Why 3 Choices Are Better Than 2

It is only in recent years that businesses have started to assess the cost of employee turnover. For many years it has not been an area of priority, simply because it wasn’t being measured and what isn’t measured isn’t valued.

So what are some of the costs associated with employee turnover?

  • Lowered productivity – you will find that either the work of the individual who has left is now not being done or, if it has been allocated to one or more people, that the more important work will be done whilst other tasks will fall by the wayside.
  • Overworked staff – although this is hard to assess it not unreasonable to assume that there is now more work to be done by fewer people (until someone is recruited and brought up to speed, but more on this later). As a result they are stretched thin, the quality of their work declines, and their level of engagement and satisfaction in the role falls. This makes them more likely to start looking for a new job and to leave. Those who remain will be overworked and you will lose their goodwill.
  • Lose High-Performers, Keep Low-Performers – a further impact of losing staff who are overworked is that it will be your best performers who are most marketable and will find it easier to find work elsewhere. As such, you will find that this cycle of losing people and the declining levels of engagement and satisfaction will accelerate. In an extreme situation you will lose your best people and find that you are left with the low-performers who are unmotivated and unable to find work anywhere else.
  • Lost knowledge – many people can do what your former employee did, but they lack the specific knowledge that person had. It’s about knowing the people, the traditions, the location of relevant information etcetera. It takes time to amass this information and you lose it when someone leaves. You also lose their insight into what the role involved, and specialized information relevant to it. Too often the actual role is rarely documented well enough for someone else to understand it and pick it up easily.
  • Lost relationships – whether these are internal or external it takes time to build the right rapport, relationships and level of trust. All the previous knowledge from relationships with key people is lost and needs to be rediscovered, recaptured and developed. This can be especially costly if the individual who has left had relationships with key clients, suppliers or key individuals internally.
  • Training costs – the training costs are easy to assess. But you also have to include the time it takes, especially if a colleague is training the new person ‘on the job’. Or if they attend a course then someone has to cover for them. Finally, you also need to cross-check their work until you are confident they can do it.
  • Interviewing costs – this can be expensive in terms of time and effort of all the people involved from putting together the advert, reviewing the resumes, sending out invites for interviews, arranging the internal and external logistics, carrying out multiple rounds of interviews, debriefs, selecting the right candidate, and negotiating with him or her. And of course, this doesn’t take into account the further costs incurred if you recruit the wrong person.
  • Recruiters – if you use them this can be helpful, but at a cost. This is often based on a percentage of the annual salary for the role being filled.

So what do all these costs add up to? Well how much? Estimates vary from 100 to 200 percent, or even greater, of annual salary. Much less for lower level positions, but still significant enough to make retention a high priority for your business.

And it gets worse!

These costs that your incur come straight off your bottom-line! This means, that you need to generate sufficient sales to recover the lost profit. Let me share an example of one client I worked with.

The client team was 30 people strong and was experiencing an employee turnover rate of 30%, not uncommon for the client’s industry.  The average salary was about $100,000. Using a rule-of-thumb of the costs being a 150% the costs were:

Employee Turnover Costs

  • 9 people x $100,000 x 150% – $1.35 million off the bottom-line

Margins

  • The client operated on slim margins of 2.5%.

Additional sales order to recover the lost profit:

  • $1.35m x (100/0.025) = $1.35m x 40 = $54 million in sales

And if you are operating in an economic downturn where markets are shrinking, there is greater competition and greater pressure on the margins, then you can begin to see how the impact of losing good people goes significantly beyond a reduced headcount – it can put your business seriously at risk!

So when looking at employee turnover make sure that you only turnover those who are not productive who you do not want to keep. For others, take the steps to counsel, coach and correct before they leave, and make sure you pay them a realistic sum. Turnover is expensive. Sometimes it cannot be avoided, but when it can, you should avoid it by doing the right things for your employees.

To view or download a PDF version of this blog click here.

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

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Creating Your Head Edge

How your mind can work for you, and against you!

Get your team, individually and collectively, to picture where they want the team to be at a given time (e.g. financial year-end).  Get them to see the picture of what it will look like, how they will feel, what they are doing.

The Power of VisualizationIt is important for them to be clear not on just where they will be, but how they will get there.  What do they have to do, day in and day out, for this to happen?  How will they do this?

Repeating visualization has been shown to improve performance and results.  Build this into all your interactions with your team, whether they be 1-to-1 or as a group, formally or informally.  On-going reinforcement of this is key and helps to build resilience and performance.

To view or download a PDF version of this blog click here 

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

What a Lack of Trust Can Cost You

Trust taxes are costs that you incur when there is little or no trust. When trust goes down, speed also goes down and cost goes up.  This is a “tax” – and this tax can double the cost of doing business.

Meeting in office

There are 7 types of “trust taxes”:

  • Redundancy & duplication with smaller spans of control – if there is less trust, then you will find that tighter control develops over smaller areas and that there is an unnecessary duplication of resources to offset the increase in perceived risk.
  • Bureaucracy – with less trust so procedures and systems become more cumbersome in order to bridge the perceived gap between what is needed and what is available in providing security and consistency in the work done.  In the US there is Nordstrom where its high levels of trust are reflected in its one card operating manual: on one side of the card it says – “We have one rule… – on the other side, it says “use your best judgment in all situations“.
  • Politics – more silos develop and turf wars become more prevalent.  Less trust results in individuals putting their agenda ahead of others and the business overall, it also creates a “fixed mindset” where people see the pie as fixed, so that they only way they can get a larger slice of the pie is at the expense of somebody else e.g. different departments negotiating for budget allocation will compete against each other for it.
  • Disengagement – a lack of trust reduces staff engagement as they do not believe that their leaders have their interest at heart.  This is reflected in research which shows that 96% of engaged employees trust their leaders, whereas only 46% of employees who are disengaged.
  • Turnover of Employees – as disengagement increases, so staff perceives roles and jobs elsewhere as more attractive which, previously, they might not have considered.
  • Churn – low trust also extends to customers and other stakeholders who now see other businesses as more attractive and less risky.
  • Fraud – with lowering levels of trust there is a lower level of integrity increasing the likelihood of fraud being committed within the company.

If you have a lack of trust, then you are likely to incur some or all of these taxes.  If you have a lack of trust then you need to address this. This is the subject of another blog.

To view or download a PDF version of this blog click here.

If you found this article of use or interest please don’t hesitate to share it with others.

What to Do Before You Start Making Decisions

What you need to do before you start the decision-making process

by Andrew Cooke, Growth & Profit Solutions

Decisions Before You DecideWe make decisions every day; small ones, big ones, unusual ones, specific or general and those which have become a force of habit.  We get so involved in the decision itself that we become blind to the key dimensions that surround it. So what are they, why are they important and how can we use them to help us make better and more effective decisions?

The Four Key Dimensions

There are four key dimensions which need to be considered when making a decision.  This includes:

  1. Composition: Who should be involved in the decision-making process?  You need to make sure you have the right people, with the right information, who can contribute and develop the necessary decision.4 Dimensions of Decision-Making
  2. Context: In what type of environment does the decision take place?  Is it an open environment that fosters open, constructive dialogue?  Or a closed environment in which personal interests supersedes those of the group?
  3. Communication: What are the “means of dialogue” among the participants?  Does it involve considerable direct discussion with those with relevant knowledge and expertise, or is it ‘filtered’ through reports from senior people in the hierarchy?  Are there face-to-face meetings or is it via phone, email, reports etcetera?
  4. Control: How will the leader control the process and the content of the decision?
  • Control of the Process how do you want to shape the way that the deliberations are undertaken and followed;
  • Control of the Content how much do you want to control the outcome of the decision

This last factor- Control – is the hardest, and has the greatest impact on the decision.

A Balanced Approach

A balance between control of the process and control of the content is required.  Too little or too much control of the process and/or the content will result in sub-optimal decisions.  Some of the impacts of low or high levels of control on the process or content are shown below.

Impact of the Level of Control of Content & Process in Decision-Making

 Decisions and Control

So how can we achieve a balance in controlling both the process and content of a decision?  There are three steps:

 3 Steps for a Balanced Approach

1.      Be Clear on the Decision

Are you clear on what the decision is that you are making is?   For example, you are looking at how to improve your retention of key customers.  This is not a decision; this is a problem that needs to be solved.  Be careful not to confuse decisions with problems.

2.      Know What Objectives & Outcomes You Want to Achieve

Have a clear understanding of where you want to be as a result of the decision you have made.  Knowing this will help you understand what expertise and information you need, from whom you need to get it, and the people who should be involved.

3.      Have Checks & Counter-Balances

You will find that you and others involved in the decision-making process will fall into common decision-making traps or errors of judgement.  Understanding them, and how to avoid them will provide you with the means to check your collective thoughts, ideas and insights and reduce the likelihood of your decision being subverted.

Use this as a checklist – make sure you address the four dimensions: Composition, Context, Communication and Control – and build the means for better decisions.  Will you share this with your colleagues and those who participate in your decision-making processes?

It’s your decision.

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Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

3 Steps to Help Your Managers Prepare for Difficult Conversations

In times of challenges and uncertainty, supervisors might be experiencing an increase in the number of difficult conversations with their staff. These could include delivering bad news about an employee’s job, informing staff about work restructuring, or discussing other complicated and stressful work situations.

  1. Preparing for the conversation

Before going into the conversation, ask yourself several key questions. Consult with peers, and other appropriate resources to be sure you’re comfortable with the answers.

Key questions include:

  • What is my purpose for having the conversation?
  • What do I hope to accomplish?
  • What is the ideal outcome?
  • What assumptions am I making about the other person’s reaction to the conversation?
  • What “hot buttons” exist – for me and for the other person?
  • How is my attitude toward the conversation contributing to the intended outcome?

Practice the conversation. You can mentally rehearse it in your mind, or practice it out loud with your supervisor, Employee Assistance Program, or Human Resources.

  1. Holding the conversation

A successful outcome will depend on two things: what you say and how you say it. How you approach the conversation and how you behave will greatly influence what you say and how it is perceived.

Acknowledge any emotional energy that might be fueled by the conversation. The emotional content is as important as the facts.

Keep aligned with the purpose of your conversation. Don’t be distracted by side tracks.

Suggestions for opening the conversation include:

  • “I’d like to talk to you about. . .”
  • “I want to better understand your point of view. Can we talk more about. . .”
  • “I’d like to talk about ________. I think we may have different ideas on how to ______.”

 

  1. Working Toward a Successful Outcome

Approach the conversation with an attitude of inquiry and discovery. Set aside assumptions and try to learn as much as possible about the other person’s point of view. Let the employees complete what they have to say without interruption.

Acknowledge that you’ve heard what the other person is trying to say. The best way to do this is to repeat their argument back to them. You don’t have to agree. Saying “it sounds like this issue is very important to you” doesn’t mean that you have to decide the way they’d like you to.

Advocate for your position without diminishing theirs. State your position concisely and clarify points they may not have understood.

End with problem solving. Find mutual areas where you can agree on solutions and identify what steps need to be taken. If there is no common ground, return to inquiry.

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

Peter Drucker on Marketing

Peter DruckerLong ago Peter Drucker, the father of business consulting, made a very profound observation that has been lost in the sands of time:

Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

Today, when top management is surveyed, their priorities in order are finance, sales, production, management, legal and people. Missing from the list: marketing and innovation. When one considers the trouble that many of our icons have run into in recent years, it is not easy to surmise that Drucker’s advice would have perhaps helped management to avoid the problems they face today.

Ironically, David Packard of Hewlett-Packard fame once observed that “marketing is too important to be left to the marketing people.” But as the years rolled on, rather than learn about marketing and innovation, executives started to search for role models instead of marketing models.

Tom Peters probably gave this trend a giant boost with the very successful book he co-authored, In Search of Excellence. Excellence, as defined in that book, didn’t equal longevity, however, as many of the role models offered there have since foundered. In retrospect, a better title for the book might have been In Search of Strategy.

A popular method-by-example book has been Built to Last by James Collins and Jerry Porras. In it, they write glowingly about “Big Hairy Audacious Goals” that turned the likes of Boeing, Wal-Mart Stores, General Electric, IBM and others into the successful giants they have become.

The companies that the authors of Built to Last suggest for emulation were founded from 1812 (Citicorp) to 1945 (Wal-Mart). These firms didn’t have to deal with the intense competition in today’s global economy. While there is much you can learn from their success, they had the luxury of growing up when business life was a lot simpler. As a result, these role models are not very useful for companies today.

There is a growing legion of competitors coming at new businesses from every corner of the globe. Technologies are ever changing. The pace of change is faster. It is increasingly difficult for CEOs to digest the flood of information out there and make the right choices.

But a CEO can have a future.

The trick to surviving out there is not to stare at the balance sheet but simply to know where you must go to find success in a market. That’s because no one can follow you (the board, your managers, your employees) if you don’t know where you’re headed.

How do you find the proper direction? To become a great strategist, you have to put your mind in the mud of the marketplace. You have to find your inspiration down at the front, in the ebb and flow of the great marketing battles taking place in the mind of the prospect. Here is a four-step process to pursue:

Step 1: Make Sense in the Context

Arguments are never made in a vacuum. There are always surrounding competitors trying to make arguments of their own. Your message has to make sense in the context of the category. It has to start with what the marketplace has heard and registered from your competition.

What you really want to get is a quick snapshot of the perceptions that exist in the mind, not deep thoughts.

What you’re after are the perceptual strengths and weaknesses of you and your competitors as they exist in the minds of the target group of customers.

Step 2: Find the Differentiating Idea

To be different is to be not the same. To be unique is to be one of its kinds.

So you’re looking for something that separates you from your competitors. The secret to this understands that your difference does not have to be product related.

Consider a horse. Yes, horses are quickly differentiated by their type. There are racehorses, jumpers, ranch horses, wild horses and on and on. But racehorses can be differentiated by breeding, by performance, by stable, by the trainer and so forth.

Step 3: Have the Credentials

There are many ways to set your company or product apart. Let’s just say the trick is to find that difference and then use it to set up a benefit for your customer.

To build a logical argument for your difference, you must have the credentials to support your differentiating idea, to make it real and believable.

If you have a product difference, then you should be able to demonstrate that difference. The demonstration, in turn, becomes your credentials. If you have a leak-proof valve, then you should be able to have a direct comparison with valves that can leak.

Claims of difference without proof are really just claims. For example, a “wide-track” Pontiac must be wider than other cars. British Airways as the “world’s favorite airline” should fly more people than any other airline. Coca-Cola as the “real thing” has to have invented colas.

You can’t differentiate with smoke and mirrors. Consumers are skeptical. They’re thinking, “Oh yeah, Mr. Advertiser? Prove it!” You must be able to support your argument.

It’s not exactly like being in a court of law. It’s more like being in the court of public opinion, especially with the rise of social media.

Step 4: Communicate Your Difference

Just as you can’t keep your light under a basket, you can’t keep your difference under wraps.

If you build a differentiated product, the world will not automatically beat a path to your door. Better products don’t win. Better perceptions tend to be the winners. The truth will not win out unless it has some help along the way.

Every aspect of your communications should reflect your difference. Your advertising. Your brochures. Your web site. Your sales presentations.

The folks who work for or with you don’t need mystical answers on “How do I unlock my true potential?” The question they need answering is, “What makes this company different?”

That answer gives them something to latch onto, and run with.

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

How to Stop Fear from Stopping You

People often experience fear and concern over what is happening or not happening as they perceive it.  As a leader, how do you manage fear?

A good piece of advice from Olivia Blanchard chief economist of the IMF was: “first and foremost, reduce uncertainty….Above all, adopt clear policies and act decisively”. When people have a clear mission then they can transform anxiety into action and productivity.

People need the opportunity, a warning as it were, so they can put themselves in the right frame of mind. When people are aware there is a looming disaster or threat prepare themselves better and become more resilient.

To help your team master their fear, and to use it judo-like to their and your benefit, help them by taking these three steps:

  • Recognize that you and they are afraid – if you can’t be honest with yourself and them about this then you can’t expect them to be.  Being prepared to admit you are afraid and ready to face your fear is not a sign of weakness, but a sign of strength. It also stops people from letting the fear fester causing their energy and self-confidence to be eroded.
  • Frame the situation as an opportunity – this helps people to think more innovatively and creatively.  To quote “When you focus on problems, you’ll have more problems.  When you focus on possibilities, you’ll have more opportunities”  In changing times what got you here won’t get you there.  You need to get different results, and to get different results you need to behave and think differently. As Einstein put it “We cannot solve our problems with the same thinking we used when we created them.”
  • Develop a sense of urgency – help them use and focus their liberated energy and enthusiasm to take action and get some “quick wins” whilst building for the longer-term.

Fear is only in our mind, so use your mind to “throw” it to your advantage.  By doing you also help others to do the same for themselves and become more resilient, flexible and adaptable in the process.

To view or download a PDF version of this article click here.

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.