How to maximize the value of employees
Do you feel like you’re maximizing the ROI on your payroll? Are you happy with your employees’ overall productivity?
Make sure when you think about business productivity, you don’t overlook financial productivity. You’re going to have to figure out how much you’re spending — in employee time — and how much you make on each project.
Before you figure this all out, you’ve got to correctly price your services, based on people’s time. Here are the most important things to do:
- Track your payroll expenses the same way you bill your clients: by customer, job, service, item, department, team or person.
- Post that cost in your accounting system and you can look at profitability in different ways. Use this to reveal your most profitable person, team, department, etc.
- Then you will begin to figure out which jobs are priced appropriately. As a business owner, there’s a certain expectation for profit-per-job. If you want to make 45 percent profit on a specific job and you’re only getting 35 percent, you have to determine the cause of the shortfall. Is it pricing or employee productivity?
MEASURING REAL COSTS
1. What do services really cost? And what are they worth?
Starting to track real costs is going to help you sell the real value of the service. At this point, there are almost certainly unknown things you don’t realize you’re giving away.
Take, for example, the costs of a project manager (PM) on a task. You may not figure in the benefits of having a quality-control supervisor who is talking with clients and overseeing checks and balances. The value of a PM isn’t seen until you see the real cost of your services provided. After a business owner realizes that, he or she can build the cost of having a PM into future jobs. Just by making one small change, profits can go through the roof because you’re pricing your jobs correctly.
2. Are your employees working efficiently?
What is the difference between your best and worst jobs? Similarly, what is the difference between your A and B players? It usually comes down to a couple things: the skillsets or behaviors of the team members. Behaviors are much different from skills because they have to do with how someone acts — something that’s usually part of their character. Skills involve their level of competence.
Figure out what behavior your best employees have and build that knowledge into your recruiting plan. Pose interview questions with those behaviors in mind. For example, you may have a position that needs someone who is proactive and attempts to figure things out on their own before asking questions. So, ask candidates: Do you like puzzles? Their answer may tell you a lot.
Make sure that, within your human capital strategy, you are assessing skills and abilities. Do you need to find training for your employees? Is someone in the wrong job? Maybe you need to rearrange your supervisors. Keep all of this in mind.
3. Is it the supervisor?
As they say, people join companies and quit bosses. Are you noticing that some supervisors engage with their teams better than others? An out-of-place managerial strategy could be causing lack of engagement, which leads to profitability problems. You need to make sure you’re getting the most out of your people.
If you think a supervisor is lacking proper messaging to their team, you should look at their skills and behaviors and develop an engagement plan. You can have a strong human capital strategy without knowing which teams, jobs, employees and supervisors are best.
EMPLOYEE ENGAGEMENT AND THE BOTTOM LINE
With just 15 extra minutes of productivity from each employee per day, companies can increase profits by more than 3 percent. That means that for every million dollars in revenue, a company gains $30,000 on the bottom line.
Your employees are going to slack off while on the clock. Employees may, for example, shop online, set up fantasy football teams or socialize a little too much. Some of this is unavoidable, so just try to keep your employees focused and productive as close to 100 percent of the time as possible. Slacking can get out of control if employees aren’t engaged in the company.
Studies show that companies with engaged employees have much higher earnings-per-share than their competition. What sets them apart? A human capital strategy that drives employee engagement.
INCREASING YOUR ROI
So, how do you get that extra 15 minutes out of your employees? Here’s a human capital strategy that can help your company get there:
- Define strategic goals
- Manage employees as assets, not expenses
- Understand the behaviors that make people successful and create a culture in which they thrive
- Recruit people who fit the culture you created
- Give performance reviews to help employees understand their goals and how they factor into the company’s goals
- Make sure they have the resources to achieve those goals, including the training that will help improve productivity and basic skills
If you implement this strategy, it will ensure your employees are more productive on average, which will make your company more productive and profitable on average. What kind of ROI are you getting from your human capital? Isn’t it time you found out?