Unmotivated Employees Can Cost a Company Up to One-Third of Its Revenue. Improving the quality of management is even more crucial than investing in technology to address this issue, writes Pille Parind-Nisula, Head of Growth and Sales at employee experience and management software startup Moticheck.
Just one disengaged team member can reduce productivity by 40%. So-called “quiet quitters” and mediocre performers are signs of a lack of management quality. Should we, like Netflix, assess the actual contribution of our team members each year?
Hard Work Without Results
Estonians have long been known for their work ethic, a mentality of “work hard and endure” that persists to this day. However, when we look at the statistics, we see that Estonia still lags behind the European average in productivity. In 2022, productivity per employee in Estonia was only 81% of the EU average, despite our digital public services and the growing share of the technology sector in GDP.
Traditionally, increasing productivity is associated with digitalization and automation. Improving management quality is not the first thing that comes to mind when aiming to reach at least the European average. However, global thought leaders in management theory assert that the next wave of productivity growth will come from integrating empathy into leadership.
What does this mean? Using an orchestra analogy, simply replacing all the instruments with the best Stradivariuses and Steinways is not enough to achieve the best performance. The conductor’s excellent leadership and inspiration are prerequisites for harmony, but if one or a few musicians are not fully committed, great art will not be created.
Negativity is Contagious
The impact of unmotivated employees on the entire team has been analyzed in numerous studies. Results show that ignoring this issue can cause significant damage to an organization, increasing employee turnover and lowering morale. Additionally, studies have found that ignoring the negative impact leads to lower team satisfaction and reduced productivity. Lost revenue has been estimated to range between 20-30% in various studies.
Yale University researchers conducted a study with students focused on motivation and team dynamics. They found that team members’ motivation increases when they feel valued and included. Feedback and recognition boosted participants’ commitment and productivity. Researchers also found that a single disengaged team member significantly affects overall team performance—the result was 40% weaker than in teams where all members were motivated.
Moreover, negativity spreads faster than positive behavior. Ignoring carelessness sets a new standard, impacting the entire team’s dynamics, morale, and, consequently, results.
Trillions in Losses
According to Gallup’s 2023 labor market study, 59% of employees worldwide identified as quiet quitters, agreeing fully or partially that their contribution at work was minimal. Additionally, 18% of employees are vocal detractors, and ignoring this problem poses direct risks.
Gallup also calculated that disengaged employees cost the global economy $8.8 trillion in 2023 (567 times the size of Estonia’s national budget), equivalent to 9% of global GDP.
In European countries, employee engagement was the lowest among all continents in 2023. Although Estonia performs better than the European average in all surveyed categories, only one in four employees in Estonia feels motivated.
To illustrate this issue, I enlisted the help of an AI-based management mentor to calculate how much revenue a company could lose. Let’s assume we have a ten-member team where one employee has lost the desire to give their best. If the average monthly salary in this team is €2,500, the AI estimates that uneven engagement could cost this team €78,000 in annual revenue.
The “Quitter Test”
Many are probably familiar with Netflix’s practice of reviewing which employees still deserve a place in the team each year. In our limited labor market, such an approach would be challenging, if not impossible.
Netflix CEO Reed Hastings and INSEAD Business School professor Erin Meyer describe in their book *No Rules Rules* how the world’s most popular streaming service provider operates as a talent-dense organization, where every leader conducts an annual audit of all team members, asking, “How would I feel if this team member wanted to leave?” A local version of this “quitter test” in Estonia could be, “What would motivate this employee to give their best?” If the leader cannot answer or if the company lacks the necessary conditions, it is time to let the employee go.
To help employees feel the significance of their work, a leader can clarify the connection between daily tasks and the company’s larger goals. The leader’s role is to explain how each employee’s contribution helps achieve the company’s objectives and to recognize their work so far.
All of the above presumes that the leader genuinely cares and wants to help bring out the best in everyone. Caring should be a natural part of a leader’s job when responsible for results, and if it isn’t, the leader is likely a quiet quitter themselves.
More Important Than Technology
How can a company or team become more effective?
If a company wants to increase productivity by 10% through automation or digitalization, the necessary investment depends on many factors, including existing technology, employee training levels, and required system updates. Similarly, the costs associated with improving management quality can vary depending on current management practices and planned development activities.
Investments are not just financial; they also involve time and energy. If we aim to increase employee satisfaction and engagement, as leaders, we must invest time in listening, understanding, and developing them. This requires commitment and patience from the leader, but it yields more significant results than any technological innovation.
Technological advancements are expected to increase productivity, but without inclusive leadership, they may never work effectively. Additionally, investment in technology can be tens or even hundreds of times more expensive than developing leaders.
Half of the Employees Are Looking Around
According to Gallup’s 2023 survey, half of all employees are looking for a new job. Whether due to a toxic work culture, expectations of a higher salary, inflexible work arrangements, or a lost sense of growth—leaders can always respond to the situation.
Listening to, advising, supporting, and training a team member is many times cheaper than waiting until the only solution is to replace the employee. In Estonia, the annual training budget for one employee is generally more than ten times smaller than the costs associated with hiring a new employee for the same position.
Caring and empathy are essential tools for modern leaders. According to Gallup’s 2023 labor market analysis, re-engaging indifferent employees through coaching and development is the fast track to improving productivity.
A caring leader should be the standard, not a privilege. Listening, understanding, and developing are expressions of care in the workplace. These are not merely soft values because, as mentioned earlier—their absence can cost companies and countries a third of their resources.
The article was originally published on Äripäev, Personaliuudised.ee and palgauudised.ee.
Pille Parind-Nisula
July 30, 2024
