Costs of Poor Culture

Several recent studies have updated information about some already well-known facts discussed in my book, Culture Trumps Everything, and my presentations. A poor organizational culture has quantifiable costs for organizations large and small.

Cost #1: Health

The American Psychological Association says that health care costs of high-pressure companies are almost 50% greater than other organizations. A full 80% of primary care doctor visits are attributable to stress. Stress in the workplace has long been linked to cardiovascular disease and more recently, it has been tied to metabolic syndrome and mortality.

Cost #2: Disengagement

In a recent study from Queens School of Business and Gallup, disengaged employees had 37% higher absenteeism, 49% more accidents, and 60% more errors and defects. When looking at organizations with low employee engagement scores, they found 18% lower productivity, 16% lower profitability, 37% lower job growth, and 65% lower share price over time.

Cost #3: Loyalty

The top two reasons businesses fail in this country are:

1. Undercapitalization
2. Turnover

In addition to the health consequences mentioned above, stress at work increases voluntary turnover by 50%. In high-stress cultures, employees decline promotions, are constantly looking for outside opportunities, or just leave. Gallup has demonstrated that even when employers offer benefits such as flextime and work-from-home opportunities, employee engagement is most predicted by a sense of well being more than anything else.

Employee well being cannot be bought, sold, traded, borrowed, copied, or stolen. It comes from one place: Your culture.

You want to build a strong culture? Start with the fundamentals – focus on primary human drives: To connect (build relationships) inside your organization, and belong (give your employees the opportunity that they are part of something larger than themselves).

These primary human drives are empathetic drives and we’re born with them. If you imagine 20 babies, only days old, in a maternity unit, and one of them starts to cry, what happens to the other 19? They start to cry. This is just one example of what is called empathetic distress. Do you think they cry differentially if they are boys or girls? No, they do not. Do you think they cry differentially if they are white, black, Asian, or Latino? The answer is still no, they do not. What creates the differences of empathy and emotional expression in adulthood, in different people, from different backgrounds, and in different organizations? Culture. This is just another example of how culture trumps even our biology.

If you want to build a strong organizational culture, begin with the human primary drives to connect and belong, which are empathetic drives. Your people, your teams, your organizations, and all of your stakeholders will benefit.

Keep cultivating your culture!