Does Employee Morale Boost Revenue?

According to Gallup’s 2017 State of the American Workplace, engaged employees are more present and productive; they are more attuned to the needs of customers; and they are more observant of processes, standards and systems. When taken together, the behaviors of highly engaged business units result in 21% greater profitability.

Gallup’s research also shows that companies with engaged workforces have higher earnings per share (EPS). In a recent study, they examined publicly traded companies with EPS data available from 2011-2015 and found that organizations that follow employee engagement best practices — the winners of the Gallup Great Workplace Award — outperformed their competitors over recent years. This finding is consistent with previous analyses of the relationship between engagement and EPS.

Specifically, when comparing EPS from 2011-2013 and 2014-2015, Gallup found that:

• Publicly traded organizations that received the Gallup Great Workplace Award experienced 115% growth in EPS, while their competitors experienced 27% growth over the same time period.
• The actual EPS of the best-practice organizations grew at a rate that was 4.3 times greater than that of their competitors.
• The best-practice organizations in the study had 11 engaged employees for every one actively disengaged employee. At the start of their engagement journey, these organizations had an average of two engaged employees for every one actively disengaged employee.

The numbers speak for themselves, don’t they?

How does employee morale affect the bottom line?

Let’s dig into the “whys and hows” of engagement and its effects on company revenue. Companies that report high engagement among their employees typically experience:

Higher Workforce Production

When employees feel positive and enjoy their work environments, their production is normally higher. This engagement helps managers achieve departmental and organizational objectives. When employees are producing more, their potential of earning more and getting promoted increases. A motivated sales rep, for instance, might generate a higher volume of sales, leading to greater commissions and bonuses and opportunities in new territories, as well having a positive impact on company revenue.

Fewer Absences

Absent employees cost organizations thousands of dollars in missed production or lower revenue. A Workforce Institute white paper published by workforce solutions company, Circadian, shows that annual absenteeism costs run $3,600 for hourly and $2,650 for salaried workers.

Lower Employee Turnover

The negative impact of employee turnover is troubling due to its effect on financial and on productivity outcomes. When employees leave, they take with them the institutional knowledge and skills that helped contribute to the goals and performance of the organization.

The Saratoga Institute suggests that the average internal cost of turnover ranges from a minimum of one year’s pay and benefits to a maximum of two years’ salary. Other research indicates that the direct expenses of turnover can vary from 46 percent of annual pay for frontline employees to 176 percent for IT professionals and 241 percent for middle managers, according to Washington-based Corporate Leadership Council. High turnover also means that significant recruitment, replacement and training costs will be incurred.

So, what are you going to do about workforce morale?

If your company is having a low-morale crisis, you have several options to right the ship. One success formula is to make sure you’ve got the right employees in the right jobs, and that you’ve gone above and beyond to keep them there. Although a great salary, benefits, and bonuses and perks are one way to help ensure your people stay happy, the quality of work/life issues is a vital element that has a definite and measurable impact on their morale and results in successful contributions.

The first step toward fixing the problem is to take time to assess how your employees feel about their current roles and what the company can do to ensure you are positioning the business as an employer of choice. Remember to recognize exceptional workers within the organization. Having employees who are valued, recognized and appreciated for their efforts will generally boost the overall morale of the organization. These employees may also provide critical business and employee referrals to further contribute to the company’s success.

Management immediately can do a great deal to help increase employee morale. Consider the following ten tips:

1. Analyze the Business Situation. Question where improvements need to be made or enhancements should take place for employees to effectively and efficiently carry out their work duties.
2. Communicate with Your Employees. Inform employees about changes within staff, budgeting, etc. and take feedback into consideration. Transparency and open, honest two-communication are a key to improved morale.
3. Increase Workplace Incentives. Provide an environment with growth opportunities, as well as monetary and non-monetary rewards. One simple example that can be easily overlooked is to thank your employees periodically for their efforts in email communications or face-to-face in staff meetings.
4. Make Employee Morale Activities Genuine. No one likes forced fun (even if they pretend to), and your employees recognize insincere behavior. Obligatory office outings and cheap, thoughtless gifts (How many stress balls emblazoned with the company logo can one person have?) will be recognized as such, and you risk damaging morale rather than improving it.
5. Consider the Environment. Don’t settle for the same ole, same ole in your office layouts. According to Harvard Business Review, the “conventional” workspace (drop ceilings, monochrome cubicles, drab carpeting) is being phased out in favor of connected spaces that encourage innovation and demand collaboration while still prizing individuality. Google, for instance, had a room in their former Chicago office that was crafted to resemble a speakeasy. Or Groupon, which uses carnivals, tiki huts, and enchanted forest motifs to spark employee creativity.
6. Let ‘em Sleep. Say what, now? According to a study conducted by scientists at the University of California, San Diego, naps are more effective than caffeine for increasing alertness and promoting learning on some memory tasks. Creating a space for workplace naps can be as simple as designating an unused office as a nap room and fitting it with a reclining chair. However, those with a bigger budget can invest in a fleet of nap pods.
7. Feed ‘em. If daily lunches aren’t in the budget, you can likely manage a weekly catered lunch. Potlucks are also a budget-friendly way to provide your employees with a meal: You buy the main dishes and have everyone else contribute sides and desserts.
8. Get Rid of Toxic Managers. If you have managers who intimidate, condescend, behave rudely, belittle people in front of others, give only negative feedback, lie, act sexist or racist, withhold critical information, blow up in meetings, refuse to accept blame or accountability, gossip, or use fear as a motivator, they need to go. Remember: People don’t leave companies; they leave bad managers.
9. Offer Referral Bonuses. Start a referral program and pay your employees who refer job candidates that are hired. You don’t have to pay it all at once. Give a portion when the person starts work, when they hit their first anniversary, when they’re promoted, etc.
10. Can the Email. Email can be a productivity killer but it also increases stress. In fact, several studies have shown that employees experience a spike in blood pressure and heart rate after reading an email in the office or after hours. Instead of email, use instant messaging software and face-to-face communication to lessen or completely negate its impact.

Resolve to make employee morale a priority. A business can prosper with the right mind-set, tools, and the greatest asset – its employees. When employees feel respected, appreciated and recognized, the increased success of business will generally follow.

For more resources and best practices on building a culture of engagement, explore our HR Center of Excellence Employee Experice hub.