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Employees Are an Untapped Source of Competitive Advantage

Employees are the most important part of any successful business, but in many organizations they are underutilized.

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Employees are the most important part of any successful business, but in many organizations they are underutilized. Seventy-five percent of American employees have indicated they are not working at their full potential according to a Harris survey.

"Although there are a multitude of reasons for this situation, there are three major contributing factors that employers should be aware of,"
says Howard Hyden, president of the Center for Customer Focus and an expert on improving competitive advantage. Hyden suggests that employers who are interested in becoming more competitive should take a look at the following three areas:

1. Communication

All too often employees do not know the strategy of the company or understand the goals of their organization. Recently, while conducting a workshop on customer focus, Hyden found that the company's employees were ill informed about a recent customer satisfaction survey.

"I turned to two employees and asked them, "˜What are the three items on the survey that the customer rated the organization highest on?'

I then turned to another pair of employees and asked them, "˜What are the three items that the customer rated your organization the weakest on?'

The answer in both cases was silence,"
says Hyden.

"It was obvious that management had failed to communicate the results of the survey to the employees. Yet it is the employees that will probably need to change some things in order for these items to improve."

2. Training

Lack of training is another big factor that keeps employees from working at their full potential.

"Companies hire new employees, slam-dunk them into their job, and provide little or no training,"
comments Hyden.

The cost of human capital, which is the sum of the employees' wages, health care benefits, retirement, payroll taxes, etc., is usually the single biggest expense in most organizations.

It is also not a one-time cost, but an investment that must be made every month. Yet most organizations fail to invest in adequate training. "My experience has taught me that a small investment in training employees is what leverages the big investment already made in terms of their salary, benefits, etc.,"
adds Hyden.

While conducting workshops on customer focus, Hyden hears numerous suggestions from employees about adding value to the customer. "These suggestions were absolutely awesome, but would have gone untapped had the employees not been trained,"
says Hyden. "The issue is the employees don't know what they don't know which is precipitated by management not knowing what they don't know either."

3. Reward Structures

Often when employees are not working at their full potential it is because the company's reward structures are not in alignment with creating value for the customer. Most of the reward structures for management, and often employees, are based around the financial performance of the company.

"Rarely have I witnessed reward structures that are based on the value that the organization and its employees create for the customer.

The old adage "˜what gets rewarded gets done' would indicate that perhaps we're rewarding the wrong things - or at least there isn't balance in the reward structures,"
explains Hyden.

He suggests that the plaques on the wall, the marketing brochures, or the words of the CEO may espouse that the customer is king, or that customers are the number one priority, but management's behavior and reward system is based on the financial statements, not adding value to their customers.

"What gets rewarded says volumes about what the organization is serious about,"
adds Hyden.

"Management behavior will tell the employees what is important more than their words. I tell managers that their videos are louder than their audios. Behavior is everything!"

Hyden encourages his clients to have a management meeting to discuss the following three financial numbers:

1. The total cost of turnover for one year. The cost of turnover is seven times an employee's annual salary. Calculate the annual salaries of those employees who voluntarily left the company and multiply by seven.

2. The lifetime value of a customer (how much a typical customer is worth over 25 years).

3. The amount invested in training new employees for one year.

These three numbers are very much associated. The issue is not whether or not a business will pay, only when they will pay. The familiar phrase, "you can pay me now or you can pay me later"
is very appropriate to the situation.

Too many organizations have a short-term mentality, meaning they are focused on this month's bottom-line or this next quarter's earnings per share.

Although those are important numbers, being totally obsessed with those numbers comes at the expense of longer-term thinking. An investment in training can have measurable results in many ways. Hyden warns, "This short-term thinking can clearly lead to cutting the investments that can ensure long-term competitive advantage. It usually results in little "˜p' and big "˜L.'"

Howard Hyden is a businessman and nationally recognized expert who speaks to organizations about how they can improve their competitive advantage and employee satisfaction - resulting in an improved bottom line. For more information, visit www.customerfocus.org.

Courtesy of ARA Content

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