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The High Cost of Low Morale

by Deborah Dorsett
Originally published in Workforce Performance Solutions,
September, 2006. Reprinted with permission.

Who in their right mind purchases a new automobile and proceeds to drive it across the country in first gear? While that scenario paints a picture of complete lunacy, it's really no different than this chronic workplace problem: Leaders spend organizational time, resources and energy to seek out the best and the brightest employees the job market has to offer. But once these talented individuals are hired, management doesn't always know how to bring out the best in them. Instead, it keeps them idling in first gear. Ultimately, the scenario creates a situation where low morale prevails.

Some business leaders who are guilty of this behavior know it, and others don't. In either case, though, few know what to do about the underutilization of their workforce. By focusing on performance management, business leaders can avoid paying the prohibitive costs of low morale.

The Face of Employees with Low Morale

A lot of managers claim their offices operate under such busy conditions and with such high stress that it's hard to know which employees suffer from low morale. Really, it's not so hard to spot—low morale brings about an attitude of defensiveness (characterized by high-energy, gossipy style and pent up aggravation) and/or apathy (characterized by low energy, a withdrawn style, non-responsiveness). Situations that create an environment for low morale include:

The face of low morale is helpless frustration, desperately seeking some form of guidance. Four overshadowing mindsets help shape the aimless faces of employees suffering from low morale. They are:

Roots of Low Morale

In general, people want to know what is expected of them in any given situation. As such, it's common for morale to plummet throughout an organization when employees lack clarity about management's expectations. At the root of unclear expectations are managers who haven't taken due time to define company principles. At the onset of any individual's employment, identifying and discussing ground rules help lay a solid foundation.

Because underutilization is a widespread cause of low morale, consider this scenario. A top-notch professional is hired, in large part because of an impressive resume. Yet, management is subsequently at a loss about how to capitalize on the very skills for which the employee was hired. As a result, the employee stagnates, and the stress that accumulates from being kept in first gear is often worse than that from being overworked.

It's similar to the situation at the financial firm. "Looking back, what the team needed were clear guidelines," the operations vice president said. "I'm not talking about marching orders, just the identification of structure around what we wanted them to do."

Lack of clarity instigates an energy drain across the whole organization. The less management gets involved in resolving the situation, the more employees feel paralyzed by their helplessness, and then the closer they sink into an instinctive tendency to shut down.

Another well-known instigator of low morale is referred to as the "one bad apple" syndrome. Who could ever imagine the rampant damage one employee can cause to an organization? But as one bad apple rolls down the hill, it inevitably bumps into other directionless apples, and the combined energy inevitably causes some level of disruption.

Remember, energy begets energy, whether it's positive or negative. Unfortunately, the negative breeds like a wildfire. As such, the bad apple is known for establishing informal groups that invest time daily "venting" about the grueling injustices that abound. Clearly, these bad apples get some sort of release from spreading their negative energy, a release that apparently their work environment doesn't otherwise provide.

In Management We Trust

Trust is considered one of the underlying core values that drive this world. If fostering trust in employees is the quickest way to build up organizational morale, betraying that trust or somehow making it vulnerable is the speediest way to tear it down.

This direct correlation between trust and morale is why maintenance of trust is so vital. With trust comes the assumption of positive intent. Translation: When an employee is comfortable and trusts management, positive intent is already assumed. Then, if and when the company does something contrary to an employee's liking, the employee is likely to give management the benefit of the doubt.

On the flip side, management needs to learn to trust employees. This is a critical requirement when it comes to developing the full potential of employees—trust increases their overall confidence, which in turn leads to increased productivity.

Low Morale: At What Cost?

Costs tend to escalate out of control when a corporation's workforce suffers from low morale. Even worse, most organizations don't track the costs enough to manage them. If only the ultimate cost of low morale could be logged in the books the same way other costs are, many companies would be startled into significant savings. One way to get a handle on the liability low morale produces is to separate costs into two categories:

  1. Visible costs
    • Recruitment: Advertising costs, agency searches, fees for outplacement, recruiter's salary, benefits and travel costs.
    • Employee processing: HR managers get intimately involved in the hiring process. In fact, on average a new hire consumes almost 25 hours of an HR person's time when the position is supervisory.
    • Relocation: Some organizations pay relocation costs when hiring someone at supervisory level.
    • Training: Consider this one example: It costs a supervisor as much as $20,000 to train a new production worker. When someone has been poorly hired, there is a significant impact.
  2. Invisible costs
    • Learning curve: What is the average length of a learning curve for a new employee? Surprisingly, companies are expected to endure over 13 months before a new hire will reach 100 percent efficiency.
    • Loss of efficiency: Helping a new hire get up to speed zaps significant time from direct supervisors and co-workers. It's referred to as a time when a team is reduced to its least productive state.
    • Reduced productivity from outgoing employee: As an outgoing employee prepares to leave, as much as three months productivity can be lost.
    • Domino effect: Co-workers are to a departing employee what "rubber-neckers" are to an accident site.
    • Position vacancy: The cost of a vacant position varies depending upon the position's complexity. It covers all expenses during the time a position remains vacant. The sad truth is up to 50 percent of the efficiency reached in a position is challenged during this time. Most of the time it's because of neglect or mistakes from temporary replacements.

The cost of low morale becomes excessive when poor hiring leads to employee dissatisfaction and ultimately the employee's decision to leave. It's even worse when termination is required. As in a case where a contract breach occurs, management must first succumb to months of coaching or training to show an attempt at good faith toward the employee.

Jim Davis, president and CEO of Guardian Automotive in Warren, MI., chose to find the right tools to correct the negative dynamics occurring. The company had just gone through reorganization—what had been a fragmented business was now consolidated under a senior management team.

Davis found tensions high on his senior team. There was poor communication and a good deal of frustration and conflict. All the right ingredients were there for disaster.

Davis' attention to the matter and decision to invest in tools that would address the problems helped preclude many costs associated with low morale, directly and indirectly.

"To learn quickly about the players on the senior team, I used tools to understand and assess the unique strengths of each team member," Davis said. "It gave me a language to talk to my team about style differences in a neutral and objective way."

By taking this route, Davis avoided paying some of the other costs associated with low morale:

Taking Control of Corporate Morale

In reality, most leaders deserve the organizations they have. Those who work smart by utilizing the human resources they have to the fullest extent, likely experience the payoff. On the other hand, those who wallow in low morale usually face a crisis at some level.

Rather than end up with employees who want to distance themselves from the team and/or organization, the management team that takes the upper hand and gets up close and personal with the employees reaps the rewards.

Don't accept the temptation not to do anything just because there is no easy answer for a workforce performance situation. Management's failure to address problems is where the real cost of low morale can be seen. Instead, when management recognizes the damage that comes from low morale, this acknowledgement represents the best place for employers to focus on improvement.

When companies make the commitment to change, they see a dramatic shift in employee performance and a corporate culture that promotes and supports a healthy work environment.

About the Author

Deborah Dorsett is a Vice President and Executive Consultant with Personalysis Corporation, a management consulting firm located in Houston, Texas. Since 1975, Personalysis Corporation has worked with national and international companies to help them achieve higher productivity and performance. For more information, call (713) 784-4421 or go to