How Employee Morale Affects a Company

Organizations are emotionless. They are rigid corporations led by high profit aspirations and increased shareholder value. Organizations are atrocious. They exploit human ambition by converting it to performance appraisal assessment. Organizations are stiff. They are driven by arrogant CEO's and heartless middle managers. However, in any organization around the globe the most important factor is human element. No people, no profit. No people, no ambition. No people, no firm.

Employee morale is the relationship of employees with the organization. This encompasses all levels of employee satisfaction and is reflective in the kind of work employees produce. High employee morale connotes employee satisfaction and high motivation to boost organizational performance and productivity. On the contrary, low employee morale typically results in lower productivity that translates into organizational failure.

The relationship between employee morale and organizational performance is straightforward. When employees are satisfied with their jobs, they are motivated to work harder and contribute the best of their abilities toward the achievement of organizational goals. They feel appreciated, important and significant members of the organizational chain and as such they are ready to maintain a positive attitude with their colleagues, clients and anyone they come in contact with. By putting their best face forward, not only they are more attractive, but they are also able to complete their tasks more efficiently.

On the other hand, low employee morale has a negative impact on organizational performance. When employees are dissatisfied with their job they create a discouraging environment where other organizational members cannot function. They cannot share knowledge or ideas and they are afraid of being ridiculed or unaccepted. Low employee morale is generally a strong indication of job dissatisfaction and it often results in organizational failure as employees cannot resolve important issues, but most importantly are not interested in asking for their manager's support.

Research has shown that organizations that appreciate high employee morale as a driving factor of organizational success are indeed successful with high profitability and outstanding performance. More specifically, in his book "The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want," David Sirota and his team provide a series of examples that prove the importance of employee morale in organizational performance. For instance, assessing the stock market performance of particular companies in 2002, Sirota concluded that companies with high level of employee satisfaction have managed to outperform the stock market in a year that the S&P had declined by 22.5% (from 98.31 on Jan 2, 2002 to 76.17 on Dec 30, 2002). On the contrary, companies with low employee morale and consequently low levels of job satisfaction increased their profitability on average by 3%, whereas the industry average was 16%.

The strong correlation between employee morale and financial performance is also proven by the fact that managers emphasize the importance of motivation. Employees who expose signs of deterioration in the job have most likely lost their interest in their job or the organization. This is often the result of ineffective managerial processes that make employees feel unimportant and therefore, they are completely unenthusiastic to contribute their effort and energy to an organization that does not appreciate them. Behavioral management skills are extremely important in the process of enhancing employee morale. Managers should be able, not only to motivate their subordinates, but most importantly, to constantly make them feel as equal and important members of a broader team, the organization.

In conclusion, human capital is the most significant asset of any organization. Employees need to feel significant in order to be able to contribute their valuable knowledge and skills toward the achievement of organizational goals. Otherwise, if organizations simply focus on generating new business and neglect their human capital, sooner or later, employee morale will decline and organizational performance will show signs of breakdown.

Sources:

http://www.marketinginnovators.com/Downloads/TheEffects.pdf

http://elmurobbie.files.wordpress.com/2009/01/motivation-and-its-impact-on-job-performance.pdf

http://www.sirota.com/pdfs/Giving_Employees_What_They_Want_The_Returns_Are_Huge_April_2005.pdf