I would like to begin this article by stating a fact. In the workforce, each employee in a Firm directly contributes to the Firms bottom line through their production value contribution, of-course if certain elements are fostered and maintained. There is an actual equation to equate the ROI (Return on Investment) per employee for the Firm’s yearly net income. But for us laymen, and for those not in HR, ROI can be determined naively as the inverse of labor costs divided by total operating costs or sales. For example, if labor is ½ of total operating expenses for a given business, then the employee costs return twice as much as they take in, gaining an ROI of 100 percent. However, the employee ROI can get diluted depending on the industry, compensation, type of work a given to the employee to perform, if the company's culture is toxic or employee relations are poor. But to be fair, things like sales fluctuating and all things relating to and affected by Porters Five Forces, can give a misleading view of the cost and therefore ROI can be interpreted or “averaged” in an illogical manner.
The Firms most valuable asset is their employees a.k.a Human Equity pool and they must protect, value and enrich this precious revenue producing mechanism of an asset. In today’s corporate America, many Firms have added enriched human equity to their Firm to give them a competitive edge advantage that’s sustainable. As the digital age gets more and more sophisticated and accessible to job seekers, this competitive edge element becomes more and more elusive to obtain and or sustain due to the tilted balance favoring the job seeker in regards to attracting and retaining human equity of the Firm. During my research, its apparent that many companies with huge turnover, poor retention and a continuing decline of the Firm’s online digital image leads to a Firm struggling to meet production needs, be noncompetitive in their market and have a poor or under par Human Equity pool.
Poor retention and the lack of ability to attract stellar candidates to a Firm can be due to a lack or minimal attention to these elements provided below.
· Employees lack of belonging (self-worth)
· Poor Employee engagement
· Lack of inputs/output feedback to and from employees
· Poor leadership communication
· Lack of leadership presence
· Silos within the Firm
· Cancerous work environment
· Lack of a strong job design
· Below average compensation and benefits
(If a Firm cannot afford competitive compensation package to their employees, then this itself can be a huge deterring factor for attracting and retaining employees.
· Poor training
· Poor referral reward system or lack of one
· No recognition system
. Below Average Compensation
· No incentive system
. No mentor-ship program
· No exit Interviews
· No career progression system
· No educational incentive programs, (tuition assistance or reimbursements)
· No dedicated HR employee relations personnel
· Poor policies and SOP’s
· Ineffective or bias HR
· Poor on-boarding process
· Poor orientation
· Poor work life balance
. No 30, 60, 90 day new employee "check in" or "progress" policy
Investing in employees can be a very beneficial and an all-around positive experience for both parties. The benefits to the Firm can be higher productivity, the ability to retain star employees, gain referrals through the human equity pool, and lessen retention expense thats due to lack of productivity, interpersonal conflicts, miscommunication and turnovers in which adds to the cost of hiring new employees. Employees that feels valued, that feels that the Firm sees, and hears them, that they feel that their inputs/outputs add value to the Firm, that feel that the Firm is getting the ROI on their efforts transform the employee to be eagerly motivated to contribute, this will work to improve their Firm’s business as well as create an incentive and sense of security that compels employees to stay with the Firm instead of “jumping ship”or seeking employment with direct competitors. Effective Employee relations is key, just showing your employees the the Firm cares about them can have a huge impact on retention. For example here are a few ways you can show your employees that your investing in them on a personal level.
o By offering them a gym membership so they can keep healthy and feel good.
o Allow them to pursue side projects that are interesting to them.
o Offer to support professional development initiatives.
o Allow the option of paid time off to volunteer.
The bottom line, The Firms ROI in Employees:
Naturally, the Firm wants to keep their employees, increase or obtain optimal ROI from each employee, which easier said than done. Currently there is a negative phenomenon in hiring and staffing, you’ll be surprised on how hard it is to staff, to find stellar candidates, and or to keep your star employees and happy at that. Many Firms not only use internal recruiters to staff their company, they also use external staffing firms to recruit, pinpoint and locate potential candidates or what we call "purple squirrels" and pay hefty commissions. Even private large staffing firms may use other external specialized companies or boutique staffing firms to aid in finding them certain niche, top talent. There just aren’t enough stellar candidates to go around and the good ones are staying with companies that place extreme value on their employees as a competitive advantage or they are not interested in make a career move.
It’s an Employees Market: The balance has tilted to their favor.
Candidates are more sophisticated nowadays, they are conducting research before applying or accepting offers from employers. They are researching the Firms digital image presence and reading reviews on the company and their inner culture, leadership, compensation, and financials. This, all to see if the company has a good working culture, if problems with management exist, if there's ethical treatment of their employees, if the compensation is attractive, is there longevity in the market and how strong are they financially. Companies cannot defend nor erase in more cases their negative sometimes smearing reviews or online digital presence. So it all starts from day one in implementing a great on-boarding experience, a robust employee relations program, and a solid retention strategy.
The negative image online or in print via reviews from former candidates (of course weeding through the externally/internally fabricated ones, biased, and deceitful reviews from prior disgruntle or poor performance candidates) can deter great potential candidates from considering employment with your Firm. Top company review sites like, Glass Door, Great Place to Work, Indeed, Comparably, Vault, The Job Crowd, and Kununu, gives the employees an even playing field through a comprehensive overview about the companies employee pool, salary, core competencies, brief history, and reviews while using a star grading system. This inside information or reviews and overview gives a quick glimpse into the Firm’s inner problematic environment from prior employees that can be immensely valuable to a potential candidate considering applying or accepting an offer with a firm. This inside information, suddenly at the candidates finger tips is comparable to obtaining “Inside Trading”information in the Stock Market arena, info which is astronomically valuable!
For example, a savvy, stellar potential candidate might look at the Firm’s financials to see how financially strong and stable they are in their market compared to the Firm’s immediate competitor. They may pull the Firms 10k report off the SEC(Security Exchange Commission) to look at earnings and profits, to determine if the Firm is financially big or if the Firm can offer a strong compensation plan. They might look at the “letter to the investors” by the Firm to see if the company is progressive and is building wealth along with future possible partnerships or merges and acquisitions to strengthen the Firms value, increase their stocks, or to strengthen their strategic positioning. This information can help determine if there may be new growing pains, or future layoffs, the companies’ pitfalls or areas of opportunities, their profit losses, their competitors, elements of the (Porters Five Forces) or increased opportunities for advancement to other companies within the Firms umbrella or portfolio.
All this information is easily accessible to the employee and aids them in picking the best employer that will furnish not only the basic needs of an employee but provide an attractive compensation package, an engaging employee empowerment experience and job satisfaction. The reality is that, employees are not machines that can be upgraded, the are not just an ID badge employee number, but are human equity assets that need to be maintained and prime for optimal production and output to increase or add value to the bottom line of a Firm. Their own feedback, sense of ownership or belonging, along with personal growth and professional enrichment (teaching new skills sets) and desires, factor into the equation in retention and increase ROI.
The Firm must have a clear and concise transparent employee relations and retention enriched strategy to engage, retain and or procure potential employees. Employees are looking for Firms that value them and invests in them so that it’s a win- win marriage. The Firm should adhere to the elements listed earlier in my article with a strong focus on competitive incentive packages, scaled bonuses, education benefits and encourages a career development program and ideology or other additional compensation that reflects successful outcomes of investing and attaining the ROI on each employee. The Firms HR department should not be considered a cost center, a profit loss department, or a revenue loss department but instead should be a revenue generating department by procuring the best talent that will yield a significant ROI for the Firm. They should both be aligned with the Firm’s strategic goals and culture and should foster a strategic employee retention and employee relations strategy.
Conclusion Summary
In conclusion, your employees are the backbone to your Firm. They should be treated like any other highly regarded assets. Importantly, investing in human equity is, in essence, no different than investing in assets, real-estate, equipment, or financial derivatives. The Firm focused on their human equity strategic plan should answer how this investment benefits the employee? how does it increase retention and attract new potential candidates to the Firm that will increase the human capital outputs to the bottom line or ROI to the Firm? A Firm who can answer these questions coherently and honestly, with a focus on enriching their employees, maintaining a positive online digital presence, sustainability, strengthening their position in the market, striving to increase and maintain their competitive edge advantage through human equity is well on his way to maximizing his ROI from investing in his employees.