I spoke at a Rotary Club yesterday on my favorite topic—increasing employee morale—and had the good fortune to be seated by a nice guy named Craig during lunch. He runs a small financial services company and has just a few employees. And what a great boss! He keeps his assistants completely informed of everything he’s doing and keeps them up-to-date on progress toward company goals. Craig shares all financial aspects of the company with his employees, so they know how business is going. Bonuses are given quarterly, when there are profits—and not surprisingly, there usually are.

Craig trusts his employees and empowers them to make decisions. He gladly lets them take time off when they need time off—no questions asked. He said to me, “I don’t even ask them to keep track of their hours. But I’m sure if I did, I would find out they are working far more hours than they are paid to work.”

That’s what highly motivated, engaged and satisfied employees do—they go the extra mile and more for their employers! Imagine what ownership Craig’s employees have in his company. They know they are valued and that success is a team effort.

I said to Craig, “I’ll bet if your assistants were offered jobs somewhere else for more money, they wouldn’t leave.”

He said with confidence, “No. They wouldn’t.”

High employee morale isn’t about the money. It’s about the way you’re treated. Craig’s doing everything right and you can bet his employees know how lucky they are to work for him. They no doubt hear plenty of “bad boss” stories from friends and family…so why would they leave? You can’t put a price on loving your job!

Here’s what he says: “In my experience, the thing that has the most significant impact on a movie’s budget—but never shows up in a budget—is morale. If you have low morale, for every $1 you spend, you get about 25 cents of value. If you have high morale, for every $1 you spend, you get about $3 of value. Companies should pay much more attention to morale.

“Before I got the chance to make films myself, I worked on a number of badly run productions and learned how not to make a film. I saw directors systematically restricting people’s input and ignoring any effort to bring up problems. As a result, people didn’t feel invested in their work, and their productivity went down. As their productivity fell, the number of hours of overtime would increase, and the film became a money pit.”

It seems so obvious, doesn’t it?

A focus on employee retention is important for all organizations. Especially when the employees you really want to stick around are among those who choose to stay. The unfortunate truth is that your so-so workers are more likely to stay with you regardless of how they’re treated. Average-at-best employees tend to have low expectations in general, so when they receive average-at-best treatment on the job they figure it’s par for the course.

But outstanding employees set the bar high for themselves and everyone else. They expect to be rewarded, recognized, respected, communicated with, and nurtured to maximize their potential. And in case you question the importance of expressing thanks to your staff, remember that about 80 percent of employees who quit their jobs say that not feeling appreciated is the primary reason for leaving.

Turnover is expensive. Depending on which study you look at, companies spend from 150 to 300 percent of an individual’s salary in lost productivity, recruiting, training, and other expenses to replace a professional employee. The cost of turnover among hourly workers is somewhat lower, but nears an amount equal to a year of pay.

Offer employees a great place to work. Your best performers will shine, your average employees will try harder, and your reputation will thank you.

A gentleman I met recently told me he once held a management position for a company in New York City. He said he increased morale by giving his employees MetroCards that gave them some free bus and/or subway rides. He said, “They loved the cards—and what I paid for them equaled a raise of about 20 cents an hour per employee. If I had offered my employees a raise that small, they would have been outraged. And if I had offered them a $2 an hour raise, and had taken away the subway card, they would have been furious!”

This smart man realized that the MetroCards made his employees feel valued, because he took the time to think about them as people. He wanted to show appreciation, and went out his way to give them something that made their lives a bit easier or more convenient. An extra $8 a week added to their paychecks just wouldn’t have had the same impact.

When employee morale is low, the reputation of your organization takes a serious hit, and your bottom line suffers. Of course, MetroCards alone won’t increase employee morale. But you’ll take a significant step in that direction by considering what’s meaningful to your employees when you show appreciation.

Yeah, well, maybe. But the inverse reaction is that morale goes down when employees don’t feel valued and important at work…and they feel that they’re stuck there.

A recession(ish) economy provides bosses everywhere with a golden opportunity to win over employees who may stick around longer than they had planned. Carpe diem! Immediately! And if you’re not sure where to start, here’s something that’s simple to do and won’t cost you a penny:

Say thank you to those who work for you. Thank each person for something specific he or she has done recently to help you, help the company, help a customer, or help another employee…or for consistently doing a great job.

Words of thanks are most effective when you comment on something specific. Don’t just say, “Thanks for everything.” Say, “I want to thank you for coming in early yesterday to make sure that report was ready. I appreciate it so much—and I know everyone else on the team does, too.” Or, “I’ve been meaning to thank you for always being so pleasant on the phone. I know our customers love hearing your cheerful voice when they call!”

Employees love knowing that you notice and appreciate their efforts. And they want to hear your praise more often than you may think. How often? I’ll address that in another day or two!

Gasp.

In the article, Edmans talks about the “increasing importance of employee satisfaction as a motivational tool. Pleasant working conditions can lead to employees identifying with the firm, and thus exerting more effort than the minimum required by the employment contract. Moreover, it can be a powerful method of retaining key employees.”

I’m speechless.

My sarcasm isn’t directed toward Mr. Edmans, though, and I mean no disrespect toward the esteemed researcher/author/professor. It’s just that I’m imagining some execs reading about this research and saying to themselves, “Well, finally, the proof I’ve been waiting for. Our bottom line will improve if employees are treated well and have decent working conditions. Let’s see…I’ll tell managers that effective immediately, they must bring donuts to their direct reports once a month.”

Cookies and mugs are a step in the right direction, but don’t begin to address what employees need to be satisfied and engaged. I’m always pleased when research spotlights the connection between employee satisfaction and engagement, and an organization’s success. But I’m overjoyed when I encounter those rare, special leaders who focus on making their employees feel connected and happy—simply because it’s the right thing to do.