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Good Company Culture, Strong Business Results?

Evidence points to a healthy bottom line, though one expert warns against tying culture solely to results.

Company leaders often feel like they must straddle the line between making a profit and keeping their employees happy.

However, newly published research suggests that positive employee experiences may in fact contribute to that bottom line.

As part of a joint study from the IBM Smarter Workforce Institute and the Globoforce WorkHuman Research Institute, researchers surveyed 23,000 employees across 45 countries to identify the ideal employee experience and measure its impact on business.

The survey responses helped create a five-facet Employee Experience Index, which measures belonging, purpose, achievement, happiness and vigor.

Through their analysis, researchers found that high scores in each dimension predicted higher retention rates, work performance and discretionary effort. These all tie directly to an organization’s financial performance, said Lynette Silva, senior recognition strategist, analyst and consultant at Globoforce.

Further, a separate study by FTSE Russell analyzed companies on Fortune’s “100 Best Companies to Work For” List and found that they provided stock market returns three times greater than the general market.

Which Came First?

Some have questioned whether the positive cultures at high-performing companies are simply due to the organization’s success and increased capital to invest in their employees.

Andrew Wittman warned against tying an organization’s culture solely to results. Wittman is a former federal agent who consults entrepreneurs, CEOs and other leaders in high-stress situations on developing mental toughness strategies.

“The leader must build a culture that focuses on the process that produces successful results,” Wittman said. “Results are the byproduct of a no-excuses/high-trust culture, not the other way around.”

But should business decisions be made only with employee well-being in mind? Wittman also stressed the importance of leading with logic.

“The sweet spot of management is to create buy-in without steering with emotion,” Wittman said. He added that although emotion certainly plays a role in decision-making, it must be guided by critical thinking.

However, Wittman also said he understands that positive emotions can drive results that are good for business.

“Managers need to tap into those internal emotional drivers to motivate their employees,” Wittman said.

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Patagonia employee John Rapp and his daughter head to the on-site child development facility.

The pursuit of Happiness

In addition to outlining business benefits, the study also identified several key practices to improve the employee work experience, such as providing a work-life balance, recognizing employee achievements and building organizational trust.

According to Silva, recognition and voice were particularly influential drivers. Employees who felt that their suggestions mattered and that they were appreciated for what they did were almost twice as likely to report a more positive work experience.

For H2O+ Beauty, a San Francisco-based skincare company, empowering and recognizing employees fostered innovative thinking that helped launch new product lines and move the company forward.

“I’m a firm believer that culture is a platform to make the right business strategies,” said CEO Joy Chen. “But as our strategy changed, we needed a new culture.”

Chen said the company needed to ensure that innovative thinking at all levels of the 42-person workforce was encouraged as they shifted the focus of their business to sales and marketing.

One approach Chen took was to start a monthly award series to recognize both big and small employee achievements. The company also began hosting “Winedowns” each Friday to allow employees to gather and relax over a glass of wine. Chen said that the resulting conversations encourage employees to share new ideas and even led to the creation of a pop-up studio showcasing products in the front of the company office.

These initiatives required minimal monetary investment, but a genuine change in mindset.

“We really needed leadership and the rest of the company to view this as a valuable effort,” Chen said.

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A young girl at the Child Development Center at Patagonia’s corporate headquarters holds a book chronicling the company’s successes.

Don’t Forget Work-Life Balance
Although engagement plays a huge role in shaping employee experiences, also influential is what happens outside the office. Employees who felt they had enough time and flexibility to meet their personal responsibilities were 30 percent more likely to have a positive work experience.

For many employees, this often means the ability to start and raise families. Outdoor apparel retailer Patagonia Inc. is known for having family-affirming workplace practices.

In addition to offering paid leave for both moms and dads, parents can bring infants eight weeks and older into a fully staffed nursery just moments away from their workspace.

“Having on-site child care is a great way to get nursing moms back into the workforce and to ensure that parents know their children are safe and nearby,” said Dean Carter, vice president of human resources at Ventura, California-based Patagonia.

Patagonia also encourages employees to pursue activism by offering paid time off to volunteer and by paying bail fees for employees who are arrested while protesting on behalf of environmental causes.

According to Carter, these benefits have resulted in more focused employees and a “freakishly low” corporate turnover rate of less than 5 percent annually.

“There’s definitely a cost to all of [these programs], but what we’ve found is that since we have less issues finding talent and low turnover, we can focus on growing our business instead of filling positions,” Carter said.

Indeed, the company has experienced double-digit growth in recent years and had one of its most profitable years in 2015.

However, Carter said that Patagonia’s decision to promote a balanced workplace had nothing to do with ROI.

“Our founder wanted to create a place where, simply, work doesn’t suck,” he said. “Our culture grew out of a deeply embedded view that work and life should be able to coexist.”

Nidhi Madhavan is a Workforce editorial intern. Comment below or email editors@workforce.com.