential loss.
That’s a nearly million-dollar deficit in a single year for a relatively small company—and that doesn’t include the knock-on effects of turnover, rework, lost time, health issues and the contagious spread of negativity.
The Bottom Line: Knowing the Cost is Key to Lowering It
Disengagement and burnout are not abstract problems—they’re measurable financial liabilities. But they’re also preventable and reversible.
In our next post, we’ll explain how pairing the Cost of Disengagement Formula with the 4Es Framework can help leaders measure their potential loss, understand why it’s happening, and take targeted action to reignite motivation, competence and adaptability.
When the Energy, Engagement, Event response and Emotional intelligence are in sync, organizations don’t just reduce burnout—they accelerate performance. The engine runs smoothly, the gears align, and the whole vehicle moves forward together.
Ready to achieve peak performance for your team? Contact us today to reduce your Cost of Disengagement!