Boost Your Bottom Line With Better PeopleWritten By John Skaeblund
Article Date: 09-01-2005
Copyright (C) 2005 Associated Equipment Distributors. All Rights Reserved.
What is poor performance costing your company?
When a company hires new employees, the goal is to grow, increase productivity, and ultimately make more money. But what happens when your new hire or even a long-time employee under-performs? Forget about increasing productivity! Every manager with a few years experience has dealt with an under-performing employee. The problem persists in every department, organization, and industry, because every company relies on the output of its workforce.
While the intangible effects of under-performance, such as low moral and reduced productivity, are real, until recently the actual cost of poor performance was too ambiguous to calculate.
The Future Foundation conducted research in seven countries including the United States to understand the costs associated with poor people performance. Their eye-opening research revealed that American managers spend 13 percent of their time managing poor performers and 14 percent correcting poor performers' mistakes.
That translates into an average of 34 days per year dealing with under-performance. Combine that with the fact that American employees admit that 68 percent of the mistakes they make never come to their manager's attention.
Worse yet - problems increase with the size of the organization. In larger organizations, managers spend approximately eight weeks per year, or 41 days, managing poor performers.
What's the root of these staggeringly high poor-performance statistics? Researchers at Sheffield's Institute of Work Psychology sampled manufacturing businesses and found that 18 percent of variations in productivity and 19 percent in profitability were attributed to people management practices.
In addition, The Future Foundation estimates the United States devotes $105 billion a year correcting problems associated with poor people management and hiring practices. This translates into 1.05 percent of the total United States gross domestic product. Clearly, the current approaches to people management waste corporate profits.
How to Improve Poor Performance
Promising instant results or oversimplifying quick fixes is counter-productive. No one-size-fits-all people management template will work for every organization. The strategy you use must fit within your company's business strategy and goals. And your management practices must fit together and mutually reinforce each other.
However, the following three strategies can be applied to every organization in any industry.
Better People Management
- Increase Accountability Everyone's contribution can and should be measured. Failure to set clear, measurable performance standards for each employee often leads to poor performance. The worker may believe he or she is meeting expectations, while the supervisor has a completely different perspective. When specific measurable objectives aren't in place, success is open to interpretation.
As a general rule, when setting performance goals you need to:
Make sure you reach a mutual understanding about each item before starting. A proven method of increasing accountability is increasing the frequency of performance reviews. Often employee performance reviews and goal-setting meetings are scheduled every 90 days; however, with such a long length of time, employees tend to wait until the last few weeks before the review to achieve the desired outcome. When this happens, you lose weeks of improved performance.
- Clearly define desired results or outcomes.
- Clarify approved policies or procedures. Be careful you don't dictate exactly how to reach the end result unless specifically asked. Remember that a goal can be achieved in different ways.
- Outline available resources. This may include a budget, personnel, and equipment.
- Set specific phases for accountability.
- Help the employee see the big picture and how his or her performance furthers the organization's goals.
Instead, break the goals into monthly segments. Then the employee can focus on a more realistic goal with a shorter duration. This makes it easier for them to stay motivated, you get the benefit of increased performance earlier, and any misunderstandings can be resolved sooner.
Plus, shorter timelines increase accountability. Holding each employee accountable and demonstrating how their contribution affects the company is essential for improved performance.
- Improve Your Hiring Process According to The Future Foundation study, an average of eight months of training is required to achieve expected performance levels. Currently, one out of eight American employees leaves the job before obtaining competency.
Worse yet, co-workers are not immune to the mis-hire. The same study found 23 percent of American workers surveyed feel their colleagues are incompetent.
To combat this problem, review your hiring process and calculate your success. Most companies have spent a great deal of time creating manufacturing and sales processes, but have neglected the procedures for finding, interviewing and hiring top talent. To do so:
Give your hiring processes the time and resources they deserve. The right people in the right positions are your most important asset - act like it.
- Hold your hiring process account- able: One of the leading causes of employee turnover is a poor job match. Calculate what your success rate is by determining the average length your employees stay before leaving. Calculate the cost of each mis-hire and work to decrease it on a regular basis.
- Plan properly: The axiom, "Poor planning produces poor performance and proper planning produces proper performance," is very true when it comes to hiring. Organize your hiring process with the same levels of effort and thought you use with other critical processes.
- Ask for feedback and conduct exit interviews: After a new employee has acclimated for 30 days, ask for confidential feedback on the hiring process while it's still fresh in their minds. You may receive information that will improve your process. Most companies perform exit interviews as people leave. If you don't, start now. You're missing out on valuable information that could improve your hiring.
- Revamp Your Development Process Most senior executives agree on the importance of developing a management team for superior business performance. The gap between current productivity levels and expected performance is often attributed to a lack of skills.
Although executives feel they are investing in their people, these programs are often under-funded, antiquated, and not in line with the organization's goals.
To improve your management's development process, stop funding reactive investments dealing with employee performance levels. The capital saved should be invested on proactive solutions to ensure the right people are matched with the right positions within the organization. This will go a long way to free up the manager's time spent on under-performers.
Second, review your development process to make sure it provides three essential elements: skills training, hands-on practices of acquired skills, and a network of advice from colleagues and mentors. Adults learn best when applying new information in a non-threatening environment to confirm understanding.
Third, be sure your development plan is in line with the strategic goals of the business. IBM now begins its development process by defining desired business results because their most popular training courses were producing a negative return on investment: They had to make changes in their system to attain their goals.
When you use this process to invest wisely, your development process will increase your bottom line.
Now more than ever, human capital is the key driver of profit and innovation. Effective people management practices get superior results by increasing accountability, retaining and recruiting better people, and developing innovative ways to increase profit.
In fact, integrated and appropriately applied people management strategies and practices are the most powerful driver of sustained success. Even small improvements can be expected to deliver results. When you use these people management strategies in your organization, you can increase productivity, eliminate under-performance, and boost your bottom line.
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