The High Cost of Low Morale—And What To Do About It

February 26, 2015
The High Cost of Low Morale—And What To Do About It

Morale is a state of mind which involves feelings and emotions. Created within each employee, it is often considered an elusive quality. It involves the attitude and perception towards the job, work environment, team members, managers and the organization on a whole. Positive employee morale is usually exhibited by confidence, discipline and willingness to perform. There are no single factors that explain high or low morale, but rather a combination of related factors.

In today's economic reality, the root cause of low employee morale can include job security issues, uncertain business conditions, limited upward mobility, a perceived lack of fair compensation and excessive outsourcing practices. In such an environment, employees focus more on their career choices, a sense of personal well-being and financial future.

While more traditional managers tend to see low morale as intangible, its importance and impact on profits, productivity and financial competitiveness are measurable and affect organizational objectives. The Gallup Organization estimated that there are 22 million actively disengaged employees costing the economy as much as $350 billion dollars per year in lost productivity including absenteeism, illness and other low morale issues.

High morale in the work place is essential to success and is mostly influenced from the top down rather than from the bottom up. Managers that create low morale in employees do so from a top-down command and control mode, which implies that employees' do the listening and managers need not reciprocate.
By prohibiting open dialogue on workplace issues, managers are denied a firsthand view of problems that exist. This can result in a gap when addressing the real problems and can further exacerbate them, leading to employee distrust, disrespect towards management and reductions of morale and workforce motivation.

The Many Costs of Low Morale

Less engaged teams are less productive, less customer-focused and prone to withdrawing their efforts and adopting counterproductive behavior. This occurs when management is unclear about expectations, employees have not been effectively trained or do not feel a sense of ownership over their work.Low morale causes employees to lose interest in going the extra mile, especially when they do not feel valued by managers or care about the projects assigned.

A costly indicator of low morale is high turnover; when employees leave because they are not happy with their jobs and have few external reasons to stay. The negative impact of employee turnover is disconcerting because of its tremendous impact both financially and on productivity levels. More importantly, when employees leave, they take with them the knowledge, skills and ability that helped contribute to the goals, profit 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 total turnover costs can reach as high as 150% of an employee's base salary. High turnover also means that significant recruitment and replacement costs will be incurred.

Another cost of low morale is increased absenteeism. A workforce that is present and healthy accomplishes more. According to an article in The Leading Edge, dissatisfied workers crave an escape from their offices, even if those escapes are only temporary. Sick days cost the organization money and production, as well as increased health and insurance costs. When employees feel dissatisfied, are not as invested in the work they produce or discontented with managers, the level of absenteeism increases, leading to less productivity. Unscheduled employee absenteeism costs an average of 9% of payroll. However, absenteeism does not necessarily mean that employees hate their jobs. It can also stem from not feeling empowered or well-trained to perform.

How to Boost Employee Morale

Low morale can in fact be controlled. Managers possess the vision and understanding of their employees' potential and their core work processes. They must ensure employees are being effectively utilized through job enrichment. It includes understanding employees' abilities and ensuring jobs provide a challenge to utilize their full capacity, recognizing achievement and giving employees an opportunity to grow and learn new things.

Managers also need to create a culture of trust as they can shape and influence, through role modeling, the way resources are allocated, how employees are rewarded, and the criteria used for recruitment, promotions, and terminations. A climate of trust exists in organizations when managers do what they say they are going to do and are consistent in their actions. Managers can earn trust and improve employee morale by being accessible, authentic and fostering openness.

Creating positive morale is accomplished through a diversified approach to relationship building, recognition and compensation. Management that implements the innovations and ideas of employees reinforces their sense of value. Mini-meetings or morning huddles will highlight the tasks to be accomplished while recognizing previous week's successes. This can also be accomplished by increasing the frequency of interaction among team members, providing opportunities to discuss group goals, and by developing a healthy sense of competition against other teams.

The time, energy and resources exerted to attract the best talent are also required after the hiring process is completed. If an employee's behavior is truly understood, then their success on the job will be more accurately predicted. Research has concluded that out of 10,000 people, 15% of their success was due to technical training, intelligence and skills while 85% was due to personality factors and the ability to deal with people successfully.

To help prevent morale issues, managers need to spend time communicating their vision to ensure it is understood. Effective managers communicate widely and allow their messages to be discussed in person or at staff meetings. By providing an open forum or allowing one-on-one time, employees can express concerns and feelings and also give input on business developments, creating collaborating and supportive workforces. According to the Supervisory and Management Training Institute, managers and employees need to feel a sense of attachment to their work, because both will then care about the quality of the output.

In any organization, people are the most important resource. They are the engine that drives productivity and results and therefore their sense of morale and motivation will impact the company's success. To ensure commitment and increased morale in economic uncertainty, managers need to energize their employees by acting enthusiastically and optimistically about the future. This heightens levels of motivation and helps employees recognize the importance of their work while encouraging a goal oriented, ambitious, and determined working style. Those companies that remain vigilant to the signs of low morale and focus on improving it can avert the inevitable impact. When an environment of value and acceptance is generated, it creates a win-win situation for the company and its employees.

Want to learn more about leveraging HR for business growth? Contact TriNet today!

Wolfe, Ira. How Much is Employee Absenteeism Costing Your Business?

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