The Cost of Managing People

Can your business survive three, six or nine months with one or two key employees absent? What about a lawsuit? Can your organization handle the expense and emotionally exhaustive, time-consuming process of an employment investigation into your organization’s workplace practices? If you are like most small businesses, the answer is no. For small to medium-sized organizations, such events can potentially devastate the business. Now, with multiple generations in the workforce, the likelihood of such challenges occurring is nearly triple what it has been in previous years.

Rather than focusing on accomplishing the organization’s goals and objectives, leaders are spending more time responding to employee disputes and complaints — and it is costing organizations big dollars. According to a recent study on Workplace Conflict by PP INC (publishers of the Myers-Briggs Assessment and the Thomas-Kilmann Conflict Mode Instrument), U.S. employers spend nearly three hours per week dealing with conflict in the workplace, which equates to two weeks per year of lost productivity. For US companies, this translates to a loss of $385 million and $359 million in working days and paid hours, respectively.

The study further indicates that 70% of employees identify managing conflict as one of the most crucial skills a leader must have, but only 46% feel their leaders effectively address such challenges. Respondents also indicate that they do not feel that their leaders effectively manage their multi-generational workforce, often avoiding addressing issues when they surface. Many managers admit to being ill-equipped to handle such conflict or feel they are too close to the employee to resolve the matter in an objective manner. Some leaders admit to delaying taking action until the last minute, which is often too late for corrective action, resulting in voluntary or forced employment separation.

Conservative numbers indicate that it costs $20,000 to replace a millennial employee and as much as $70,000 to replace a mid-level employee. These expenses include not just recruiting costs but training the new hire, the investment lost from the previous hire including their organizational knowledge, as well as the wages of other employees involved in the training and hiring process. Other experts estimate replacing one employee can cost an organization 150% to 200% more than the employee’s benefits and salary. If you are a small to medium-sized business, this expense (and loss) can be even greater as employees are often tasked with performing multiple functions.

Also, let us not underestimate the role and power social media plays in managing personnel. A decline in customer service standards, employee morale, or the reputation of the company due to employees sharing problems on social media sites such as Facebook or Glassdoor, can negatively impact sales or damage recruitment efforts, thus causing irreparable harm.

Employees are the lifeblood of any organization, but managing them is an inherent entrepreneurial challenge. Regardless of size, businesses should not wait until a problem arises to utilize subject matter experts in managing a multi-generational workforce and resolving conflict in the workplace. Below are tactics that small businesses can implement to effectively develop and manage their people. If engaged early enough, these small steps can yield a substantial return on the “human capital investment” for your organization and go a long way to increase employee morale, keep staff motivated and increase confidence of managers and leaders, saving the company hundreds of thousands of dollars in the long run.

  • Be proactive. Hire an expert to train your leaders. If you are unable to hire an HR professional full-time, consider a contract HR professional or consultant.
  • Develop a process. Have a process and operation procedures for dealing with employee issues. Do not wait until issues arise to develop a plan of action.
  • Invest in E.I. – Emotional Intelligence. Adding this component to an employee’s overall development plan can potentially sustain them much longer than just training in their specific job function.

 

Kathey Porter, MBA, CPSD is the Director of Small Business and Vendor Diversity Relations for the University of Florida. She was recently appointed to the Florida Advisory Council on Small and Minority Business Development by the State of Florida Department of Management Services.

Krishna Powell is CEO of HR 4 Your Small Biz, LLC and is a subject matter expert on multi-generational workforce talent management.  She provides human resources consulting, has mediated numerous employment related cases for the Equal Employment Opportunity Commission and works extensively with leaders and their employees in universities, corporations, job placement and career development programs. She has managed the HR and talent management function for various Fortune 500 companies throughout the United States, France, China and Singapore.