How to save £15,000 per employee by boosting morale

Morale issues cost the average 200 employee UK company £3million a year. The evidence is clear that morale and motivation deeply impact:

• Disengagement £1.3m
  82% of employees are currently disengaged (Gallup) and each disengaged employee costs their employer £6,450 a year (Queen’s Uni Ontario). That’s £1.3million a year if you have 200 employees.
• Sickness Absence £0.7m
  The average UK 200 person organisation faces £180,000 in direct sickness absence costs (CIPD) and several times that in indirect costs, in total up to £0.7million each year.
• Staff Turnover £1m
  The average cost of replacing a staff member, adding recruitment to learning curve costs, is £30,600 (Oxford Economics). Mean turnover rate is 15.6% and rising (CIPD). That’s £1million for 200 employee businesses.

For these reasons investing in effective morale improvement yields a higher return on investment than other spends.

So what is an effective morale intervention? Do wellbeing initiatives work? 35% of them do – perhaps because only 24% of people attend them (Gallup) – that’s not a great statistic if £3m a year at your bottom line is in play. As PwC’s report says, morale interventions need to embrace the psychological.

Poor morale comes from one of four things:

1. Negative cultures
2. Judgemental leadership
3. Sub-optimal Individual Psychology
4. Events overpowering personal resilience.

The strategy is as one would expect:

1. Fix the culture
2. Instil resonant leadership behaviours
3. Optimise individual psychology
4. Boost personal resilience.

The great good news is that in order to achieve any of these four, you need to achieve all of them.

They are all inextricably linked to each other:

• Culture change is the aggregated behaviour and mindset change of every individual in an organisation (see my blog Six Long & Short Cuts to Crack Culture Change)
• Optimised psychology is the only reliable way to master behavioural change
• Resonant leadership comes from – and drives – optimised personal psychology (see my blogs Leadership Demystified and Seven Sure-Fire Steps for Securing Engagement)
• Optimising psychology creates unprecedented levels of resilience.

This shouldn’t surprise us: high morale & motivation create high levels of engagement, which in turn delivers increased discretionary effort, lower sickness absence, and reduced staff turnover. (See my blog Seven Sure-fire Steps for Securing Engagement).

So the money question: how much should one invest in an effective morale intervention to secure a high ROI? Based on the figures above, interventions that address all four drivers of poor morale will produce savings of up to £15,000 per employee.

That’s in an average business – the numbers are obviously even more compelling where morale challenges are bigger and disengagement is higher.