Smart HR is Hard Numbers HR

What the data is, and what to do with it

Solid HR is always people- and numbers-centric. It isn’t simply about saving money, but more about controlling costs and finding value. Unfocused human resource management can see the price associated with employee disengagement soar, and never more so than when it leads to a loss of valuable talent. How can you avoid these pitfalls and provide a solution that gives staff what they want and the business what it needs? Smart HR can solve the problem. It begins with awareness of the numbers and ends with sensible employee investment and rewarding ROI.

The costs of employee disengagement

Over half of the 100-million strong American workforce aren’t engaged at work (either not engaged or actively disengaged); that’s 51 million people who aren’t giving their all. Poor management, low morale, and other reasons play their part (we take a closer look at those here), but let’s stick to the digits.

LinkedIn offers a downloadable calculator that gets to the hard numbers of employee disengagement. To summarize, disengaged workers cost $3,400 for every $10,000 of salary. With 17.2% of workers actively disengaged, it’s a simple two-step process to estimate how it may be affecting you. First, a business has to calculate how many people 17.2% of the current staff is. Next, a look at their median salary will provide a good estimate of the disengagement figures.

Every organization is different, but this is a rough estimate of the ROI the average business stands to lose or gain.

Tough truths about turnover

We’ve already considered the costs of losing staff members in our previous blog. Here’s some further thinking on the issue.

What kind of dent would it make in your company’s performance if employees should leave, especially the top performers? It means having to pay to advertise for new personnel, train them, and then wait for the new ROI to become evident. Retaining a top performer automatically reduces the cost of recruitment and training while preventing any productivity gaps. With the typical median cost of turnover for employees being 21% of their annual salary (and up to 213% for higher levels), your ROI on key staff can appear in savings as much as earnings.

Silicon Valley HR expert Dr. John Sullivan suggests an interesting metric: It’s important to calculate the financial worth generated by an average employee (total corporate revenue divided by number of employees) in order to better ascertain the value of an exceptional one. The average figure would be multiplied by the top performer multiplier to give a sense of the effect on profits:

“For example, at a company like Sears, the average revenue per employee is $138,200, so a 10 times multiplier would mean that a top-performing employee would produce an additional $1.3 million in revenue each year. At a higher-performing organization like Apple with revenue per employee of $2 million per year, using its actual multiplier of 25 times, a single top-performing programmer would produce an astounding $48 million per year in added value each and every year.”

This method of calculating ROI places the minimum top-employee performance multiplier at plus 33% of the average revenue per employee, with mid-level top performance ten times the average revenue per employee and exceptional performance at over 100 times the average revenue per employee.

Incentivize to capitalize

With over half the U.S. workforce disengaged and many actively so, attentive and smart HR solutions are a remedy.

Here are some more hard numbers: 60% of job applicants consider benefits a major factor in job acceptance, with 80% preferring additional benefits over a pay raise. While it’s no surprise that health, dental, and visual insurance rank highest on the list of employee preference, there are other benefits that are desirable for staff. Many are relatively low-cost for employers, and one of the most effective ones may actually be free.

The promotion of a healthy work-life balance (WLB) is a growing need among the workforce that is set to become a necessity. When this is nurtured, it creates an environment with minimal stress; something every team member wants. Incentives being offered to increase WLB vary. Here are a few:

• Unlimited vacation: Not quite as scary as it sounds, unlimited vacation is an exercise in trust between staff and managers. With a few sensible expectations and proper coordination, this once radical practice provides a massive ROI boost to the work/life balance.
• Work from home: These days, 43 percent of employees are working from home at least some of the time. Again, how much of an option this is for a candidate can influence whether or not they take a job offer.
• Bonding events: This is a people-centric HR benefit. The psychology of team work is simple and fascinating, and makes people feel not only personally valued but causes them to value every member of their team. Trust, strengthened identity, and reduced stress are all positive ROI from bonding a group.
• Paid parental leave: Changes are afoot at the highest levels to promote this benefit. The U.S. Trump Administration’s proposed budget for 2018 is set to introduce a “national paid leave plan for parents after the birth or adoption of a child,” while Democrats in Congress reintroduced the Family and Medical Insurance Leave Act. Employers who can augment these improvements with further flexibility for parents stand a better chance of landing desired candidates.

A recent survey by The Society for Human Resources shows that “health, wellness and career development benefits” can attract the right talent while controlling costs. Even minor or non-traditional perks like free coffee, flexible shifts, standing desks, and financial advice rank highly.

We mentioned that a vital incentive may actually be free. Perhaps the most human requirement of all, positive recognition, creates motivation that enhances a business. Public or private congratulations on a job well done not only reinforces confidence in individuals, it promotes productivity and reinforces a positive business culture (especially if good performance is recognized publicly).

In the end, the right HR solution is as diverse as the people it serves. What works for one business may not work for yours. If you’re looking for a specialized answer to your HR situation, we’re here to help.

At KARP HR Solutions, our creative approach has mastered the marriage between finances and human resources. If you need a partner to get the most ROI out of your team, call us at 954-684-3284 or contact us online for a free consultation.