Bring Out the Best in Your People Key Principles for Building Positive Culture and Morale June 2014 Lockton Companies The roles of culture and morale are increasingly recognized for their wide-reaching influence on organizational effectiveness and tangible impact on company performance. DR. CHARLIE CARTWRIGHT Claims Cost Control Consultant Risk Control Services 816.960.9857 ccartwright@lockton.com The intermingling of these critical aspects of an organization and its workforce are not only the foundation for happy, productive employees, but also a leading indicator of an organization s bottom line. It s no coincidence that between 1998 and 2010, Fortune Magazine s 100 Best Companies to Work for in America outperformed the S&P 500 by more than 228 percent. 1 But exactly what are culture and morale, and how can companies make sure they are cultivating them to the greatest benefit? While culture characterizes the overarching beliefs, methodologies, and customs of an organization, morale reflects the enthusiasm, loyalty, and confidence of individuals (or of a company s workforce as a whole) that may be greatly influenced by culture. Together, they have the power to drive behaviors, attitudes, and engagement levels that are critical to business success. Between 1998 and 2010, Fortune Magazine s 100 Best Companies to Work for in America outperformed the S&P 500 by more than 228 percent. L O C K T O N C O M P A N I E S
Progressive companies keep a close eye on these workplace barometers and implement a number of programs and practices to build favorable culture and morale. However, problems remain in companies at large and are reflected in very low employee engagement levels across the country. According to a 2013 Gallup report, only 30 percent of the American workforce is engaged, 50 percent is not engaged, and 20 percent is actively disengaged. 2 How big is $500 billion? A stack of 500 billion one-dollar bills stacked end to end would reach all the way to the moon! 20% Not Engaged/ Low Morale 30% 50% Engaged/ Good Morale Actively Disengaged/ Poor Morale Gallup defines engaged employees as those who work with passion and feel a profound connection to their company. They drive innovation and move the organization forward. It s estimated that engaged employees have 50 percent fewer accidents, 41 percent fewer quality defects, and far lower healthcare costs. 2 Employees who are not engaged are essentially checked out. They are sleepwalking through their workday, putting time but not energy or passion into their work. And, at the extreme are actively disengaged employees those who are not just unhappy at work, but are busy acting out their unhappiness, undermining the ability and accomplishments of their otherwise engaged coworkers. In fact, active disengagement among workers costs U.S. companies an estimated $450 billion to $550 billion annually. 2 Why Culture and Morale Matter When culture and morale are low, the price that companies pay is high. Employees performance stalls, their health suffers, productivity plummets, and workers compensation claims jump up markedly and that s among those who stay. Perhaps of greater concern is poor culture and morale s role as a catalyst of voluntary employee turnover a factor that can levy significant financial burdens on organizations. The American Management Association estimates that turnover can cost a company 25 to 200 percent of a lost employee s annual compensation. 3 Based on an average annual salary of $44,321, if a company has turnover of 16 employees annually, the cost to the organization at 150 percent of employees annual salary swells to more than $1 million. 2
June 2014 Lockton Companies These costs ripple throughout the organization in a variety of ways: Overtime Unemployment insurance premium Impact on morale Staff loyalty Managers time Training Severance and/or benefit continuation Recruiting costs: Advertising Recruiters time Administrative costs Preemployment screening costs Interview process Litigation Damaged reputation (inside and outside) Losses in: Productivity Internal relationships External relationships Client knowledge Tribal knowledge Intellectual capital Experience Talent Future innovations Asset Networks Sales Investment (time and resources) Customers Management is about persuading people to do things they do not want to do, while leadership is about inspiring people to do things they never thought they could. Steve Jobs, Cofounder, Apple 3
Leadership from a green energy client recently attended a training session on Culture and Morale in the Workplace that was taught by Lockton s Claims Cost Control team. The client implemented these strategies and has seen major changes in its workforce: Recent Success Productivity records have been set three of the last four months. Workplace injuries have been reduced by 80 percent. In the month that it typically sees the highest incident rates of injuries for the year, it had zero. This client is making culture and morale its No. 1 corporate initiative in 2014 and is excited to see all of the impacts that this can have on its business and insurance costs. their best. Indeed, the return on this relatively small investment can be high generally people will rise to both the situation and their potential when given the chance. Tips for Bringing Out Employees Best Connect don t just speak. Ninety-three percent of communication is nonverbal, so body language and the way information is presented is critical. Be silent and listen. Often managers are too quick to offer advice or the remedy to a problem when an employee just wants the opportunity to think out loud or be heard. Remember that communication is a two-sided coin, and the flip side is listening. So what can companies do to promote positive culture and morale? Begin With Leadership A Gallup poll of more than 1 million employed U.S. workers concluded that the most common reason people quit their jobs is a bad boss or supervisor. 5 Similarly, results published in USA Today from a 2012 Bank of America survey show that 90 percent of the 1,000 employees surveyed said the most important element for inspiring employee loyalty is a good boss. 6 Manage by walking around. Simply walking around and talking with employees with no specific agenda is an extremely effective way to connect and interact with them. You may be pleasantly surprised by what you learn about employees personally, and about how they can contribute to the organization. Recognize human factors. Events and situations outside of the workplace, such as divorce, financial problems, or health issues, can greatly affect an employee s behavior and performance at work and should be considered with sensitivity. Management s mindset must be around an understanding of the importance of culture and morale, with an emphasis on bringing out the best in employees to cultivate and retain them. To do so, companies must be sincerely interested in investing in their people. At a basic level, that means providing meaningful opportunities for growth and development, listening to employees, and considering their ideas. What do you think? are four magic words that employers can say to employees to help bring out 4 When you make a commitment, you create hope. When you keep a commitment, you create trust. Stephen Covey, Author
June 2014 Lockton Companies The Ignition Sequence Key Principles for Getting Started When it comes to building positive culture and morale, organizations can move the needle in months, not years. There are a number of meaningful steps that cost little time and money and can be implemented right away. Referred to in this paper as the ignition sequence, five underlying principles can help companies get started on the right path. Consistent Intensity Be sure to celebrate employees successes as well as correct their mistakes, and do both with consistent intensity. This balance of energy and feedback helps maintain a constructive, ongoing dialogue that can contribute greatly to employees overall sense of value, commitment, and positive morale. Fairness A sense of fair treatment is at the core of who we are as humans and an essential motivating factor in the workplace. If you re fair, even though some one may not like what you re saying, then he or she can at least accept it, and perhaps even appreciate it. Don t overlook anyone, and always remain impartial. Reciprocate when an employee truly goes above and beyond even a small gesture, such as leaving an hour early, creates a sense of equity and recognition. What is one of the first phrases a child learns? That s not fair. It s important in childhood and no less important in adulthood. Warmth Be genuine, show care and concern, engage, and listen. People may not always remember exactly what happened or exactly what you said, but they will always remember how you made them feel. Don t overlook issues or life events that matter to employees, such as marriages, birthdays, work anniversaries, and funerals. Especially when there s a funeral, it s important that you be there. If you show up, that person will never forget it. And if you don t, he or she will never forget it. Courtesy Courtesy should be so automatic that it doesn t even require any mention. But it is especially critical in relationship-based businesses. When customers see positive (or negative) treatment of employees by leadership and are aware of a good culture versus a bad one, it can have a tangible bottom-line impact accounts can be won or lost very quickly as a result. Trust Through leaders words and actions, they are either building trust or creating doubt. Trust drives beliefs, which in turn drives behavior. In fact, it s impossible for human beings to repeatedly act in a manner that is inconsistent with their beliefs. The importance of fostering trust among employees cannot be underestimated it is the foundation of the beliefs and behaviors that are essential to high levels of engagement and performance. 5
Companies have the power to create winning cultures and cultivate positive morale, often more easily than they may know. By applying a few basic principles that invest in employees and tap into the great contributions they have to offer, organizations can quickly move toward creating a workplace that favors employee satisfaction and loyalty, as well as business success. References Self-Evaluation Think of a few opportunities you ve had during the last month to practice consistent intensity. Did you do it? When dealing recently with multiple 1 Russell Investment Group for Fortune Magazine (2011). How Does Trust Affect The Bottom Line? Performance of the U.S. 100 Best Workplaces 1998 to 2010. 2 State of the American Workplace, Employee Engagement Insights for U.S. Business Leaders, Gallup, Inc. (2013). 3 Branham, F. Leigh. (2004). Six Truths About Employee Turnover, American Management Association, New York, NY. 4 Social Security Administration Average Wage Index (2011). 5 State of the Global Workplace, Employee Engagement Insights for Business Leaders Worldwide, Gallup, Inc. (2013). 6 BusinessLink (2012). http://hbusinesslink.wordpress. com/2012/08/14/want-to-keep-employee-loyalty/ people having multiple interests, were you fair to all parties? How many people have you shown genuine warmth to in the last month (including your family)? Are you always courteous, regardless of circumstance? Are you open to examining your beliefs about the way people should be treated? Who is responsible for how you treat other people?
June 2014 Lockton Companies NOTES 7
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