Studies have shown that organizations with high morale and happy employees are more profitable and have lower labor costs. The success of an organization is dependent upon upper management, which sets the overall mood of the company. High morale is achieved when 70 percent of employees report they are satisfied with their current job. The same study indicates companies who nurture their employees achieve higher productivity and satisfaction levels.
Why Traditional Management Isn't Profitable
Traditional management has proven deadly for the world's largest corporations. This type of management often holds the belief that employees are simply replaceable resources, and are supposed to succumb to the orders of their superiors. Employees have their own reasoning when joining an employer, however; the post-hire relationship is not what was expressed in the original job offer or interview. Low retention and satisfaction ratings are indicative of the management and not the company in general. The traditional paradigm treats employees as criminals or servants, rather than being part of the solution.
The Carrot Principle
Improving employee relations not only boosts morale, but it increases productivity and lowers labor costs. The Carrot Principle studied 200,000 people over a period of ten years and identified a direct correlation between managers who gave constructive praise and employee satisfaction (morale). Managers who motivate their employees with achievement and purpose-based recognition products received higher returns on their assets, operating costs, and return of investment.
The principle relies on productivity, engagement, retention, and customer satisfaction to lower labor costs and increase morale. The driving force behind the carrot principle is that the methods do not require a significant amount of money. The principle is culture-based and team-oriented, fostering genuine relationships that lower labor costs.
Lowering Labor Costs
When organizations need to lower labor costs the terms "layoffs," "terminations," and "buyouts" come to mind, however; by increasing workplace morale, companies save thousands of dollars each year. Employees who are satisfied and happy at their current job are less likely to leave their position for another company. Considering hiring expenses are astronomical, high retention rates reduce costs associated with recruitment, training, lost productivity, new hire, and lost sales. Retention rates among current employees may fall if the department is forced to pick up the slack, as positions are not filled immediately. It would cost $150,000 to replace an employee who made $100,000 per year, including benefits.
Addressing Morale Issues at the Top
When surveyed regarding workplace morale, most employees blamed their immediate supervisor, manager, or overall company structure. While managers have more autonomy and responsibility, they do not have the right to belittle their employees. Despite their past positions, managers need to be good leaders more than anything else. Beyond the basic job description, managers need to communicate the company's vision, energize staff, build trust, and develop genuine connections with their coworkers.
The role of the manager is much different than it was twenty years ago, as there has been a general shift in employee relations that reduce labor costs. The modern workplace culture is solutions-based, with employees working to achieve a common goal. Communication amongst employees and managers should be open, honest, and genuine, with both parties actively listening to each other. More importantly, managers need to clearly identify their requirements and needs in a friendly manner. Dictatorship has no place in the modern workplace, as managers built trust and gain an employee's loyalty.
Mentoring Employees
Increase productivity and build trust simultaneously by encouraging managers to coach their employees. Coaching is a friendly technique that provides employees with a means to improve their work and increase performance levels, which reinforces long-term job security. Mentors interact with their employees by engaging them during lunch, on breaks, or after work in a friendly environment. While intimate fraternization is cost prohibitive, mentors are encouraged to get to know their employees on a semi-personal level.
Foster the relationship by providing each employee with individual attention, as they need to feel they are part of the equation. Lower labor costs by keeping the conversations professional and enhancing their skills as an employee. Consider creating a "career track" for your employees, which helps them develop personal and professional goals. Discuss their current skills, and encourage them to develop new skills by taking professional development courses. Keep the communication open by asking employees for their input whenever possible, especially at larger company events where it will be noticed by other executives.
You can lower labor costs by thinking of your employees as regular people, asking them about their daily lives and their families. For larger organizations, consider adding an employee of the month column that highlights some of their professional - and personal - accomplishments. This is a great way to encourage employees to meet their personal fitness goals, for example, which reduces health care expenses. However, keep in mind that it's advisable to avoid playing 20 Questions or getting too personal with employees.
The Cost of High Morale
Employee mentoring, incentive, and recognition programs significantly lower labor costs and are far less than what a company would spend to hire new employees. There is a direct correlation between low satisfaction and employee retention, which indicated that those less happy at work are more likely to leave their current position for a different job within the same industry. The truth is, most employees want working relationships with their managers that foster collective thinking for the greater good. Cheerful and happy workers are excited about their job and want to do their best, thus increasing productivity while lowering retention rates.
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