Why on earth is improving staff performance so important? It’s a good question. The answer is often a surprise. It’s not because employees who are performing a satisfying job will do better work. It’s not because you need relaxed, competent staff. These issues are important. But there’s another compelling reason. And there’s nothing fancy about it , believe me.
Return On Investment
Return on investment is the major reason. It’s a matter of money. Callous, hard-nosed and brutal as it may sound, first rate staff management is so important because it’s an ROI issue. That’s why you must improve the performance of your staff and manage them very well.
The Wages Investment
Let’s say you employ 10 staff. Let’s say you pay them an average of only $30,000 a year. Let’s say that your salary services or “on costs” are only 25%. You annual minimum investment in wages alone is $375,000. And that’s a very, very conservative estimate. It’s a different staff management perspective isn’t it?
The Hidden Investment
Staff need a place to work, equipment, computers; all sorts of physical support to enable them to do the job you want them to do. Call this “overheads” or any other fancy name you like. They’re part of what it costs to employ staff. They add to your investment cost. Again, let’s be very conservative and say this adds $25,000 a year to your wages investment.
The Big Question
So, on a very, very conservative assessment, you’re paying $400,000 merely to employ staff: just to have them on hand. The actual figure could easily be double that amount. Consider this. Before you invested $400,000 in any area of your business other than employees, what return would you expect?
And remember, in the case of employees, you’re paying $400,000 annually merely to have them in your business; before they provide anything for you. Would you invest even 10% of that figure on new equipment without an almost ironclad guarantee that you’d get a worthwhile return?
A Reasonable Return
You’ll have lots of other costs not directly relating to employing people. For the purpose of this exercise, let’s ignore them and concentrate on the $400,000. By the way, this is a nett cost. Let’s say that you expect a 20% gross return. Your employees need to produce revenue of $480,000 to pay their way and provide a reasonable return on investment. Realistically the business needs to produce revenue far greater than $480,000 to cover all the non-staff expenses. Makes staff performance rather important doesn’t it? It’s not “fancy” anymore.
Staff Are Human
This fact means that you can’t simply “switch ‘em on, fire ‘em up, let’em go and switch ‘em off”. Employees have feelings, opinions, skills, experience, suggestions and a whole lot of intangible responses between “switch on and switch off”. It also means that they, unlike a machine, can do lots more than their basic design suggests … if you get them “running well”. But they can cause you lots more aggravation than a malfunctioning machine.
Why Have Employees?
It’s simple. You have employees so that you can manage. They handle all the routine matters perfectly. You’re free to manage. Where that happens both you and they actually do what you’re paid to do. They could also be described as a faultless human machine with the potential bonus of superior performance when you utilize those intangibles mentioned above.
Maximizing Your Staff Return On Investment
The better your staff perform, the better it is for you and your business. The more they improve your operating systems the more streamlined your operations will be. The better they look after your customers, the more customers you’ll gain and retain. The more you trust them completely to do their jobs perfectly without your intervention, the less stressed you’ll be.
All of these things will result in more success for your business and a higher return on investment. You’ll concentrate on managing. You won’t need to fight fires or supervise closely. That’s a highly desirable state. You want the best ROI you can get. One other thing: the more people you employ the costlier it becomes. ROI is a demanding force.
Embrace with enthusiasm the staff management techniques based on measurable standards of employee performance. They may seem far out and unconventional. But they are clearly in the best interests of you, your business and your staff. Do everything you can to make your employees more competent, more contributory and more productive. You’ll be pleasantly surprised at how efficient and contented your employees become. And you’ll make lots more money. There’s nothing fancy required. Just first rate staff management.
What To Do Now
Do your maths. Work out exactly what it costs you just to keep your staff on the payroll. It’s probably your biggest single expense. Were you to improve their performance by, say 20%, what would it mean to your business. Contact me or leave a comment if you’d like to know more.