Boost your bottom line with better people management

Drake Editorial Team

When a company hires new employees, the goal is to grow, increase productivity, and ultimately make more money. But what happens when your new hire or even a long-time team member underperforms? You can forget about increasing productivity, that’s for sure. Any manager with at least a few years’ experience has dealt with an underperforming employee. The problem exists in every department, organization, and industry because every company relies on the output of its workforce. While the intangible effects of underperformance, such as low morale and reduced productivity, are real, until recently the actual cost of poor performance was too difficult to calculate.

The Future Foundation, an independent consumer trends and insight enterprise, conducted research in the United States and six other countries to understand the costs associated with poor people performance. Their eye-opening research revealed that American managers spend 13% of their time managing poor performers and 14% of their time correcting the poor performers' mistakes — an average of 34 days a year dealing with underperformance.

And American employees admit that 68% of the mistakes they personally make never come to their manager’s attention. Worse yet, problems increase with organizational size. In larger organizations — those with over $8.5 million in turnover, managers spend about eight weeks a year, or 41 days, on managing poor performers.

What’s at the root of these staggeringly high poor performance statistics? Researchers at Sheffield’s Institute of Work Psychology in the UK sampled manufacturing businesses and found that 18% of variation in productivity and 19% in profitability were attributable to people management practices. In addition, The Future Foundation estimates the US devotes $105 billion a year correcting problems associated with poor people management and hiring practices. This translates into 1.05% of the total US gross domestic product. Clearly, the current approaches to people management waste corporate profits.

How to Improve Poor PerformancePromising instant results or oversimplifying quick fixes is counterproductive. No one-size-fits-all people management template will work for every organization. The strategy you use must fit your company’s business strategy and goals. And your management practices must fit together and reinforce each other. However, every organization in any industry can use these three strategies.

1. Increase accountability.Everyone’s contribution can and should be measured. The failure to set clear, measurable performance standards expected of each employee often leads to poor performance. Workers may believe they are meeting expectations, while the supervisor has a completely different idea on the desired outcome. In these cases, when specific measurable objectives aren’t in place, success is open to interpretation.

As a general rule, when setting performance goals:1. Clearly define desired results or outcomes.
2. Clarify approved policies or procedures. Be careful you don’t dictate exactly how to reach the end result unless specifically asked. Remember, the same goal can be achieved in different ways.
3. Outline available resources. This may include a budget, personnel, and equipment.
4. Set specific phases for accountability.
5. Help employees see the big picture and how their performance furthers the organization’s goals. Make sure you reach a mutual understanding about each item before starting.

You then need to communicate these five elements clearly to your employees. A proven method for increasing accountability is increasing the frequency of performance reviews. Employee performance reviews and goal-setting meetings are often given every 90 days; however, with this great length of time, employees tend to wait until the last few weeks before the review to achieve the desired outcome, and you lose several weeks of improved performance.

Instead, review goals and performance each month. This enables employees to focus on more realistic goals with a shorter duration, making it easier for them to stay motivated, while you get the benefit of increased performance earlier, and any misunderstandings can be resolved sooner. Plus, shorter timelines increase accountability. Holding each employee accountable and demonstrating how their contribution affects the company is essential for increased performance.

2. Improve your hiring process.According to The Future Foundation study, an average of eight months' training is required to achieve expected performance levels, but one out of eight American employees leaves their job before obtaining competency. Worse yet, co-workers are not immune to the miss-hire: Nearly one quarter (23%) of American workers surveyed feel their colleagues are incompetent.

To combat this problem, review your hiring process and determine your success. Most companies spend a great deal of time creating their manufacturing and sales process, but neglect the same procedure to find, interview, and hire top talent.

Review these three items:
1. Hold your hiring process accountable. A leading cause of employee turnover is a poor job match. Calculate your success rate by determining the average time your employees stay before leaving. Calculate the cost of each mis-hire and seek to decrease it on a regular basis.
2. Plan properly. “Poor planning produces poor performance, and proper planning produces proper performance” is very true when it comes to hiring. Organize your hiring process with the same levels of effort and thought you use on your other critical processes.
3. Ask for feedback and conduct exit interviews. After a new employee has acclimated for 30 days, ask for confidential feedback on the hiring process while it is still fresh in their minds. You may receive information that will improve your process. Most companies perform exit interviews as people leave. If you don’t, you are missing out on valuable information on how to improve matching the right person with the right job, so start now.

Give your hiring process the time and resources it deserves. The right people in the right positions are your most important asset, so act like it.

3. Revamp your development process.Most senior executives agree on the importance of developing a management team for superior business performance. The gap between current productivity levels and expected performance is often attributed to a lack of skills. Although executives feel they are investing in their people, these programs are often underfunded, antiquated, and not in line with the organization’s goals.

To improve your management’s development process:
1. Stop funding reactive investments dealing with employee performance levels and invest that capital on proactive solutions to ensure the right people are matched with the right positions within the organization. This will go a long way to free up the time managers spend on underperformers.
2. Review your development process to make sure it provides three essential elements: skills training, hands-on practices of acquired skills, and a network of advice from colleagues and mentors. People learn best when applying new information in a non-threatening environment to confirm understanding.
3. Be sure your development process is in line with the strategic goals of the business. For instance, IBM now begins its development design process by defining desired business results because their most popular training courses were producing a negative return on investment: They had to make changes in their system to attain their goals.

When you use this process to invest wisely, your development process will increase your bottom line.

Better People ManagementAs the world continues to merge into a single global economy, human capital is the key driver of profit and innovation. Effective people management practices get superior results by increasing accountability, retaining and recruiting better people, and developing innovative ways to increase profit. In fact, integrated and appropriately applied people management strategies and practices are the most powerful driver of sustained success. Even quite small improvements can deliver results. When you use these people management strategies in your organization, you can increase productivity, eliminate underperformance, and boost your bottom line.

Interested in learning how to better manage your talent? Watch this.

Reprinted with the permission of W. John Skabelund, a business lawyer  at Davis Miles McGuire Gardner PLLC. Contact him at 480 344-4059 (US) or jskabelund@davismiles.com.