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Building your business case for a highly productive culture

CIPD

This blog post has been produced for the Greater Birmingham Chambers of Commerce as part of the 2019 Growth Through People campaign.

Growth Through People is the Chamber’s annual campaign aiming to help local firms boost productivity and grow through improved leadership and people management skills. In 2019 this involves 15 free events, workshops and training sessions taking place between 25th February and 26th March, along with thought leadership videos and blog content such as this.

Thanks to our Sponsors – the University of Birmingham, Aston University, Curium Solutions and CIPD - all events are free to attend. Interested readers can find out more here.

Increasing employee engagement, productivity and profits with the resources you already have…………

If this appeals, then please do read on.  If not, then please ignore - at your peril!

And if you are working in a Government Department or in the Public Sector, please don’t switch off when you read about brand and customers, you too (can) have both!

If we have one thing to thank the banking crisis for, it is that culture change is a topic that is regularly discussed in the business context.  It is a subject that appears in research and business articles. More recently, it is linked with productivity.

Which comes first, employee engagement or a highly productive culture? The two are intrinsically linked. Successful, culture change can be measured by an increase in employee engagement and productivity.  Headline business benefits include an improved customer experience, a reduction in sickness and staff turnover, improved innovation and a positive impact on your bottom line. So how do you convince your Executives of the need for culture change and more importantly, the personal leadership investment that it requires?

Culture can be your Achilles Heel or your competitive advantage. When successful, it is the unique selling point (USP) that attracts and retains highly committed staff and even more importantly, it attracts and retains loyal customers.  Loyal customers are so much more profitable than satisfied customers, they tell others about you.  They do your global marketing for you on social media.

So what is culture?  It is like a jelly.  It wobbles often, is hard to describe and difficult to grasp.

Culture describes:  “how things are done around here.”

It is about behaviours.  These are often rooted in and defined by values that underpin the vision and brand. Culture is created by the behaviours of leaders and those who work for you.  Culture is embedded by aligning the processes and technology that you use.  When leaders consistently demonstrate the culture, it grows roots and flourishes.  

I can identify a highly productive culture when walking into a business.  I sense the energy, the buzz and the pride of those who work there. I can see their engagement in everything they do. I connect with the business and its ethos. Their brand is threaded through the employee and customer experience.  Staff understand what is expected of them and are empowered to deliver. They have loyal customers who are their advocates and do their marketing for them.  Technology and processes are aligned. Leaders lead.

Many businesses focus on “what we do here.”  The measures, the conversations, the agendas in fact the majority of the time is focused on tasks.  This focus ignores that humans design and deliver the majority of their products and services for other humans to buy and use!

Employee Engagement | Employee Experience | Employee Satisfaction | Net Promotor Score, one of these is likely to be the label applied to the headline result from a survey that is used to measure employee connection with their work.  Many employers are so intent on the number of staff who complete their survey and improving their scores, that they forget about the humans they need to be involving and connecting with to achieve an improvement.

Culture change is not for the faint hearted. Some say it is the “soft, pink and fluffy” aspects of a business.  In reality, culture is the hardest aspect to shape and change.  It is often ignored and left in the “too difficult box” to fester and manifest its own, often unmanageable, characteristics and unacceptable behaviours. In our experience it is not unusual for a business culture to be toxic.

How many times have you personally made a New Year’s resolution only to find yourself breaking it within the first few days or weeks? If it’s difficult to change our own behaviour, then how can we hope to convince Executives of the benefits that can be achieved from a business wide behavioural change?

Building the Business Case:

The majority of people will have a preference for either logical decision making (based on rational and objective analysis) or feelings based decision making (that considers personal values and conviction whilst also considering others values and how they are feeling)[i]

So let’s first consider the logical, rational case for culture change:

If your Executives are not already focussing on the value of your business culture, then inevitably it is the rational case that you will need to focus on.  They will require the logical reasons for investment. Specifically they will be seeking a return on their investment.

Culture cannot be copied by your competitors! Consider Apple, Pret a Manger, Google, Innocent …….  They differentiate and succeed by recognising that their business culture is their USP (Unique Selling Point).  Their culture is their competitive advantage.

What examples can you provide within your own sector?

Achieving an increase in productivity: of the 18 countries in Western Europe, the UK has the 6th lowest level of engagement in Western Europe.[ii]  The UK has the third lowest productivity in the G7, with Germany, USA and France where productivity is 1/3 higher than UK.[iii]

Engage for Success demonstrates there is a firm correlation between employee engagement and high productivity across all sectors.[iv]   Gallup’s global employee engagement database reports business units in the top quartile are 17% more productive and 21% more profitable than those in the bottom quartile. 2

So what does your employee survey tell you about your employee engagement? 

Gallup Research2 tells us that:

  • Only 11% of the UK workforce is engaged (down from 17% in 2013). Employees are involved in, enthusiastic about and committed to their work and workplace.
  • 21% are actively disengaged (26% in 2013) Employees aren't just unhappy at work; they're busy acting out their unhappiness. Every day, these workers undermine what their engaged co-workers accomplish.
  • The remaining 68% (56% in 2013) “feel no meaningful attachment to their job and their company.[v]

(By comparison, U.S. employee engagement is more than, three times higher at 33%)

Now replace these figures with your own from your employee opinion survey.  Then use the following research to calculate the cost and impact on your bottom line.

Disengaged employees have a negative impact on profitability – they cost an organisation approx. £3,400 for every £10,000 annual salary. 5

Using your staff survey results, you can now calculate the cost of your business culture, simply and effectively.

No staff survey results?

Then use the Gallup research data2 (ie 21% are actively disengaged) to calculate the impact of disengagement on your bottom line:

 

           No employees     X    total salary bill pa   =     £ cost of disengaged employees, every year 2

                     5                                   3


For those who need further evidence, here are some more rational calculations that contribute to the headline calculations:

Attracting and retaining talentUK Unemployment is at 4.0% [vi] Unemployment is the lowest since 1975. Whilst it is great news for those seeking a career move it also means that access to the skills and expertise that you need in your business is becoming more and more difficult each day. Costs are rising to attract, to recruit and to retain staff (and therefore customers too). As a result, businesses are having to offer higher salaries and have to be the fastest to connect with candidates and integrate new recruits. The impact of Brexit is unclear and is of growing concern to many employers seeking to recruit and retain talent.

What is your recruitment and staff turnover data telling you about the impact that these have on your bottom line? How many times have you failed to recruit the right people?  What is this truly costing you in in terms of HR and management hours: writing the JD, advertising, long listing, short listing, interviews, induction, performance management …………………..

Disengaged staff rarely take ownership for the customer problem, Sixty-eight percent of customers leave because of poor employee attitude5, they take their custom elsewhere. A 2% increase in customer retention has the same effect as decreasing costs by 10%.[vii]

Consider your customer retention.  Review repeat and loyal customer spend. Now consider how much it costs to attract new customers?  How much does it cost to lose customers who never return? What are the real costs of your customer complaints handling processes and systems? What decisions are front line staff able to make?  What does it cost to escalate decision making up the management chain?

Culture influences recruitment and retention: Next to pay, culture is the 2nd most important factor that influences an employees decision to stay or accept a job offer.  62% are prepared to take a pay cut to work for an organisation that offers a better culture fit.[viii]

What are your exit interviews telling you?

Disengaged employees are not productivethey make 100 times the number of errors. 5

How much does this cost in management time? In managing customer complaints? What does it tell you about your recruitment process, induction, training and development, manager interaction?

Fiona Anderson
CIPD