Profitability Killers: High Risk Areas

An article I found from Management-Issues.com opened with this, “Listen up, I will say this only once. Misunderstandings between workers and managers cost firms $37bn a year, yet few firms trouble to do anything about it.” Another article from the Society for Human Resource Management cited Debra Hamilton as estimating the costs to “companies of 100 employees an average of $420,000 per year.” While the idea of “misunderstandings” lends itself to poor communication (and we’ll certainly be addressing that specifically soon), that’s definitely not the only way it’s killing our profitability!

While I had significant hiring responsibility in my full time roles, and even in the work we do today, it’s rare to see organizations have so many highly skilled individuals on staff that they aren’t at least passively looking for great talent. In the toughest scenarios, I’ve seen the high demand for talent push managers and business owners do what resembled beginning to perform CPR (check to see if the candidate was breathing and look for just the faintest pulse even if they weren’t breathing) before extending a job offer. In fact, I remember a time where I was hiring for one particular skilled trade and the manager I was supporting said he needed no less than seven new employees for those positions in the next five days. I just happened to be holding all five applications we had gotten to that point. I explained that we may be better off serving a restraining order on two but he was welcome to pick any seven he wanted from those five. After glancing at what we had to work with right then, he decided his needs weren’t quite as urgent as he had let on!

While he and I didn’t see eye to eye on everything, that was one case where he chose not to sacrifice at least some level of quality for the need to fill his open spots. Unfortunately, a number of decisions the management team (that he was a part of) had made in the twelve months or so leading up to that conversation had drastically changed the approach we had to take to find candidates and to even maintain a decent culture with the folks who were already there. And that opens the door to one of the biggest misunderstandings I’ve seen organizations make: prioritizing an immediate need for a certain skill set over the importance of ensuring the person with those skills has similar values!

We can certainly plug a hole in the short term with someone who has a relevant set of skills but mismatch on value, or even not making sure the company values are clearly understood from day one, can kill profitability for the duration of the working relationship! Having even the slightest focus on values from the start though can provide a foundation for everything else we do moving forward and can help us capture profit that can otherwise be lost completely. Once we’ve nailed that down, we can call attention to what’s likely hanging on the wall in our lobby (or somewhere prominent) but no one really considers on a routine basis - which makes it our next high risk area that’s actually pretty simple to address…