Bad culture is bad for business

Are you happy with your job?

If your answer is “yes”, then congrats, you’re probably in a company with a pretty good culture.

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But why culture plays such a big part in businesses these days?

The answer is simple. Bad company culture can harm employees’ productivity over time. A company’s culture forms and shapes everything it does and everything it makes. People always say, ‘happy employees are productive employees’ and this is not wrong. Productivity is generally a result of motivation and motivation is formed by the work environment, relationships with co-workers, flexibility, decision-making structure, compensation, style of management & etc.

An unproductive employee is generally wasting company’s dollars to get little work done and hiring a new employee is even more expensive in retaining an unproductive employee. According to a CAP study, an average costs to replace an employee are:

  • 16% of annual salary for high-turnover, low-paying jobs (earning under $30,000 a year). For example, the cost to replace a $10/hour retail employee would be $3,328.
  • 20% of annual salary for mid-range positions (earning $30,000 to $50,000 a year). For example, the cost to replace a $40,000 manager would be $8,000.
  • Up to 213% of annual salary for highly educated executive positions. For example, the cost to replace a $100,000 CEO is $213,000.
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Not only it will cost in terms of monetary value but also time, manpower and engagement from other employees. Additionally, it also impacts on the company culture generally because other employees will ask “why” when someone leaves. For instance, companies with high turnover rate are usually known for underpay employees, low engagement with employees, no career development and bad bosses. Having sites like Glassdoor, not everything can be swept under the carpet when words get out and gradually build a bad rep for the company.

Source: [1], [2], [3], [4]

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