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Culture, engagement and happiness = productivity + profit

By Rebecca McCaffry CPFA, FCMA, CGMA, Associate Technical Director — Management Accounting, Association of International Certified Professional Accountants

We’re all familiar with the damage that can be caused by personality clashes in the workplace, but how can leaders ensure a harmonious balance between their organisation and its employees?

Corporate culture has been variously defined as “the glue that holds an organisation together,” the “secret sauce” and “the way we do things round here.” 

At a recent Institute of Business Ethics event, culture was described as being to an organisation what personality is to an individual. We’re all familiar with the damage that can be caused by personality clashes in the workplace, so how can leaders ensure a harmonious balance between their organisation and its employees? 

One element of this is making sure we are recruiting the right people. Anyone can play the corporate game in an interview situation, but are prospective employees really who they appear to be when out of the spotlight? A well-known internet retailer, as part of its hiring process, will obtain feedback from the driver who shuttles interview candidates to and from the airport. If the driver has not been treated courteously, the candidate will not be hired.  

Building a culture of engagement, in which employees are seen (and see themselves) as stakeholders, will promote organisational harmony as well as creating additional financial benefits. A Gallup study found that companies with strong employee engagement saw higher productivity and were 22% more profitable than those with poor employee engagement. Unsurprisingly, employee retention was also significantly higher in these businesses. 

Many organisations set great store by the results of their employee surveys, yet the impact of employee engagement goes further than publishing a smiley-face infographic in the annual report. Gallup found that simply measuring employee contentment or happiness (perhaps following a strategic circulation of baked goods) has limited impact on improving business outcomes. It seems that employees prefer to have purposeful roles rather than games rooms.

Happiness is important, of course, and the lack of it has risk implications, as highlighted by Peter Montagnon, author of the IBE’s recent ‘Culture Indicators’ report. “A company whose staff, suppliers and customers are all broadly happy is likely to have a robust culture. But if even if only one of these groups is unhappy, the risk of ethical problems is high” Montagnon said.

Another risk factor is the lack of trust between employee and organisation, which can be caused when leadership culture is misaligned. As discussed in the recent CGMA “Managing the Trust P&L” toolkit, trust is crucial to business. Trust is required in order to persuade customers and suppliers to do business with the organisation, employees to work for it, society to believe it will act responsibly, and investors to provide its financial capital. In a trust vacuum, all this value will be destroyed.

The economic consequences of an ambivalent workforce are huge - a reported 85% of employees globally are not engaged or, worse, actively disengaged, resulting in around $7 trillion of lost productivity. And lack of engagement impacts culture as well as the bottom line. 

It’s not all bad news. Boards are beginning to recognise and discuss the importance of building and maintaining a strong corporate culture, as recommended by the FRC’s 2016 report on culture and the role of boards. But while the board itself may have a strong ethical culture, the challenge is to ensure that this “tone at the top” is reflected in the “mood in the middle” and the “buzz at the base.”

Engaging the workforce through words, actions and maybe the occasional doughnut will be key to this process.

Find out more on managing trust with this Managing the Trust P&L toolkit designed to help board members manage trust over the long term by viewing their business model through the Lens of Trust.

Check out this Financial Management magazine podcast episode, with Gillian Lees, senior director, Governance & Risk Research – Management Accounting for the Association of International Certified Professional Accountants, discussing steps that businesses can take to build trust over the long term. She is the author of the CGMA report, Managing the Trust P&L: A Toolkit for Boards.