Pay close attention to how managers view the commodity called “labor.” In most organizations, the perspective is that labor is an expense. It is handled on the financial statements as an expense.
In most cases, labor is the highest monthly expense for an operation. It is the payment made in order to secure the resources needed to create the products or services sold by the organization.
As the largest expense for many operations, labor is watched and managed very closely. The profitability of the operation is directly impacted by how many workers there are, so all kinds of techniques are used to keep this variable under tight control.
Managers want to have exactly the right number of people on the roster, so perhaps they utilize temporary workers during peak times to mitigate overtime. They need to be careful because the temporary workers need to be sufficiently trained so there are no safety issues or quality lapses.
In many professional settings, the workers are stretched to the elastic limit and beyond. Managers ask individuals to take on responsibilities that were formerly done by two people or even more. This is done in the pursuit of maximum productivity, which is thought to be the prime governing mechanism for profit.
When budgeting, managers at various levels play games trying to pump up the size of the workforce realizing there will be cuts down the road. Alternatively some managers cut the estimated number of people to the bone in order to show positive yearly trends in productivity. The sequence goes on year after year in many organizations. The charade is well known by managers at all levels, and the posturing or tactics sometimes go beyond annoying to downright fraudulent.
Only in a small percentage of organizations do they view employees not as expense items but as assets. Oh sure, most companies have a value on the plaque in the lobby that states, “People are our most important asset,” but the managers’ daily actions reveal the hypocrisy of that platitude.
If people were the most important asset, then during times of low demand, the managers would be selling inventory or buildings and training the employees for future service. Instead, you inevitably see layoffs or at least furloughs to control labor expenses in slack times.
Try looking through a different lens
What if we really did think of employees as assets rather than expenses? Would that provide some unique and amazing possibilities for profits? I think so. Here are some benefits you might see…
1. People would feel valued
In most organizations, people feel like pawns. The investment is always minimal, and the expectation is that employment is a temporary condition at the whim of management and the vicissitudes of the fickle marketplace.
Treating people as valued assets would bring out the best in people because they would feel more engaged in the business. The magnitude of this effect can only be estimated, but it is a lot larger than most leaders realize.
For example, several studies have shown that the productivity multiplier between low trust groups and high trust groups is two to five times. When people are engaged in the work, they perform significantly better because they feel valued.
2. Development of people would be emphasized
The mindset of treating employees as assets would lead to continual training. When you invest in an asset, you take care of it and make sure it is performing at peak levels. This creates a situation where employees truly want to stay with an organization, which reduces the issue of turnover.
Turnover is often the most controllable expense in an organization, yet the true cost is hidden somewhat. World class organizations achieve turnover rates below 5%, while many organizations habitually live with a 30% or higher turnover rate. Do you know the turnover rate for your organization? Do you have an estimate of the cost for turnover?
3. The culture would be uplifting
When employees are learning and growing, they become more valuable not only for what they can do but for how they influence others. The workplace takes on a feeling of freedom and joy rather than of being an oarsman on a Viking ship. When people are treated like assets, they band together as a strong team or family that is unstoppable. The power of synergy is obvious, and the productivity gained from lack of quarreling is immense.
4. The focus would be on the right stuff
In most organizations, where people are considered expenses, the daily focus is myopic. People are grumbling about each other and trying to protect their turf and future. The atmosphere is one of scarcity where the resources are not there to do what is needed to survive. People are always clamoring for more resources. I knew one professional who spent about 40% of his time going around grumbling about not having enough resources to do his job.
When people are assets, the atmosphere is one of abundance where there is high value internally. People focus on the customer and on the mission of the unit. Since there is no longer a need to protect your back, you have the ability to move beyond just satisfying the customer or even delighting the customer to actually amazing the customer. That focus becomes a competitive weapon which further entrenches security for the future.
5. Organizations could be flatter
The need for numerous hierarchical levels has to do with control. When people are treated as expense items, they need to be kept in line. That means the span of control for any one manager cannot be too great. There is a lot of accounting work that needs to be done in order to assure the expense of labor is optimized.
When people are treated as assets, trust grows naturally. That dynamic means less supervision is required, so over time the hierarchy can become flatter. The overhead cost savings available to most organizations is staggering.
6. Improved Teamwork
If people are assets, the organization is going to do a lot of cross training, especially during slack times. That increased capability pays off handsomely when the cycle reverses and there is a need to cover some critical positions based on bench strength.
When workers cross train each other, they form a kind of bond that is intangible but highly valuable in times of high need.
These are just six ways an organization can prosper by considering employees as assets instead of expenses. The operation can be much more profitable in the long run with this kind of mindset. Try it in your organization and experience the difference for yourself.
Bob Whipple, MBA, CPLP, is a consultant, trainer, speaker, and author in the areas of leadership and trust. He is the author of: The Trust Factor: Advanced Leadership for Professionals, Understanding E-Body Language: Building Trust Online, and Leading with Trust is Like Sailing Downwind. Bob has many years as a senior executive with a Fortune 500 Company and with non-profit organizations. For more information, or to bring Bob in to speak at your next event, contact him at http://www.Leadergrow.com, bwhipple@leadergrow.com or 585.392.7763