If you ask a business owner, director or senior manager from any organisation what their biggest competitive advantage is, they will probably answer – great products, competitive pricing, state-of-the-art production equipment, location or fantastic marketing.
While these may be good competitive advantages, they are not unique. Products can be copied, prices can be undercut, new production equipment can be bought, offices or factories can be relocated and marketing campaigns can be copied.
The only unique competitive advantage any company has is its staff. Employees are the lifeblood of any organisation, and yet their wellbeing, motivation and engagement are often overlooked by management.
Australian businesses lost $42 billion in 2012, largely as a result of the low level of staff engagement, according to a Gallup survey. Although the situation improved a little in 2013, lack of engagement and recognition is still a leading factor in employee turnover.
There is a strong correlation between staff engagement, brand value and corporate performance.
I believe that there is a very strong correlation between staff engagement, brand value and corporate performance. This can be clearly seen at organisations such as Apple, Virgin, Nike and Google. In these leading companies employees are made to feel valued, appreciated and part of the vision. As a result these companies regularly outperform their competitors.
Happy, motivated and engaged staff = great customer service = high brand value = corporate performance.
Without doubt one of the major challenges facing any business, whether they are a commercial operation or a not-for-profit organisation, is the ability to firstly attract the right staff, and then secondly engage, motivate and retain them. All too often a company will expend enormous time and energy in developing and nurturing staff, only to have them move on. This is not only frustrating, but can be costly and damaging to the business.
Mercer, a global consulting company, estimates that the cost of staff turnover and replacement can be as much as 150% of salary, and some companies claim it can cost even more.
To quantify these figures, we have produced a list of the potential costs for every time an employee leaves. There are a variety of obvious and some less obvious hidden costs to be considered. They are:
1. Slippage
When an employee is missing, the work that isn’t getting done has a lost opportunity cost associated with it. Lost sales, production delays and lags in new product introductions can all cost your company money.
2. Ripple effect
Staff turnover has an impact on the peer group, as well as the management chain, making everyone less effective. Coworkers 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. One CEO I heard of had his five-year growth plan turn into a six-year plan because of delays due to employee turnover.
3. Customer loss
When a knowledgeable or long-term employee leaves, taking experience and customer-service ability with her, it can have an impact on customer satisfaction. Customer commitments are often not met, and the company could lose important customers. Dealing with trainees can also be challenging. If you have a high level of staff turnover, customers can get frustrated and begin to lose interest in your business.
4. Lost credibility
When staff turnover is high, management can lose credibility. When you have an environment with excessive staff turnover, existing employees can become demoralised and decide to move on. This ripple effect can be disastrous.
Next week: the fifth hidden element
Tony Delaney, CEO, Brownie Points
