employee engagement

Healthy cultures make for healthy profits

When I tell people that I help build healthy working cultures, I get a lot of blank looks. For many a commercially minded business leader, 'culture' is a concept which remains elusive, vague and really rather too soft.

Fortunately, a compelling business case has been made for investing in culture.

I’ve used it in the work I’ve done with clients this past 12 months. And, finally, it dawned on me that it might be a good idea if I shared it.

It’s based on a study in which US consultants Adrian Gostick and Chester Elton collaborated with Towers Watson to understand how different cultural metrics correlate with profitability. The research was conducted among 50 globally high performing businesses with over 300,000 employees, collectively.

In a nutshell, it established that businesses with healthy cultures enjoy profits close to three times greater than those without.

There were three ingredients which were consistently present in the highest performing businesses:

  • Engagement: Essentially attachment and effort, this is perhaps the most commonly measured workplace culture metric. It’s important, but Gostick & Elton found that it was far more powerful when combined with the other two ingredients. 
  • Enablement: Essentially the sense of being supported and equipped to excel. This refers both to the way people feel about their colleagues (at all levels and across all departments) and the extent to which the working environment (their kit, their desk, their office etc.) helps them to do their job well.
  • Energy: Essentially, feelings of well-being and purpose. Energy can be produced at work as well as expended. You feel it when you walk into a place. In large part, it depends on whether people feel their work is worthwhile. It helps, too, if it's enjoyable. But, crucially, it does also depend on the ability to take breaks and have a manageable workload. 

In summary, the profit dividend of healthy cultures was found to be as follows. In companies where all three "Es" were strong, profit margins were in excess of 27% on average. Those where engagement was high, but the other two Es were less strongly felt, had margins of almost half that - 14.3%. This was still almost 50% better than firms where employees failed to record a strong result on any of the metrics - these had margins of below 10%, on average.


The value of employee engagement

So engagement does matter. But it's striking how weak its business impact is, when it exists in isolation from enablement and energy. Why is this? 

The classic criteria used to assess engagement include things like how long employees see themselves working in the business; how motivated they feel to go above and beyond; and how much they’d recommend working there to friends. All important, for sure, and all proven to be predictors as well as indicators of business success. 

But a lot gets overlooked if you focus solely on this measure. 

It may be that there's a lot of tension between different departments, or that your boss doesn't give you as much freedom as you need to perform at your very best. It may also be that you work long hours and are pretty exhausted most weekends. None of this stops you saying in a survey they you’re prepared to go above and beyond. After all, that’s more a question of personal pride than organisational loyalty. 

In fact, your loyalty might still be in tact too – at least for now – depending on lots of other factors (including the number of viable alternative employers in your area). And you might even recommend working there to others, despite the long hours, because maybe it’s a company which looks good on your CV, or perhaps the perks are good, or the particular department you work in is full of good people. 

Maybe all of this is enough for you to overlook the other flaws. But maybe, one day, those flaws will really hit you between the eyes. And then what? Resentment. Stress. Low productivity. Departure. Nothing positive, that’s for sure.

This is why the other two measures are so vital. 


The value of enablement & energy

Measuring enablement forces a business to attend to the basics: clear roles and responsibilities, a boss who listens and supports you, productive collaboration between teams as well as within them, a physical working environment that helps you to do your job well and a sense that you are learning and progressing at work. All of these things can be addressed and improved through direct means and it is not hard to see how they can lead both to improved business performance and higher engagement. Indeed, I’d argue that only if enablement is high, can you be confident that high employee engagement scores have deep roots.

But what of the third ingredient? Energy is perhaps the most interesting of the three – not least because it’s easily the most overlooked. Indeed, this is where the hard-nosed commercial brain really kicks against soft ideas like meditating, going home on time and not answering emails at the weekend. 

And I'm not just talking about the boss's brain here. We all discount these ideas in our own mind. Many of us probably regard them as signs of weakness. Without being coerced, we skip lunch breaks (and even lunch itself); we work late; we work weekends; and we check emails constantly, even when we're on holiday.

In doing so we fly in the face of strong scientific evidence which shows that working for too long without a break damages not just our health, but also our productivity. Nutrition, rest and a good night's sleep are key to optimal performance. In their absence, we work increasingly inefficiently - even when we feel positively towards our work.

I suspect there are many profitable businesses out there whose employees may well feel both engaged and enabled, while also feeling high levels of stress and having little or no energy for the other things in their life. The question is: can they go on like this indefinitely? 

The Towers Watson data would suggest that the smartest business leaders have worked out the answer to that one. 

It may feel soft to invest in employees’ emotional needs, as well as their professional ones. But the evidence tells us that looking after people really does matter – at a commercial level. It’s not soft, it’s not vague and it’s certainly not elusive. It’s within the grasp of every business leader – they just need to pay more attention to it.

For more information about the Decision Practice’s Cultural Healthcheck, contact me at john.owen@decisionpractice.com