The most profitable investment for businesses? Happy employees

The Statistical Case for Company Culture [Infographic]

The most profitable investment for businesses? Happy employees

Note: Infographic is at the bottom of the post.

“Culture” has been a buzzword in the corporate world for several years, but what does it mean and why is it important? defines company culture as “a blend of the values, beliefs, taboos, symbols, rituals and myths all companies develop over time.”

In other words, company culture is the personality of an organization from the employee perspective, and includes the company’s mission, expectations, and work atmosphere. Whether it’s written down, symbolized in the business logo, or simply an unspoken but understood definition, culture determines a company’s environment.

An often-cited example of good company culture is Google. With an employee count of47,756 it hardly qualifies as a mom and pop shop, and yet people who work there describe it as having a small-company feel where no one hesitates to “spike a volleyball across the net at a corporate officer.”

But the culture of a company is not just about whether you’re allowed to chuck balls at your boss—it’s also determined by what the company stands for and how it treats others. Google gives back to the community as well as to countries around the world in the form of financial aid, restoring public parks, and Googlers volunteering their time.

To win in the marketplace, you must first win in the workplace.”

–Doug Conant, Campbell Soup

BONUS: I’ve made a company culture cheat sheet that summarizes the key points and lists every link in this post for easy reference. Save it to read later or email to coworkers. Get the free bonus here.

Statistics show that a company’s culture has a direct impact on employee turnover, which affects productivity, and therefore success. A Columbia University study shows that the lihood of job turnover at an organization with high company culture is a mere 13.9 percent, whereas the probability of job turnover in low company cultures is 48.4 percent.

The reason for this is simple: unhappy employees don’t tend to do more than the minimum, great workers who don’t feel appreciated quit, and poor managers negatively affect workers and productivity.

In Rob Markey’s Harvard Business Review blog post “Transform Your Employees into Passionate Advocates” he states, “Loyal, passionate employees bring a company as much benefit as loyal, passionate customers. They stay longer, work harder, work more creatively, and find ways to go the extra mile.

They bring you more great employees. And that spreads even more happiness — happiness for employees, for customers, and for shareholders.”

Although you don’t have to be a math whiz to understand the correlation between happiness and productivity, it should interest you to know the Department of Economics at the University of Warwick found that happy workers are 12 percent more productive than the average worker, and unhappy workers are 10 percent less productive. In fact, unhappy employees cost American business over $300 billion each year. So it literally pays to make sure your employees are happy.

Statistics from New Century Financial Corporation indicate that employees who are actively engaged in their job, i.e. happy, produce better results.

For instance, account executives at a banking company who were actively disengaged produced 28 percent less revenue than those who were engaged. On the other hand, companies with happy employees outperform the competition by 20 percent, earn 1.2-1.

7 percent more than their peer firms, and are 2.1 percent above industry benchmarks. Happy workers are also more ly to solve difficult problems faster.

To make customers happy, we have to make sure our employees are happy first.”


The Current State of Employee Engagement

A joke that was told at an executive workshop on leadership sheds some humorous light on employee engagement: “A CEO was asked how many people work in his company: ‘About half of them,’ he responded.” Ensuring your workers’ happiness is not just some new age, hippy-dippy, feel-good notion; it translates directly to the success, financial and otherwise, of your business.

According to Tim Rutledge’s book Getting Engaged: The New Workplace Loyalty, an employee who is engaged actually cares about the company beyond his paycheck or the quality of coffee in the break room. These are the workers who are willing to make the extra effort, with or without being asked, to ensure that the job is done to perfection and, directly or indirectly, that the business succeeds.

A 142-country Gallup report on the “State of the Global Workplace” shows that 63 percent of employees are not engaged at work and 24 percent are actively disengaged, leaving a mere 13 percent of workers who are engaged in the work that they do. Another way of saying this is that 900 million employees are not engaged and 340 million are actively disengaged around the world. That’s a lot of online Sudoku being played.

More importantly, this means that the overwhelming majority of people working for you lack motivation and enthusiasm and are not performing at their full potential.

This makes a fertile environment for negativity, and just as happiness is infectious (have you ever been able to suppress laughter when someone around you is in stitches?), so is unhappiness.

Employee engagement goes beyond making your staff happy; it separates the great companies from the average ones.

Engagement is a renewable daily decision that is voluntarily given when the company has proven worthy of it.”

–Jason Lauritsen, Talent Anarchy

Negativity and the Bottom Line

Are you starting to see the picture? Unhappy employees are disengaged at work which leads to negative attitudes and low productivity, and ultimately affects your business’ bottom line.

In fact, low-level engagement within companies results in a 33 percent decrease in operating income and an 11 percent decrease in earnings growth, whereas companies with high-level engagement have a 19 percent increase in operating income and a 28 percent increase in earnings growth.

Your business can stand out from the crowd by making using of your greatest asset: your employees. Marketing Innovators makes it clear that satisfied employees equals satisfied customers, who then spend more on your service or product and provide free marketing via great word-of-mouth.

They say that money can’t buy you happiness, but according to the data, happiness sure can buy you money, so to speak.

BONUS: I’ve made a company culture cheat sheet that summarizes the key points and lists every link in this post for easy reference. Save it to read later or email to coworkers. Get the free bonus here.

The Staples of a Strong Company Culture

When you were in grade school and causing trouble the teacher would usually send you to the principal’s office.

If the principal was able to invoke the right amount of fear into you, you’d return to class with your tail between your legs and throw yourself into the assignment to avoid being disciplined again.

Your change of behavior probably lasted until the end of the week, if you were lucky, before the cycle started again.

This method of forcing people to do the work—and love it, by God!—isn’t effective for the long term because it doesn’t address the deeper issue: what is causing this person’s unhappiness?

The Energy Project joined forces with Harvard Business Review and found that when four basic needs were met, employees were happy. These core needs are physical, emotional, mental, and spiritual well-being.

This means getting adequate rest, exercise and nutrition, feeling seen and valued at work, having the space and time to focus and think creatively, and experiencing a deeper sensation of being part of something worthwhile.

Employers who treat their staff robots rather than flesh and blood humans with all the emotions, requirements, and limitations that come with our species will wind up running them into the ground—and out the door.

When The Energy Project worked with Sony Pictures to address the problem of employee disengagement, the entertainment company made a change: instead of pushing their workers to perform better, they started fulfilling these four core needs. Despite the 2008 recession, Sony had its most profitable year that year.

Coming together is the beginning, keeping together is progress. Working together is success.”

–Henry Ford

Measuring Employee Engagement

Whether you’re a Fortune 500 company or a start-up, you can turn your company culture around and watch both enthusiasm and revenue skyrocket. But first you need to take the time to measure employee engagement. According to The Next Web, the information you gather will help you “predict, prevent, and improve everything from manager effectiveness to your churn rate.”

How do you do this? First and foremost, you must be open to observing and listening without getting defensive. Schedule weekly one-on-ones with each employee and give them a safe place to talk about what’s going on.

Organize company outings to promote camaraderie and get to know each other outside of the cubicle walls.

And track employee absenteeism: unhappy employees take fifteen more sick days each year than the average worker.

There are also a lot of great analytics tools to help you measure engagement by collecting employee feedback: Apple uses the fairly new metric employee Net Promoter Score (eNPS), Atlassian uses the app MoodApp, and Single Grain uses the cloud-based survey platform TINYPulse. 15Five CEO David Hassell suggests these ten questions to ask your team every week, explaining that “answers become conversations about what is most essential and meaningful for the team and the company, and those conversations transform into action.”

Engaging the hearts, minds, and hands of talent is the most sustainable source of competitive advantage.”

–Greg Harris, Quantum Workplace

Finding the Perfect Fit

Before you even survey your employees or analyze the data from all those fancy metrics you’ve put into place, consider not only who you’re hiring, but how you’re hiring them.

Zappos conducts two sets of interviews, one with the hiring manager who focuses on resume and ability, and one with the HR team which evaluates whether the candidate fits in with their culture. They also offer all trainees $2,000 to quit after the first week of training because they want only those who absolutely love the company culture to stay.

Buffer has a 45-day trial period, called Buffer Bootcamp, to see if the company is a good fit for the employee. They n it to the dating process, where each party gets to know each other before committing to a long-term relationship.

Chipotle uses a list of thirteen characteristics that every new hire must possess. They also started a restaurateur program for its employees, allowing hourly crew members to become managers. When selected, they get a one-time bonus and stock options, and an extra $10,000 each time they train a crew member to become a general manager.

Successful companies The Walt Disney Company have strong values that are so essential to their way of life that the company name and company culture are practically the same thing. Disney requires specific work experience for landing a dream job with them: childhood dreams.

Southwest Airlines, a service leader, zeros in on behavior, not just the resume; when they fly candidates in for an interview, gate and flight crew report back on their attitude and how they behaved. You may be able to fake a good attitude in an interview, but your true colors come out when dealing with travel, large groups of people, and small spaces.

If you are lucky enough to be someone’s employer, then you have a moral obligation to make sure people look forward to coming to work in the morning.”

–John Mackey, Whole Foods Market

BONUS: I’ve made a company culture cheat sheet that summarizes the key points and lists every link in this post for easy reference. Save it to read later or email to coworkers. Get the free bonus here.

Company Culture Makes a Difference!

Beyond keeping employees happy so that they positively affect your revenue, having a great company culture can encourage solutions, inventions or innovations that might not have come to light in a more oppressive environment. When a worker feels valued and respects her organization, the productivity possibilities are endless.

3M implemented a program called “15 Percent Time” which allows employees to use some of their paid work time to “chase rainbows and hatch their own ideas.” It was during this time that scientist Art Fry invented one of the most renowned products of all time, the Post-It Note.

Taking its cue from 3M, Google started its own “20% Time” program which resulted in the creations of Gmail, Google Earth, and Google Talk, to name a few. Similarly, Hewlett-Packard Labs gives its employees personal creative time during which new products have been created, such as clear bandages and optical films that reflect light which are both on the market.

No company, small or large, can win over the long run without energized employees who believe in the mission and understand how to achieve it.”

–Jack Welch, former General Electric CEO

It’s clear that there is an exceptionally strong case for company culture. When your organization’s culture is in alignment with your goals and you hire people who share your values and enthusiasm, you are paving the way to financial success and building an outstanding reputation.

So what are you doing for your company culture?

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The Key to Happy Customers? Happy Employees

The most profitable investment for businesses? Happy employees

We all know that customers are central to the fate of businesses. It’s captured in the maxim, coined by department store tycoons of the early 20th century, “The customer is always right.

” Jeff Bezos, one of today’s most iconic businessmen, has laid Amazon’s incredible success at the feet of its obsession with customers, saying “You can be competitor-focused, you can be product-focused, you can be technology-focused, you can be business-model-focused… But in my view, obsessive customer-focus is by far the most protective of Day 1 vitality.”

As company leaders strive to put customers first, our latest research offers new insights into how that might be achieved: through engaged and happy employees.

Glassdoor knows a lot about employee experience. Studying our database of millions of insights about jobs, salaries, company ratings and reviews, we’ve quantified the impact of worker satisfaction on retention, talent attraction, stock performance, and more.

In our new study we asked: Can companies help to achieve high customer satisfaction by investing in employees and ensuring that those who deliver goods and services  are themselves satisfied with their jobs?

Our answer was clear: There is a strong statistical link between employee well-being reported on Glassdoor and customer satisfaction among a large sample of some of the largest companies today.

A happier workforce is clearly associated with companies’ ability to deliver better customer satisfaction — particularly in industries with the closest contact between workers and customers, including retail, tourism, restaurants, health care, and financial services.

Linking Happy Employees to Happy Customers

To study this employee and customer satisfaction connection, we joined together two data sources: Glassdoor employee reviews and ratings from the American Customer Satisfaction Index (ACSI), which records the opinions of 300,000 U.S. customers on products and services.

We looked at 293 large employers spanning 13 industries, including their average overall Glassdoor rating (on a scale of one to five) and ACSI score (on a scale of zero to 100) annually from 2008 to 2018.

Using a standard panel model, we estimated the impact of the former on the latter, after carefully controlling for employer, year, and industry.

We found that each one-star improvement in a company’s Glassdoor rating corresponds to a 1.3-point 100 improvement in customer satisfaction scores — a statistically significant impact, which was more than twice as large in industries where employees interact closely and frequently with customers.

This finding is nearly identical to another recent study on the same topic, using similar data. Taken together, this growing body of research offers a powerful lesson to CEOs: If you want to build a customer-first strategy, building high employee morale is a necessary (though not sufficient) precondition.

While our observational data can’t prove causality — it’s possible having happy customers can boost employee satisfaction, rather than the opposite — we’re confident in our findings for several reasons.

First, we see many examples in our data where employee satisfaction rises or falls first, followed by changes in customer satisfaction later; by contrast, examples of the reverse are rare.

Second, the panel data examines changes in customer and employee satisfaction within the same firm, which addresses fears that the results are driven by differences between companies and their customers. Finally, even if our study shows happier employees are just a predictor of customer success, and not the main cause, that is still a useful indicator.

Industry Matters, But No Sector is Immune

One of our strongest findings is that there are some industries where employee and customer satisfaction are more correlated.

For example, in retail, food service, health care, and other industries where the two groups routinely interact, each one-star improvement in Glassdoor company rating predicted a 3.2-point increase in customer satisfaction.

Sales associates, cashiers, baristas, and bank tellers are prime examples in our data of service workers that make up a significant portion of these employers’ labor pools and whose personal experience with company culture (either good or bad) is transmitted daily to customers.

By contrast, our data show software engineers and warehouse staffers, who rarely work directly with customers, have little impact on their satisfaction. (You can explore our analysis yourself here.)

At the same time, even tech and manufacturing companies benefit from investing in employee satisfaction, among not only workers in customer-facing roles such as sales and support but also those behind the curtain.

These organizations that have invested in a positive workplace cultures should also find ways to increase customer-employee interactions.

For example, although Apple is a tech manufacturer, its brick-and-mortar retail locations expose millions of shoppers to its people daily, which benefits its brand image.

Companies that Hit the “Sweet Spot”

By studying more than a decade’s worth of data for hundreds of companies, we found several employers who stand out as being in the “sweet spot” with both high employee satisfaction (four-star or above Glassdoor rating) paired with high customer satisfaction (ACSI rating of 80 or above).

In travel and tourism, Southwest and Hilton top the list. Retailers Costco and Trader Joe’s were in a similar position.

This comes as little surprise, as the link between customer and employee satisfaction surfaces often in Glassdoor reviews for many of these companies.

As one Trader Joe’s  employee wrote, “you are encouraged to have fun with customers, answering product questions[…] Kindness to the customers is a big focus.”

High employee and customer satisfaction can be found outside of service industries, as well. Manufacturer Johnson & Johnson earns good marks in both areas, even though few of its workers are on the front lines. As one Johnson & Johnson employee review explains, “We are team players. We get things done. We serve our customers.”

Financial Benefits of Putting Employees First

In our study, we also give a ballpark estimate of how employee culture may impact corporate valuations through the channel of more satisfied customers.

A 2006 study published in the Journal of Marketing found that each 1% improvement in ACSI customer satisfaction scores for an employer was associated with a statistically significant 4.6% boost in its overall stock market value.

Applying this to our findings, we can calculate the possible impact of a one-star improvement in Glassdoor employer ratings, given the expected knock-on improvement in customer satisfaction scores: an increase of 7.8% to 18.

9% in long-term market valuation.

Becoming a customer-centric business is a worthwhile goal. But our research reminds business leaders that becoming more customer-oriented while allowing workplace morale to suffer is a poor and short-sighted strategy.

Instead, customer and employee satisfaction should be seen as two sides of the same coin.

Our past research shows what employers can do to improve worker engagement and well-being, while our new research shows those same strategies can also pay off in the form of happier customers.


Investing in Your Employees Is the Smartest Business Decision You Can Make

The most profitable investment for businesses? Happy employees
June 29, 2018 11 min read Opinions expressed by Entrepreneur contributors are their own.

It’s one of those things that we all knew, but didn’t quite have enough data to paint a picture of: Most people are not happy at work. But, now we do, and the number is 85 percent.

That’s how many people are dissatisfied with their jobs the world over, according to the “State of the Global Workplace” survey conducted by Gallup poll last year.

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While this in itself might be a depressing number, it points to almost $7 trillion in lost productivity the world over every year! Unfortunately the bad news doesn’t stop there.

The true cost of replacing employees can be twice their base salaries depending on their wage, role and experience.

 The cost of replacing high performers who often deliver 400 percent more in productivity than their average counterpart can be higher still.

In other words, the measures businesses use to engage employees and evaluate their performance are not working, or worse, they're backfiring.

Unfortunate, but totally understandable

There are many reasons that may explain why this trend exists. Some companies either willingly or unwillingly instill not-so-best practices that can make employees not just unhappy but downright dejected.

Often companies don't communicate properly. Or, worse, they just assume everyone already knows what they are supposed to do. In a survey of 400 very large companies titled the “Cost of Poor Communications,” it was discovered that poor communication was costing each company tens of millions of dollars.

Many companies do not take employee training seriously. Just having a rulebook rarely suffices to help employees understand the nuances of their job.

An IBM study revealed that employees who do not feel they are developing in a company are 12 times more ly to leave it.

Many times companies see employee training as an expense rather than investment and end up paying dearly in terms of low productivity and high turnover.

Other companies micromanage  crazy. Nobody s someone (particularly a workplace supervisor) hovering over their shoulder all the time.

And yet in a report by Career Addict, 79 percent respondents said they were being micromanaged and 69 percent had as a result considered switching companies.

Contrary to what managers who micromanage believe, their methods actually motivate employees not to perform and to try and leave the company, while destroying teamwork and creating health problems.

Some managers literally track an employee's every movement.

 Now, it’s one thing to keep a record of productive activities for posterity, and it’s another to use employee GPS tracking apps to know when they have exited a vehicle, where they are going after office hours and surveilling their chats. While workplace surveillance is usually carried out in the name of productivity, it often creates even more stress and defeats its purpose.

Too many companies use interns to do the heavy lifting. Many people would rank this practice in the same category as kicking a puppy, but shortchanging interns is a surprisingly common practice in the startup world.

Interns are promised nebulous, performance-based incentives including stock options that never materialize to squeeze every last bit of performance them for free.

And let us not forget the cynical assertion that interns should really be paying their employers, since the latter is blessing them with knowledge and experience.

Dress codes might have made sense 20 years ago, but with freelancing and co-working culture on the rise, many employers including multibillion-dollar brands are giving up the suit and tie entirely and letting employees decide what they want to wear. On the other hand, many employers try clever ways of creating a middle ground — even where there isn't one.

Related: What's the Difference Between Business Casual and Smart Casual? A Handy Guide on How to Dress. 

Why you should be investing (heavily) in your employees

While the issues mentioned (and those them) are best avoided, companies need to go above and beyond to find what their employees are looking for and deliver on it. The best companies have always understood this, too. Richard Branson, for instance, famously stated that customers come second, while employees come first.

But there is a much deeper reason to investing in your employees than good feels. Investing in your employees is a great business opportunity.

It builds you a solid reputation in the marketplace. All companies want to attract the best possible talent over to their camp. But who in their right of mind would want to work with a company that treats its members as disposable assets?

Unless you are the owner of the company, you will want to work for an organization that promotes your own growth and values your opinion.

In fact, millennials today often quit their jobs because of lack of learning and growth opportunities. And since almost all of them are researching companies on sites Glassdoor and LinkedIn before applying, having bad reviews on there won’t help you attract resumes.

Happy employees, even happier customers

Engaged employee help you establish better relationship with your customers. Since your employees are the ones who are actually in contact with your customers, how they think and feel is actually a better representation of your company than all your marketing and advertising material ever could be.

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Gallup in “State of American Workplace” reports that employees who are engaged are more ly to improve customer service and can result in 20 percent increase in sales.

Tempkin Group’s 2016 Employee Engagement Benchmark Study also shows that companies acing customer experience have one-and-a-half times as many engaged employees as those that are not so good at it.

Employee engagement will foster loyalty. Brand loyalty is all the rage today, with many companies focused on increasing customer lifetime values. But what about your employee lifetime value? Losing your employees can have heavy repercussions in terms retraining time, cost and lost skills.

Related: 4 Ways Managers Can Commit to Improving Employee Engagement

By putting your employees first, you can help them relate with your organization’s goals and find a common ground. Doing so can engender trust and a feeling of mutual respect between the employer and the employee.

Altogether, it will make your organization a competitive powerhouse. Almost every brand today is data-driven, even if it is to a small degree. But making use of that data in a way that powers organizational growth depends on how engaged and active your employees are.

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When employees are well trained, they will be better equipped to identify and exploit fleeting opportunities. That will, in turn, benefit the company.

Some ways to invest in your employees

Every organization needs to find the best way to inculcate great relationships with their employees. So, there are many examples of how the best companies out there are making sure their employees are on top of their respective priorities.

Google keeps it casual. While having a dress code is all very nice to promote homogeneity, we now know that people are happier when they are allowed to customize their workspaces. Google is a great example of how companies can keep it light and fun while still killing it, productively speaking.

The company offers everything from laundry facilities to places for naps, and creatively executed common areas as well. They also give free breakfast, lunch and dinner; health and dental benefits; and hybrid car subsidies to keep their employees happy.

Employees at Google are also allowed to spend 20 percent of their time pursuing special projects they feel are worth their time. In fact, many of their best products, such as GMail, Google Maps, Google Cardboard, Adsense and Google Talk, are products of this policy.

You don’t have to be a billion-dollar company to implement some of their methods. At the heart of Google’s policy lies their belief that every employee’s ideas can make a difference. TargetProcess, which was a small startup in 2013, decided to try their hand at Google’s 20 percent policy, which resulted in an incredible culture of innovation.

Listening is investing, and it pays dividends

Listen to your employees the way Virgin does. Lecturing employees where the company is heading and what is expected of them is so passé, so top-down. Not only can involving employees in your companies larger, strategic decisions help them feel valued, but you can also get fresh ideas and perspectives.

Virgin is a great example of a company that listens to its employees. Virgin realizes that every person on the planet has the potential to come up with the next million-dollar idea. Some of them may well be within your ranks, and the only way to find out who is to let everyone share their ideas.

For instance, Virgin Trains asked their employees for suggestions on improving their Voyager products. Bethan Patfield, a customer service assistant, came up with one when she noticed that celebrity chef Bryn Williams of Odette’s was using their service regularly.

Patfield suggested that Williams might be asked to look into Voyager’s menu options. Many meetings later, the team came up with awesome menu options that were a big hit with their customers.

The lesson here is your employees have a lot of insight that can be used to improve the quality of service. Given a chance, they can help you make a better product or service.

SquareSpace's flat organizational structure enhances communications. Primarily suited to startups, a flat organizational structure is where there are fewer management levels between leadership and employees. This facilitates communication between everyone involved and allows ideas to flow easily.

Coupled with some really strong perks and benefits, including 100 percent health insurance coverage, relaxed workspaces, flexible vacations, catered meals, monthly celebrations and more, Squarespace has consistently secured itself a top spot in every best places to work list out there.

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Maintaining a flat organizational hierarchy can get tricky as companies become larger. However, there are ways to maintain your culture while growing as a company. For example, you can consider harnessing the power of smaller, project-focused teams that are far more agile with faster velocity than big departments. and Microsoft are great examples here.

Challenge your employees

Adobe is another popular mainstay in best workplaces surveys. The firm is known for its rather generous perks, holiday pay, medical insurance, retirement plans and education reimbursements. However, there’s a lot more they put into making sure their employees are happy and productive.

Adobe provides its employees with challenging projects, then follows up with all the support they need to meet them. Consequently, they routinely deliver fantastic products to the market.

At the heart of Adobe’s workplace culture lie four signal characteristics — exceptional, genuine, innovative and involved. Adobe is very proud of its integrity, which is upheld by their senior management who ensure full, fair and accurate disclosure of information.

Finally, the company also celebrates their employee’s accomplishments by sharing their success stories on the Adobe Life blog. Doing so not only gives a huge boost to an employee’s pride, but also helps them share their ideas with fellow Adobites.

Related: Here's the Secret to Improving Employee Engagement That Every Company Can Afford

Henry Ford had once said, “The only thing worse than training your employees and having them leave is not training them and having them stay.” In today’s data-driven business world, talent is widely regarded as the most important resource. The ability to find simple yet effective solutions to pressing problems is what segregates great brands from mediocre and failed ones.

Since it’s unrealistic to expect top-tier leaders to have the best solution for every single problem every single time, companies today must not only start investing in their employees but also make them an integral part of the decision-making process and growth story.


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