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Employees and Profits: How to Increase the Bottom Line

By John Towler Ph.D. |

Everybody knows that happy customers lead to higher profits. But the same is true for happy employees and the reasons why this is so may surprise you. The reasons have to do with turnover, performance, theft and disruptions. Here are the facts.

Turnover – American companies regularly turn over about one half of their employees every four to five years. This is very costly since replacing an employee can cost between 25% and 200% of their annual salary. If you reduce your turnover, you save the money that it costs to make new hires. Even a 5% increase in retention will improve a bottom line profit margin by 25% or more. Obviously, it is better to keep employees than let them leave. Of course this only applies if you hire the best and retain the best. But what kind of employees do you actually have?

A survey of more than 10,000 employees in more than 32 countries found that no matter where you do business, employees fall into one of four categories.

Loyal – 34%These are the very best employees. They work hard, are the most productive and give good customer service. They are also the ones that are most likely to stay with the firm.
Transitory 8%These are good employees, but they will leave within 2 years for personal reasons that have nothing to do with the firm, the people they work with, or their working conditions.
Trapped 31%These people hate their jobs and the firm and would leave if they could. However, they are trapped and cannot leave, or feel that they can't escape. In the meantime, they do very little, are only as productive as they need to be to stay out of trouble and generally waste time. Unfortunately, they stay on just filling in time and space.
Inferior 27%These are the poor employees. They do as little as possible, are disruptive, non-productive and will either leave on their own or when they are found out and fired. But in the meantime, the don't contribute anything worthwhile, but they do cause problems.

The inferior employees create your biggest headaches and cost the firm the most. In addition to a lack of productivity, they do things that put the firm at risk through theft, or misconduct. These are the people who cause the most shrinkage. They are also the ones that engage in questionable behaviors such as harassment, rudeness to customers, or sending offensive emails. The latter may leave a firm legally liable for the actions of these people. One wonders how they got hired in the first place.

Unfortunately, the problems may not end when these people leave the company. A disgruntled employee may retaliate by sending disruptive emails to former co-workers. This happened at Intel where not only did a fired worker send 35,000 email messages, but the California Supreme Court has just upheld his right to do so. This gives a whole new and dreadful meaning to SPAM. Just think of the damage that could happen if that employee had targeted customers instead of co-workers. That would have been illegal since it would be easy to show that the firm had been damaged. But in the meantime, the harm would have taken place.

Obviously, it is far better, more profitable and less troublesome to have happy employees. How do you accomplish this? It's an easy two-step process.

Hire the best. Pre-screen your applicants for their knowledge, skills, attitudes and ethics. The reason for selecting employees with the right knowledge and skills is obvious, but what about the issue of ethics? Ethical employees don't steal, and don't engage in disruptive behaviors. They are less likely to become aggressive or become irrational. Use one of the readily available pre-screening tools to help you avoid hiring someone else's rejects. Just make sure that the instrument is accurate, valid and reliable.

Keep them happy. This means finding out what they want, and what troubles. This also means listening to them, addressing their areas of concern, and taking action to remedy certain issues before they become big problems. This can best be done through anonymous satisfaction surveys. Look for ones that can be customized to include questions that measure morality within the firm. Employees who are guaranteed anonymity will tell you what's really happening, where the gaps are in your security or shrinkage programs and give examples of improper behaviors. But, and this is a big but, don't even think of doing a survey unless you are prepared to act on the results. If you fail to show that you have listened and are going to do something, your employees will be even more unhappy since they will feel that management really isn't interested in their concerns.

Employees are the backbone of any organization and happy ones have a continual, positive effect on the bottom line. Finding them and keeping them is easy and best of all, when you eliminate the 27% who are poor or inferior performers, it leaves you with the opportunity to do something significant with the remaining 73%. As Einstein said, solving a problem is easy. It is the identification of the problem that is hard. These approaches will help you with the diagnostics; the rest is up to you.

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