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.
David Osborne
www.profitablepersonnel.com
About David Osborne