Recently I’ve become aware of a small but significant difference between companies and teams that are people focussed,
and those that are more focussed on the bottom line. I’m not saying this is a recent phenomenon, in fact quite the
opposite, this has occurred throughout my entire career; I’m just a bit slow at recognising the pattern.
When I’ve worked at organisations that refer to staff as people I immediately know that senior staff don’t just consider
the bottom line, they consider the total impact on every individual involved in a decision. On the flip side of this,
the organisations that refer to people as resources tend to drive staff harder, don’t consider factors such as burn-out,
career progression, or work/home life balance.
Although I am focussing on the difference between “people” and “resources” in this article, I feel it could also
similarly apply to those that think of the environment as a resource. Think of the
mining natural resource
company, would they refer to themselves as an environment depleting organisation? Anyway, I digress.
I think it is important to make a distinction between a resource and a person. A resource is a tool to be used or a
consumable, over time it will degrade or be depleted and will need to be replaced. A person on the other hand will
likely grow and improve over time (given some training and support). A resource is something like a stapler, a printer,
a ream of paper; a person is an individual with feelings, desires, wants and needs.
I’ve worked in businesses that purely focus on extracting the most from employees in the shortest amount of time
possible; I’ve also worked in organisations that focus on the employees’ growth and well-being. From my perspective,
those that focus on the individual get a much greater return on investment in the long-term, while those with the focus
on deliverables will only see a greater value in the short term.
We can do the following comparison on learning and development to see how this can manifest:
Let’s take a mid to senior developer on $100,000 package per year. If we have staff turn-over averaging 18 months we’re
spending an additional $10,000 per year on recruitment fees. It then takes around 3 months before a new recruit has
learnt all the systems and the codebase, for the sake of simplicity we’ll assume they have linear upskilling progress,
so they are effectively unproductive for 6 weeks. That means we spend about $11,500 every 18 months due to lost
productivity, or around $7,500 per year. During an employee’s notice period we know that most people will be less
productive and the last day or two have almost no productivity, that’s around $1,900 of lost productivity (or $1,200 per
year). That brings the total cost of replacing an employee to $22,700 per year.
Now, let’s take the same person, but we’ll provide some time off for training and a budget to help pay for the training.
I’ll use numbers similar to those I included in a recent proposal; this developer would have a budget of $5,000 per year
for formal training, 2 days per month of work time for learning and development, and a monthly budget for informal
learning of $300. Based on this, the company would lose around $10,000 of productivity per year, add to that the $5,000
formal training budget and the $3,600 informal training budget and the total is $18,600.
Without accounting for the increase in knowledge, nor the increased productivity due to happiness and feeling valued
we’ve already saved over $4,000. If this means the employee stays with the company for 6 years, instead of 18 months,
then the cost of replacement has been reduced to $0.
Of course the ROI on learning and development is easy to calculate. It’s much harder to calculate the value of flexible
hours, of not requiring a doctor’s certificate for a sick day, or of implementing work from anywhere policies. It’s
even harder again to calculate the value gained by encouraging open and honest communication between all layers of the
business, of holding off on a redundancy or redeploying a person to another role while they transition out of the
company, of not demanding overtime nor imposing tight deadlines.
I’ve heard arguments from people that a company should always extract the maximum from employees, they often cite the
duty to shareholders as a core reason for this. But, at least in Australia, the duty to shareholders is to delivery the
maximum return on investment. If considering employees as expendable “resources” diminishes their productivity and
increases the total cost of employment the duty to the shareholder is not being fulfilled.
If you’re a senior manager, stop using the term “resources” when you mean “people”. You don’t need to allocate more
resources to that task, you need to hire more people.