Ultimate Account Blog

Happy Employee, Happy Life

employee retention, employee happiness, preventing turnover

Last week’s blog post focused on the merits of evaluating customer satisfaction. Equally, if not more, important to a business is the engagement and happiness of its employees. Gauging employee morale can be difficult if for no other reason that because oftentimes employees are unlikely to tell their bosses about any discontent or frustration they feel for fear of appearing ungrateful or for concern over how this conversation will unfold.

Despite its potential awkwardness, monitoring employee satisfaction is imperative to a successful business. The Carrot Principle by Adrian Gostick and Chester Elton is one of my favorite books on the subject, and the authors cite research that shows that a “5 percent increase in employee loyalty can increase profits by as much as 50 percent.”

This severe of an effect may seem exaggerated, but when the book was written almost 10 years ago, the cost to the American economy of employee turnover was a collective $5 trillion, large enough to make it “one of the most ignored economic factors in business history.”

Not only does turnover create the need for additional interviewing, ad placement and possible overtime payments for those filling in for the vacated position, the most costly turnover is to high performers. Such employees may not be easily replaced using traditional hiring methods, and recruiting firms may be necessary. These firms often charge 30% or more of the recruit’s first-year salary. All of these costs add up quite quickly, and the loss of production has not even been listed as a consideration yet.

Companies that want to measure their employees’ satisfaction can do so with various types of confidential surveys. There are plenty of local and online offerings to conduct these assessments. If the results are not as good as business executives would prefer, there are steps to improve morale and engagement before turnover impairs productivity, perception and profitability.

The Carrot Principle suggests that employee satisfaction and engagement can increase dramatically through goals, communication, trust and accountability, with goal setting being most closely tied to employee satisfaction. One of the best ways to determine goals is at the company-wide level through mission or vision statements and core values. Some of the most successful companies I’ve seen have strong and consistent buy-in to the company’s values at all levels of staffing.

A great example of this is in the hospitality industry. Most hotels realize that the competence and friendliness of front desk personnel correlates directly to a guest’s enjoyable stay. Positions that are easy to overlook, however, may be laundry and housekeeping, yet if a guest gets to his or her room and finds a shabbily-made bed or a room that has not been adequately cleaned, whatever goodwill the front desk created is already gone. When the laundry and housekeeping departments understand their role in the company’s overall mission, they are more satisfied, are more likely to do a quality job, and are less likely to leave the employ of the company.

On the opposite end of the spectrum, some companies will create a mission statement and list core values and hang them in the lunch room or the conference room and never readdress them after they are initially established. This sort of tactic will not allow employees to grasp the greater purpose or what they do every day, and it risks those employees looking elsewhere for a place where they will be valued.

Whatever their preferred method for determining and improving employee satisfaction, business owners and executives ought to recognize that turnover can be a variable cost, not simply an expensive necessary evil.


By Dan Massey, CPA, Manager


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