Tag Archives: staff turnover

Do Fringe Benefits Increase Productivity?

Does employee happiness improve productivity and which types of workplace benefits produced the greatest productivity gains?

By fizkes/ Shutterstock

Until we are all replaced by robots, there are very few businesses where employee productivity is irrelevant.  It is self-evident that fringe benefits which increase employee happiness and reduce stress are likely to increase productivity.  But until now there has been very little hard data around this concept.

A recent series of studies by the University of Warwick, Department of Economics, looked at whether employee happiness improved productivity and, more specifically, if they do, which types of workplace improvement produced the greatest productivity gains. 

The series of experiments was based on creating ‘happiness shocks’ in one group and not doing it in a matched group.  Both groups were then asked to perform a series of easy mathematical additions under time pressure.  They were paid about 50c for every correct answer, so there was incentive to take the test seriously.

Everyone was also asked to provide their most recent school level results in mathematics and do a separate mathematical reasoning test so that adjustments could be made for individual mathematical ability. The time-pressured mathematical test was designed to simulate the type of work done in typical white-collar job in a precise and measurable way. 

The happiness shocks in the first two experiments were created by showing the group a 10-minute movie clip of a well-known comedian performing comedy sketches.  Based on their own assessment, on average people shown the clip were 1 point (on a 7 point scale) happier than people not shown the clip.  In an attempt to make the happiness shock more closely reflect real-world examples, in the third experiment the participants were given chocolate, fruit and drinks instead of being shown a clip. They were given 10 minutes to consume whatever they wanted.  This was equally effective in raising the mood of the participants.

All three experiments showed that the happy people were more productive than the people who weren’t shown the clip or given treats.  Both groups were paid for their answers, but the happy group shown the comedy clips attempted 10 per cent more problems and got 10 percent more correct answers after adjusting for mathematical ability. 

The researchers analysed those results in detail and found that the improved outcome was entirely due to attempting more problems. The happy workers were more motivated to put in more effort. The improved mood did not make them smarter or better at maths. If they were bad at maths before the experiment, they still were when they were happy, they just attempted more problems and so had a greater chance of getting correct answers.  And the same was equally true of those that were good at maths before they started. The improvement was uniform across all ability levels.

The improvement was approximately doubled in the experiment were the ‘happiness shock’ was snacks. Interestingly one of the experiments involved not telling the participants that they would be paid for correct answers.  It made no difference to the outcome.

The researchers also tried a variation where they attempted to see if recent ‘bad life events’ in the participants real life showed up as having any effect on their happiness and their performance. In this experiment, no ‘happiness shocks’ were given, and they were asked to perform the timed task after they reported their self-assessed level of happiness.  After the test, they were individually asked if they had, at any time, experienced one of more of: close family bereavement, extended family bereavement, serious life-threatening illness in the close family or parental divorce.

People who had reported one of the ‘bad life events’ within the last three years were measurably less happy and less productive.  They were at least half a point lower on the 7 point happiness scale, they made 10 percent fewer attempts at the maths problems and got around 15 percent less correct answers.  The more recent the ‘bad life event’ the lower their initial level of happiness and the worse they did on the test. If it happened more than 3 years ago, it made no difference to either happiness or performance.  When they looked at how people who had suffered bad life events had gone in the other experiments they found that the ‘happiness shocks’ were just as effective at improving their performance.

When the researchers separated out the results by the type of event experienced, they found that ‘parental divorce’ probably didn’t qualify as a ‘bad life event.” It had no effect on happiness or productivity and in some instances actually improved both. 

These are obviously not real-world experiments, but they do a reasonable job of simulating the effect of delivering happiness to a workforce.  Happy workers try harder and do more immediately after receiving a ‘happiness shock.’ And their cash reward for the work, their pay, had little effect.

Translating those findings into the workplace suggests that if an employer provides “extras” which the majority of their workforce regard as a treat, the workers are likely to be at least 10 per cent more productive.  As long as the cost of that benefit is less than the measured productivity increase, then employers would be mad not to do it.


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Is Employee Turnover Killing Your Profits?

It’s a good idea to get the bottom of why employee turnover happens and how to limit it.

By KeyStock/ Shutterstock

Employee turnover costs US businesses more than one Trillion (1,000 Billion) US dollars a year.  That represents about 10 per cent of all US corporate profits, so it is nothing to be sneezed at.  It is therefore probably a good idea to get the bottom of why it happens and how to limit it.

According to the latest statistics from the US Bureau of Labor Statistics, the average US business turned over 44 per cent of its employees in 2018 and in some industries it was significantly higher.  It was 87 per cent in the Arts and entertainment and 75 per cent in accommodation and food services. At just under 15 per cent, Federal government agencies experience the lowest turnover.

Gallup research suggests each employee loss costs the business 150 per cent of their salary.  Deloitte Consulting partner Josh Bersin says his research shows that, depending on the position,  it could be as high as 200 per cent by the time you account for hiring, on boarding, training, ramp time to peak productivity, the loss of engagement from others due to high turnover, higher business error rates, and general culture impacts.

Besides those obvious cost cascades there are some less obvious, but no less important costs.  The significant direct costs put real time pressure on an organisation to hire a replacement and get them trained, settled and productive quickly.  The pressured hiring process can often lead to the new hire not being a good fit for the job and leaving (or being let go) within a year, thus compounding the costs.

The Harvard Business Review says that as much as 80 per cent of employee turnover is due to bad hiring decisions.  Similarly Leadership IQ’s Global Management Survey reported that 46 per cent of new employees turn out to be a bad hire within 18 months and only 19 per cent will turn out to be an unequivocal success.  When it came to teasing out the factors behind the failure they found  a lack of technical skills explains only 11 per cent of new hire failures, whereas coach-ability (the ability to accept feedback from bosses) accounted for 26 per cent of failures. 

Employee turnover is very real and very costly, so doing anything at all about it, no matter how small the impact, is likely to be a good investment.  The research suggests that there are some especially important factors that are key to retaining employees (that you want to retain).

Obviously the first rule is don’t rush.  It is important to ease a potential new hire into a job.  Ensure they have a good sense of who they will be working with and what the expectations are well before they are signed on.  This means going beyond the standard probation period clause and pro-actively ensuring compatibility with your culture and team preferably before they start.  Throwing a new hire in the deep end and hoping for the best is likely to be a bad idea.

Pay is also obviously a factor but the research shows that if the only thing you do is throw money at them, you are unlikely to be able to stop a valued employee leaving. While being paid too little for the role will definitely motivate churn, overpaying will not make up for an unhappy workplace.  A workplace survey by Equifax for example found that 44 per cent of workers who leave within a year take a pay cut. They want to get out so bad, the pay is not enough to keep them there. 

Pay does have an effect but it is relatively small. According to Glassdoor surveys, every 10 per cent increase in pay only reduces the likelihood of an employee leaving by 1.5 per cent.  So if you double their pay they are still 85 percent likely to leave. 

On the other hand opportunities for advancement and training are significant factors in employee retention.  Humans like to feel they are getting somewhere. Research repeated shows that role stagnation leads to turnover.  Glassdoor have even put a number on this, saying that every 10 months at an unchanged role increases the likelihood of an employee leaving by 1 per cent. 

According to exit surveys conducted by Gallup, more than half of all exiting managers say that in the 3 months before they left, no one in the organisation spoke to them about how they were feeling about their job or their future with the organisation.  If no-one is talking about your future with the company, it’s easy to come to the conclusion you don’t have one.

Gallup recommend proactive engagement about an employee’s opportunities for growth are key to retaining valuable employees.  They suggest you know the employee’s long term personal goals, allow them opportunities in roles bigger than their past experience and help them to acquire new skills to advance their careers.  In short, treat them as you yourself would like to be treated.  Let’s call that the Golden Rule for Employee Retention.  You could so a lot worse than applying it in your business.


Dear Boss, I Quit! Why Good Leadership is Key

Looking for the real reasons your staff are leaving? Instead of focusing on the ‘business’, you may want to take a look at your leadership.

This article was first published on Boxchange.

I’m sure that you, like me, are saddened every time someone in your team has resigned, (apart from the one or two rare exceptions when I have actually danced a celebratory jig around my desk, but that’s for another article!).

Mostly, my natural reaction has always been a human one I suppose. “Why would they do that?” or, “What’s wrong with them?” or even, “The fool must be leaving for money!”

But as the years rolled by I have become much wiser.

Lack of Leadership

Experience tells me that people don’t change jobs solely for money, and they almost never resign on a whim or in a fit of anger. People joined your company because they believed it was right for them, and they desperately want it to be right.

However, something, at some point, makes it wrong and if you are able to uncover their real reasons for leaving, and you should, you will find that it’s not ‘the company’ they blame. It’s not the location, or the team, or the database or the air-conditioning…

…it’s the leadership!

Of course they very rarely use that word. They may not mention management at all.

Instead they talk about “morale,” or say “communication is poor”, and, when they express frustration at the lack of clarity for their career progression, they are telling you that it’s the leaders they are leaving. After all, leaders are responsible for morale, communication and career path.

Discover the Real Reasons

And don’t be fooled by the results of your employee engagement survey – they rarely get to the heart of the matter. A ‘company’ is just a legal entity and a ‘business’ is simply a building containing a collection of desks and computers. No one resigns because of that.

It’s the decisions, the motivation, the atmosphere, the ethos, the support, the training, the vision, the inspiration and the direction set by the leadership that your employees will follow…or leave!

Take the time to have an honest look at your business or department without further delay. If you’re losing too many people, (or have high absenteeism), you need to discover the real reasons why.

If you’re not sure how to get to the root cause then ask. My colleagues and I are happy to offer our free advice, and it could transform your performance and results in 2016.

Boxchange offers a fully integrated business change solution that fits almost every conceivable change challenge your business may, or is currently facing. We focus on delivering value, return on investment & ensure effective knowledge transfer throughout.