The Relationship Between Employee Morale, Productivity, and Retention

We've written at-length about each of these topics individually, but it's important to cover the relationship between employee morale, productivity, and retention. The age of entrepreneurs being the only important stakeholders in a company has passed. Today, employees are increasingly becoming a business organization's key stakeholders. This is due to both the globally growing demand for quality products at reasonable prices and constantly increasing competition. It is more important than ever to have highly motivated employees that can give an edge against the competition.

If you're looking to build employee morale, you have to consider ways to keep them productive. And if you're looking to have productive employees who want to stay with your company, you'll need to boost employee morale. They all go hand-in-hand. Let's talk about it more in detail.

What is Employee Morale?

Employee morale can be a tricky aspect of leadership — and if you want to boost employee morale, it may seem impossible. At first glance, it seems like it’s a “fluffy” kind of business measurement, but it can become very concrete very quickly when it’s low. Low employee engagement can cause higher absenteeism, lower productivity, even employees turning to a third party to solve problems, like a union or an attorney. So, perceptions of the value of high employee morale aside, it’s actually a vital component of a company’s success or failure!

Employee morale is the psychological state of employees and is often determined by their satisfaction with their work. When employee morale is high, employees are typically more productive and less likely to leave the company. Conversely, when employee morale is low, employees are less productive and more likely to leave the company. This makes sense, as unhappy employees are not motivated to do their best work.

The Cost of Low Employee Morale and Engagement

According to a 2021 Gallup workplace study, low employee engagement costs the global economy about $8.1 trillion. The same study found that employee engagement has decreased to a very low 20% across the globe, and that has senior leadership scratching their heads wondering how to boost employee morale and have a more productive workforce. It means that organizations are spending funds, time, and resources on trying to combat high turnover and consistently spending money on new employees who, like their disengaged coworkers, will eventually leave -- that is, if positive changes aren't made and the organization's goals don't shift to make improvements.

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How Does Morale Impact Productivity?

Productivity refers to the amount of work that is produced by a worker within a certain period of time. Productivity can be affected by many factors, including employee morale. When employee morale is high, workers are typically more productive because they are motivated to do their best work. On the other hand, when employee morale is low, productivity tends to be lower.

Having productive employees has always been a goal for companies. But today, the goal is to have highly motivated employees that are productive and glued to the organization. Employee retention is important because a good worker who is dissatisfied with their work may easily find another position, and that position may be with the competition. Employee retention is more than just reducing employee turnover. It is about holding onto high-quality employees that are motivated by excellent management practices.

What About Retention?

Retention is the rate of how long employees stay with the company. Retention rates are affected by many factors, including employee morale and productivity. When employee morale is high and employees are more productive, retention rates tend to be higher because workers want to stay at the company where they feel valued and appreciated. On the other hand, when employee morale is low or productivity isn't up to par, retention tends to be lower as workers look for other opportunities outside the business that will better suit their needs.

employee morale, retention, and productivity

6 Ways To Boost Employee Morale

  1. Adopt a Healthy Work-Life Balance as a Standard

    "Work-life balance" seems to have become a bit of a buzzword in recent years, but it really needs to become more of an organizational goal as it is a key piece of a positive workplace culture. Perhaps it's become a hotter topic with the rise in millennial employees in the workplace, since that remains a critically important factor in determining what company they will choose to work for or stay with. However, with a massive shift to remote work due to the Covid-19 pandemic, employees' mental health has also taken a hit. A 2021 study of remote workers from the American Psychiatric Association found that two-thirds of team members working from home feel isolated or lonely "at least sometimes" while 17% of them feel it all the time. Additionally, the APA study found that over two-thirds of employees who work remotely at least part of the time report they have trouble getting away from work at the end of the day always (22%) or sometimes (45%).
    So what does this mean for your own organization? A recent Forbes article on the impacts of remote working and mental health shared the following from Dr. Teralyn Sell, who is both a Psychotherapist and brain health expert. Dr. Sell stressed the importance of workplace leadership focusing on the well-being and work-life balance of their employees with the following. “Workplace leadership can play a crucial role in the overall well-being of their employees simply by paying attention to their behavior. Supporting employees taking breaks, leaving on time and using vacation time is important for productivity. An overworked employee is going to be less sharp and ultimately less productive. Allow for flexibility. Some antiquated ways of doing business are just not conducive to life in 2021."
    She continued by sharing some tangible tips surrounding flexibility and ways to create a healthy work environment, which will combat low morale and benefit remote employees, but also your company culture as a whole. "Often, the only thing that keeps flexibility in the workplace from happening are ideas that ‘that’s not the way we do it. If that is the case within your organization, really engage in some critical thinking about it. Perhaps you are missing some opportunities to increase the happiness of your employees by allowing that flexibility to work from home or adjust schedules to participate in their child’s after-school activities.” 
  2. Provide Employee Feedback... and Ask For it!

    If you're truly looking for ways to boost employee morale, requesting employee feedback simply has to be among your top priorities. How do you know what will lead to high company morale? By taking the time to collect feedback, and making positive changes! Do your employees want more paid time off? Do team members want the flexibility to work from home when they need to? Do your employees simply need the time to take real lunch breaks without interruption? Sure, it may require a little creative thinking, but senior management and supervisors alike can positively impact the overall company culture, boost morale, and encourage higher productivity by taking action on one simple word: feedback. By taking the time to have ongoing communication between leadership and employees, especially in the form of regular one on ones, you're giving employees a voice. You'll better understand what your employees feel is the most meaningful which will certainly help boost employee morale.
    As Glassdoor explains, "Positive feedback is an important part of maintaining an uplifting work culture. Receiving praise and validation can help employees understand their strengths and the expectations of the company. With too much criticism, employees can become hypercritical of themselves and hesitant to try new things. When you receive positive feedback, you may be more apt to continue developing your skills and pushing your boundaries. This can lead to more productivity, motivation, and innovation in the workplace." Want to boost workplace morale? Incorporate opportunities for your employees to offer their feedback. In addition, make sure your HR professionals, managers, and all leaders are also looking for ways to provide constructive feedback in return.
  3. Don't Downplay Employee Recognition

    As we previously stated, it's important to ask your employees for feedback. Another important way to boost employee morale is gathering that information and acting on it. Employee recognition isn't a one-size-fits-all approach, it's going to be more or less significant depending on the team members. However, expressing gratitude for your employees' work performance is a non-negotiable. It's so important to reward employees for their hard work, especially if you're looking to boost morale. We've shared a lengthy list of employee recognition ideas - including some good food in the break room, or even celebrating personal milestones as employees achieve them. What works for one company won't work for them all. If you're looking for a few quick tips to get the wheels turning, these were shared from Harvard Business Review:
    • Write a short, personalized note expressing gratitude for an employee’s recent good performance.
    • Publicly recognize an employee’s contributions in your next team meeting.
    • Hold a morale-building meeting to celebrate your team’s successes.
  4. Ultimately, managers and supervisors can boost employee morale by providing regular employee recognition even in simple ways. Genuine recognition in front of co workers and peers for accomplishments to the company may be all that it takes to improve your employees' experience.
  5. Offer Continuous Learning Opportunities

    An often-times overlooked employee morale booster is the opportunity for continuous learning and career development. The 2021 LinkedIn Learning Report has some pretty important findings surrounding the opportunities for learning and internal mobility for employees. From the report, "employees who have found new roles internally are three and a half times more likely to be engaged than those who haven’t.... 82% of {learning and development} pros report that engaged learners are also more likely to participate in internal mobility programs. That’s a win- win-win for you, your learners, and your organization."
    Not only will you be providing your employees with the professional skills needed to advance their careers, you're giving them all the tools they need to succeed, and keeping retention rates higher than ever. If you're wondering what's on the horizon for internal training, the LinkedIn report also shared this from Samit Deb, CHRO at Airtel, a company based in India. "Compared to instructor-led training, a robust online learning solution would provide far superior coverage in terms of reach, accessibility, and learning content. We wanted a solution that would open new doors and help ensure that every employee has the opportunity to learn.” Simply put, if you're looking for ideas to boost employee morale, your company should include robust opportunities for online learning for workers, and especially leadership!
  6. Diversity & Inclusion Essential to Positive Employee Morale

    An increasingly important component of your company culture and employer brand is the championing and promotion of diversity & inclusion. It's not just the right thing to do, but it will also have a positive impact on company morale.
    We've written at length how to develop a diversity and inclusion strategic plan, including how to measure success and hold leadership accountable. 2021 research collected from Glassdoor shows that 76% of job seekers report that a diverse workforce is an important factor when evaluating companies and job offers.  Additionally, 32% of candidates would not apply to a job at a company where there is a clear lack of diversity among its workforce. The survey also showed that among employees (especially in under-represented groups) 71% of Black employees and 72% of Hispanic employees felt their employer should be doing more to increase the diversity of its workforce, compared with 58% of white employees.
    As Gallup shared, "Diversity is about who you hire. Inclusion is about the respect and acceptance people feel." There are some clear signs of a lack of diversity: including high turnover for diverse employees, or even a lack of diverse employees applying to your company. Gather feedback from your new hires, prospective job candidates, and your current employees to evaluate whether or not you can be doing more to promote diversity and inclusion in your organization. Hold yourself, your managers, and even senior leadership and HR professionals accountable to boost employee morale and foster an inclusive and healthy work environment.
  7. Promote a Positive Company Culture to Boost Morale

    It may seem obvious, but one of the most important ways to boost employee morale is starting at the foundation of your company culture. Creating a positive work environment where all employees are comfortable giving feedback to leadership, sharing ideas, and are confident their voices are heard is all within your control to promote positive employee morale. Be transparent in your hiring process, and offer opportunities for constant learning and career advancement. After all, your organizational culture is the glue that holds all of your employees together. Your company's mission should be intentionally creating an environment where prospective candidates want to work and where current employees want to stay.

The Relationship between Employee Morale, Retention, and Productivity

The relationship between these three factors (employee morale, productivity, and retention) can have a significant impact on the success of any organization or team within an organization. HR professionals and executives should place employee morale, productivity, and retention high on their list of priorities in order to create a positive work environment that encourages employees to stay with the company for the long haul.

Employees stay because the company is adequately fulfilling their needs and they are given opportunities that allow them to fully use their skills. While decent pay and benefits are important, employees want to feel like they are contributing to a goal and making a difference. A company needs to have a purposeful and gratifying culture, based on values and principles that make sense, are fair, and provide a positive work environment.

A company culture that encourages its employees to advance in their skills and provides opportunities for increased responsibilities will successfully retain employees. This is where management comes in. Managers are the ones responsible to maintain a company culture where employees are inspired and have a sense of belonging. Once employees feel like they are part of something more than just a job, productivity will come naturally.

Importance of Excellent Management

High employee morale is a major factor in the success of any organization. In order for companies to retain their employees, they must have a strong management system using strategies that inspire employees both individually and collectively. Managers are the direct link of communication between the company and its employees. Therefore, it is important to the success of a company to have well-trained managers that can communicate clear company goals and motivate their employees to make efforts towards those goals.

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About the Author Jennifer Orechwa

With over 25 years in the industry, and now as IRI's Director of Business Development, Jennifer has gained a unique perspective on what it takes to build a culture of engagement. By blending a deep understanding of labor and employee relations with powerful digital marketing knowledge, Jennifer has helped thousands of companies achieve behavioral change at a cultural level.

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