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flevyblog
The Flevy Blog covers Business Strategies, Business Theories, & Business Stories.
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Editor's Note: Take a look at our featured best practice, Fiaccabrino Selection Process (44-slide PowerPoint presentation). The Fiaccabrino Selection Process is a powerful methodology for interviewing and screening the best people for your organization. The objective is to select those people who will be the highest performers with the lowest turnover. (Whereas the methodology was originally developed for a sales [read more]
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For most businesses, their biggest expense is their wages bill. Surely, then, you should do whatever it takes to get the maximum value out of this investment, shouldn’t you? Yet, most HR Departments don’t do much more than assist with hiring and terminations, maintenance of Policy and Procedure manuals, advise on wage rates, keep review documentation and the odd bit of training.
The cost of losing and replacing people is also extraordinarily high. ZaneBenefits reports that some studies (such as SHMR) predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a high-earner or executive level employee, the cost can be more than 2x their salary. A study by the Institute for Research on Labor and Employment, University of California, Berkeley found that “turnover costs for a manager average 150% of salary, including tangible costs of hiring new workers and relocation, and intangible costs such as the new worker’s inefficiency and lost productivity while the job is vacant.”
Does your HR Department work closely with your staff, understand their drivers and goals, help them enjoy their work and grow in it? My money says it doesn’t. Most HR Departments of large companies are reactive, only providing what sectional heads ask them for.
How then should you approach the twin issues of employee productivity and retention? Modern thinking is that these are two sides of the same coin.
Employee productivity means having people doing things they are suited for and enjoy. It means they are properly trained and have the resources they need to get the job done. It means everyone pulling in the same direction, feeling part of a team, each one fulfilling their role and supporting others. It means that people get satisfaction from their work and recognition for performance. It means that they are supported in their desire to grow, that their concerns and complaints are listened to, and they feel valued. It means that from the top down, everyone understands the organisation’s priorities and goals, high ethical standards and good corporate citizenship.
Not only is achieving these conditions likely to engender motivation to perform for the organisation, it will also create a climate of loyalty and pride, where staff put in the extra required to achieve quality outcomes within deadlines. When staff are so turned on by their work and have a career path they want mapped out for them, are they likely to seek greener pastures elsewhere?
In fact, getting the fundamentals right in a business as described above leads to a slew of benefits that all translate to a much healthier bottom line:
The result of all this is, of course, an organization that outperforms its peers, sets standards of customer service, performance and profitability, and becomes a place which enriches the lives of all those who work there.
An HR Department that actively works to achieve the outcomes above is one that is significantly contributing to the organisation. If it doesn’t, then it is a drag on the organisation’s performance and profitability. How do your HR efforts rate?
You can download in-depth presentations on Human Resources and 100s of management topics from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives.
For even more best practices available on Flevy, have a look at our top 100 lists:
These best practices are of the same as those leveraged by top-tier management consulting firms, like McKinsey, BCG, Bain, and Accenture. Improve the growth and efficiency of your organization by utilizing these best practice frameworks, templates, and tools. Most were developed by seasoned executives and consultants with over 20+ years of experience.
