There is long-standing empirical research demonstrating how corporate culture improves organizational innovation, productivity, and profit. Now, evidence is emerging that healthy organizational cultures are also the best way to beat the Great Resignation.

Two weeks ago, MIT researchers uncovered that toxic organization cultures drive employee turnover 10 times more than pay. This is startling news during the Great Resignation when employers have been significantly improving pay and benefits to reduce employee turnover. Yes, toxic organizational culture was driving employee turnover 10 times more than pay.

In an April 2021 New York Time’s article, the author Adam Grant, an Organizational Psychologist from Wharton, builds upon the MIT researcher’ findings. He identified that the rising trend of employee malaise has morphed into languishing organizational cultures. The article’s title says it all, “There’s a Name for the Blah You’re Feeling: It’s Called Languishing.”  HR executives have seen it during the past two years of COVID-19 with rising absenteeism, illness, leaves of absence, confusion, and transitions to new hybrid work models. And these blah feelings have occurred despite increases in worker compensation.

Are you surprised? You should not be. Early research has shown the importance of organizational culture in raising organizational innovation, productivity, revenues, and profitability. This includes research from Harvard’s John Kotter, and James Heskett, and C. Brooke Dobni Ph.D. of InnovationOne. (Full disclosure, I am a Managing Partner of InnovationOne, LLC.).

The research from major consulting organizations such as McKinsey and Company, Boston Scientific, Booz & Company, and Arthur D. Little have published similar findings. And academic research has also shown an empirical relationship between transparent and agile organizations and improved innovation and productivity.

Back to hiring and retaining employees. The research on recruiting has shown that keeping organizational pay competitive to the organization’s industry and region of the country is essential to attracting employees, especially when wages have risen faster last year than in the past 14 years. But other research (documented in my book Hack Recruiting and including the work of researchers such as The Harris Poll, Glassdoor, and Fractl) shows that while great pay and benefits will lure excellent employees, it takes excellent cultures to retain your best employees.

Great cultures allow employees to align their values to the company’s mission, empower them in their work, and are transparent and collaborative. Organizations with excellent cultures have supportive leaders who provide honest and timely feedback to employees, provide growth opportunities, and develop careers.

More research is being published that shows the “the blah” feeling trend is real.

Gallup reported this month that US Employee Engagement has dropped in 2021 for the first year in a decade. Just over one-third of employees (34 percent) were engaged, and 16 percent were actively disengaged in their work and workplace (which means “they are just showing up”), based on a random sample of 57,022 full-and part-time employees throughout the year. This compares with 36 percent engaged and 14 percent actively disengaged in 2020, a year with unprecedented highs and lows.

While employee engagement does not fully measure the state of an employer’s culture, this latest report by Gallop adds to the evidence that there is a malaise out there that employers need to address to keep their best employees.

According to Gallup, not all organizations showed declines in employee engagement. The organizations that did not show a decline in employee engagement did what Gallup calls the basics of employee engagement. They follow these steps:

  1. Executives provide clear and frequent communication to their managers, who can then do the same for their employees
  2. Leaders provide the right tools and opportunities during change, especially when there is a high rate of resignations.
  3. Companies continue to provide career and learning opportunities.

To develop robust, collaborative, and transparent cultures that improve innovation, productivity, and profitability — and retain employees, organizations will need to make more fundamental changes to how they lead and develop their cultures and the alignment of their employees’ values to the vision and purpose of the organization. The rewards will be outstanding.

For more on what your organization can do to improve its culture of innovation and have better morale and financial performance, we recommend you read the following: “The Seven Traits of Highly Innovative Organizations that Drive Improved Financial Performance.”