Are You Only Seeing A Portion Of Your Staffing Costs?

June 15, 2017

'It's tough to find good employees these days.' That common saying has been uttered for years, centuries if period television shows are to be believed. However, it makes me wonder if the problem isn't more related to the employer. Have they created an environment where the employee feels appreciated and connected to the work?  

This is the basis of that all-important buzz word "engagement." Employees who are engaged with their work, or employer, produce better results and are more loyal in all the ways that matter, including work ethic. Engagement is why our customers spend money to offer premium coffee or free food in the break room. It's why workplace cafes have become a real thing and interior designers are being asked to plan beautiful break areas.  

When you are the owner of a smaller company however, it can be hard to put a price on employee engagement. It seems like costly extras that shouldn't be needed. Even with statistics about the benefits of engaged employees on the bottom line, it can still seem so unnecessary.  

Cost of your workforce 

I did a little digging and while most people know what they spend on employee salaries and benefits, their understanding of the full cost of their workforce is incomplete. According to the Society for Human Resource Management, people obsessed with employee/employer relations, the total cost of workforce (TCOW) is a metric that includes a variety of labor costs such as recruiting, onboarding and training, as well as wages and benefits. In a recent article, an HR manager at a beer distributing company was arguing for higher driver wages. Senior executives didn't agree, caring only about how many kegs were delivered each day. The HR manager showed the negative effect on deliveries caused by higher turnover (due to low wages) and high time-to-fill rates. It was an effective way to get the executives attention. 

In any business, but especially service and delivery, the cost of recruiting, interviewing, hiring, training and onboarding are real costs, but can be hard to uncover. How long does it take to get a new employee to full productivity? How does performance of other employees suffer when they are distracted by hiring someone new or covering for an employee who left?  

Accounting for every dollar 

In this era of technology and big data where we can capture every transaction and cost, numbers are becoming more important. It helps reveal trends and places where we can be more efficient and profitable. It's a good thing. But some numbers are harder to calculate, so it's important to assign your workforce a cost that includes more than just salaries and benefits per employee. Include costs of turnover and low engagement. It could be that paying a little more in salaries increases delivery efficiencies. Or perhaps it means offering your own employees a pantry service with free food in the break room to make them feel more appreciated, thus reducing turnover. 

Sometimes as a managers we need to step out of ourselves. Rather than using our personal feelings and a quid pro quo mentality, we must figure out how to improve a situation so the entire company will benefit. Numbers can help us step out of ourselves, but only if we remember to include the whole picture.    

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