Employee engagement, improve morale, motivate employees, there are numerous phrases used by executives and consultants all with the same result in mind: get employees to WANT to come to work. There are two reasons for this, a happy employee is a productive employee and to decrease the cost of turnover.
A highly motivated employee wants to do the best job possible and naturally performs at a higher level. Their enthusiasm is contagious and elevates their team to exceptional performance. On the flip side, an employee who is disengaged or has low morale can be a cancer to a team with their negativity dragging down performance.
According to a 2012 study by the Center for American Progress, the cost to replace an employee is approximately 20% of their salary . In today’s tough economy, employers are scrambling to identify strategies to increase revenue and often overlook the indirect costs associated with high employee turnover. The cost of turnover includes the loss of productivity (due to vacancy), cost to recruit, cost to train, and time it takes for a new employee to transverse up the learning curve to become fully productive. Reducing the indirect costs associated with turnover provides a strategy to organizations to improve their bottom-line.
What Doesn’t Work
Organizations try multiple tactics to help improve morale and reduce turnover. Various strategies include:
- Salary Increase
- Spot Bonuses
- Employee of the Month award winners
- Team Building Exercises
- Town Hall Meetings with Senior Management
- Censing Sessions
- Overly sensitive management approaches
These tactics alone only put a bandage on what could be a seeping wound unless management identifies the root-cause reason as to why morale and turnover issues exist within the organization. In other words, an employee with low morale due to being bullied by peers isn’t going to all of a sudden have high morale because his manager give him a spot bonus or gift as a reward.
In 1943 Abraham Maslow developed his Hierarchy of Needs theory. The theory states that there is a hierarchy of five needs for human beings. The needs form a pyramid with the lower tiers needing to be satisfied in order to build on the next level. The levels of Maslow’s Hierarchy of Need model is shown in the below figure and are defined as follows:
- Physiological needs – basic needs of food, water, air, clothing, and shelter
- Safety needs – physical, environmental, and emotional safety and protection
- Social need – feeling of belonging, friendship, affection
- Esteem needs – Self respect, confidence, recognition, power
- Self-Actualization need – need for growth and self-contentment
The above theory is general in nature and can easily be applied to organizations as follows:
- Physiological needs – paycheck, basic equipment needed to do job
- Safety needs – safe work environment (physically and emotionally)
- Social needs – feeling part of a team and not alienated
- Esteem needs – Pat on the back, being recognized by peers and supervisors
- Self-actualization needs – promotion, advanced training
Based on this theory, in order to improve morale management must ensure the lower level needs are satisfied before investing money or time on a strategy that would be applied to higher levels of the pyramid. For example, an employee who is being bullied by his peers would not have his Safety needs satisfied; therefore, the impact of being recognized by management for outstanding performance would have a short duration.
A firm encountered a 15% increase in turnover from the previous year resulting in an approximate cost of $700,000. In response to the increase the organization hired a third-party vendor to determine why turnover was increasing. The vendor interviewed employees who had recently left the organization and conducted an Employee Engagement Survey to obtain employee insight. The firm (whose cost for the project was $350,000) identified the top five areas that were of the most concerned based on the interviews and surveys as follows:
- Continuous IT/ network issues
- Delays in travel reimbursement (>45 days)
- Overcrowded facilities
- Abusive front-line supervisors
- Rundown facilities (leaky roofs, bad plumbing and electrical)
The firm’s executives were astonished at the poor scores in the Employee Engagement Survey and agreed that the company must take swift action in order to reduce the turnover trend. Therefore, they decided to hire an Employee Engagement Champion (salary of $125,000) to turn-around the numbers.
The newly hired Champion traveled to the various locations and spoke with employees at an expense of about $20,000. He explained to the employees that executive management team had heard their voice and was taking seriously the issues they raised. He went on to state that the company was starting an Employee of the Month recognition program where the winner would win an iPad and an Employee of the Year program resulting in a $10,000 bonus.
The executive management team was convinced that their recognition program would increase morale amongst the employees, however, turnover continued to increase. Therefore, the executives instructed each location (45 different sites) to conduct their own Employee of the Month programs and hand out $100 gift cards on top of nominating personnel for the company level award. This still had no impact on turning the negative trend of turnover. They had wasted over $550,000 (surveys, Employee Engagement Champion, iPads, gift cards) to reduce a turnover with no positive impact. The executive management team was stumped.
Achieving Employee Bliss
In the above case study the management strategy failed for two reasons. First, they did listen to the fact that their employees suffered from low morale, but they did not listen to WHY they were unhappy. The second reason the strategy failed is because the managers did not apply any action to satisfy the needs on the bottom level of the pyramid. The top five issues mentioned by the employees impacted their physiological needs (delay in travel reimbursement, IT/ network issues) and safety needs (overcrowded and unsafe facilities, abusive front-line supervisors). The bonuses, gift cards, and iPad strategy impact level 4 of the pyramid, esteem. But since the issues that mattered the most to the employee laid with levels 1 and 2, all the management team was successful in doing was throwing away $550,000.
In the above case study the management team should have invested in upgrading their IT infrastructure and facilities in order to satisfy the physiological and safety needs. Training or replacing front-line managers and a review of the travel reimbursement process will also go a long way with improving the morale of employees. Only after these level 1 and 2 needs are satisfied can an employee recognition program have any substantial impact to employee morale.
Appling Strategies for Success
Decreasing turnover is an effective strategy in reducing expenses within an organization. If not implemented correctly it can result in additional expenses while producing little results. An effective strategy impacting the needs in Maslow’s Hierarchy will produce the results necessary to make employees WANT to come to work!
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 Heather Boushey & Sarah Jane Glynn, “There Are Significant Business Costs to Replacing Employees”, Center of American Progress, 16 November 2012