INVESTING in PEOPLE: COST or BENEFIT?

Economic trends such as globalisation and recent challenges in the recruitment and retention of talent have prompted many organisations to seek and adopt creative hiring and talent management strategies. With increasing local and global competition for high calibre professionals, organisations need to look beyond the standard cookie cutter method of human resources development.

Most companies would prefer to invest their resources in state-of-the-art technology, software, equipment and/or market expansion where the benefits and returns are much more instant and visible, albeit being mostly short-term gains. It takes an organisation with a longer-term vision to understand that real sustainable competitive advantage can only be achieved with a focus and priority on developing, inspiring and nurturing its most important resource, the people.

To be a people-focused organisation, the management needs to re-strategise its business operations around its employees by looking into regular training and education, effective talent management and retention programs, leadership and career development opportunities, personal development programs, staff empowerment and motivation. Other key areas include embracing an open leadership environment, developing an unrivalled rewards, compensation and benefits structure, as well as creating a strong corporate culture and effective internal communication channels where the people are not afraid to share their ideas or voice their opinions.

Many of the world's best employers continue to reap the tangible and intangible benefits of integrating such HR strategies officially into their businesses and mission statements, yielding significant returns by making the best of people power. These high performing organisations have successfully identified the implications of having the business strategy based on people:

1. Return of Investment

Customer satisfaction has often been identified as a key business issue and there is much research to support the view that 'satisfied employees make satisfied customers'. When the employees are highly trained in product knowledge; when the company treats its staff in a "privileged" manner just as how they want their external customers to be treated; when the people are empowered to make decisions without the fear of failure and punishment; they will feel more motivated to put in their best for the company and provide better customer service, which in turn will lead to highly satisfied customers and hence, translate into greater growth for the business. A global home furnishing brand in Germany profited from such a people strategy by reporting a 700% return of investment in four years.

2. Cost of Employee Turnover

Companies that invest heavily in their people have noticed a significant drop in employee turnover. The impact on cost savings could be quite significant over time because there is direct link between turnover rate and loss in productivity, knowledge and skills drain, staff replacement and training costs. Organisations should know by now that the cost of hiring a new staff far exceeds the cost of retaining one, and hence their retention strategies begin from the day the employee walks in through the door.

3. Cost of Absenteeism

Absenteeism is often considered to be a lead indicator of 'morale' in the workplace. Cultural, organisational and management issues could also be found lurking behind high absenteeism rates. Employers are demanding people to give 110%. The problem is people are not only unable to do it, they are unwilling to do so especially if they do not feel happy at work.

Companies who have not been investing in their people have found this out the hard way: they are losing millions of dollars due to unscheduled absences, which erode earnings and hamper retention. The high costs of absenteeism include wages paid out to absent staff and on additional staff or temporary cover.

A people-focused culture that supports work-life balance, takes care of the physiological, emotional and mental well-being of the employees and makes working life as pleasant and as possible for them will help in reducing absenteeism.

The benefits of reduced absenteeism are not just reflected in profit margins. It also reduces down-time in the office and increase productivity.

4. Workforce Productivity and Efficiency

It is clear that productivity and efficiency levels are affected by how people view their work. An employee who feels valued would probably be more passionate about building his long-term career within the company and contributing towards the success of the organisation. Conversely, someone who sees his job as something he needs to do to pay the bills, will simply clock in the hours and wait for his check at the end of each month. For such employees, the company's goals are somebody else's problems, and they hardly have any sense of ownership in what they do.

The knowledge that your company takes a vested interest in your well-being, advancement and progress is what differentiates a career and a job, and is usually a key determinant of the kind of people that the company attracts.

5. Impact on Recruitment

Organisations in this year's "100 Best Companies to Work For" list are excellent testimonies to the success of investing in people. Their relentless focus and efforts on inspiring, growing and rewarding their employees have consistently given them an almost unsurpassable lead over their competitors in terms of branding, profit margins, turnover rate, productivity and many other areas.

To be an organisation recognised by the industry as the provider of choice, employer of choice and investment of choice, a company's HR has the responsibility of ensuring its managers are equipped with strong people management skills and trained in leadership skills, so that they can build a culture of motivating and encouraging their people to bring out the best in them, and to attract the very best in the industry to join them.

Conclusion

Few companies have yet to harness the power of investing in people and learn how it could be creatively applied to create that sustainable competitive advantage in developing top notch human resources for the organisation. It is important to know that people are no longer motivated with that additional spike in salary, the company car or a free trip to the Bahamas in this extremely tight labour market. A true people organisation seeks to reward its employees in ways that are meaningful to them, and empower them to be their best by offering a work environment and benefits that recognise the needs, interests and values of their people. Such human-focus initiatives just might be what a company needs to gain an edge over another in the global war for the best talent in the market.