How to reverse the productivity slide

February 02, 2023
How to reverse the productivity slide
Here’s a shocking fact for employers. Most people who work in our companies hate their jobs. According to Gallup, just 13% of people in the world are actively engaged at work and this has a massive impact on productivity.

And 1 in 5 hate us. 19% of people admit to actively sabotaging their employer.

This is not just a tragic waste of human joy and potential but a shocking loss to our businesses and the economy.

19% of people admit to actively sabotaging their employer.

We read constantly about declining productivity in western economies. According to economist Francis Green “the lack of individual discretion at work is the main explanation for the declining productivity and job satisfaction in the UK”.

Gallup estimates lack of engagement at work is costing the US economy $450bn a year. If you factor that globally, that’s $1.7trillion.

Let’s just to put that into perspective for a moment. Let’s pretend we could choose to reinvest that money in solving the world’s problems. We’d eliminate extreme global poverty, end moderate poverty and then go on to reverse climate change all in ten years.  (Ending poverty: $3.5tr Jeffrey Sachs ‘The End of Poverty’. Stabilising greenhouse emissions $13tr, UN Intergovernmental Panel on Climate Change).

So just what is going on? Is this wholesale disengagement from the idea of work truly an existential threat to free market capitalism?

It very well might be. But it’s a problem with a strikingly obvious solution.

Only 40% of people have the first idea what their company even stands for.  Since a fundamental human need is a sense of meaning and belonging, this gives a fairly strong clue to the cause of all that disengagement and anger.

A sense of meaning is a fundamental human need.

And there’s evidence to back that up; 62% of millennials want to work for a company that benefits society and 50% would sacrifice salary for meaningful work (Global Tolerance). And 77% of recruits report they joined their employer partly because of the company’s purpose (Deloitte).

The evidence that offering people something to believe in has a huge impact on their happiness and performance is compelling. Staff in purpose-led companies are 12% more productive, 40% more engaged, 70% more satisfied and 300% more likely to stay (Warwick University, Energy Project).

IMD concluded purpose-led companies showed a 17% increased return over 5 years.

It’s axiomatic that human performance leads to business performance. And human performance appears to be strongly influenced by what the company believes in. In a review of 56 academic research papers conducted by Deutsche Bank, 89% showed companies with strong Environmental, Social and Governance factors “outperformed competitors on a market basis, while 85% exhibited accounting-based outperformance”. And the numbers are arresting. According to Havas, purpose-led brands are worth 20% more than their peers and IMD concluded purpose-led companies showed a 17% increased return over 5 years.

The prize is therefore huge. And the solution sounds incredibly simple. To re-engage with our people, to create fulfilment and wellbeing and to build high-performing companies we just need to rediscover and re-communicate what we stand for.

It’s therefore no coincidence that purpose is now driving so many Board conversations, so much internal comms, and even leaking out into consumer advertising (just take a look at some recent banking commercials).

Regrettably, it’s not that simple. As so many are now discovering, meaningful organisational purpose doesn’t just happen. The bad news is that it requires two things that big corporate companies forgot how to do a long time ago.

The first is ownership. Without a sense of emotional ownership it’s hard to engage or find the motivation to strive. Without ownership, why bother? Those who feel ownership care. They also act autonomously to serve the good of the company. In research by Cornell University, businesses that offered autonomy grew at 4x the rate of control-orientated firms, with a third the turnover of staff.

Without trust and ownership, purpose is just a set of words.

Yet ownership will only exist in an environment of trust. According to academic W Edwards-Deming “Trust is mandatory for optimisation of a system. Without trust, each component will protect its own immediate interests to the detriment of the entire system”. Without trust, why take the risk? High trust cultures are effective and productive because they are open, compassionate and creative, not inward, fearful and controlling. Energy is directed to the good of the firm, not the protection of the individual’s position. In research by Paul Zak high trust companies were fully 50% more productive.

The lesson is clear. Before investing in purpose, companies need to take a long, hard look at how they are treating their people. Are they creating cultures of ownership and, most fundamentally, creating environments of genuine trust and true compassion? Without these things, purpose is just a set of words. Devoid of human meaning.

As employers, even if we’re not moved by a sense of our moral duty to make our places of work fulfilling and purposeful, compassionate and meaningful; even if we can live with being hated by 20% of our staff; we should be swayed by the compelling commercial case for purpose. $17tr over 10 years is a pretty good return for doing the right thing.
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