The Underlying Cost of Not Being Bold
Last week, I gave an example of a client who chose to be bold when addressing an employee-performance issue. In that case, the results turned out to be positive for both the employee and the company. Of course, it doesn’t always work out that way. So, if you’re hesitant to deal with an employee-performance issue, you might want to consider what that issue is really costing your business.
According to Gallup, disengaged employees have higher absenteeism, lower productivity and lower profitability. Gallup estimates that a disengaged employee will cost their employer 34% of their salary, meaning that a disengaged employee making $50,000/year will cost you $17,000. Multiply that by 10 employees, and you’re losing $170,000/year.
That number seemed a little high at first, but then I went back and looked at some recent engagements and what each client’s situation was really costing the business. Here are some examples:
- A mid-sized professional services company had a department manager who didn’t have the skills to manage his team, resulting in reduced productivity, more mistakes and a lower-quality product leaving the department. The owner estimated that this was costing his $40M business about $325,000 across the entire company, in key employee losses, additional installation labor and product redesigns.
- A $20M low-tech manufacturing company was struggling with lack of engagement in the supervisor who oversaw its highest-revenue, most technical department. Over a period of six months, the company missed more than $1.2 million in shipments and $300,000 in revenue and 50% of all shipped product was rejected by the customer. These two issues nearly put the company out of business.
- A manager at a highly technical manufacturing company lacked the interpersonal skills to manage a rapidly growing department. This resulted in a $457,000 drop in profitability in just three months due to numerous errors in quotes to customers, inefficient processes and a growing scrap rate.
If you have concerns about how a key employee is performing, are you ready to Be Bold and take action? Email or call me today and we can immediately begin to take steps to correct this situation.