Investing in staff is like investing in shares or property you want a good return on the investment. However many business owners are not VERY clear about the return they should be obtaining from investing in staff. 

If you are struggling to pay yourself a good wage? If so this article is for you…….

Be honest about the real cost

There is a long list of costs that need to be attributed to the business being open and having staff. Below are some of the costs that need to be accounted for when having staff:

¨  Superannuation

¨  Leave

¨  Sick leave

¨  Insurance

¨  Soon maternity leave.

¨  Administration costs to have them on the books.

¨  Training

¨  Leasing costs

¨  Marketing costs.

¨  Heating costs.

¨  Lighting costs.

¨  Product costs.

¨  Money set aside to up grade equipment they are using.

¨  The cost of an employee not being gainfully employed when business is quiet.

¨  YOUR WAGES.

¨  YOUR OWN PERSONAL DEVELOPMENT.

If you are paying someone $25 per hour the cost to you is AT LEAST $50 per hour.

Where there is margin there is motive

Many business owners start to lose motivation when their place of business becomes a grinding struggle rather than an opportunity to live the lifestyle they once dreamed about. The margin or the return you should be obtaining from paying a staff member $25 an hour is $100. Anything less is going to drain your cash reserves and one or two of the costs mentioned above you will start to avoid paying.

Your staff must be able to sell from the time of hiring.

Clearly to achieve this return on investment your staff must be able to sell. A good sales person has a certain set of behaviours that will ensure selling products, services and re bookings is easy and is a natural part of their daily activity, and a basic requirement for the position.

A good technician is not necessarily going to be great at selling and rebooking, because selling is a completely different set of behaviours (Attitude) that the employee will either naturally have or not have. However even engineers, administrators and other professionals can practice consultative selling.

Staff always need to be thinking how can I undertake this work and ensure the customer is “sold” on what we have done and how can we retain this customer. This is selling it is selling the experience. Selling is not something a ruthless group of people do, its what we all should be doing when undertake our work.

Should you use incentives to get the required margin?

No! If you pay $25 per hour you should be obtaining a return of $100 per hour. If you want more productivity and sales from your staff over and above the $100 it is then that incentives can be thought of. However if you have staff who are not adding value (3.5 – 4 times the cost of employment) then you have either hired the wrong staff or you have not made the performance standards clear and managed the staff to ensure they honored the basic requirements of the job.

Incentives should be used to entice employees to do more than the basic requirements of the job. Why, because if you make incentives an opportunity for staff to strive for higher standards.

 Secondly if you make incentives a general part of the standard job salary then if the employee leaves they can argue in a court of law that you owe them their incentive pay, because it formed part of their standard employment rate.

Lastly if you train staff to only respond to incentives and not the requirements of the job then they will always need better and better incentives to remain motivated.

Incentives should be used to entice the employee to perform over and above the basic requirements of the job, and bonuses are to reward staff for achieving incentive targets of a certain period of time.

For example

The incentive for an athlete is the medal they win for performing well, not just competing in the event. The bonus is being selected for the Australian team or being chosen as the sporting star of the year.

Committed To Building Your Business With The Right Staff.

www.profitablepersonnel.com

www.profitablepersonnel.com

And how improve your profit margins by thousands of dollars.

The world has gone qualification crazy! Colleges and Universities are creating a plethora of courses to sale to keen and eager students who want and need something tangible to prove they are worthy of a certain role, but do certificates and Degrees really make the recipient worthy?

Consider this fact: Education has only a 22% validity rating in predicting job performance. In other words to expect someone to be successful in your business based on their education is foolish and irresponsible.  

So what really predicts someone’s likelihood to be successful in the workplace?

Answer: A track record of the behaviours they consistently exhibit and the results they achieve from the use of these behaviours. This alludes to one of the secrets to obtaining a great return on investment from training, and that is:

Rule One: To obtain a GREAT return on investment from training, you need to link the training outcomes to a workplace procedure that has to be used. This will give you the business owner and the trainer a precise measurement of how well the student has applied the knowledge.

Daniel Goleman says from his research, the studies of management training in a supermarket chain found very little correlation between manager’s knowledge of the competencies they were trained in, and how they actually behaved in the store. This indicates that competencies need to be linked to a procedure that is used every day so that the true impact of the training can be measured.

“The world does not pay for what a person knows.
But it pays for what a person does with what he knows”.

 
Laurence Lee

Unfortunately most trainers struggle with trying to measure the impact of their training. In many cases workshop feedback forms and students undertaking various activities to meet a “competency standard” creates the foundation of current training practices. But would a top sports trainer get away with such a flimsy measurement, NO! Professional sporting teams are measured every weekend by the results they achieve, and if they don’t achieve the required results after a number of games the trainer is given their marching orders.

So why isn’t this practice followed by many businesses?

Answer: Often business see themselves as very different organisations from professional sporting clubs, but are they?

“There’s a complete parallel with running a successful company as there is running a successful sports team. You need the same skills”.

Sir Clive Woodward
Manager of the 2003 Rugby World Cup Winning team -England

Interestingly in many businesses trainers undertake the training program but if the employee utilises or doesn’t utilise the knowledge then that’s the employee’s issue not the trainers, but is it?

Confucius says:

“Tell me or I’ll forget
Show me, I may remember
Involve me, I may understand”

This quote reveals the second secret to obtaining a GREAT return on investment from training.

Rule Two: Training only occurs when the student is not only educated about the subject matter BUT they are then trained to consistently apply the knowledge. The real value of a trainer is the money they save or make the company from their training activity, not just obtaining good comments on their workshop feedback forms or passing students as competent.

Competence is the consistent application of the newly acquired knowledge to save the company money or make the company money. Never lower your training standards to the point you can-not obtain a financial return on investment from every training session.

“It is a funny thing about life: If you refuse to accept anything but the best you very often get it.”

W. Somerset Maugham

Committed to hiring the right person the first time round and recovering all the costs of the campaign! 

  

OPTIMISATION or Best Practice standards are crucial to you maximizing profits.

The value drivers for business are:

1. Getting New Clients / Sales

2. Retaining Your Clients

3. Retaining Your Staff

4. Providing a Quality Service

5. Providing a Quality Product.

6. Process and System Improvements

7. Safety of Staff and Clients.

 The Sub Value Drivers Getting New Clients / Sales Are:

 1. Getting New Clients / Sales

1.1 The Recruitment procedure for acquiring staff who can achieve THE MARKETING / SALES goals.

1.2 The Quality of the MARKETING information being used to train the staff. 

1.3 The Quality of the TRAINING procedure that will ensure the staff can adequately ACHIEVE MARKETING / SALES goals.

1.4 The Quality of the IMPLEMENTATION procedure for the marketing.

1.5 The Quality of the MONITORING and MEASURING procedure of the Marketing Results.

1.6. The Quality of the EVALUATION and DECISION MAKING procedure.

1.7 The Quality of the COMMUNICATION procedure being used by the manager and the team.

The secret is to map out what are the sub value drivers for each of the MAIN value drivers so that can now look for ways to improve your business. The sub value drivers are like the smaller components of a car engine, and by knowing what part they play in your business, you can now start to fine tune them.

I have seen groups of managers given goals to improve a procedure by over a 1000% and the managers had to overcome their own skepticism and be driven to achieve. They all did achieve but the expectation was from an external source and there were plenty of times when the managers would have accepted a lower standard.

So let’s examine how we could improve these sub value drives.

 1. Getting New Clients / Sales

 1.1 The Recruitment procedure for acquiring staff who can achieve THE MARKETING / SALES goals.

 Example the optimum recruitment process

 - The new target total cost of recruiting the new team member $4000

- The team member can return a 350% return on investment within 4 weeks.

- The new target total cost of training the new team member $3000

 Previously the results were:

 - The cost of recruiting the new team member was $11000

- The team member returned 350% return on investment within 6 weeks.

- The cost of training the new team $7000

 If the new optimum targets are achieved.

$15000 has been saved from the recruitment costs, plus an extra two weeks of salary (at $1000 per week) where they were unproductive. The total cost savings to the business will be $17000.

So you can see if you know:

The value drivers
The sub value drivers
 And Establish standards of optimization / best practice you can drive improved business performance through the belief and expectations that the standards can be achieved.

                    “It is a funny thing about life: If you refuse to accept anything but the best, you very often get it.”

                                                                                      W. Somerset Maugham

Committed To Building Your Business With The Right Staff.

www.profitablepersonnel.com

You are leaving thousands of dollars on the table unless you optimize performance.

When you coach or train anyone you need to accurately bench mark the person’s current performance status. The benchmark standard you need to use is VALUE. Because this is a holistic measure, and by this I mean all the good things the manager does and all the poorer things a manager does are put onto a VALUE BALANCE SHEET or score card so that the TRUE VALUE of a manager can be identified.

This is by far the best quarterly performance review anyone could have.

                                     A VALUE BALANCE SHEET

Credits

1. The dollar value of new clients / sales obtained by their team over the last financial year.
2. The dollar value of clients retained by their team over the last financial year.
3. The dollar value of retaining good staff over the last financial year.
4. The dollar value of providing a Quality Service (Measured in referral sales)
5. The dollar value providing a quality product. (Measured in additional sales)
6. The dollar value of process and system Improvements obtained by their team over the last financial year.
7. The saved money by the team from safety improvement initiatives.

Debts

1. New Clients / Sales – What is a realistic optimum target that should be achieved in this area?
2. Client Retention – What is a realistic optimum target that should be achieved in this area?
3. Retaining Good Staff – What is a realistic optimum target that should be achieved in this area?
4. Providing a Quality Service – What is a realistic optimum target that should be achieved in this area?
5. Providing a Quality product – What is a realistic optimum target that should be achieved in this area?
6. Process and System Improvements – What is a realistic optimum target that should be achieved in this area?
7. Safety improvement Initiatives – What is a realistic optimum target that should be achieved in this area?

Take the credits away from the debts and you have the manager’s TRUE VALUE to your business.

We see a similar process undertaken during sports matches like football where ground covered by a player is measured against the average ground covered by someone in that position. What the coaches are looking for is any statistics that would help the player improve or clarify where they are underperforming. The reason why this is done is to ensure the player adds VALUE to the team.

What the debts do is clarify exactly the optimum standard that is expected in that position. This indicates clearly to the manager the IMPACT of their performance on the business.

Important point

The impact of a manager’s performance when measured in dollars is a key catalyst to managerial behaviour change and a great motivator to take action.

Committed To Building Your Business With The Right Staff.

www.profitablepersonnel.com

How Key Performance Indicators might not be giving you the full picture.

The first secret to coaching or training anyone you is to accurately bench mark the status of the person’s current performance. Most businesses are very poor at bench marking managerial performance. The benchmark standard you need to use is VALUE.

VALUE means the value this person adds to your business.

Most businesses use a few Key Performance Indicators to measure the performance of a manager. However these indicators do not give the business owner a true picture of value.

 Key Performance Indicators are the components of VALUE.

EXAMPLE: If you had a manager that ensured their team achieved their sales targets, but upset staff to the point that staff actually resigned. Then the cost of these resignations must be deducted from the value of achieving the sales targets.

 Adding value means to add value on all fronts. To build a business you need to measure the key value drivers in your business.

 Value Drivers

 The value drivers for business are:

1. Getting New Clients / Sales

2. Retaining Your Clients

3. Retaining Your Staff

4. Providing a Quality Service

5. Providing a Quality Product.

6. Process and System Improvements

7. Safety of Staff and Clients.

 The Managerial Value Drivers

1. Getting New Clients / Sales – Recruiting and managing the team who do this

2. Retaining Your Clients         – Recruiting and managing the team who do this

3. Retaining Your Staff            – Recruiting and managing the team who do this

4. Providing a Quality Service – Recruiting and managing the team who do this

5. Providing a Quality Product – Recruiting and managing the team who do this

6. Process and System Improvements – Recruiting and managing the team who do this

7. Safety of Staff and Clients – Recruiting and managing the team who do this

 The Managerial KPI’s That Would Indicate VALUE

1.  The dollar value of New Clients / Sales

2.  The dollar value of Client Retention

3.  The dollar value of Staff Retention Levels

4.  The dollar value of Providing a Quality Service (Measured in referral sales)

5.  The dollar value of Providing a Quality Product. (Measured in additional demand)

6.  The dollar value of the Process and System Improvements

7.  The dollar value of the savings from improved safety statistics.(Lost time injuries)

 If you have a manager who runs a SERVICE BUSINESS then the KPI’s that would measure their value to the business are:

 1.  The dollar value of New Clients / Sales

2.  The dollar value of Client Retention

3.  The dollar value of Staff Retention Levels

4.  The dollar value of Providing a Quality Service (Measured in referral sales)

6.  The dollar value of the Process and System Improvements

7.  The dollar value of the Savings from improved safety statistics.(Lost time injuries)

 If you have a manager who runs a PRODUCTION BUSINESS then the KPI’s that would measure their value to the business are:

 2.  The dollar value of Client Retention

3.  The dollar value of Staff Retention Levels

5.  The dollar value of Providing a Quality Product. (Measured in additional demand)

6.  The dollar value of the Process and System Improvements

7.  The dollar value of the savings from improved safety statistics.(Lost time injuries)

When you talk about someone’s value to a business, you are talking about how they are impacting the business on all fronts. Too many businesses put up with toxic managers because they are good in one aspect of the business, but fail to measure the cost of their performance in other areas of the business.

Committed To Building Your Business With The Right Staff.

www.profitablepersonnel.com