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Save on Staff Costs

The hidden costs of employee turnover.

Gwen Moran

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Employee turnover has some obvious costs associated with it, including recruitment, training and salary. However, every time an employee leaves, there are a variety of hidden costs you might not have considered.

The cost of churn

While you might not be writing a cheque for these costs, here is how staff turnover can drain rands:

  • Slippage. When an employee is missing, the work that isn’t getting done has a price attached to it. Lost sales, production delays and lags in new product introductions all cost your company money.
  • Ripple effect. Turnover has an impact on the peer group, as well as the management chain, making everyone less effective. Co-workers need to pick up the slack, distracting them from achieving their own performance goals while managers need to devote time to finding a new employee.
  • Customer loss. When a knowledgeable employee leaves, taking experience and customer service ability with him or her, that can have an impact on customer satisfaction. Customer commitments are suddenly not being met, and the company loses important customers. Dealing with trainees can be challenging. If you have a lot of unwanted turnover, customers can get annoyed or begin to lose interest in your business.
  • Lost credibility. Turnover is a cost to management in two ways: Management can lose credibility when it creates an environment with excessive turnover, and existing employees can become demoralised and decide to move on.

Invest now, save later

It’s important for SMEs in particular to work on creating environments that retain employees. Too often, SME owners don’t consider how important it is to invest time and resources into their employees. Either way, you pay.

Gwen Moran is co-author of The Complete Idiot's Guide to Business Plans.

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Managing Staff

Why I Stopped Doing Annual Employee Reviews

Why wait months to discuss problems that matter now?

Ximena Hartsock

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When my company Phone2Action launched in 2013, we tried to manage employee performance with annual reviews. It was pointless. Why wait months to discuss problems that matter now? In a start-up, we needed to move faster and calibrate more often than annual reviews permitted.

We scrapped reviews and implemented a performance management system developed by Martin O’Malley, former governor of Maryland. He “disrupted” conventional management techniques well before Agile and Lean Start-up methodologies swept through Silicon Valley.

Today, many companies use “data-driven” management techniques. However, they struggle to find a balance between team and individual accountability, transparency and privacy, and actions and goals. O’Malley’s approach may help you find the sweet spot.

The CitiStat story

citistat-logoWhen O’Malley become mayor of Baltimore in 1999, the city suffered from chronic absenteeism, excessive overtime and poor response times. He implemented a data-tracking and management approach called CitiStat, inspired by the New York City Police Department’s CompStat crime analytics. Between 1999 and 2007, CitiStat saved Baltimore an estimated $350 million yet the programme cost only $400,000 per year (spent mainly on staff salaries), according to the Center for American Progress.

Related: These 4 Types Of ‘Nightmare Managers’ Are Scaring Employees Away

CitiStat required city departments to track performance metrics unique to their responsibilities. The Department of Transportation, for example, recorded how quickly it filled potholes after being alerted.

The department heads met with the CitiStat team every two weeks to review the data. If it was trending in the wrong direction, the CitiStat team and department head would brainstorm and test a solution. At the next meeting, the data would reveal whether the follow-up actions had made a difference. By 2007, the Department of Transportation was filling 97 percent of potholes within 48 hours of notification.

Other cities took note of O’Malley’s success. Mayor Adrian Fenty introduced a version called CapSTAT in the District of Columbia Government, where I learned the system. We used it to track major initiatives such as school openings.

“CapSTATs” were intense accountability meetings that gathered all the agency heads. When an initiative hit delays, there was no place to hide. The numbers, the colors (green for on track, yellow for delayed and red for behind) and mapping revealed the status of everything.

Having observed the effectiveness of CapSTAT, I wanted to create a version for Phone2Action. We called it ActionSTAT.

Why it’s different

There are different schools of thought in performance management. ActionSTAT addresses three conflicts that arise in most performance evaluation systems.

1. Team v. individual

Traditional employee reviews often happen in isolation and emphasise individual achievements. In contrast, ActionSTAT holds both the team and individual accountable by measuring how people spend their time. The system connects individual actions and goals to departmental and company goals.

This kind of “systems thinking” is hard to achieve in government but comes naturally in technology companies, which have standard measures of success. In software-as-a-service (SaaS), these could include annual recurring revenue (AAR), monthly recurring revenue (MMR) and gross retention.

For example, let’s say we ask each salesperson to make 40 calls per day. The salespeople who perform this “leading action” close more deals than those who don’t. The action appears to work, so we keep doing it. If salespeople made the 40 calls but didn’t close more deals, we’d test other leading actions. Ultimately, we trace the salespeople’s work to AAR and MMR.

2. Public v. private feedback

One of the hardest aspects of performance management is giving and receiving feedback. When a manager gives an employee feedback in private, the company doesn’t gain institutional knowledge. Only two people learn from the experience. When performance management is a team activity, a culture of continuous learning, improvement and transparency can emerge.

Phone2Action holds ActionSTATs every Thursday at 10 a.m. The meetings are open to everyone but focused on one department each week. We start ActionSTAT by reviewing a dashboard that shows the most important metrics of company health. Those include our load time, conversion rate and retention rate.

Next, we look at the department’s lagging indicators (marked green, yellow and red, just like in CapSTAT) followed by its “leading actions.” Often, we look at individual leading actions, too. The data sparks questions, conversation and feedback from across the company.

Related: 10 Tips To Motivate Employees Without Resorting To Money

Over time, a few things happen:

  1. Everyone in the company gets used to providing and receiving feedback.
  2. Everyone gets used to discussing performance publicly.
  3. Everyone sees what people do in other departments and therefore learns how each team member contributes to the company’s goals.

The health metrics never change, but how teams spend their time can. By discussing the leading actions of each department, we set and correct behaviours.

3. Actions v. goals

ActionSTAT distinguishes between how people spend their time (leading actions) and lagging indicators (goals defined by metrics). This is crucial because companies that manage solely by objectives cannot address the behaviors that drive the outcomes.

If we want to lose weight, jumping on the scale everyday won’t change anything. What we eat and how much we exercise will. The same applies to companies. If we measure lagging indicators but not the activities that influence them, we will not identify what works.

Every ActionSTAT becomes a chance to refine leading actions. If we wait one full year to evaluate an employee, we see if she hit the metrics, but we cannot correct behaviours along the way. Performance management is about continuously identifying the actions that produce desirable outcomes.

Related: ‘Let’s Be Friends’: Bad Idea When That Person Is Your Employee?

A thing of the past

Every tech company wants to be “agile,” but traditional employee reviews hinder that culture. Annual reviews exhaust managers and stress out employees who might have spent months working tirelessly – in the wrong direction. Neither the company nor the employee can afford to wait a year for the feedback.

Today, people choose work environments where they can learn continuously and understand how their actions contribute to the company’s success. Annual reviews are thing of the past.

This article was originally posted here on Entrepreneur.com.

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Your Employees Are Your Greatest Asset – Manage Them Well

The success of a business depends on many factors, but there are good reasons for arguing that a company’s people must be regarded as a critical lever for success. Consequently, smart business means smart people management.

Morné Stoltz

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The notion of the six capitals captures the idea that business does not only require financial capital to deliver returns. It also needs manufacturing, social and relationship, intellectual and human capital —not forgetting the natural capital on which everything depends.

This being said, human capital is rightly regarded as somewhat special for several reasons:

  • It has agency. Human capital is the only capital that has a mind of its own. If employees are not happy, or get a better offer, they will simply leave your employ.
  • It costs a lot to acquire and maintain. Human capital is expensive to acquire, and must then be trained regularly. It also requires benefits like canteens, medical aid, pension, holidays and so on. It thus represents a cumulative investment, and we all know that investments need to generate returns or they are not worth making.
  • It can be a value multiplier. Properly trained and fully engaged employees deliver more than just output. Their contribution also includes building relationships with clients and business partners, collaborating with and motivating colleagues, acting as a repository of institutional memory, and coming up with innovations that save money, improve sales or open up new opportunities. In this way, employees can add tremendous value to your business, and their potential to do so increases the longer they work for you. Alternatively, getting an employee to the point at which he or she is capable of adding significant value is a long and costly journey.

Related: 10 Ways To Make Your Employees 10x More Productive

And, of course, your star performers are most at risk of being poached by competitors, who thus stand to benefit from your investment in that person — adding insult to injury!

So, if your employees are such a valuable asset, how do you maximise their contribution?

Acknowledge achievement

Star performers are always innately motivated people. To take advantage of that, you need to recognise that highly motivated people need affirmation that their contribution is valued, and to be doing something that is worthwhile. Managers thus need to provide positive feedback and acknowledge achievement.

And take a leaf out of Google’s book: it mandates that employees spend at least 20% of their time doing “what they believe will benefit Google most”. Such projects typically yield huge dividends for the company, and ensure that employees remain engaged.

Give them the bigger picture

More generally, research shows that employees find it extremely demotivating not to understand the big picture into which their work fits and not to have any control over their work schedules. Other big employee turnoffs include intrusive or punitive rules, such as overzealous attendance policies or appropriating employees’ frequent flyer miles. Rules like these work against the kind of collaborative atmosphere that nourishes high performers.

Collaboration is also hampered enormously by an office atmosphere that is characterised by conflict with other employees and, of course, any kind of prejudice.

Treat employees fairly based on performance

Companies should also think carefully about how they treat employees. It might seem fair to treat everybody equally, but in fact that ends up discriminating against those that work harder and smarter. The flip side of the coin is that poor performers suffer no consequences – even though it is their colleagues who have to pick up the slack.

Related: Why Your Employees’ Health Is Your SME’s Wealth

These are general points, but employees are individuals whose preferences are likely to change as they get older. Smart employers who understand the power of an engaged and experienced workforce will put a mechanism in place for asking employees regularly how they want to work and what they like or dislike about their current work conditions.

For example, somebody who is motivated mostly by good benefits might, once his or her children are grown up, become more interested in working on projects that have a specific focus.

Some food for thought in parting, everything one reads about employee motivation mentions fun. Avoiding the pitfalls mentioned above will go a long way towards creating a pleasant and productive workplace that people want to visit, but the odd bit of fun is also necessary. Everybody has his or her own idea of what constitutes fun; again, and this should be your watchword, ask your employees.

MiWay is an Authorised Financial Services Provider (Licence no: 33970).

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Managing Staff

How To Plan Effective On-The-Job Training Programmes That Work

On-the-job training doesn’t have to be the hassle you make it out to be.

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A company which takes pride in their employees’ professional development and provides them with the right training to expand on their roles, will quickly reap the benefits through loyal, productive employees. There is no employee who doesn’t want to learn or progress in their career. And, unfortunately, the reality is that when employees don’t have access to these opportunities, they are more likely to move on.

On-the-job training doesn’t have to be the hassle you make it out to be. What it is, is an investment.

Understanding the basics of how to plan and conduct a training course is the first step to understanding the importance behind this initiative. Not only is it beneficial to your employees, but also to the company.

Understanding the importance of on-the-job training

On-the-job skills development that includes SETA training will not only benefit your employees but it will provide your business with new opportunities for years to come. Due to economic and financial challenges in South Africa, it is important for companies to invest in programmes to keep up with competition, increase their lifespan, and keep their employees happy.

Related: 10 Ways To Make Your Employees 10x More Productive

When employees feel motivated, they perform well. For your company to invest in skills training, it means the following:

Happier workforce

According to this article, positive emotions appear to invigorate human beings. When employees feel inspired, they become more enthusiastic and loyal to your company. And, in essence, good employee commitment results in a boost in company profits.

Internal promotions

Investing in your employees means that you are promoting the need for skilled employees. An ‘always learning’ mentality contributes to a positive attitude which will take you to even bigger heights. When employees are always bettering themselves, there is no reason not to promote them and keep them satisfied during their stay at your company.

You will attract new talent

This is a no-brainer. Millennials, who are currently flooding the job market, are the ones who want to keep learning and keep changing the way businesses operate. If your company supports professional development, you will find that many people will be attracted to you simply because of that. This type of company culture shows that you want to grow people and you are willing to spend the money on building a better team.

Employee flexibility

In today’s working world, people’s job roles do not determine any other responsibilities that are required of you. Gone are the days where you weren’t able to do something because of the lack of training as today, everyone needs to be able to assist where need be. Companies need to create a flexible workforce that is capable of many things.

Issues that enhance the need for training

For business owners looking to implement a new training programme, it might be best to consult with an external training organisation beforehand. They will be able to come in, sit with your staff and successfully execute a programme that will play out according to specific employee acts and skills development legislation.

Related: 5 Mindset Changes You Must Make When Going From Employee To Entrepreneur

There are a number of reasons why employees need to be trained, including:

Lack of communication

Internal communication is one of the biggest barriers among employees and management. When things aren’t structured or run systematically, employees cannot do their jobs, and they’re not motivated to do their jobs properly when they don’t have the skills to do so. Not to mention, a lack of communication is demotivating for employees as they’re not kept in the loop of things that are happening around them. When people know what purpose they play in the bigger picture, they’ll be able to feel the value they’re adding.

Not up to date with the latest technology

Besides the skills you need to deliver a task, employees need to be up to scratch on the latest technology. Not only does this frustrate business owners, thinking employees cannot do the job properly, but it limits employees completely. Upgrades and modern technology make on-the-job training more beneficial.

Understanding your position

When employees have a proper job description, they feel more secure in their positions. It’s important for companies to be clear on employee tasks, not only to plan around their skills but to also set boundaries on tasks so that employees are not overworked.

For businesses which want to be a cut above the rest, they will understand the importance of skills development. Industries are always changing, providing an even bigger purpose for training. With the constant change in technology and trends, there will always be a reason for companies to train their staff. However, understanding the ‘why’ and then implementing the ‘how’ is always the challenge.

Here are a few tips to planning effective on-the-job training programmes that actually work:

  • Start by assessing each employee and their roles. Once you’ve analysed their positions, jot down the skills you think your employees need to be able to do their jobs better.
  • Wrap your head around the type of programme you’re going to implement. Once you’ve created a strategy around this, brainstorm the type of methods, resources and materials you’ll need. Try to stay away from self-help work, unless there is something to achieve at the end.
  • Employees will need to understand the importance behind these programmes, therefore when implemented by an external company, they cannot be avoided. If it is set up by an in-house management team, business owners need to ensure that the implementation is strong enough to keep employees engaged, enthusiastic and committed to learning.
  • Once you have completed a programme, make it a priority to include follow up meetings with staff to evaluate the outcome of the training. Usually, when employees can get involved in practising what they’ve learned, it guarantees better and more successful after-training results.

Final words

Forget the challenge and look at the benefits that skills training will provide you, your business and your employees. Skills development and training goes beyond using just the basic skills to perform a task and be a better employee. It’s about building a better future for your company and your employees.

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