Morale and Company Performance

by Editors at BRW 2001

from Business Review Weekly (Australia), 2001

Why don't enough companies care about the issue of low morale, especially considering its impact on the bottom line?

RW: Most managers do care about morale (or at least want it to be higher), but whenever there's a trade-off between morale and short-term cash, cash wins every time. The issue is expediency. So rather than take the time to coach someone who needs it, the manager dashes off to make the next sales call. There are very few bad people out there with bad intentions, but there are lots of managers with bad habits.

Second, most of us who were trained in business were taught nothing about dealing with people. We were taught analytics, systems, processes. How do you energise someone? How do you enthuse a group? How do you get people to buy into your vision? It's actually a skill that many of us lack. Most of us (including me) are not naturals at it, and as a result it's hard emotional work, which is much tougher than intellectual work. And when we fail, instead of saying "I'll try harder next time," we tend to react by saying "Ah, forget it. This ain't my thing." So we fail to improve.

How much does it cost to "fix" morale?

RW: Nothing. If you've got an enthusiastic, excited, motivated, enthused, driven, passionate, ambitious workforce, you'll save a bundle on recruitment and retention costs; you'll be hugely more efficient; and, since the people will work harder, your unit labor costs will go down. That's what it looks like once you're there, so what does it take to get there?

Contrary to common belief and practice, it has little to do with extras like free day care, concierge services, beer bashes at the beach or things like that. (Although they don't hurt at all!) What I've been able to prove with my global statistical study is that it's all about the character, beliefs and behaviour of the local unit manager. In other words, if you've got managers in place who actually know how to manage, you can take the same market conditions and the same employees and make a lot more money. That's not going to cost a lot of money (except for severance pay for existing managers who can't change.)

In many businesses, the manager is chosen because he or she was the best business-getter, or the best technically, or the most senior, or the most comfortable with financial reports. It turns out that none of those are key. You need to choose that person who best has the ability to challenge, cajole, excite and enthuse a group of people into doing what is truly their best. They then serve your customers extraordinarily well, and that's how you make the money!

How did you uncover the link between employee satisfaction and a company's performance?

RW: I approached a conglomerate that has 139 offices in 15 countries and asked them if they would not only let me send out a 74-question survey to all their people worldwide but also give me the financial results (profitability and growth) of each office. And they did!

I then threw it all into the computer and, using standard statistical techniques, asked which employee attitudes, if any, were correlated with financial performance. Financially successful businesses did better than the rest on virtually every employee attitude. I was able to prove that attitudes affected the financial performance, and not the other way around. The big message is that success is not about any one employee topic of, say, coaching or training or pay. Financially successful companies did it all better. It's all about where you think the main lever is to influence your business. We all say that we care about clients, profits and people. But which causes which? Which should occupy your attention? I've been able to show that there is an order and it's this: managers excite people who serve customers who pay money. So if you want the money, focus on what produces it!

From your experience, what is the happiest workplace you have encountered and why?

RW: What's happy? I used to work at one place where everybody was content, glad to be where they were, and none of them were really striving for excellence or to achieve anything else with their careers. The place was doing OK. They were content.

Is contentment the same as happiness? Not for me. I've also worked at places where everyone was challenged, stretching themselves to the limit, and all felt proud not only of themselves but of their colleagues. They acted like a group of people who really were out to win the Olympic gold. Were they happy? You bet! Yet they were working harder than the other folks, to higher standards. The key point (and this comes out of the study in my article) is that the people who are making the most money and are the happiest are those who are treated like they are part of a team that is going somewhere, is doing something meaningful and takes their standards seriously. Not everybody wants to be part of that, but those are the guys who are winning financially.

From your experience, what is the worst workplace you have encountered and why?

RW: There are many types of "worst." One is the Dickensian sweat shop that just wants to hire output machines that happen to be biological entities (hence the term "human resources") to churn it out. I know a lot of those places. But for me, I can actually develop a grudging respect for that, because many of the employees working at those places don't want more. They wouldn't want to be on the Olympic team. Too much like hard work! They just want a job, a paycheck and no hassles. It's a deal with the devil, but if both sides understand what the deal is, who am I to say no?

Far worse, in my view, are the "muddle-through," "it's all right," "mustn't grumble" kinds of places filled with bright people who are operating far below their potential. They're spending their lives doing tolerable stuff for tolerable customers because "it's a living" and "what else can you expect? It's just work." These are companies that are always pretending to be going somewhere, but never do because the managers have no follow-through, no theory of the business and no real standards. "It's about the money. If you pay me I'll do it!" There's a word for that, of course! I think that's a human tragedy and I see it all too often.

In what ways do some consultants fail when they come in to "fix" morale? e.g., what are your competitors doing wrong that you are doing right?

RW: I don't blame consultants, I blame the managers that hire them. There's an incredible appetite for quick fixes and add-ons because they allow you to think that you don't need to change the way people are actually being managed. I mentioned some before, but here are others: dress-down days, tinkering with benefits and reward systems, focus groups and employee surveys. All good ideas, but none of them the real point, which is to improve the quality of management. The data I have is very clear: success is about personalities, not policies.

I've got many, many suggestions, but here's one. Survey everyone in each operating group and ask them if their manager

1. Enforces the values articulated in the company's mission statement
2. Acts more like a coach than a boss
3. Gets the best out of everyone in the group
4. Ensures that everyone in the group treats people with respect
   
5. Refuses to tolerate individualists who disrupt the group's teamwork
6. Makes client or customer satisfaction the top priority of the group

Then publish the results openly to everyone in the company, and let every manager know that if he or she cannot get top scores within, say, 18 months, then he or she will be removed from a managerial position! I absolutely guarantee that if you did that, employee morale would go up and you would see a dramatic increase in profits.

Notice, none of this is about being nice, or gentle, or undemanding. That's not what produces high morale. I can prove it! It's about what my article is about! Set high goals that people can believe in and actively work to help them get there. That's motivating!

Is it possible to estimate how long it will take to rebuild morale?

RW: You can turn it around very quickly (in three months) with a great (new) manager. All he or she has to do is fire the selfish SOB who makes a lot of money for you but who treats people around him or her badly. Tell everyone why you did it. I've seen this in action, and it's incredibly powerful. At the opposite end, tell the lazy buggers that they can have any support they want (training, coaching, tools, personal attention) for 18 months, but that if they don't shape up in that time, they're out. The vast majority of the rest of the employees will be cheering. Standards at last!

It's almost impossible to turn morale around with the existing manager, because everyone has come to disbelieve that this person actually cares about them (or anything else except themselves.) Leopards don't change their spots, or at least people don't believe that they do.