Employee disengagement: what every entrepreneur should know about staff management

Mark-Pope-Headshot-1The transition from entrepreneur to business owner presents a steep learning curve in all matters of business management. From finance to staff engagement, an initial idea will only take seed if the right structures are put in place. And key to the success of these structures is maintaining staff enthusiasm whilst holding them to your vision writes Mark Pope, MD of Chase Performance.

In a growing organization it is difficult for business owners to look beyond financial burdens, cost imperatives and bottom line policies. Attention is often taken away from no less crucial operational factors including staff management. In many businesses, the owners and leaders of that business expect employees to come to work and perform a set task. In contrast, good leaders will encourage staff to undertake their regular responsibilities and improve on efficiencies.

Staff encouragement is vital to a smooth operation. A lack of encouragement, however, will slowly seep into an employee’s psyche and force them to question their role within the company. Lack of encouragement disengages employees and results in limited innovation or down the line initiative. The irony if this is to occur is that your bottom line will suffer.

The equation that you must get right in your initial planning is this: satisfied employees = workplace efficiencies = business profitability.

The cost of disengagement

When I ask employee groups if they have any ideas about how to improve the business they operate in, typically, 90% raise their hands. They may not generate million dollar ideas, but they often produce 100 smaller ideas that may yield bottom line value while demonstrating greater ownership of their roles.

A Harvard Business Review study undertaken in July 2013 found that engagement creates an increase of up to 22% in productivity and a 41% increase in quality.

Disengagement leads to turnover, which is costly for any business. workplaceinfo.com.au suggests: “Some sources estimate that the cost of replacing a salaried and professionally qualified employee is equivalent to a year’s salary or more. Other studies suggest that a typical rate of voluntary turnover (resignations) for organisations is about 10% per year (i.e. excluding dismissals and redundancies).

“Consider the following sample calculation. A business with 500 employees can expect to have 50 resignations per year. Average Weekly Earnings (AWE) figures issued by the Australian Bureau of Statistics (for November 2006) record AWE for full-time employees of $1,058.90. Adding 30% to this for the cost of employee benefits and on-costs amounts to $317.80, giving a total cost of $1,376.70.

“Assuming turnover cost to be a year’s total remuneration for each employee, total annual cost of turnover for this business is $1,376.70 x 52 weeks x 50 employees. That’s a total of $3,579,420 per year. So a retention strategy that was able to reduce employee resignations from 10% to 5% per year would save this business almost $1.8 million per year, less the costs of implementing the strategy.”

The question is: how do you retain staff, engage them and keep them happy?

World-renowned psychologist Dr. Martin Seligman’s research into positive psychology focuses on the scientific study of the strengths and virtues that enables individuals and communities to thrive. The research is founded on the belief that people want to lead meaningful and fulfilling lives and cultivate what is best within themselves to enhance their experiences.

Applying this theory to the workforce renowned author Daniel Pink says the three real drivers of motivation come from having a sense of autonomy, purpose and mastery in our activities.

When we combine the research, we find that to lead a more fulfilling life in the workforce requires management to create a culture of autonomy and responsibility. When people take on a new job, they look for money and opportunity. When they leave a job, it is because of culture, management or lack of opportunity.

Entrepreneurs need to focus on many things, but they would do well to make staff engagement a priority. By doing so they will retain their top employees, encourage new employees to innovate and remain with the organisation.


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