Engagement Is EBITDA: The Profit Lever Most Owners Refuse to Pull

Most owners will do anything for EBITDA.

Cut costs. Renegotiate vendors. Squeeze insurance. Fight over a half point of margin like it is life or death.

Then they tolerate a culture where people show up, do the minimum, avoid accountability, and quietly bleed the business from the inside out.

That's not leadership. That's self-sabotage.

Engagement is not a “people thing.” Engagement is a financial system. It is an EBITDA system.

And if you don't run it like one, your margins will keep paying the tax.

Engagement Is Ownership

Engagement is not happiness. Engagement is not “everyone smiling.” Engagement is not snacks, swag, or another fake culture initiative.

Engagement is ownership.

It is the moment an employee stops thinking, “What do I have to do to get through today?” and starts thinking:

• This is my problem to solve.

• This is my standard to uphold.

• This is my customer to protect.

• This is my craft to improve.

• This is my team to strengthen.

When people take ownership, defects drop. Rework drops. Callbacks drop. Drama drops. Productivity rises. The owner stops being the operating system. That is EBITDA.

If you want something practical, not philosophical, here is what ownership looks like this quarter:

• Managers set the weekly target in writing, not in passing.

• Standards are defined upfront, not corrected after the miss.

• Problems get named early, while they’re still cheap.

• Feedback happens in real time, not at review time.

• Wins get recognized for the behavior that created them, not just the outcome.

The Numbers Owners Respect

Gallup reported that U.S. employee engagement fell to 31% in 2024, the lowest level in a decade, and that actively disengaged employees sat at 17%.

And Gallup makes the scale painful: each one point change in engagement represents roughly 1.6 million U.S. employees.

Quick note if you're the analytic reader:

• The 31% and 17% figures are trend data about the state of the U.S. workforce.

• The outcomes people love to quote (profitability, defects, safety, absenteeism) come from Gallup’s Q12 meta-analysis, which aggregates 736 studies across 183,806 business and work units and 3.35 million employees.

The Translation Into Real Money

Let’s translate the “soft stuff” into dollars without getting lost in a spreadsheet.

Assume a company with:

• 200 employees

• $30M in revenue

• 12% EBITDA margin (that is $3.6M EBITDA)

Gallup’s Q12 meta-analysis reports median percent differences between top-quartile and bottom-quartile engagement units, including 23% in profitability.

So a directional translation looks like this:

$3.6M × 0.23 = $828,000

Not a guarantee. Not a promise. A clean demonstration of how big the lever can be when you stop treating engagement like a vibe and start treating it like a profit driver.

Why Pay Does Not Create Ownership

Owners love to say, “My people are paid well. Why aren’t they engaged?”

Because pay is not the operating system.

Pay gets you attendance. It does not guarantee ownership.

Ownership gets created (or destroyed) by the conditions people work inside every day:

• role clarity

• manager consistency

• standards

• recognition

• growth

• accountability

• trust

If those conditions are weak, people protect themselves. They do less. They wait to be told. They stop caring. They stop trying. They start looking.

That loop is not normal. It is not inevitable. It is a choice.

The Sequence That Actually Works

Here is the mistake most leadership teams make.

They try to “improve engagement” while their hiring is broken, their managers are inconsistent, and expectations are foggy.

That's like repainting a sinking boat.

This is the sequence that works.

Step 1: Fix the hiring system first, or you will keep buying problems

If you don't know how to attract, identify, interview, and onboard great-fit people, you will never get sustainable engagement. You will get temporary compliance and long-term churn.

This quarter, do three things:

Define the role like you mean it.

Write a one-page role scorecard: outcomes, standards, non-negotiables, and what “excellent” means in 90 days.

Stop winging interviews.

Use a structured interview with clear competencies and scoring. If two interviewers cannot independently score the same candidate and land close, your process is opinion, not selection.

Onboard like the role matters.

Build a simple 30-60-90 plan with weekly checkpoints. Most “performance issues” are onboarding failures in disguise.

This is where most companies bring in outside help, because redesigning hiring from inside the chaos usually fails.

If you do not do Step 1, every other step becomes a treadmill.

Step 2: Install a leadership cadence that forces clarity and ownership

Owners love to say, “I talk to my people every day.”

Daily talk is not leadership. It is noise.

A cadence creates predictability. Predictability creates trust. Trust creates speed.

This quarter:

• Weekly 1:1s for every manager with every direct report (30 minutes, same structure every time)

• Weekly team huddle (30 minutes, metrics, priorities, obstacles)

• Monthly accountability review (what shipped, what did not, and why)

The goal is not more meetings. The goal is fewer surprises, fewer assumptions, and fewer “I thought you meant…” conversations.

Step 3: Define “excellent” so clearly it becomes a weapon

Most companies have a vague culture and unclear standards. People cannot own what they cannot see.

This quarter, for each key role, define:

• the 5 to 7 outcomes that matter

• the standards of “done”

• the leading indicators that predict success

• the behaviors that are required, not preferred

When people can see the target, they stop guessing. When they stop guessing, performance goes up. That's margin.

Step 4: Build managers who coach, not managers who babysit

If your managers don't know how to set expectations, give feedback, and develop people, engagement will never scale.

Owners often avoid this because it feels “soft.”

It's not soft. It is operational.

This quarter, train managers on:

• how to run a real 1:1

• how to give feedback that does not create defensiveness

• how to recognize effort without inflating mediocrity

• how to coach toward outcomes, not personalities

Then hold them accountable for consistency. Inconsistent leadership is engagement poison.

Step 5: Put engagement on the dashboard like cash

If engagement is EBITDA, then treat it like a leading indicator, not a vibe.

This quarter:

• pick a simple engagement pulse (not a once-a-year survey that dies in a PDF)

• measure it consistently

• tie it to operational outcomes: turnover, quality, rework, safety, production, customer issues

• make leaders own action, not opinions

No theatrics. Just execution.

What This Looks Like in the Real World

Here's a composite example based on what shows up in the real world again and again.

A $20M services firm with about 120 people had:

• strong revenue

• inconsistent delivery

• rework and callbacks that ate margin

• managers promoted for tenure, not leadership

• hiring done in panic

• an owner stuck in daily operations

They did not start with engagement surveys. They started with the system.

In 90 days they:

• rebuilt the hiring process for the roles causing the most pain

• installed a manager cadence

• defined “excellent” for the frontline roles

• trained managers on one thing: clarity plus follow-through

The result wasn't a sudden wave of happiness. The result was fewer fires, faster delivery, cleaner handoffs, and less owner involvement.

Engagement rose because the environment stopped punishing ownership.

That is the real game.

The Blunt Ending

If you tolerate mediocre leadership, sloppy hiring, unclear expectations, and inconsistent management, you are not just “having some people issues.”

You are choosing a lower EBITDA ceiling.

You are choosing to live inside avoidable churn, avoidable defects, avoidable rework, avoidable turnover, and avoidable owner stress.

In my opinion, that is a death sentence for any business that wants to scale and win.

Because competitors who build a true people system do not just outperform you. They recruit your best people while you are still arguing about whether engagement matters.

If you want higher EBITDA, do not start with cost-cutting. Start with the system that creates ownership.

That's where the margin actually lives.