The benefits of keeping a happy ship when it comes to the working environment are clear: if people are happy they will work more efficiently, are more positive in their outlook towards their role and their colleagues, and will strive to achieve the best they can, all of which ultimately benefits the company. But things can go wrong and companies are misguided if they think they can buy their way out of trouble.

In the UK, for example, the government-run Employment Tribunals Service (ETS) publishes statistics on the number and nature of employment tribunal claims. During the 12-month period between April 2011 and March 2012 ETS received 186,300 claims covering areas such as unfair dismissal and age and sex discrimination, all of which impact on employee engagement and morale.

Low morale amongst staff can be a major problem and should never be dismissed lightly. According to a recent Gallup poll, 70% of workers in the US say they are either not engaged or are actively disengaged from their companies. The cost of disengagement to businesses in terms of lost productivity is estimated by the research firm to be up to $550 billion a year.

It need not be like this. In his book, ‘Conscious Capitalism’, Professor Raj Sisodia claims “conscious companies” outperformed S&P’s 500-stock index from 1996 to 2011 by 10.5 to one. In their bid to be more aware of their relationship with the world, these companies have actively adopted ‘conscious leadership’ which means mentoring, motivating, developing, and inspiring people, rather than deploying models of command-and-control or carrot-and-stick.

What problem?

In order to improve and maintain employee morale, it is first essential to identify the roots of the problem. Maslow’s hierarchy of needs, a theory of human motivation, says we all must meet the basic physiological demands before moving to the next level which is security. This is followed by belonging, self-esteem and finally self-actualisation. The hierarchy is dynamic but humans typically must satisfy the lower order needs before moving to the next level.

As one of life’s necessities, money, is seemingly an obvious starting point for work-place satisfaction (or otherwise), but Mike Richards, Managing Director of treasury recruitment specialists, MR Recruitment, which publishes an annual salary survey, says it may not be so. “We have found that lack of pay isn’t a major cause of low morale; it is a contributing factor, but certainly never the only factor,” he states.

However, one of the most common causes of low employee morale is lack of career development, says Adam Scurr, Business Manager at Hays Financial Markets. “This can leave people feeling they are in a rut, with nowhere to go,” he notes. This observation is refined by Richards who notes that aside from poor job content and leadership, lack of control over day-to-day work, often as a direct result of an authoritarian management style, will cause tension. “For instance, as a treasury analyst you are often following the directions of those above you for the majority of the day and frustration can build. Even as a global or group treasurer you have to agree the strategic direction that treasury should follow with your FD or CFO before being given the powers to carry it out.”

The list of potential threats to employee morale also includes poorly managed change, job uncertainty caused by restructures, mergers, downsizing and relocations, lack of employer appreciation, personal or domestic issues, bullying and even gossip and rumours within the workplace. But perhaps one of the most destructive causes of low employee morale is stress. It may be caused by overwork, boredom or the breakdown of a working relationship with a line manager; each of these may have roots in other factors such as lack of training, poor management technique or just simply selecting the wrong person for the job.

The causes may be many but the effect is dramatic. A survey from the UK Office for National Statistics (ONS) has shown that work-related stress was cited in over 40% of work-related illnesses. On average, people suffering from depression, anxiety or stress take about 24 days off work a year, a figure that translated to 10.4 million working days lost in 2011/2012 in the UK alone.

Stress at work can be costly for businesses financially, but it also has a negative influence on staff relationships, poor performance, staff turnover and leads to more management time being spent on resolving the issues arising from stress.

Asset or cost?

According to Vijay Kapur, a Malaysia-based Senior Corporate Social Responsibility (CSR) Consultant, the damage that low morale (whether caused by stress or not) can do within a business is self-evident but the key question an employer must ask itself is “are employees an asset or a cost?” Costs, he writes in his blog for the Indian CSR consultancy, Kohana, “need to be minimised and controlled; assets are expected to produce a return over the long term and are worth investing in.” If a business sees employees only as a cost it will have a high turnover of staff, almost certainly will not be getting the best out of them and will be spending far more on recruitment, training and lost productivity than a business that values and retains its staff.

If employees are genuinely seen as an asset, Kapur’s view is that the key challenge for the company is how to “recruit, retain and motivate high performance staff by creating a sense of pride and spirit in the organisation”. The most effective means of achieving this, he argues, is through attention to the fundamental needs of every employee which include a safe workplace, proper rewards, employee personal growth, and good work/life balance: in other words, the hierarchy of needs. “The more satisfied workers are with their jobs, the better the company is likely to perform in terms of profitability and particularly productivity,” he writes.

Staff survey

Richard Lambert, Director of employee engagement consultancy, Morale Solutions, notes that many organisations carry out ‘exit interviews’ in an attempt to uncover the true thoughts of departing employees. Clearly not all reasons for leaving are negative (someone may just seek a change of lifestyle or location). But where organisational negatives are apparent – particularly amongst professional staff – Lambert confirms that lack of career progression, a poor relationship with a line manager and wage stagnation often surface.

As part of Morale Solutions’ remit it carries out employee surveys. An organisation will often conduct a survey if it perceives there is a problem with staff morale. The first time a survey is used it is natural for staff to suspect motives, Lambert notes. Genuine anonymity is therefore a key issue as without it survey results may be worthless. Good communication is essential to ensure employees are at ease with the process but it is also essential for the company to use the research results to make positive changes. If this is done, Lambert says there will be “a massive upturn in levels of morale and employee engagement”. Of course, if no action is taken it will serve quite the opposite purpose and any future promises will sound hollow.

Conducting a survey of this kind will incur costs and building a business case may be necessary. But finding business metrics that correlate well with the concept of employee morale is not easy, warns Lambert. However, it may be enough to know intuitively that spotting signs of dissatisfaction early on enables an employer to tackle the issue before it becomes a major problem.

Reading the signs

There are many signs of deterioration in employee engagement. Some common signs of dissatisfaction are:

• Increased absence from work.
• Lack of motivation.
• Low and/or poor quality productivity.
• Constant complaints and a focus on the negatives of the job.
• A general distancing from colleagues and withdrawal of cooperation.
• Clock-watching.

It should always be borne in mind that such behaviours may not be job-related and instead may arise out of personal or domestic issues; if so it becomes a more sensitive issue to handle and may require professional guidance from HR. It should also be noted that changing behaviour in the workplace is never clear-cut and must be taken on a case-by-case basis.

For most employees, the feeling of being valued, and being of value, is important in working life and thus many employees need to understand how their work fits into the general scheme of things. It is therefore also necessary to regularly give constructive feedback (positive and negative) but, says Lambert, the rule is “praise in public and chastise in private”. However, failure to confront poor performance is potentially disastrous, not just for the individual who will not know they are performing badly or feel they can get away with it, but also for colleagues who may see the lack of action as tacit management approval of poor performance and hence begin to question the validity of their own efforts.

Taking action

Regardless of how low morale manifests itself, Richards advocates a “360 degree view” to help managers understand how employees may be feeling. “The best managers are those who listen and react to those above, below and on the same level and who can balance the needs of all,” he says. A little empathy goes a long way: “If you are the senior treasury professional in the department and you are frustrated by the current environment or company ethos, you can be sure those below you are feeling the same at least to some degree.”

The responsibility for creating a positive working environment rests with all parties but much rests on the ability of line managers in this capacity. “If there are any major changes going on in a business, employees need to be kept informed as much as possible, preferably in person,” states Scurr. “When people are kept in the dark, people start guessing and that’s when rumours circulate.”

A manager’s responsibility for staff welfare goes “as far as they feel comfortable going”, notes Richards. “Some staff members will be comfortable with an equal exchange – they will bring their personal problems or issues to the work place – whilst others will feel uncomfortable doing this.” Regardless of the depth of discussion, communication is clearly one of the most important aspects of a managerial role and getting it wrong can destabilise an otherwise good working environment.

Managing people is a skill but many managers are promoted because they have the skills, understanding and experience of the actual job, not necessarily the equally important communicative skills. In a commercial environment managing should be about building relationships with employees based on mutual trust and respect. The authoritarian model may benefit some environments (military for example) but quite often serves only to create an ‘us and them’ divide. This can impact severely on productivity, staff retention and, as we have seen above, the bottom line.

Managers should:

• Be open to communication.
• Take grievances seriously.
• Accept responsibility for mistakes.
• Be truthful with the team.
• Set realistic targets.
• Never treat employees like a commodity.
• Be explicit with instructions.
• Avoid micro-management where possible.
• Offer praise and thanks where due.
• Encourage employee initiative and development for all.

The right person for the job

The concept of a ‘job for life’ is a thing of the past not just because the way we work has changed but also the range of opportunities and the desire to progress has increased: people can move from job to job so they do (albeit less so during an economic downturn). As a driver for moving on, there is a clear link between level of job satisfaction and length of employment.

According to Lambert, there is always a “honeymoon period” when people start a new job. “Our research identifies morale as tending to peak when people have been in a role between three to five years; they know how everything works, they feel that their career is progressing and that they are valued.”

The common ‘danger zone’ is around the one to two year period. From exit interview data gathered by Morale Solutions, those leaving at this stage tend to be highly negative about specific issues. If a company can identify and tackle those issues beforehand it might be able to retain staff longer, reducing losses caused by under-performance as well as the significant cost of recruitment and bringing new staff up to speed.

There is a common plateau after the three- to five-year period where for many employees the challenge may have gone. If the employer cannot find a way of reinvigorating these individuals it is likely they will part ways. Five years’ or so service may be considered a good run by both parties, says Lambert, “but what is difficult to swallow is when a company spends lots on recruiting someone and they leave after one or two years”.

When it comes to recruitment, the interview should be a two-way conversation devoted to getting the right match of skills, Richards advises. Questions should:

• Draw out the actual skills and achievements of the candidate.
• Find out how capable the candidate is at managing and working in teams or alone.
• Assess the candidate for fit with the culture and values of the organisation.

It is essential to ensure balance between these elements and to consider the value of building a team with a diverse set of backgrounds, experiences, ideas and working styles, rather than being swayed by one outstanding feature.

Keep it going

Building and maintaining internal relationships can be approached in a number of ways and Scurr believes that the so-called ‘away-day’ or off-site team-building exercise can be useful. “It is very easy to become focused on your own role within your own team and not really venture out to find out how each team plays its part,” he explains. “With an away-day you get to meet people in other departments and this is vital to understanding the business better.”

Maintenance of morale can also come from stepping aside from day-to-day responsibilities and being invited to participate in project work, notes Richards. A break from regular duties adds a challenge to working life and can similarly expand the participants’ circle of colleagues and understanding of other functions.

The importance attached to pay varies, but a reward beyond basic remuneration, such as a bonus, can go some way to creating satisfaction, Richards notes. Be warned though that if employees start to see a bonus as a right, subsequent failure to meet that expectation can create the opposite of the desired effect – which shows how difficult it is to create the right balance.