Organizational culture has always been a critical driver of productivity and revenue for organizations. However, the COVID-19 pandemic has highlighted the negative impact of imbalanced cultures through various research and industry evidence. This imbalanced culture has led to issues such as:
- Employee burnout ($16.6 billion in absenteeism/year in Canada)
- Employee disengagement ($7.8 trillion in lost productivity/year globally)
- Employee Turnover (cost of 90-200% of the outgoing salary to onboard new)
Organizations that do not actively invest in their culture and people but rather attempt to let nature take its course are more than 70% likely to fail.
Fortunately, after over two years of chaos, we are entering an era of opportunity to transform our work permanently for the better.
Benefits: Economic Earnings
Through our experience and research, we’ve discovered that organizations often assume an either-or-scenario or trade-off in their culture. We see organizations fail in two common ways. Some may be intentional with their people but unintentionally miss the mark on results. Others may have leaders so invested in performance and strategic goal achievement that their people feel unheard, undervalued, and excluded.
Benjamin Laker, a Forbes leadership strategy contributor, highlighted that organizations that align their people, values, and culture see a 4x increase in revenue growth and have higher average annual returns, with cumulative returns as high as 495% instead of 170% (Russel 3000) and 156% (S&P 500).
Pitfalls: Economic Cost
Essentially, cultural imbalance damages an organization’s potential for success. These imbalances create unintended detrimental effects and poor organizational outcomes. Worse, since the pandemic’s aftermath, the stakes regarding organizational culture balance are at an all-time high as it is considered a prized possession, a compelling edge. We see imbalance directly causing three things: employee burnout, disengagement, and voluntary turnover
#1: Culture imbalance leads to burnout
When stress is extreme, it leads to burnout: a state of emotional, physical, or mental exhaustion caused by excessive and prolonged stress from work-related activities. Feelings of cynicism and detachment can be accompanied by decreased efficiency and productivity.
Burnout can result from a high workload, lack of support, unrealistic expectations, and a lack of control or autonomy in the workplace. It can significantly negatively impact an individual’s overall health and well-being.
Companies are largely driven by business efficiency and productivity, which may be profitable in the short term. Abundant evidence shows that competitive and high-pressure organizational cultures are at the core of employee stress and lack of well-being.
Gallup’s annual State of the Globe Workplace report from 2021 also noted that nearly 70% of the world’s employees are not thriving regarding overall well-being, with the biggest contributor being a lack of meaningful work.
This debilitating state also impacts organizations’ bottom line by increasing worker errors by over 60%, causing absenteeism at an annual cost of $16.6 billion in Canada, and increasing health insurance, depression, and short & long-term disability claims.
Moreover, the pandemic wreaked stress-related havoc on even the most culturally aligned organizations. Essentially, it opened a ‘pandora’s box’ of intertwined traditional and novel work-related stressors (e.g., work-life imbalance, social isolation, lack of workplace support, occupational and financial insecurity, self-threat/fear of illness, and workload), stagnating any organizational progress on employee well-being.
A recent pulse survey by KPMG in 2021 found that the pandemic caused one of the most stressful times in modern-day history, with over 94% of workers suffering from stress or anxiety. Similarly, the Public Health Agency of Canada determined that 70% of employees experienced at least one work-related stressor during the pandemic, with heightened negative effects for younger generations, women, and visible minorities.
Employee well-being is critical to an aligned workplace culture. Organizations with balanced cultures foster employee well-being and, importantly, cultivate mechanisms to lessen the direct effects of workplace stress on each organizational member. In the past, wellness programs were an added benefit. However, since the wake of the pandemic, employee well-being is no longer a nice perk, it’s a necessity.
#2: Cultural imbalance creates disengagement
On top of burnout, work-related stress exasperated an already prevalent issue in organizations that do not stay at the forefront of their cultures. This issue is disengagement: emotionally or actively withdrawing from work activities leading to minimal output.
Disengagement happens when people don’t feel they can bring their whole selves to work. They may show up and clock in/clock out (literally or figuratively), but the emotional commitment, passion, and enjoyment are lost. Some workers even describe themselves as being actively disengaged. Others are ‘quiet quitting’ and merely meeting their job requirements.
Engagement is context-dependent. The pandemic is a prominent nuance. It caused an abrupt halt to even the most highly engaged organizations, causing a global low in engagement. It sent millions of us home, and while we’ve come to realize there are benefits to remote work, it’s also created a gap in human connection, sense of purpose, and heightened loneliness.
In a random sample of over 50,000 U.S. workers, the statistics behind engagement were the lowest in over a decade. In 2021, 65% of workers felt disengaged, and 16% felt actively disengaged while spreading negativity in the workplace.
According to Gallup’s State of the Global Workplace 2022 report, employees who are not engaged or actively disengaged cost the world $7.8 trillion in lost productivity per year.
Cultivating engagement and creating an engaged workplace organizational culture takes energy and intention, but it’s worth far more than most leaders think. While external variations in engagement can be due to radical things like the pandemic, internal variations involve leadership response in creating new work environments and taking actionable steps to re-balance their culture to fit the current reality.
#3: Cultural imbalance leads to voluntary turnover
An attrition rate is a metric used by organizations to measure how many employees leave voluntarily or involuntarily. Voluntary turnover in the workplace refers to the resignation of employees who leave their jobs on their own, instead of being laid off or terminated. It can be driven by factors such as dissatisfaction with the job or the organization, better job opportunities elsewhere, or personal reasons.
Even before the height of the pandemic, attrition began to rise. A study by Catalyst in 2020 highlighted that over 75% of workers felt that organizational culture led to voluntarily leaving.
The annual cost of toxic culture-related turnover is in the billions, and indirect turnover expenses, like re-hiring, are between 90-200% of the departing employee’s annual salary.
In high-performing healthy corporate cultures, turnover is less than 15%. In toxic organizational cultures, that percentage triples. This, with an “us-versus-them” mentality, has been cited as one of the “real reasons people quit.” So, when toxicity is added to the corporate culture mix, voluntary turnover is astounding.
An MIT Sloan Management Review study found that toxic corporate cultures are 10.4x more powerful than remuneration in predicting an organization’s attrition rate.
Since the start of the pandemic, attrition rates have been extraordinary. Workers are leaving in droves, causing what’s now known as the “Great Resignation.” Between 2021-22, one in five working Canadians and 47 million Americans left their current employers, citing poor workplace culture as one of the primary drivers for quitting.
Moreover, a survey conducted by McKinsey in 2021 stated that 36% of workers that left their jobs did not have a new position lined up, further suggesting that employees are fed up with how “out of touch” employers are with the new reality of work.
Strikingly, there is a projected $818.7 billion deficit in the financial/business industries by 2030 attributed to the rise and rising rate of turnover.
The high attrition rate in organizations, especially due to toxic workplace culture, is causing a significant financial deficit and affecting productivity. To prevent this, organizations must prioritize creating a balanced organizational culture where employees feel valued and motivated to stay.
Culture Balance is Key
The pandemic has intensified stress and negatively affected the mental, physical, and emotional health of workers worldwide. The evidence is clear: organizational culture imbalance not only causes workplace friction, but it can also harm your greatest assets, your people. A lack of meaningful work and human connection, and high competitiveness, are key contributors to employee stress. Burnout, disengagement and voluntary turnover lead to detrimental performances and productivity, concrete costs and, in extreme cases, the demise of your organization entirely.
Yet, the solution is simple, to counter the current trends, fostering a balanced organizational culture that prioritizes employee well-being can lead to increased engagement, productivity, and job satisfaction. Organizations must also strive to create a culture that fits the current reality and meets the needs of their employees. It will save your organization money. When culture is balanced, the direct positive effects are limitless. Decades of data confirm that when your people are thriving, they are less stressed, more engaged, and less likely to quit.
Still today, cultural dynamics are often put to the wayside because organizations don’t put the time and effort into measuring what matters. Make organizational culture balance a top priority through intentional (re)design or by prioritizing cultural analytics based on your organization’s current systems and strategies.
The bottom line is healthy, high-performing balanced cultures have high results and relatedness, which undeniably unleashes your people’s happiness and your organization’s performance.
Danielle Mercer, Ph.D., Lead of Research and Innovation at innerlogic.
She has a B.Com. and MBA from Memorial University, and a Ph.D. in Business Administration from Saint Mary’s University. Her research and consulting interests focus on organizational leadership models, workplace gender and diversity, and worker well-being. She was awarded the SSHRC Joseph Armand-Bombardier Doctoral Scholarship for her work on the gendered decision-making styles of organizational teams.
She has experience in qualitative, quantitative, and mixed methods research design with expertise in developing and validating organizational measurement tools. She has presented at over 15 international conferences and has eight publications in peer-reviewed journal articles and edited book chapters. Danielle is also an Assistant Professor of Management at Acadia University.