The U.S. Department of Labor (DOL) reports that the average cost for employee compensation is $34.15 per hour. This means a company spends an average $1.75 million for 25 employees, $3.5 million for 50, and $7 million for 100. Suffice it to say, your workforce is probably eating up most—if not almost all—of your gross profit.
Despite the high cost, Ernst and Young identifies your company’s people, behaviors, and culture to be one of seven factors that drives accelerated growth. They say, “Leading businesses provide strong leadership and create an inclusive environment where differences are valued and people can innovate to drive the business forward. On top of this they invest in their employees, nurturing their talent and helping them develop skills to match the demands of the business during each different growth phase.”
While maintaining a workforce takes a large portion of the budget, successful business leaders know how to take their greatest expense and turn it into their greatest asset. And, it starts with establishing the right culture.
Building Strong Cultures
With advancements in technology and a new generation entering the workforce, your company’s values, reputation and benefits play a large role in the kind of talent you attract and the employees you retain. Because of this, it is vital that companies develop a culture that is based on innovation, teamwork, and other beneficial attributes to attract employees who will accelerate growth by contributing actively to the company. On the other hand, a weak culture will lead to a high turnover rate because employees will grow disenchanted with driving company success.
Lower Turnover Rates
A high turnover rate is one of a business leader’s greatest fears as there are many costs associated with it. Josh Bersin, Principal and Founder of Bersin by Deloitte gives seven:
- Cost of hiring a new person (advertising, interviewing, screening, hiring)
- Cost of onboarding a new person (training, management time)
- Lost productivity (a new persona may take 1-2 years to reach the productivity of an existing person)
- Lost engagement (other employees who see high turnover disengage and lose productivity)
- Customer service and errors (new employees take longer and are often less adept at solving problems)
- Training costs (over 2-3 years you likely invest 10-20% of an employee’s salary or more in training, that is gone)
- Cultural impact (whenever someone leaves others take time to ask “why?”)
To address employee turnover rates, start by taking a look at metrics related to it and evaluate the consequences. From there, create strategies for helping your employees engage with the company. There are hundreds of resources available with different ideas about how to boost employee engagement, consider multiple options before deciding on one that will benefit your company most.
Attracting and retaining the best talent in the industry is only half of accelerating company growth using your workforce. The reason why is because, even the most skilled employees need the right tools to operate. Technology solutions for HR, project management, or accounting are the tools your workforce is going to be using on a daily basis to drive company growth. Take the time to evaluate technology investments and see how well your employees interact with it. Having the right employees aligned with the right technology is key to accelerating growth.
Reduce Workforce Costs
While it is important to invest in your workforce, it is equally important to look for ways to reduce costs. In some ways the popular phrase, “less is more,” applies to accelerating growth with your workforce. While hiring someone new to handle a particular role can be beneficial, the question should be asked if the new hire will be a return on your investment? While you may want to hire, there are other options that business leaders may not have considered first, such as outsourcing.
Take inventory of your current workforce and plans for the future. Are there certain functions that can be automated? How can you streamline processes, so your workforce doesn’t have to spend time—and subsequently company resources—on completing tasks? Do you have an employee that is overburdened with administrative tasks that can be outsourced?
Business leaders need to recognize just how much of an impact people, behaviors, and culture have on their businesses. Some leaders may see their workforce as little more than a large expense, but successful leaders know how to transform that expense into accelerated growth for their companies.
About the AuthorMore Content by Andrew Larsen