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March 10, 2009

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Improving employee morale is essential to greater profitability, according to one workplace expert. Another warns that layoff worries can drive down productivity.

David H. Maister, a former professor at the Harvard Business School, says a study he conducted shows that successful businesses do better in virtually every aspect of employee attitudes, with attitudes driving success - not vice versa.

Meanwhile, workplace consultant Bruce Tulgan points to new Labor Department statistics showing a drop in productivity last quarter as evidence that managers and employees alike are distracted by layoffs or the threat of them.

Both men are publicizing books. Maister's is, "Practice What You Preach: What Managers Must Do to Create a High Achievement Culture." Tulgan's is, "Winning the Talent Wars."

Maister claims that by raising employee satisfaction 20 percent, a company can boost its financial performance by more than 42 percent.

He surveyed more than 5,500 people from 139 offices in 29 firms in 15 countries. All were asked to rate how well they think their offices are doing in such areas as quality client service, quality of work, market reputation, long-term client relationships, profitability, and growth.

Financial performance of each office was measured by an examination of margin, profit per-employee, revenue growth over two years, and profits over the same period. Among his findings:

  • Employee attitudes actually drive financial results, not the other way around.
  • Fully 23 percent of all the variations in financial performance can be explained by the degree to which employees agree with the statement, "We have an uncompromising determination to achieve excellence in all that we do."
  • More than 50 percent of all variations in profit performance can be explained by nine key attitudes, with none having to do with technical skills nor financial acuity.

Maister added that he found in interviews with managers and employees that the keys to success were not the strategies or systems of the firm, but rather the character and skill of individual managers - namely, whether they practice what they preach and recognize the importance of their role in coaching employees.

Tulgan answers the question, "Why is productivity dropping?" this way:

"One of the reasons is that business leaders, managers, and employees at all levels are distracted by the recent flurry of downsizing activity.

"Certainly, companies need to downsize when they are severely overstaffed. However, it requires time, energy, and money to execute a reduction in staff, and employee morale is going to be affected under such circumstances. Diminished employee morale means diminished productivity."

If companies must downsize, Tulgan said, they must be careful to do it properly. "They must have an effective communications strategy in the aftermath of downsizing for getting people back on board and back to work to maintain productivity levels."

Tulgan added, "With all the recent downsizing, there have been a lot of labor costs that are linked to separation rather than productivity, and this is also a factor."

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Filed Under: Workplace Issues
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