The Benefits of a Positive Work Environment

Nevermind the 15% overall revenue growth the AP News article I referenced in The Importance of Organizational Culture detailed… While we’re at it, let’s also disregard the turnover costs of up to 300% of an employee’s salary I share from Hireology in The Benefits of Effective Onboarding… And for now, let’s not even consider the 22% productivity improvement I cited from the Harvard Business Review in Why is Employee Engagement Important? For now, let’s pretend like those things don’t play a significant role in running a business and just think about how much nicer it would be to go into a positive work environment on a daily basis… You know, one that doesn’t suck every ounce of joy out of our lives!

Before we do that though, I just can’t fight the urge to give you an approximate total of those three stats combined for a company with just 100 employees… Sorry, that’s the capitalist in me. Like I mentioned in the last article like this, Being Miserable at Work Comes at a Cost!

According to Small Business Matters Online, “The average small business actually generates about $100,000 in revenue per employee. For larger companies, it’s usually closer to $200,000. Fortune 500 companies average $300,000 per employee.” Since a company with 100 employees falls into that Small Business category, and it will make the math a lot easier, let’s stick with the $100,000 per employee times 100 employees for a total annual revenue of $10 million. A 15% increase in that over three years takes the total to $11.5 million without anything else changing. I can’t imagine a single business owner I know turning that kind of growth down, especially if they’re able to sustain it over time!

With the average voluntary turnover rate in the US being close to 25%, according to the Bureau of Labor Statistics, coupled with just half of that potential cost per employee I referenced before for a workforce with an average salary of $50,000 per year, the total turnover cost is more than 18% of the revenue! What if creating a positive work environment reduces turnover by a third, meaning we only have to replace 18 employees of our 100 instead of the national average of 25? We can immediately add almost a half a million dollars back to our profit column of the P&L!

Finally, let’s assume our current productivity is around 50%. While I know that sounds low, it’s really not for most companies - especially when all the indirect costs are added into the mix. That 22% increase takes us to 61% productivity. Although that may still seem low to some, I assure it’s really not! But how does that show up on the bottom line? If we had been able to maintain just a 5% profit margin on the $10 million in revenue with 50% productivity, it would have been around $500,000 annually but that 22% increase in productivity (with the same fixed costs) increases profit to $610,000.

When we add the $500,000 we didn’t lose to turnover, we’re at $1.1 million in annual profit. That’s 11% of $10 million instead of 5% in case I lost you. Now let’s look at 11% profit once we’ve grown by 15% over the course of three years… That’s $1,265,000 using fairly conservative numbers - and it’s also nearly 3X the total profit we started with!

The business owners I know who work the hardest to constantly improve each of these metrics are also the ones I’ve seen be the most willing to pass these rewards along to the team members who had a hand in making them happen! Add the increased compensation to a culture where you know you’re cared for as well as one where you’re challenged to be the best you can be, and you can quickly see the benefits of a positive work environment impact everyone in the mix! Moving forward here, we’ll look at how that ties back to each member of the team then we’ll look at the benefits of a simple approach anyone can apply.

Everyone’s Favorite Radio Station

So here’s the reality of it all… All the profit in the world, even when it’s a direct result of building a positive work environment, won’t be what motivates our team members - especially if we’re trying to hang onto every stinking penny of it - unless we can provide something truly meaningful to each individual who contributes to making that profit!

Yes, a solid onboarding process helps… Yes, employee engagement contributes to it… And yes, the organizational culture those things help build plays a role in achieving that sought after profitability - but none of those things just happen on their own. No organization magically stumbles onto buckets of free money lying around… It’s all part of the cycle, and a significant piece in that cycle is making sure we’re giving each of our team members what they really need so they have a reason to stay engaged.

If you and I are traveling in a car together, with me most likely being the driver because I'm not a very good passenger, there’s a decent chance we’d have some music playing even if we’re talking and not paying much attention to it. I’ve got lots of friends who are into all kinds of music, I’m just not one of those people! With a few exceptions, I like most southern rock, hard rock, and eighties metal bands. I will change the station or turn the radio off every time Queen or KISS are on - especially “Bohemian Rhapsody” or “I Wanna Rock & Roll All Night”! That said, I’d prefer no music at all over pop, country, or most anything else… While I can respect most styles of music, don’t expect me to listen to all of it…

OK Wes, how can that have anything to do with creating a positive work environment that ties in with the things we looked at before that contribute to profitability?

Just like I prefer certain music, albeit from a fairly limited range, we all have certain things that motivate us, inspire us, and just simply give us a reason to engage in our work regardless of how hard or unpleasant it may be on any given day. If that happened to be on a radio broadcast, I’m told the station would be called WIIFM, for What’s In It For Me?

As leaders, part of our responsibility is to communicate the message of who we serve and how we do it in a way that each team member receives it and that message fills a very personal need. That requires knowing every single person in our audience, and it means having at least a basic understanding of what’s important to them. If time were my friend here, I’d give examples of how we could do exactly that for each different primary communication style. Since I’ve done that multiple other times here, as well as in several lessons in our Leading At The Next Level program, I’ll press on…

With that in mind, a critical piece in creating a positive work environment lies in making sure we share that message so that everyone on our team knows how they contribute and what’s in it for them when they do. And while sharing in the profit gained helps, there’s certainly more to it than that. And we’ve got to be sure to keep playing tunes on the right station!

Why You Really Matter

How many times have you had a task on your to-do list that you just didn’t want to mess with? You know, one that was not only a pain in the butt to deal with but also something you didn’t really understand why it even needed to be done? Assuming you’re picturing at least half a dozen examples of your own, I'll be completely transparent in sharing that those have always been the easiest for me to push to the back of my desk and even pile other things on top of! And truth be told, the level of difficulty has little to do with it… I just want the effort I put into anything to matter!

Can you relate? I’m guessing you can, and I’m certain the people on your team can too!

Even when we’re extremely intentional about sharing a message with our team members about how achieving organizational goals benefits them, we can’t stop there… While that’s certainly important, we need to make sure we’re clear about the impact they make beyond the numbers; who are they serving (internally and externally) and why any given task (even the seemingly stupid ones) is important. We need to make sure they know what they’re doing matters!

This doesn’t need to be complex or eloquent. In fact, simple and specific may be our best approach. But it can’t be something we mention once and never circle back to! In Jeff Henderson’s book, Know What You’re FOR, he shares the story of why we never hear someone say “you’re welcome” at Chick-fil-A. He explained how Truett Cathy came up with the idea, and how long it took the founder of the company to embed “My Pleasure!” into the culture.

You’d think all he would have had to do is send out a memo stating the new corporate policy and the rest would be history - and you’d be wrong! And that wasn’t something that only Truett Cathy faced… I don’t know a single business owner, or leader at any level for that matter, who can snap their fingers and get their team members to magically change what they’ve been doing for years.

When we want to build a culture that our team members truly enjoy being part of - and really be sure that working for us doesn’t suck - we need to be very clear on why any task we assign matters, to the individual, to the company, and to the people we serve. We need to keep it incredibly simple and we need to talk about it over and over and over again. And then we need to circle back to why it matters! After all, don’t you want the work you do to matter too?

In my next page like this, we’ll look at a few key things we can focus on, even in the toughest jobs, so our team members know they matter, they have clarity on their overall performance, and they actually enjoy being part of the process!