Humanity Lost: The Consequences of a Profit-focused Company Culture
In today’s economy, the corporate landscape is a battleground of uncertainties.
Organizations are recovering from the upheaval of the COVID-19 pandemic, worried about a pending economic recession, tentative about the use of unregulated Artificial Intelligence, and more. Large publicly traded companies are scrambling to keep their stock prices up, meet quarterly goals, and make their investors happy.
This is leading to a lot of tunnel vision, with executives making decisions to boost short-term profits that leave their employees out of the equation.
For example, many companies are trying to force return-to-office for their employees that have enjoyed the flexibility of hybrid or remote work, even though the rates of productivity have not seemed to decrease during remote work during the pandemic. In addition, companies have been pushing back on sharing record profits with workers themselves, forcing unions, such as the WGA, SAG-AFTRA, United Auto Workers, and more to strike for fair wages.
Tech companies in particular are dealing with a difficult moment of cost-cutting.
Many of them are choosing to layoff workers in droves with a current estimate from Layoffs.fyi putting the number of workers laid off from Tech at around 250,000. Sometimes, these layoffs are occurring without even a face to face conversation, but an email message telling the employee they no longer have a job. This not only lacks respect, but it is often done as a ‘security measure’ treating employees as potential threats.
Overall, this past year has been tumultuous for workers as many executive leaders are making decisions based on short term finances, ignoring that their company is actually successful because of the work of human beings with needs, feelings, and decision making capabilities of their own.
My prediction: A reckoning is coming.
It may take a year or two, but these leadership decisions are causing a degradation of organizational culture that will lead to a lack of trust in leadership, lower productivity, higher employee attrition, and eventually, a loss of profits.
Let’s investigate the research behind these predictions:
Catalyst found that employees who had more empathetic leaders had higher levels of productivity and innovation than those who did not. Hence, when leadership is not focused on employee needs or considerate of their well-being, employees don’t see the benefits of putting in extra effort or taking risks/thinking outside of the box. They sell less, make less, and invent less when their leaders lack empathy.
Layoffs, especially ones performed poorly (e.g. lack of transparency), increase the rate of voluntary employee turnover for those that remain in the company. Employees see how their colleagues were treated, lose faith in their leadership, and fear being next. Many of them are asked to do more work (that was the responsibility of their laid-off coworkers) with no additional pay. Why would they want to stay when they could move to another company without that baggage? This voluntary attrition is very expensive with one study estimating that it costs at least 33% of an employee’s salary to replace them.
And the biggest kicker: A longitudinal study by Great Place to Work found that companies with higher ratings of positivity on organizational culture over time had 16.5% higher stock prices in 2020 than the broader market. In addition, Gallup estimated that there could be a 23% difference in profits between organizations with engaged workforces and those without. When companies are too focused on their short-term goals, it can drain trust, transparency, well-being, and inclusion out of their organizational culture, leading to the long-term negative financial impacts they were so worried about in the first place.
All of this research shows that when we don’t consider employee needs in our decision-making, we actually lose out on productivity and profits in the long-run.
So leaders, what will you do with this information?
It is time to change the narrative. A focus on your employees is a strategy for long-term financial success. Are you ready to make that change?