Your Employees: Assets or Annuities?

With “people costs” accounting for upwards of 90 percent of your total budget, it means that every night the biggest assets of your business walk out the door and go home. Depending on your turnover, you may be switching your human assets on an annual basis between 75 and 300 percent. Is this good asset management?

Let’s look at two scenarios. The first is a cleaning operation that considers their business essentially a glorified temp service. Turnover is high, bids are low, customer retention is sporadic and unpredictable. This business spends little time and resources in training and recognition programs for the workers. Why should they? The workers don’t stay that long and any additional skills are taken to a competitor or used to start their own service. Supervisors and managers are paid higher than the going rate, but are expected to create profitability in the account, no matter what.

In the second scenario, there is still much turnover, but it comes from a different cause. Workers are motivated through a training and certification program that ensures that they learn more and earn more than they would at competitive firms. Learning (training) begins before they are hired and continues until they reach a position that is better than offered at the competition. This causes skilled, trained employees to earn promotions within the organization at a faster rate than in organizations that do not grow at the same rate due to lower quality programs.

Cleaning companies with skilled, motivated workers take market share from companies that offer lower quality services with untrained workers, high levels of mistakes, safety violations and complaints.

Not all workers produce with the same output. A skilled employee with good morale may do 110 to 200 percent more than an untrained, under-motivated worker. This provides a revenue source for training programs and compensation programs that reward initiative. It is the formula to create high-energy work teams with low relative complaint rates.

To make all employees strategically motivated and focused, you need to identify priorities, and share them with your targeted segments of customers. Make clear what you are striving to provide customers, and how you’re going to do it consistently better than your competition. You should also identify the operational strategies you are pursuing to provide sustainable cost advantages over competitors, which will not hurt quality or value to the customer.

Ask all employees for their ideas on how to better achieve these two sets of objectives. They will have some good ideas and questions. Also, have all new employees review these strategic objectives as a part of their initial orientation program.

This is the simple formula to transform employees from liabilities to assets. It’s like having an annuity where your competitors have an expense.