The “R” Factor Part 2: Show Me the Money!

Our previous post focused on the importance of relationships within the workplace and the impact on people.

It has also been well-documented with facts and data that the cost of poor relationships in the workplace is significant; and in contrast, improving relationships improves the bottom line.

For example, a Watson Wyatt Worldwide study found a direct correlation between trust and profitability. Where employees trusted executives, companies posted returns 42% higher than those where distrust was the norm.

In a different study, they found that of the 7,500 employees surveyed only half trusted their senior managers. So imagine the impact of improving the relationships with the ‘other’ half!

Another study on trust in the workplace conducted by Leadership IQ, which involved a database of 7,209 executives, managers and employees, revealed that 44% of participants’ responses ranged from not trusting to strongly distrusting their top management, and that trust significantly predicts employee loyalty and their inclination to stay or leave the organization. Having employees “go” is costly and especially so at the managerial and executive level. As once cited in the Orange County Business Journal, the cost of losing one executive who underperforms or one who chooses to join another executive team is an average of $1.5 million per executive hire. Calculated another way, the cost can reach 400% of the yearly salary of a high level employee.

Along the same lines, in his book The Speed of Trust, Covey quoted Professor John Whitney of Columbia Business School, who said “Mistrust doubles the cost of doing business.”

In addition to the obvious and direct costs of attrition (recruitment, severance, training, etc.), there are other costs associated with dissatisfied employees at any level. There is the pervasive, though
often not measured, cost of wasted time and lowered productivity — the unproductive time spent in unresolved conflicts, complaining about management or co-workers, lack of engagement and not putting forth best efforts. It follows that reducing wasted time, like reducing other forms of waste, can contribute to improved profitability.

Imagine how much better-off we all might be if we could better manage our relationships; as noted above, the improvements could be staggering!