12/11/2012
people over profit

People over Profit!

Although firing people might seem the best solution for companies looking to cut costs in the present, I wonder how much more will it end up costing them a few years down the line?

Having to pay less salary, bonuses and all the other costs associated with an employee does lower costs for the company and is an immediate handy solution to keep profitability and share price afloat, I am not going to deny that. But due to my profession, I am much more interested in the value of human capital and the way companies choose to handle it.

Human capital is the best and most profitable asset a company has! It is people who generate profit starting from coming up with an idea and all the way to selling the final product or service. At the other end of the bargain, the consumer reacts to the quality of the person he/she is facing. Simply put: the better the employee, the better the results.

During the coaching sessions I have with my clients I learned that more than the amount of pay they receive, what makes them really happy and loyal to an employer is the level of recognition they receive in the workplace, the happy environment they work in, and trust in their abilities to do the job right. Employees are not stupid. They do understand the world is going through tough times and they are willing to compromise some things in order to pass this period successfully. And money, as it turns out, is one of these things. What they are not willing to compromise on is not being treated like the good professionals they are and having all their potential missed by their colleagues and bosses. A happy employee can actually move mountains as humans thrive on recognition, on being appreciated and being given the chance to show how good they are and be praised for it.

I am going to exemplify what I just said. I have one client, Maria, who works for a large corporation within consumer goods industry. She is very dedicated to what she does, is willing to put in all the long hours needed, sacrifice weekends, should it be the case. Whatever it takes for her job to be done correctly and successfully! Maria is a career woman who sacrificed her personal life for the professional one. What she’s unhappy about is that she’s not being listened to, her expertise is not being properly recognized. She’s a brand manager and the brand is her baby, but all she has to do is follow instructions and meet deadlines. She’s now asking herself whether all her sacrifice was worth it, whether she should stay with the company. Overall, she’s unhappy, hence her productivity lowered, she puts far less effort in what she has to do and tries to figure out why she is being treated like this after years of working with the company. She makes good money, but that matters least. She was utterly unhappy when we met first …

Or take for example Tom, another one of my clients. Tom is a very good investment banker who was pushed to resign because he felt he was wasting time, talent, energy and potential by staying with his current employer. And mind you, the pay was very generous. But it wasn’t enough. The negotiations to employ him took longer than employment. As a result, the company wasted money on the head hunter, the time of all those people he met for interviews, the time it took in exchanging emails to negotiate terms, his exit clause and now they are back at square one looking at paying to hire another. It honestly makes no sense to me …

I could go on and on with such examples, but I think I’ve proved my point. So I come back to my initial question: why do companies believe that firing people is the answer to the economical crisis we are living? Firing an employee puts much more pressure on everything else around and implicitly on every single one of us, including on the company that fired that employee. Think about it like a chain reaction:

A jobless employee would probably go on benefits until he or she finds another job, which means state expenditure goes up. That employee most probably will go on NHS care since he/she cannot afford private health insurance, so more costs on the state budged, less income for the private doctors, which will raise costs to cover the loss, so more pressure on the other patients. The NHS will have to lower salaries and increase patient/medical personnel ratio, hence more stress and less efficiency.

Once fired and with hardly any income, that person will not be spending as much on food and other goods, less going out and definitely not to the same places where he/she used to, so less income for the services sector and for the large corporations such as the one which fired him/her in the first place. Banks are directly affected as well, the energy companies, schools, you name the stakeholder and I can guarantee it is affected by the joblessness of one employee. As a result, taxes go up, prices go up, stress builds, depression settles in…Now multiply that by 904,000, the number of workers currently unemployed for more than a year in the UK and you get an image of how much it costs us all. Scary isn’t it?

But does it have to be like that? How about if the company invested in having that person deliver at his/hers real potential and actually gain more than what it gains by firing that person. How can it be done? Through coaching, for one, or by shifting teams, by placing each person where he/she would be most useful, and by using employees’ creativity and experience to make them more efficient and more profitable as employees. They all are willing to share their knowledge and experience and to contribute to the development and success of the company they work for. You’d probably be surprised to find out that employees tend to identify themselves with the company they work for, to consider it part of their family. After all it is the place they spend most of their time at. So why not make them feel welcome and appreciated? We live in a modern world where human interaction is valuable and should be treated as such. The flow of information is free and fast and can be used to find answers. Yes, it does take a bit of time and energy, but it is so worth it!

For now, I chose to end with a question: why is unemployment considered the better solution to secure profits against empowering employees and benefiting from their best? 

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Tip of the Week
The value of what you receive is always reflected in the value of what you pay!
Mihaela Berciu

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