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

“Whether you are the boss or an employee, low morale can be a killer,” says Ron Halversen of Clarity-Ventures.

Morale is a state of mind that 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.[1]

High morale in the workplace is essential to success and is mostly influenced by 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.[2] 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.[3]

Less engaged teams are less productive, less customer-focused and prone to withdrawing their efforts and adopting counterproductive behavior.[4] 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.[5] 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.[6] 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.[7] 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.[8] 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,[9] leading to less productivity.

Another reason for missing work or lower productivity is chronic pain. “We had issues with lower than average productivity and found the problem was pain related to the neck and shoulder area,” says Julie Swain of Ithaca Sports. “When we introduced them to our own product, China Gel, the pain was not only relieved for them, but their productivity went up too. You can’t solve a problem unless you know what the problem is.”

Unscheduled employee absenteeism costs an average of 9% of payroll.[10] However, absenteeism does not necessarily mean that employees hate their jobs.  It can also stem from not feeling empowered or well-trained to perform.[11]

Low morale can, in fact, be controlled.  Managers possess the vision and understanding of their employees’ potential and their core work processes.[12] 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 the 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 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.[13]

Sometimes the issue with lower morale isn’t something that is expected. According to Sam Muslin, a respected dentist in Southern California, he reports that his patients reported not only more self-confidence, but better morale and increased productivity following their overbite correction procedure. According to Muslin, because the problem made them feel inferior, by fixing the issue, gave them a boost.

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 then will care about the quality of the output.[14]

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.
–By Vikki Ali

[1] Fink, Nicole, The High Cost of Low Morale: How to Address Low Morale in the Workplace through Servant Leadership

[2] Simonton, Ben.  Why Employees Develop Low Morale & Are Managers to Blame?

[3] Simonton, Ben.  Why Employees Develop Low Morale & Are Managers to Blame?

[4] Woollard, Stuart.  The High Cost of Low Morale

[5] Case, Holly.  Signs of Low Morale Among Employees

[6] Nase, Daniel.  The High Cost of Turnover

[7] Bowes, Barbara.  A Competitive Employee Market Compels Companies to Manage High Turnover

[8] Bartolomei,Kyra.  The Effects of Low Employee Morale

[9] Bartolomei,Kyra.  The Effects of Low Employee Morale

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

[11] Case, Holly.  Signs of Low Morale Among Employees

[12] Winning Workplaces.  Curbing Low Morale.

[13] Morales, Manuel.  High Cost of Low Morale

[14] Case, Holly.  Signs of Low Morale Among Employees