The Risk and Reward of Your Employee Spend

Would you ever buy a thoroughbred and expect no return on your investment? What would be the logic of spending time looking for the best breed, with the best breeding lines, the best muscle tone, and the best character and then putting it in a field where it does not have place to run? Surely at the cost of buying the most capable animal you can find there is a sense that this is a resource that can be utilized to make money?

In a recent conversation with Junita van der Colff, who specializes in Risk Management, she mentioned that risk is only one side of the coin – the flip side is opportunity. Hence the analogy of the horse. Why take on the risk of owning the animal if you don’t make use of the opportunities created by the ownership.

The Risk

This got me thinking that one of the biggest risks companies are facing now is their employee spend. Let us first get a good perspective on what the cost is of employing staff. Often times we think of it as just another salary bill at the end of the month, but actually it includes the following: 

  1. Recruiting expenses
  2. Monthly salary, bonuses, incentives
  3. Office space allocation
  4. Employee administration costs such as Finance and HR
  5. Tech and equipment costs
  6. Leave
  7. Training and development
  8. Meeting times (unless billed to a client) and Manager inputs.

Generally, depending on business size and industry, it is accepted that up to 30% of a company’s revenue goes straight into employee salaries. If that covers point two above, it still leaves seven other areas of business where money and time are being spent on employees which is unaccounted for.

A lot of businesses, especially with the effects of COVID-19 and Lockdown, are having to take a long hard look at their employee spend as one of their biggest risk factors. At the same time they are dependent on their employees to provide the services and products they sell. It is an enormous Catch 22.

The Reward

While retrenchments are the order of the day, I believe that businesses are missing an important step here. Instead of getting rid of people, they should do more with the employees available to mitigate this risk.

It is interesting that employers often prefer a plug and play model of management. They want to hire the best people, match them to a job profile and then they want them to “get on with it”. This approach reduces real connection between the manager and the employee. It does not take into account the employee’s unique skills, abilities and strengths, and in essence relegates the employee to a machine.

I believe that when we connect with team members we can unlock more potential and by seeing and getting to know them as individuals we learn what motivates and inspires them. This process is good for business as more value is gained from the same individual, while simultaneously rewarding the individual for what they are good at. This creates a win-win loop of positivity and engagement from the employee, as managers provide them with interesting challenges relevant to them as employees. This then solves the problems the manager is coming across and removing stress from their environment.

The “How”:

  • Constantly review conventional norms.
    Often employees are under-utillized because they aren’t allowed to act outside of their job profile.
  • Be open to ideas from team members.
    I have seen too many businesses hire the best and most talented people just to force them into the mould of “that’s how we do things here”.
  • When there is a problem to be solved ask around.
    Sometimes people with the least knowledge of a problem have the best solutions because they can provide a fresh perspective.
  • Acknowledge all contributions.
    Employees are being asked for their inputs, they are not sitting an exam. There is no such thing as failure in thoughts. The moment people’s contribution in solution crafting is judged harshly you remove their future ability to speak up.

In essence, show trust and create a safe environment for brainstorming. Then see how you can further leverage team members to bring the plan to action. This way you will get a great return on your employee spend. Both from a financial but also a psychological level. This allows you to do more with less.

This week my Coffee Companion on @Performance Café is Junita van der Colff, MD of Protean Business Solutions and host of the Risk Revue podcast. We talk about Risk Management and how to be properly pro-active as well as constructively reactive, to ensure that employee performance is at minimum risk during challenging times.