How much do your staff cost you?22nd August 2018
It’s easy to calculate the cost of hiring the right person.
Recruitment agency fees and the hours it takes to interview are all part of the mix.
As a leader, I’m sure both you and your team invest a lot of time hiring people who will become an asset for the company.
I’m going through the hiring process right now.
Two team members have decided to take new opportunities outside of the company.
It didn’t come as a surprise – they grew a lot with us and I’m happy to see them take on new challenges.
But it’s still relatively rare for us to lose people, for any reason.
And so, since I’m a financial guy, this experience got me thinking about people and finances.
And how they’re connected to how profitable a company is.
When most businesses assess their costs, assets and financial performance, they look at tangible figures.
Profit and loss. Payroll. Buying new machinery or services. Office and building maintenance. Recruitment.
Bottom line issues.
They often miss the fact that their people are a financial issue, too.
In fact, many say their people are an asset… but they may not treat them as one.
Case in point: When a building or piece of machinery is seen as an asset, maintenance costs are allocated to it. They make the annual budget every time.
But… do you have ‘maintenance costs’ in your budget for your people?
Are they also treated as an investment and do you take care of them, too?
Even though it’s often unseen, the cost of your biggest asset – people – not performing
has a knock-on effect on both productivity and profit.
When people aren’t trained to do their job well, they take twice as long to complete one task.
When they don’t feel engaged, they may keep vital knowledge to themselves. This can delay projects, upset clients, and lower morale in the office.
The unexplained absences and sick days all add up and are an enormous cost to the British economy - £18 billion a year according to the Centre of Economic and Business Research – and rising.
When people don’t have a clear development path, they can become complacent. This results in taking longer breaks, not actively replacing manual tasks with systems and processes, or looking for a job outside of the company.
Over time, people inefficiencies add up… and can reduce income and profit.
And when you have high churn and need to replace people often, the cost of recruitment can become a real issue.
It’s difficult to calculate ‘maintenance costs’ for people accurately, since they’re nothing like machinery – it isn’t as simple as replacing a broken part!
People have feelings and thoughts that you can’t detect automatically. Understanding what motivates them to develop and grow takes insight, empathy and emotional intelligence.
But it’s vital, because people are a real financial issue for your business.
In my next email, I’ll share a tool we use at Insight Associates to determine what motivates people and how we use it to invest in our biggest asset.
It’s the reason why some of our people have been with us for over 15 years.
I’m excited to share it with you.
Until then… if you’d like help evaluating and improving your company’s financial performance, hit reply and let’s talk.
As part of our process, I can help you see where people inefficiencies lie, and how to invest in them in a cost-effective way, so they become profitable assets for the years they’re with you.