How is your company going to win in a competitive environment? The answer to that question is really your business strategy. You might try to win by offering the lowest price or by delivering the highest quality or by offering the best value (of price and quality) or by finding some unique niche. You must clearly understand how you are going to win.
Compensation strategy must follow and align with business strategy. Based on your strategy, certain roles in the organization may generate a higher return on investment than others. Some roles may be easier to train and develop, while others are more difficult to develop and may be scarce in the marketplace.
Here are some tips for controlling labor costs and increasing your return on your labor investment:
1. Make sure you are a good place to work to begin with. Companies that have a negative culture with bosses that are simply hard to work for typically must pay a premium to attract and keep employees. I sometimes refer to this phenomenon as the "a$$hole premium." If you regularly schedule two hour meetings on Friday afternoons at 4:00 or jump down people's throats every time they make a mistake, you are probably paying it. You can avoid this premium by simply becoming a better employer.
2. Understand market rates. Some roles in your company should be paid at or above market rates (based on your business strategy). Other roles may achieve a satisfactory result at or below market rate (if the cost of turnover is relatively low and the time to proficiency is relatively short). It's important to know which roles matter more and what the general market rate for those skills is.
3. Align your rewards with the behaviors you want. Commissions, individual performance bonuses, team performance bonuses, etc. should align with the behaviors that you want repeated. Want collaboration? Look at team rewards. Think competition is the best motivator? Look at individual rewards (and hire competitive people). It's easy for a company to inadvertently reward behavior A when they really want behavior B. One example might be paying commission on gross sales when your business goal is to improve profitability. Your commission structure may be encouraging sales reps to offer discounts at the very time you don't want that behavior.
It's really easy during times when unemployment is low and competition for talent is high to start throwing money at your labor force. But taking some time to analyze where your cost of labor should be, structuring it to get the best bang for your buck, and looking for appropriate ways to make a portion of total compensation variable so that you can reward the behaviors and the performance that is important to you in a way that is self-financing, is an important strategic initiative. Now might be a good time to revisit those questions in your organization.
Tuesday, February 13, 2018
Why Don't My Employees Take Initiative?
Bob is a service technician. He drives a company truck. He drove it for several days after he noticed the check engine light blinking. Finally, the engine seized up. A repair bill that might have been a few hundred dollars became several thousand dollars due to Bob's lack of initiative. Bob had no good answer for why he didn't report the blinking light when he first noticed it.
These are the kinds of things that drive small business owners batty. My employees can see the piece of paper on the floor just like I can, why don't they pick it up?
Initiative or proactivity is an interesting topic. Turns out there are two possible explanations for why Bob let the truck blow up.
First, proactivity is a personality or behavioral trait similar to extraversion or conscientiousness. Some people score high in proactivity and others low. In Bob's case, if he scored low on an assessment that measures proactivity, he might be as likely to let his personal vehicle blow up as he did his company vehicle. If this is the case, no amount of yelling or disciplinary action is going to make Bob more proactive. He might notify someone the next time the check engine light is blinking, but he's just as likely to miss a new opportunity to proactively contribute as he was the last.
Second, organizations might be inadvertently managing initiative right out of individuals. How can this happen?
Jane is on the phone with an angry client. There is no specific policy to address this particular client's complaint. Jane proactively offers the client a solution that is "outside-the-box." The customer is happy with the outcome but Jane's manager is furious. Jane gets reprimanded.
Joe is in the field and encounters a situation he's never run into before. Rather than call his supervisor, he attempts to solve the problem himself. Turns out his effort to solve the problem actually made it a little worse and cost the company a modest amount to correct. Joe gets an earful from his supervisor for not getting permission before attempting the non-traditional fix.
In both of these cases, Jane and Joe were proactive and showed initiative. In both cases, their initiative was met with punishment. If this happens often enough, both Jane and Joe will eventually decide that it's not worth taking initiative.
So, the very managers who are asking me why their employees aren't proactive might be the very managers who tend to question every decision their employees make and create a culture where it's safer for employees to do nothing than to do something before they've been told to. In other words, they become passive because they've been trained to be passive.
If hiring proactive individuals is truly an important predictor of success for certain roles in your organization, then you should measure for this during the interview and selection process. If proactivity or initiative is not a significant success factor for your organization, and what you really want are people who are compliant and do only what they're told, then you'll need to accept some mistakes of omission because you're not likely to get many mistakes of commission.
These are the kinds of things that drive small business owners batty. My employees can see the piece of paper on the floor just like I can, why don't they pick it up?
Initiative or proactivity is an interesting topic. Turns out there are two possible explanations for why Bob let the truck blow up.
First, proactivity is a personality or behavioral trait similar to extraversion or conscientiousness. Some people score high in proactivity and others low. In Bob's case, if he scored low on an assessment that measures proactivity, he might be as likely to let his personal vehicle blow up as he did his company vehicle. If this is the case, no amount of yelling or disciplinary action is going to make Bob more proactive. He might notify someone the next time the check engine light is blinking, but he's just as likely to miss a new opportunity to proactively contribute as he was the last.
Second, organizations might be inadvertently managing initiative right out of individuals. How can this happen?
Jane is on the phone with an angry client. There is no specific policy to address this particular client's complaint. Jane proactively offers the client a solution that is "outside-the-box." The customer is happy with the outcome but Jane's manager is furious. Jane gets reprimanded.
Joe is in the field and encounters a situation he's never run into before. Rather than call his supervisor, he attempts to solve the problem himself. Turns out his effort to solve the problem actually made it a little worse and cost the company a modest amount to correct. Joe gets an earful from his supervisor for not getting permission before attempting the non-traditional fix.
In both of these cases, Jane and Joe were proactive and showed initiative. In both cases, their initiative was met with punishment. If this happens often enough, both Jane and Joe will eventually decide that it's not worth taking initiative.
So, the very managers who are asking me why their employees aren't proactive might be the very managers who tend to question every decision their employees make and create a culture where it's safer for employees to do nothing than to do something before they've been told to. In other words, they become passive because they've been trained to be passive.
If hiring proactive individuals is truly an important predictor of success for certain roles in your organization, then you should measure for this during the interview and selection process. If proactivity or initiative is not a significant success factor for your organization, and what you really want are people who are compliant and do only what they're told, then you'll need to accept some mistakes of omission because you're not likely to get many mistakes of commission.
Subscribe to:
Posts (Atom)