By Fran Molloy
You know how much you pay your staff, but how much does this actually relate to their value? In part one of this series, Fran Molloy helps you identify ways staff members can contribute to your business success beyond the financial.
Most employers judge the contributions of employees to the business solely on the direct financial value of their work.
That view is just too simplistic insists HR expert Martin Nally, who heads human resources services company HRanywhere.com
He says it's more useful to classify staff contributions into ‘funded' and ‘unfunded' work: "Funded work is very simple to calculate. The work is done, the employee costs so many dollars during that time and any revenue above that is profit."
While the dollars your staff add above what you pay them are easy to identify, it's the unfunded work that makes it hard to assess the real value of an employee.
"There is planned, unfunded work that you do because it's an investment in future revenue. For example, development of new products or markets, which are critical activities," says Nally.
Nally says you also need to take into account the unplanned, unfunded work, which can include many necessary overheads such as running the accounts, meeting tax and insurance obligations, and even maintaining your website.
"Staff contributions are by nature multi-dimensional. How do you quantify personal and emotional attributes? Or their role in obtaining customer loyalty?"
CHALLENGE: Find the real value
So why do small business owners struggle to identify the real contributions of their staff?
Penny Parsons, the joint CEO of the fast-growing online holiday accommodation business Take A Break, says it's difficult for many business owners to work out how their staff contribute because they are simply too busy getting the job done.
Although she has put various HR tools and systems in place to measure her own employees' performance (like job descriptions and a six-monthly performance review), Parsons says her staff members' roles evolve and change very quickly.
"Many small business owners just don't have the resources or skills to put systems in place," she says, agreeing that her corporate background has helped.
One of the big reasons the issue poses such a challenge for small business owners in particular, she notes, is that SMEs are often headed by entrepreneurs with strong business skills who may not be as experienced in staff management.
For Josh Fisher, the CEO of Rationale Skincare, an Australian small business with just under two dozen employees, the ‘tight ship' that many small businesses run means that it's easy to spot an employee who is not pulling their weight.
After a decade in banking and finance, Fisher says it's been refreshing to work in a small business where there's so much more opportunity to innovate and respond to customers.
He recently appointed a senior operations manager from the corporate finance world who had extensive skills to aid the fast-growing company. But things didn't work out.
"This person wasn't able to make the transition from a large company with myriad resources and infrastructure where you can get things done without doing them yourself," he says.
While Fisher uses clear corporate-style job descriptions and says role clarity is important, he adds that the advantage of small business is its ability to respond fast to changing environments, and that happens through staff getting their hands dirty.
BENEFITS: How identifying the value pays off
Daniel Banik is the co-founder of Melbourne-based digital agency August, which has grown very rapidly to 15 staff.
"The value of your staff is always more than the sum of their productivity output," says Banik.
With the right structures in place, any business can encourage staff to contribute ideas and improve staff attendance and retention rates, explains Banik.
And when your staff realise that putting in the extra effort is recognised and rewarded, financially or otherwise, they will be motivated to keep it up.
1. Payoff: Unexpected innovation
Penny Parsons at TakeABreak.com recently awarded an on-the-spot bonus to a young programmer who took the initiative to develop a much-needed website resource that the team had discussed but not yet scheduled: "She's just a fantastic staff member!" says Parsons.
2. Payoff: Better customer relationships
Fisher is now giving far more responsibility and recognition to a junior sales rep who doesn't have extensive experience or qualifications but is a great ‘brand ambassador' with an innate ability to put clients at ease and read people's behaviours: "This person adds immeasurable value to the company,"
he says.
he says.
3. Payoff: Staff retention and loyalty
Both Parsons and Fisher believe in rewarding good performers - and linking those rewards to behaviours.
"I really want to keep my best staff members and recognise them for doing a good job," says Parsons.
Martin Nally says that valuing your staff is a two-way process - and identifying their value to you allows you to reward your employees appropriately.
"It's going to pay off in retention of staff and in the amount of commitment they feel towards the business."
Four steps to getting more staff value
Often the first time that many small business owners give any thought to the value of their employees is after they have lost a really worthwhile staff member. The fact you're reading this workshop means you've already begun the work of assessing the value of your staff. Here are four ideas for what you can do next:
1. Break up activities into a ‘wagon wheel'
You can get better value from all of your staff when you understand where their strengths are, what they like to do best - and then apply this knowledge, says Martin Nally of HR Anywhere And the best way to do this is to ask them.
"Sometimes we break up all the activities that each staff member does into a ‘wagon wheel' chart and make sure that the proportion between funded and unfunded work is in balance on the chart."
He says that most employees ‘get it' and are keen to make sure they don't just fund their own position in the company, but they add to the company's overall growth.
2. Link reward to performance
Penny Parsons of Take A Break believes that thanking staff for improving your business carries more weight when you share the success. She's introduced a quarterly bonus split between non-managerial staff that comprises a percentage of the profit.
3. Flatten the management structures
Daniel Banik of August believes that a multi-tiered or hierarchical management structure can hide the activities of your ‘doers' from view. He says that when management are in direct contact with all staff members, you're removing barriers to uncover the intangible contributions of your staff.
4. Encourage innovation by offering flexible work conditions
"Flexibility is a manifestation of trust," says Nally. "Face time - that is, the time that you are actually physically in the office - is nowhere near as important as outcomes."
Banik agrees and points out that offering work options such as part-time or remote work can also increase the diversity of people that work for your business or company.
"It's time we got away from focusing on the hours that you can actually see someone at their desk, to the benefits that person brings to the business."
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