Your Poor Company Culture Is Costing You

cultureInfluential organizations like Google, NASA, Apple, and the US Army can’t be successful without high-performing teams that are challenged, driven, and inspired by leadership to reach their full potential. A strong team will propel any organization infinitely further than any budget strategy, any streamline initiative, or any reorganization. I have seen time and time again that when a team is managed correctly, the quality, quantity, and value of their work will exponentially increase.

The problem is, few organizations are able to create the environment necessary to get the very best out of their teams. Honestly, they rarely experience second or third best.

A recent Gallup study shows that out of America’s 100 million full-time employees, only a mere 33 percent reportedly like their job. 1/3 of the population actually likes going to work. 51 percent of 100 million employees are disengaged at work. Over half the workforce is ‘just getting by.’ These are the employees that do the bare minimum until 4:00 p.m. and ultimately don’t care how well the company performs (so long as they continue to have a paycheck).

So, if 33 percent of employees are happy and 51 percent are apathetic, what’s going on with the other 16 percent? These employees are actively disengaged in the workplace. As a leader, you’re familiar with this employee. They spend most of their day on Facebook. Despite knowing they could perform better, they choose not to because they haven’t bought in to your company, their job, and you, their leader.

It’s tempting for leadership to shrug their shoulders and say, “that’s not my problem.” However, choosing to be blind to employee dissatisfaction is entering a race with a broken leg. If your team doesn’t care, you may as well forfeit—you’ve already lost. You’ve lost because disengagement is expensive. These employees take more time off, are less productive, make more mistakes, and wreak havoc on optics from a PR perspective.

Disengagement is particularly expensive when going through a tumultuous time in the company, such as a change initiative or reorganization. Employees that hate their jobs are not going to stay loyal during a transition.

While a company can’t buy loyalty, they pay for not having it.

Society for Human Resource Management (SHRM) predicts that every time a business replaces a salaried employee, it costs six to nine months’ salary on average. For a manager making $60,000 a year, that’s $30,000 to $45,000 in recruiting and training expenses.

A CAP study found that this rate is related to salary. For example, an organization can expect to pay more based on employee compensation, as seen below:

  • 16 percent of annual salary for high-turnover low-paying jobs (earning under $30,000 a year). The cost of replacing a $12/per hour employee is about $4,150.
  • 20 percent of annual salary for midrange positions (earning $30,000 to $50,000 a year). The cost of replacing a $40,000 manager is $8,000.
  • Up to 213 percent of annual salary for highly educated executive positions. For example, the cost of replacing a $1 million CEO is $213,000.

We acknowledge that these are only estimates and that retention is difficult to measure due to the huge number of variables to account for. But, just because something is challenging to measure doesn’t mean it isn’t worth talking about. Even if an exact dollar figure can’t easily be projected, one thing is clear: employee disengagement and poor retention will cost you.

Consider the expense of hiring a new employee. Costs include finding qualified applicants, such as advertising, screening, and interviewing; and don’t forget the cost of onboarding a new person, including time taken from management to train. Then there is the cost of loss in productivity as well as the dip in sales resulting from poor customer service (as you’re well aware, new people are prone to errors and slowness). Finally, consider the cultural impact the loss of an employee has on an organization.

What unsuccessful leaders fail to see—no, choose to ignore—is their own ability and responsibility to orchestrate an environment where employees can find meaning in their work.

Companies with disengaged employees have missed the opportunity to create a culture where work becomes discipline, repetition becomes skill, and challenge becomes its own reward.

They’ve overlooked that coveted space of ingenuity, innovation, and creativity—where the line between ‘have to’ and ‘want to’ blurs into ‘get to.’

The above is an exclusive excerpt from Rachel & Meg’s new book iX Leadership: Create High-Five Cultures and Guide Transformation.

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Rachel MK Headley & Meg Manke
Dr. Rachel MK Headley & Meg Manke, MSSL are Senior Partners at Rose Group Int’l. Headley is a Mensa PhD Scientist and a certified Project Management Professional who brings a methodical intellect to solve problems that suit her client organization, its ideal culture, and business goals. Manke is a culture and leadership expert with years of experience leading companies large and small through major transitions, mergers & acquisitions, and behavior-based training and development.