The hidden costs: how people issues impact your bottom line
As business owners, we're all acutely aware of the numbers: revenue targets, profit margins, expense reports. We (or our accountants!) meticulously track our sales, analyse our spending, and strategise for growth.
On top of that, in the small to medium sized business, your time can be swallowed up quickly with sales, marketing, operations, customer service – ie the business of making money. With all these roles to play, the human resources role is often left to languish – and that could be harming your business.
The way your people feel, interact, and are managed can have a profound, and often hidden, effect on your revenue and profitability. Unresolved ‘people issues’ aren't just HR headaches; they're business challenges with a direct impact on your bottom line.
Let's explore up to 10 common people issues and uncover how they subtly – and sometimes not so subtly – erode your financial performance, along with some encouraging thoughts on how to turn things around.
1. High employee turnover: the revolving door of expenses
Every time an employee leaves, your business incurs significant costs. There's the expense of recruitment (advertising, screening, interviewing), onboarding, and training a new hire. Beyond the direct financial outlay, there's also the loss of institutional knowledge, a dip in team productivity during the transition, and the potential impact on client relationships. A stable team means more consistent output and less money spent on replacing talent.
Impact on bottom line: Increased recruitment and training costs, reduced productivity, potential loss of clients.
2. Low employee morale and engagement: the quiet productivity killer
When employees are disengaged or unhappy, their productivity naturally declines. They may do the bare minimum, lack motivation, and be less invested in the company's success. This can lead to missed deadlines, errors, and a general lack of innovation. A team that feels valued and engaged is a team that goes the extra mile.
Impact on bottom line: Reduced productivity, increased errors, diminished innovation.
3. Poor communication: the root of misunderstandings and inefficiency
Miscommunication or a lack of clear communication can lead to duplicated efforts, errors, missed opportunities, and a general sense of confusion. This not only wastes time and resources but can also damage client relationships if promises are misunderstood or information isn't shared effectively. Clear communication fosters efficiency and a shared understanding of goals.
Impact on bottom line: Wasted time and resources, increased errors, damaged client relationships.
4. Lack of clear roles and responsibilities: the "who does what?" dilemma
When employees aren't clear on their roles and responsibilities, tasks can fall through the cracks, or multiple people might work on the same thing. This leads to inefficiency, frustration, and a lack of accountability. A well-defined structure ensures everyone knows their contribution to the bigger picture.
Impact on bottom line: Duplicated efforts, missed tasks, reduced accountability, slower project completion.
5. Inadequate training and development: stagnation in a changing world
If your employees aren't given the tools and knowledge to do their jobs effectively, or to grow with the business, they'll struggle to keep up. This can lead to decreased efficiency, a lower quality of work, and an inability to adapt to new technologies or market demands. Investing in your people's development is an investment in your business's future.
Impact on bottom line: Decreased efficiency, lower quality of work, inability to adapt to market changes.
6. Unresolved conflict: the lingering drain on energy
Workplace conflicts, if left unaddressed, can fester and create a toxic environment. This drains energy, reduces collaboration, and can lead to resentment and even sabotage. A harmonious workplace where conflicts are addressed constructively allows everyone to focus on their work.
Impact on bottom line: Reduced collaboration, decreased morale, increased absenteeism, potential for legal issues.
7. Burnout and stress: the cost of an overstretched team
Pushing your team too hard without adequate support or breaks can lead to burnout. This manifests as decreased productivity, increased errors, higher absenteeism, and ultimately, a greater likelihood of employees leaving. A sustainable pace is key to long-term performance.
Impact on bottom line: Reduced productivity, increased errors, higher absenteeism, increased turnover.
8. Lack of recognition and appreciation: the demotivator
When employees feel their hard work isn't recognized or appreciated, their motivation can plummet. They may feel undervalued and less inclined to put in extra effort. Simple acts of appreciation can significantly boost morale and engagement.
Impact on bottom line: decreased motivation, lower effort, potential for higher turnover.
9. Poor leadership and management: the ripple effect
Leaders set the tone. If management is ineffective, inconsistent, or lacks direction, it can lead to widespread confusion, demotivation, and a lack of trust throughout the team. Strong, supportive leadership inspires confidence and drives performance.
Impact on bottom line: reduced productivity, increased errors, higher turnover, general inefficiency.
10. Ineffective feedback mechanisms: missed opportunities for growth
Without regular, constructive feedback, employees don't know where they stand or how to improve. This can stifle individual and team growth, leading to recurring mistakes and missed opportunities for enhanced performance. A culture of feedback fosters continuous improvement.
Impact on bottom line: Stagnated performance, recurring errors, missed opportunities for improvement.
Turning challenges into opportunities
The good news is that admitting that some of these issues could be present is the most crucial step. You might not ‘be able to see the forest for the trees’, and that’s when it’s a great idea to bring in an external partner to review your business, listen to your employees, and diagnose any issues that are bubbling away, before they become bigger issues.
The solutions don’t always have to cost you a lot. Maybe it’s building culture and engagement, or it’s providing leadership development or team leader training so that more people are empowered to create a great workplace.
Whatever the solution, it’s an investment that could save you money in the long run.