When you’re losing money, does culture go out the window?

Girard Dorney


written on May 19, 2017

Workplace injuries happen more frequently when organisations are having money problems or confront earnings pressure, new research says. But is the problem even bigger than that?

New research, published in the Journal of Accounting and Economics, found that companies struggling to meet analysts’ financial forecasts have higher rates of illness and injuries.

They attributed this to a few causes. Firstly, the stress of potentially not hitting targets causes managers to pressure employees to work faster and for longer hours. Secondly, employees themselves will endanger their safety through over-exertion and by bypassing safety protocols that take up valuable time. Lastly, training and maintenance that improves safety but costs money are subjected to cutbacks.

Intuitively this makes sense, people take bigger risks when there’s more at stake. But is it more than that? Does a company’s positive culture that values employees decline in the face of financial pressure?

In the US, Tesla is under such pressure in the incredibly competitive industry of car manufacturing. They have set themselves a target to make 500,000 cars in 2018, an almost 500 per cent increase from 2016. Under the shadow of that daunting task, there have been union reports of long hours, low pay and unsafe conditions for their workers. It’s allegedly so bad that some employees have worked until the point of literally collapsing. “I’ve seen people pass out, hit the floor like a pancake and smash their face open,” said Jonathan Galescu, a production technician at Tesla in a Guardian report.

Tesla is an interesting case because the company’s mission – which is related to, but not the same as its culture – is so idealistic. There’s a genuine belief from Elon Musk (its CEO) on down that they are helping to save the world by contributing to  a greener future. This sentiment is even felt by people who complain about the working conditions to which they are subjected. Richard Ortiz, a production worker interviewed in that same story, says “I can’t wait for my granddaughter to one day go to class and say, ‘My grandfather was in there.’” He is also genuinely concerned that working at Tesla will mean he won’t be able to use his right arm come retirement.

Musk is admirably upfront about the economic pressure being a driving factor in the stress faced by employees. “We’re a money-losing company,” he says in the Guardian article. “This is not some situation where, for example, we are just greedy capitalists who decided to skimp on safety in order to have more profits and dividends and that kind of thing. It’s just a question of how much money we lose. And how do we survive? How do we not die and have everyone lose their jobs?”

Musk’s point that the cause is not greed but the need to survive seems sharp. If the equation is between treating people poorly in the short term or bankruptcy, who would not choose the former?

Uber, which lost over a billion dollars last year, is another startup that seems to put pressure on its workers in an effort to claw its way to financial sustainability. As we reported on earlier this year, they use behavioural tricks in their app to try and coerce their drivers to work more and harder, sometimes against their self-interest.

What’s the alternative?

But as both Uber and Tesla are discovering, while you will probably fail in the face of persistent financial problems, you can also fail due to persistent employee dissatisfaction. As any HR professional could tell you, disengaged employees cost money. In the retail sector, for example, they make for terrible customer facing representatives.

In 2015 Gallup estimated that actively disengaged workers alone cost the US between $450 billion and $550 billion per year. Considering that disengaged employees can exacerbate existing financial problems, it’s not surprising that Tesla is making efforts to increase pay, decrease working hours and put more emphasis on safety. After four years in a row of exceeding the industry average rate of illness and injury, so far in 2017 they are have beaten the average by 32 per cent.

The fear is that by reacting to financial pressure with reduced care for employees you increase the financial pressure (through the costs of attrition, and lower performance) – putting your business into a death spiral.

The alternative to just trying to avoid employee dissatisfaction, of course, is to use engagement to try and drive business success. Whether that’s by putting value in the strategic capabilities of HR or by being a company that elevates the HR function to a leadership role.

What are your thoughts? Have you ever worked for a company whose culture faltered or failed under financial pressure?

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4 thoughts on “When you’re losing money, does culture go out the window?

  1. I worked for a global company that was losing millions and millions for over 6 consecutive years. I didn’t see a compromise in safety of the staff as there were policies and systems already in place. What I did see was the quality of work conditions decrease. Employees had to do the job of 3 sometimes more employees and incentives such as Christmas functions were abolished. Eventually this led to a negative culture as the employees were happy to help the company succeed but with no ROI for themselves (incentives, simple recognition) the energy and interest left. The company could only ‘borrow’ extra employee effort for so long before something had to change. Eventually this resulted in the company downsizing in Australia by over 70%.

  2. When company leaders put finances ahead of employees, morale and productivity will dive. Pressure triggers our defence mechanisms in our brain which puts us in a mindset of shut down and protect. This in turn restricts our higher order thinking which is critical when we need to find new solutions to our problems. So by allowing our innate fight & flight responses to flourish Leaders do more harm than good for the company. Leaders have to remain aware the importance of maintaining a healthy mindset and being positive and resilient so that they can maintain high levels of trust and support in the business. This may need external assistance which again is frowned upon in times of crises. It really can end up as a death spiral.

  3. Interesting article could you provide the link to the academic research (or title of article ) again please as I am not able to access it with this link or by search for some reason
    Thank you

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