A group of warehouse and distribution employees of a global company all wanted to leave. Many had been with the company for over 10 years, they all enjoyed their work, they knew what their job entailed, and liked each other. The tipping point in the crisis was their annual cash bonus being replaced with a cheap token gift from the shop floor. The employees were critical and resentful of management and all had the feeling that they hated coming to work more than ever before. There was a toxic work culture and this was a business in crisis that needed immediate attention.
How much investment of time and money was needed to fix this situation? It took a couple of minutes and cost nothing. Why wouldn’t every company do the same thing? Fear and justification.
There exists a fear that addressing workplace well-being would be expensive, time-consuming, and a minefield of legal and social faux-pax. Where to begin? What would be effective? What do I need to learn? If creating a humane workplace involves a certain level of reflection as a leader or company, can I handle the criticism? As you will see, there is no need to fear any of these factors.
Every commercial decision comes down to profit. Whilst initiatives, interventions, and training, have clear costs, it is difficult to quantify the financial benefits, and decisions are often made on gut feelings rather than the value of the return. Short-term business needs seem more important than the long-term benefits of a healthier work culture but they needn’t be. The financial benefits are both instant and long-term, so the sooner you make improvements, the sooner you make more profit and continue making it for longer.
Research on employees conclusively correlate happier employees with increased sales. Happier employees care more about their work, their employer, each other, and the customer. A 10-year Shawn Achor study showed an increase in sales of 37% from “unhappy” to “happy” employees. If you can improve employee happiness, sales will grow.
A service industry like a restaurant will sell more with happier employees. It is obvious that sales would improve, there is no negative to happier employees, so let’s make a conservative assumption that sales will rise by at least 1% and realistically by 5%. A restaurant taking $25,000 per week would be expected to grow sales to between $25,750 and $26,250, just by increasing employee well-being.
A healthy workplace has a much lower employee cost than a toxic one. With improved employee retention, the company makes huge savings by recruiting and training fewer replacements. The business is more attractive to a better caliber of employee. A Gallup survey found that 81% of employees value a healthy workplace over a higher salary. A restaurant with staff costs of 25% could expect to reduce this by 1% or 2%, or save between $250 to $500 per week.
Achor argues that happier employees are up to 31% more productive and 19% more accurate. With an experienced, motivated, and happier team, one that cares about the company, it would be fair to assume that Gross Profit in our restaurant would improve by 1%-5% or $250 to $1500 per week.
By focusing on the happiness and well-being of employees, and not thinking about sales or profits, what would be the improvement to net profit for our restaurant? At an absolute minimum, the annual net profit increase would be worth the equivalent of a week of sales, $25,000. More likely the profit would be closer to 3 weeks of sales, $75,000, every year. With gains that significant to the business, the happiness of the employees should be the number one priority in order to grow profit. Employee well-being is a profit generator, not a cost, and to further emphasize this, we can return to the crisis at the warehouse.
The managers didn’t have the answers to solve the crisis, nor should they, the employees are the experts on employee happiness. I asked the employees to name three things that would help them be happier at work. More time off, higher salary, and reinstatement of the annual bonus were not even mentioned. Even in this extremely toxic environment, there was no harsh criticism of management. They wanted schedules to be completed a week in advance to give them time to plan their social and domestic lives. They wanted to be thanked for their work and to be trusted to do what was required without micro-management. If these basic management functions could be worked better, they wouldn’t want to leave a job they loved doing and did well.
The most effective way to grow profits is by asking employees one simple question and doing all you can to work with them to address whatever arises: “What can we all do better to improve your happiness inside of work and outside of work?”. It’s easy, quick, cheap and pays huge dividends.
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