Wednesday, February 9, 2011

Cost or Contributor?

I recently got a call from someone who wanted to be a client. He was having “employee issues” and he had heard that I’m really good at “fixing” those kinds of problems. His team was “unmotivated” and even “lazy.” Worse yet, he said his business was struggling and “staff costs were killing him.” As soon as our conversation started, alarms began going off in my head. The words he used bothered me, but the tone he used bothered me even more. In his business, employees were the key to his success. Yet it was clear to me that he didn’t see it that way at all.

So often in business we focus on things or tasks that need to be accomplished and, in the process of doing so, forget the people side of the business. We need a new marketing plan, we’re looking to develop new products, there are issues in the warehouse, or the production numbers are down. These are the types of items that tend to get the attention of the leadership team. They are important decisions, without doubt. But they are task based issues in a world where your biggest expense is most often your people.

Take a look at your organization’s budget. You see things like:
  • Communications expense
  • Advertising and Marketing
  • Supplies
  • Travel
  • Legal expense
  • Rent
  • And so on…

Of course, in 90% of all organizations the biggest line item in your budget is payroll; the cost of your employees. And when you add in the cost of benefits and training, those numbers get even larger. It’s no secret to management that salary and the associated benefit costs are the biggest items in the budget. It’s the exact reason that they look at headcount first when times are lean. Logically speaking, the biggest item in your budget should get the biggest reduction when it’s time to cut costs. So they look to reduce costs by cutting people.

I mean, that just makes sense, doesn’t it?

Let me offer a different perspective on the issue of your biggest cost. Because I would tell you that, while the cost of your people is the single biggest item in your budget, it’s probably the most underutilized aspect of your budget as well.

Your purchasing department is constantly on the lookout for ways to reduce the costs of supplies and materials. They analyze where the dollars are going and check out alternative supplies, or how changing the specs might reduce your supply costs. The accountants scrutinize the travel dollars making recommendations on airlines, hotels, and rental cars. And your Real Estate department is not afraid to renegotiate a lease when there is a downturn, knowing that your landlord would rather rent to you at a lesser price than have the facility go empty.

But who is scrutinizing your people to make sure that you get the very best out of them? Who is making recommendations on how to improve their performance, increase their productivity, and maximize their value to the company?

Too often that answer is “the first line manager.” The same manager that is worried about managing the budget, researching the new product requirements, taking calls from angry customers, and attending 15 hours of meetings each week. And let’s not forget that this same manager has never been trained on how to truly develop people.

In short, the biggest and most expensive part of your company’s budget is routinely neglected or mismanaged by well intentioned, but undertrained managers. Is it any wonder that your productivity is down?

Let’s go back to this “would be” client. In our discussions it was crystal clear that he viewed his employees as a cost of doing business and not as something that contributed to the company. He wanted to “fix” his employees when they really weren’t the problem. After all, there really aren’t that many bad teams out there. But there are a lot of bad leaders.

At ECI Learning Systems LLC, we are dedicated to helping companies get the greatest return from their most valuable asset: their employees. We work with you to align 3 key organizational factors:
• Your Company Culture
• The Leadership Styles of your key managers
• The Expectations of your Employees
When these 3 factors are aligned, you create an energy in your company that improves productivity, reduces absenteeism, increases creativity, and positively impacts your bottom line. Contact ECI Learning Systems LLC today to get your free Workplace Evaluation.
Until next time....
Dave Meyer
ECI Learning Systems, LLC


1 comment:

  1. Dave,

    I am hoping you turned down your potential client. He had a problem that was unfixable with out some serious soul searching.

    Your point is well made that our people are the largest item in our budget and yet because they are people and we are people we assume that it is easy to lead and manage them.

    It take an effort to manage staff as the resource that they are. It can be hard to measure in the near term. Yet when we do and we recruit, train, drill and execute; and then have them train, drill and execute we get the elite of the industry.

    Look to the elite of our armed forces. There is a lot of energy, time and thought that goes into maximizing and optimizing those resources. And the outcome is measurable.

    Thanks for the post