Are Your Policies Hindering Profit?

Many companies believe that working staff as hard as possible will get them the best result (profit). Nothing can be further from the truth. In fact, the wrong policies can result in habits and processes which are detrimental to people and the organisation.

In this article I will discuss how your policies (or lack there of) might be hindering the profit of your organisation.

Productivity vs Utility

As a manager, my main objective is to maximise the productivity of my staff. Many managers confuse productivity with utility. Let me explain...

Many managers and organisations believe that working staff as hard as possible will get them the best result. This is the idea that utilisation of people's time, at maximum load (& stress levels) will ensure that their output is at peak velocity. This is a fallacy, and actually results in quicker burnout, and reduced productivity over time.

We are all familiar with the idiom "The straw that broke the camel's back". You burned out the camel very early, so it could no longer work. A better approach would have been to only half load the camel so that it can work indefinitely.

Simple process changes can result in reduction of load, while also increasing the team's overall output. So, my advice to all managers is to seek to reduce load (utilisation) of your staff, while maintaining/increasing output.

One easy way to start is to ask your staff: "What can I do to help make your job easier?"

Overworking Hinders Profit

Overworking your staff actually hinders profit in the medium to long term.

When staff are overworked:

• More mistakes occur
• Quality of work reduces
• Velocity (productivity) is reduced
• More sick days are incurred
• Morale can be affected (hence wider spread reduced productivity)

These are known facts. Falling quality & productivity result in reduction in your overall profit. Moreover, the more you overwork your staff, the higher the likelihood that they will leave the company.

Logically, it is important to have HR policies which ensure that staff members are not overworked. One way to measure this is by a quick survey where staff rate the work-life balance (eg. 1-5). If your organisation rates lower than 4/5, then it is highly likely that your staff are overworked, and your profit is suffering.

Staff Churn Reduces Quality

It is very difficult to maintain quality when good staff leave. The cost of good staff leaving can be very hard to measure. I will attempt to explain...

When a good staff member leaves a company, they take with them a lot of knowledge and good habits. The remaining staff will often not operate as efficiently without that good example in house. They will often even develop suboptimal habits and processes because they do not have the experience or knowledge. Your quality and productivity are likely to fall. The greater the churn of good staff, the more pronounced this effect will be come.

Often good people leave due to frustrations with processes, being overworked, or even because they don't like their manager. The best thing you can do is look at why these people are leaving, and address the root causes. 

Training New Staff

When staff leave a company, the existing staff need to train the newcomers. This reduces the productivity of the existing staff.

Imagine the following scenario:
Alice is an existing staff member
Bob is a new staff member

Since Alice needs to train & mentor Bob, her productivity will be reduced for at least 3-6 months (depending on many factors). In my experience, assuming Alice is a good mentor, her overall productivity would be reduced by at least 20%.

Since Bob is new, his productivity will initially not be as high as Alice. In my experience you cannot expect more than 50% productivity from Bob for at least 3-6 months.

Staff churn reduces productivity for existing staff for several months, while they help ramp up productivity of the newcomer. This is basically unavoidable. There are ways which you can help make the process smoother, however it is much better to address the root cause of why people are leaving in the first place.

In IT it is common for people to change companies every 2.5 years. If you can modify our processes and policies so that staff are retained for 3.5 years, then the cost of training can be drastically reduced.

Management Concepts

As a manager, your job can be summarised in 2 simple questions:

1. What can you do to maximise productivity of your department in the medium to long term (without burning them out)?
2. What can you do to retain staff as long as possible (hence reducing churn & saving money in the long run)?

For me, the answer to these questions is another question...
What can I do to increase happiness in my department?

Increasing happiness is not as simple as free breakfast, and vodka shots on a Friday. I will elaborate further in a future post.

Mental Health In The Workplace

Mental health is an issue which needs much more attention. Managers need to be increasingly aware and diligent in addressing problems. When people are under too much pressure, then all types of behavioural problems can manifest - both at the individual and at the team level. Productivity and quality can suffer.

I recently stumbled across a company called Unmind. This is a startup which seeks to improve mental health in the workplace. I think this is a great initiative, and one of the cofounders is a clinical psychologist. They rate 4.9 on Glassdoor. I hope to hear more about their success stories.

Final Thoughts

I hope I have given you some food for thought when it comes to your organisation's policies. To maximise productivity of teams, Managers really need to take a step back from the ideas of utilisation. The camel can only take so much!

I hope I have convinced you that overworking people really does reduce your company profits, due to reduced quality & productivity, and also the cost of churn.

If you are serious about improving your organisation, please consider staff happiness first. Unmind is a company that can help you do this. Happy staff leads to better outcomes, and hence more profit!