Your Workforce: Expense or Asset?

May 14, 2019

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


The Golf Ball of Trust

May 4, 2013

golfball_fixedJust as a golf ball is completely different on the inside and the outside, so trust built by leaders has important characteristics inside that may not be obvious from the outside.

For any leader, the aspect of trust in the organization is a foundation for performance. Without trust, groups might look the same on the outside, just as a golf ball looks shiny and dimpled on the outside, but it is the compressed inner layers that give power and flight characteristics to the ball.

Actually, golf balls come in numerous designs from one piece (practice) balls to five piece balls: each design having different characteristics. For example, the two-piece ball is designed for low spin to allow excellent stoppage on the green and to minimize the magnitude of any slice or hook. Trust also comes in a variety of designs, and you cannot tell how well established the trust is by just looking at the outside. The striking difference between high trust groups and low trust groups can be seen on many levels. Let me name a few ways trust impacts how groups operate.

What people say

One good barometer of trust is to monitor what people are saying to each other in normal conversation. If you just walk around your place of work for a day and listen to how people talk, you will get a quick view of the level of trust. Mark an X on your score card every time you hear a conversation about pursuing the goals or vision of the group. Mark an O on the card every time you hear a conversation that is basically badmouthing other individuals within the group. If, at the end of the round, you have more X’s than O’s, then you are likely witnessing a high trust group. If it is the other way around, then trust is low, just like cheap “driving range” golf balls.

How groups deal with challenges

All groups have challenges from time to time. Groups with low trust get stopped in their tracks because the interpersonal problems make it very difficult to even figure out what is wrong. It is as if a golfer accidentally used the wrong style of golf ball off the Tee. The error would be evident from the results. Groups with high trust can resolve challenges quickly and easily because they communicate honestly. They deal with the root cause of problems rather than getting hung up on symptoms. They also frequently come up with more creative solutions to problems because they are free to explore out-of-the box ideas. Teams at work have a style of operating that works to produce the highest level of trust. Golfers find a type of ball they are most comfortable with, based on their swing and strength.

The level of people development

In high trust environments, the leaders are vitally interested in developing all employees to be the best they can be. Investment in people is a hallmark of high trust groups. In low trust organizations, you can find leaders who are less interested in training people for a few different reasons: 1) They are so busy trying to survive that they have no time to devote to training, 2) Leaders are afraid if people are properly trained the leader might be overtaken, or 3) There is so much apathy that nobody really feels like development would be helpful. Not investing in people would be the equivalent of using a cut ball where the surlyn cover has been damaged to the extent that the core is compromised.

Making ethical decisions

The study of ethics is very interesting because most leaders are convinced they are ethical, yet many of them find ways to shade things somehow when nobody is looking. We see this all the time in scandals that seem to come up like crocuses in spring. The important part of being ethical is not what you do when people will see it but what you do when nobody would know if you were cheating. Having two sets of books, one for public display and one that is kept hidden away is a good example of a kind of empty shell of a leader, like a golfer who is inclined to write a wrong number on his or her card if nobody is keeping track. For an honest golfer, it is annoying to have another person checking to see that the right number of strokes has been recorded for each hole. This verification step signals a lack of overall trust, and it can lead to hard feelings.

Exposing hypocrisy

When leaders talk a good game, but really do not act in ways that are consistent with their words, there is a falsehood that is obvious to everyone. It is like we all have x-ray vision and can see inside the ball. One good example of this is when senior leaders have a value like, “People are our most important asset.” It sounds really good until you realize that the decisions made on a daily basis rarely reflect that as a reality. If it was so, then when times were tough, the senior leaders would scale back by selling off buildings and equipment and keeping people on the payroll. Instead, they do the opposite. People notice the hypocrisy quickly, so the value becomes something we say but not something we back up with actions. We may look good on the outside but we are missing an important layer inside.

The analogy here may be kind of wild, but it is an interesting one because we rarely think of what is going on inside as being that important, but we sure would notice a difference on the links if we were using incorrectly fabricated golf balls. Likewise leaders need a firm foundation that is as true under the surface at it appears to observers.

Incidentally, the golf ball in the picture is real, not Photo-shopped.  I obtained it in the late 1970’s at the home of a relative who found the ball in his garden. He lived next to a fairway on the golf course at San Clemente, California, where Nixon lived at that time. The ball is a “Titleist 4” and is identified “K2 Acushnet.”  It is available, if anyone is interested.


Leaders. Read Your Hat

May 22, 2011

I used to enjoy watching the Alf Show on television. The gags were very creative, as was Alf. I remember a concept from one episode that has a lot to do with trust. In that edition, Willie was dealing with a CEO of a large organization. This leader wore t-shirts and a hat that were inscribed, “Save the Earth!” The leader was saying the right things, but in reality he was making decisions to dump toxic waste from his factory into the river. Willie tried in vain to have this manager see the hypocrisy of his actions. Finally in exasperation, he yelled at the leader, “Read your hat, man.”

The concept of reminding leaders when they are not practicing what they preach is one that can build trust or it can destroy what trust is already there. It all depends on how the person wearing the hat treats the person holding up the ” You are Acting Like a Hypocrite” sign.

If the leader becomes defensive and in some way punishes an individual for pointing out a perceived inconsistency, then that leader is destroying trust by blocking a vital communication channel in the future. Future messages of potentially wrong behavior will not be sent.

It is probably impossible for any leader, no matter how enlightened, to practice this 100% of the time. For one thing, the person with a gripe may pick a poor time, place, or method of describing the paradox. I think if a leader can move from a typical low percentage of making people feel glad when they point out a disconnect (my opinion is that most leaders can do this roughly 10% of the time) to doing it over 70% of the time, then the culture will shift. The environment will become one of higher trust and respect.

If the leader is wearing a hat with the words, “I want to build trust” on it, then the best way to do it is to reinforce people when they are candid with their observations. In other words, make the person glad when he or she points out something you have done that seems inconsistent or wrong. Read your hat!


Neon Hypocrisy

March 19, 2011

Many organizations (perhaps most of them) have a value that states, “People are our most important asset.” It stands to reason why this should be the case. People are usually the biggest expense item in the budget of an organization. They hold the intellectual capital of the organization. They do the research on future streams of products. They produce the current products or services. They sell the output of the organization. They work with the suppliers and vendors who make production possible. They administer the business and keep things working financially. So, any organization would be insane to not recognize that people really are their most important asset.

You can see the phrase on the values plaque in the lobby of most companies. In fact, it is often the number one or number two value listed because it comes out first as the top brass sit down to dream up things like values statements. The problem is that the dreaming phase does not match the execution phase. It is in the daily actions of managers and leaders at all levels that the hypocrisy of the statement shines like a neon sign to everyone who works in the company. Most managers simply do not act as if they believe people are the most important asset. Most employees walk past the values plaque in the lobby and don’t pay any attention to it. After all, if management is not behaving consistently with the value, why should employees believe the value is operational?

Meanwhile, in the conference rooms, computer notes, offices, private discussions, decision meetings, town hall meetings, and every possible form of interaction, managers are dealing with the business of business and ignoring the neon value sitting out in the lobby.

As younger generation workers begin to filter in from high school and colleges, a greater sense of personal self esteem is arriving with them, and organizations will need to show more respect for people than in the past. Younger generations are not willing to endure corporate jargon that does not match observable behavior, and it is not just a corporate phenomenon either. We can clearly see a trend of less tolerance for duplicity in the broader society as we witness social unrest all over the world from the “Tea-Party” to the riots in Egypt. People seek an environment that fulfills their sense of purpose. They are less tolerant of corruption from the Town Hall to the Union Hall. If leaders are going to spout out platitudes about people being the most important organizational asset, they need to start acting that way!

Just imagine what you would see if an organization really did believe in the neon value. What would it look like? Here are some ideas, and you can fill in other examples for yourself:

1. Managers would take the time to interface with most employees on most days. They would not be cloistered in conference rooms, deciding whether or not to tell people about the impending layoff or how to posture the latest benefits cut.

2. Communication would be intended to help engage people, not be a feeble attempt to spin the latest information in an effort to avoid a revolt.

3. People would have a sense that upper management really wants them to get as much development as possible to be able to rise to their potential, rather than having managers check off the boxes to record that each employee had all the mandatory hazard training for the year.

4. Recognition for good work would be spontaneous and light hearted instead of an obligation to be performed begrudgingly and with insincerity.

5. Flexibility would be evident when employees have personal issues or family matters to deal with instead of maintaining strict discipline so managers will not be accused of playing favorites.

6. Trust would be in abundant evidence in all matters rather than a CYA mentality to document all forms of behavior not according to strict guidelines.

7. CEOs would not tolerate a multiple of 300X between their salary and that of an average production worker.

8. Ethical decisions would be made because it is just good business rather than to comply with the Sarbanes-Oxley Act.

9. Corporate jets would be sold, so top leaders would deal with the same travel hassles as their “most important asset.”

10. Management washrooms would be gutted and made into cultural centers where all employees could learn to appreciate each other more.

11. Organizations would welcome social networking and transparency rather than try to seek ways to restrict these trends out of fear of being exposed.

12. Managers would spend less energy trying to explain financial performance to Wall Street and more energy trying to improve the culture of their organization.

13. Leaders at all levels would learn the value of praising people who express a concern about inconsistencies. Thus, they would be building higher trust on a daily basis by reinforcing candor.

I believe the neon value is a wonderful ideal. It does express the right attitude toward the value of people. We need to encourage all leaders to make their actions and policies be consistent with the words. Some organizations have been able to accomplish that to a large degree. These groups have reached the status of the best companies to work for in America. Leaders who habitually pay lip service to the neon value will feel more and more like Hosni Mubarak sitting in his palace watching the mob outside throwing stones at the windows.