It is generally accepted that a business’ most valuable asset is its employees. So, it is somewhat bewildering that very few have implemented structures and made other necessary arrangements to capture the full value employees have to offer.
This could come down to the different perspectives business owners and their executive teams have as to employee contribution potential.
Some business owners would be satisfied if their employees did their jobs efficiently and effectively and did not cause trouble. Other business owners recognise that their employees have the potential to do much more. They recognise that employees with the right attitude could identify opportunities and implement strategies to increase revenues, reduce costs, lower risks, reduce wastage, take on additional work and so on.
Those in the former camp (who expect employees to do their jobs efficiently and effectively and not cause trouble) essentially regard their employees as machines needing maintenance, some repairs, and in respect of which they need to make periodic payments. By working a machine harder, it will need more maintenance and more repairs until it gets to a point when it breaks down or the cost of the repairs is not justifiable. Similarly, these business owners want to ensure their employees work to a sustainable level of capacity until a more productive person is found. To recruit and retain these people they need to be offered market related salaries, a potential bonus approximating a 13th cheque and provided a comparatively better working environment. The corollary is that such employees will be inclined to do just what is necessary to not to lose their jobs. They tend to work their allotted times, take the tea and lunch breaks and take their full annual and sick leave.
Other business owners recognise that all their employees, from the lowest paid to the highest, have the potential to identify opportunities for the business to increase revenues, reduce costs, lower risks, remove bottlenecks, eliminate waste, improve processes, offer to take on more work where they have the capacity to do so, assist others needing assistance, and to otherwise identify opportunities to increase the value of the business. The challenge for the business owners in this camp, is convincing their employees to act accordingly, and that is not a simple exercise. This may necessitate changes to the business’ management style, culture, employee remuneration, and to operating procedures as regards issues and opportunities.
Many would be inclined to say those in the latter camp (where employees go above and beyond) are far more likely to be successful. That is however not necessarily the case. It really depends on whether, and if so to what extent, the value added exceeds the additional costs. Another relevant factor is how to reduce the risk of a business getting enough additional value to cover direct and opportunity costs. Business owners will want to avoid a situation where the expected benefits well exceeded the expected costs, but the actual costs well exceeded the benefits.
That said, many companies have enjoyed remarkable improvements in both profits and shareholder value after recognising the potential for their employees to contribute significantly more to the business than ‘just doing their jobs’. This change has also saved some from the ‘corporate guillotine’.
R&M can help business owners move employees from the former camp to the latter one, define the ‘added value’ (increases in NPAT, shareholder value or other), reduce risk, review (and if necessary, change) the management style, culture and operating procedures, and design suitable employee remuneration arrangements, employee recognition policies, and more.
For more information on what R&M can do, why and how follow this link to R&M ‘s Advisory webpage – https://www.rogersmorris.com.au/rm-advisory/