Employee Morale

An employee's overall satisfaction, outlook, and feelings of well-being in the workplace

What is Employee Morale?

Employee morale is defined as the overall satisfaction, outlook, and feelings of well-being that an employee holds in the workplace. In other words, employee morale is how satisfied employees feel about their work environment. Employee morale is important for many businesses due to its direct effect on productivity. Employees with higher morale exhibit higher productivity while employees with lower morale show lower productivity.


Employee Morale


Importance of High Employee Morale

Employee morale can determine how successful a company is. Employees with high morale possess a better attitude, maintain higher customer service levels, and are generally more productive. Poor employee morale reduces productivity, negatively affects other employees and customers, and reduces efficiency. Here are reasons why high employee morale is important:


1. Increases productivity and efficiency

When employees enjoy the work environment, they will work more efficiently and productively. Employees with high morale enjoy going to work.


2. Increases quality of work

Employees with high morale produce higher quality work than those with low morale.


3. Provides a competitive edge in times of crisis

Employees with high morale provide a company with a competitive edge. For example, if a company is going through a recession, surviving such a crisis is far easier when employee morale is high. Employees work and pull through together. Therefore, high employee morale can help shield a company from the crisis.


4. Retains and attracts talent

Naturally, employees want to work and stay at a company with a good work environment. An exceptional work environment leads to higher employee morale, helping retain and attract talent.


5. Reduces costs

High employee morale lowers workplace accidents, reduces absenteeism, lessens stress, and decreases the number of paid leaves an employee takes.


Indicators of Poor Employee Morale

Here are some indicators of poor or declining employee morale at a workplace:

  • Poor or little communication between the employees and management
  • Increasing amount of absenteeism
  • Hostile or argumentative behavior in the workplace
  • Excessive complaints by the employee(s) over small issues
  • Increasing conflicts between employees
  • Lower/Poor work quality
  • Declining productivity
  • Increasing customer complaints
  • Low level of enthusiasm
  • Increased tardiness
  • Uncooperative attitude
  • High employee turnover rate
  • Silence during employee meetings
  • Opposing authority and lack of commitment


Ways to Improve Employee Morale

Here are some ways to boost employee morale:


1. Celebrate accomplishments

Employees need to be recognized for their accomplishments. Take the time to provide positive feedback and acknowledge the accomplishments and success of employees. By doing so, employees will show more appreciation for their work.


2. Respect employees

Employees are sometimes heavily undermined. Treating employees with respect and making them feel like they are the company’s most valuable resources goes a long way in improving employee morale.


3. Communicate

Be as transparent with your employees as possible. Communicate often and take into consideration what an employee says.


4. Offer competitive benefits and compensation

Provide competitive benefits and compensation. Employees that are paid benefits and compensation that are industry competitive or above industry average exhibit significantly higher employee morale.


5. Provide employee perks

Provide the employees with perks such as dental care programs, vision care programs, medical care programs, wellness programs, on-site fitness facilities, etc.


6. Empower employees

Give employees the ability to empower themselves and feel like they are able to make decisions about their job.


7. Provide career path

Give employees a clear career path. Ensure that they know how they are able to progress in the company and what the attainable career paths within the company are.


8. Offer mentorship

Provide employees with coaching and mentoring. It will make them feel more in-tune with the company and motivate them to appreciate their employer more.


Good work!


Now, after understanding ways to improve employee morale, can you think of what the store manager can do to improve Jennifer’s morale (in our example above)? Here are some ways, specific to the example, the store manager can improve Jennifer’s morale:

  • Acknowledge Jennifer’s accomplishment.
  • Provide Jennifer with a bonus upon reaching her sales target.
  • Communicate with Jennifer and understand how she feels about working at the store.
  • Raise Jennifer’s hourly wage in line with how well she is performing (the wage must be at least higher than the new hire’s!).
  • Give Jennifer a management role by giving her the responsibility of looking after the new hire.
  • Offer a clear career path to Jennifer.
  • Make Jennifer feel like she is a valuable employee by outlining the hard work she’s put into the company.


Practical Example

Jennifer is an employee at her local retail store. She started working at the store as a sales associate more than six months ago. Despite being able to consistently reach her monthly sales target, Jennifer receives no acknowledgment from employees at her workplace. Recently, the store hired a new sales associate to work alongside Jennifer.

It turns out that the new hire is paid a higher hourly wage than Jennifer, despite a lack of prior work experience. Realizing that she is not appreciated at her workplace, Jennifer decides to stop trying to meet sales targets and spends the majority of her time in the back room of the store instead of greeting customers.

In the example above, we can see that Jennifer is exhibiting low morale due to a poor work environment. This, in turn, reduces Jennifer’s productivity and negatively affects the store.


Related Reading

Thank you for reading CFI’s guide to employee morale. CFI offers the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful:

Financial Analyst Certification

Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s online financial modeling classes and training program!