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Boost Your Bottom Line-through Better People Management

When a company hires new employees, the goals are to grow, increase productivity and ultimately make more money. But what happens when your new hire or even a long-time team member underperforms?

Any manager with at least a few years experience has dealt with an under-performing employee. While the intangible effects of underperformance, such as low morale and reduced productivity, are real, until recently the actual cost of poor performance was too ambiguous to calculate.

The Future Foundation conducted research in seven countries, including the United States, to understand the costs associated with poor people performance. Their eye-opening research revealed that American managers spend 13% of their time managing poor performers and 14% of their time correcting the poor performers’ mistakes. This translates into an average of thirty-four days per year dealing with underperformance.

These problems increase with organizational size. In larger organizations (those with over $8.5 million in turnover), managers spend approximately eight weeks per year, or forty-one days, managing poor performers. The Future Foundation estimates that the United States devotes $105 billion a year correcting problems associated with poor people management and hiring practices. This translates into 1.05 percent of the total United States gross domestic product. Clearly, the current approaches to people management waste corporate profits.

How to Improve Poor Performance

No one-size-fits-all people management template will work for every organization. However, the following general strategies can be applied to almost any organization in any industry.

  • Increase Accountability. Everyone’s contributions to the organization can and should be measured. The failure to set clear, measurable performance standards for each employee can lead to poor performance. When specific, measurable objectives are in place, success isn’t open to interpretation.

Performance goals should:

  1. Clearly define desired results or outcomes.
  2. Clarify approved policies or procedures. (Keeping in mind that goals can be achieved in different ways.)
  3. Outline available resources, i.e., budget, personnel and equipment.
  4. Set specific phases for accountability.
  5. Help the employee see how his or her performance furthers the organization's goals.

Once you’re clear on the above five elements, you need to communicate them to your employees. Also consider increasing the frequency of performance reviews. For example, break a goal into three monthly performance increases so that employees are able to focus on shorter-term, more realistic goals, which makes it easier for them to stay motivated.

  • Improve the Hiring Process.  According to The Future Foundation study, an average training period of eight months is required to achieve expected performance levels. Currently, one out of eight American employees leaves his or her job before reaching competency. Worse yet, co-workers are not immune to the mis-hire. The same study found that nearly one quarter of American workers surveyed feel their colleagues are incompetent.

    Unfortunately, many companies spend a great deal of time creating their manufacturing and sales processes, but neglect the procedures used to find, interview and hire top talent.

Review the following items:

  1. Hold your hiring process accountable. One of the leading causes of employee turnover is a poor job match. Determine the average length your employees stay. Calculate the cost of each mis-hire and set a goal for improvement.
  2. Plan properly. Poor planning produces poor performance. Organize your hiring process with the care used for other critical business initiatives.
  3. Ask for feedback. After 30 days, ask new employees for confidential feedback on the hiring process. Additionally, conduct exit interviews to obtain valuable information about how to match the right person with the right job.
  • Revamp the Development Process. The first step is to stop funding reactive investments dealing with employee performance levels. Invest any savings in proactive solutions to ensure the right people are matched with the right positions. This will go a long way toward freeing up the managers’ time spent on underperformers.

Next, review your development process to make sure it provides three essential elements:

  1. Skills training
  2. Hands-on practice of acquired skills
  3. A network of shared knowledge from colleagues and mentors

Then, be sure your development process is in line with the organization’s strategic goals. For example, IBM now begins its development design process by defining desired business results, because their most popular training courses were producing a negative return on investment. They had to make changes in their system to attain their goals. When you use this process to invest wisely, your development process will increase your bottom line.

Concluding Thoughts
As the world continues to merge into a single global economy, human capital has become the key driver of profit and innovation. Effective people management practices get superior results by increasing accountability, retaining and recruiting better people and developing innovative ways to increase profit. Even quite modest improvements will boost the bottom line.