Monday, August 22, 2011

ROPI – Return on People Investment

The core driver of any business is investing with the expectation of positive (financial) returns. Companies build manufacturing plants and buy machinery to establish the means to create products and then get them to market. 
            When customers in their target markets buy their products, the resulting revenue stream is what makes the up-front investments start paying off in the form of profit – also known as return on investment (ROI). 
            When business people talk about invested capital, this is what they generally mean: physical plants, equipment and transportation, the kinds of investments that are amortized and depreciated over time.
            Building a new production plant may cost, say, $150 million and the senior managers justify the expenditure based on the projected ROI – how long it will take to “pay” for the investment before they can start realizing a profit. 
            However, we rarely hear business people talk the same way about the investment they make in their people, whether they are getting a good return on that investment.  Employees are often an overlooked part of the big picture.
            That seems ironic, especially in light of the fact that the cost of personnel is often the biggest line item on most companies’ balance sheets. In addition to salaries, health care costs, and other benefits, investing in people includes many other things, such as:
  • The time and money it takes to find the right person for a given position, including paying the recruiter and investing the man-hours to conduct interviews and winnow down the candidates to the final few.
  • The initial and ongoing training necessary to assure that people acquire and sustain the skills needed to be the best they can in their jobs, and to excel and rise in the organization, further adding value.
  • Various other costs incurred in retaining people, such as salary increases, incentives and bonuses. 

This all may seem obvious. I only reiterate here it because of what we have been experiencing for the past three years or so. Millions of American jobs have been lost – evaporated. And the job shrinkage doesn’t appear to be over in light of recent announcements we’ve read about this month: Merck’s head-count reduction of 13,000 over the next four years, in addition to the 20,000 cuts already announced; HSBC’s announced cut of as many as 30,000 jobs; Bank of America’s decision to eliminate 3,500 jobs; and Cisco Systems’ pledge to cut 6,500 positions.
            Naturally, a good leader resorts to lay-offs only as a last option, doing so only after hiring and wage freezes, other expense cuts, and/or price increases have failed to stanch the red ink. They know that every single laid-off employee is a lost opportunity, a lost investment.  Good leaders feel an ache in the pit of their stomach at the prospect of having to cut the work force.
            While they are conscious of the personal side of each lay-off – the family that’s impacted, and the blow to the employee’s ego and sense of self-confidence – the business leader side of their personality aches at the loss of investment capital.
            However, the bigger challenge and what keeps these leaders awake at night is what each lay-off does to the company and its future prospects. Yes, shedding jobs reduces expenses to better ensure the company’s ability to persevere in the trying times – which is the point, after all. 
            But the care, feeding, and cultivation of effective employees are works in progress.  When it all meshes and the company is thriving, there are few things that make a leader prouder than seeing the employees operating at their best, as a team, contributing collectively toward the company’s mission. 
            But when lay-offs are unavoidable, that finely tuned machine loses its edge. Remaining employees lose their focus on the mission, instead concerned for their own future with the company, while wondering when the other shoe will drop.
            That said, in the toughest times – like right now – businesses need to continue to cultivate their people, to be sure they understand how much they mean to the future success of the business and how important it is for them to stay focused on the mission.
            Of course, the key is communications – through both good times and bad. Keep employees well informed and actively engaged in the external challenges the company is facing: competitive threats, economic turmoil, government regulation and taxation, etc.
            Share with them, too, the company’s opportunities and always invite their perspective and ideas. Open and honest communications build trust and understanding, which will be what leadership needs most when the situation gets tough, when the best efforts of everyone and their full engagement to the company’s mission are central to seeing it through hard times.

Thursday, August 4, 2011

Business, Politics and Social Media


An old maxim advises us not to discuss politics or religion in mixed company. I would add that that truth goes double for business. It just isn’t wise. Expressing one’s opinion on such matters does not make us better at our jobs. If anything, it’s an impediment.
            In fact, bringing one’s political opinions into the office, plant floor or business meetings, even casual off-site meetings, can hamper our ability to work together by creating unnecessary tension and distrust in the workplace when our views on certain subjects outside the business realm don’t sit well with others or, worse, create irrelevant and unproductive disagreements.
            Based on my observations, that maxim seems to be followed pretty universally – if not consciously, then simply because we’re all too busy to wallow in political arguments while trying to get our work done.
            Yet, oddly enough, this truth is not universally observed in the context of social media.
            A lot of people, previously without public forums, have discovered Facebook, Twitter and blogs as business communications tools: to connect and have a dialogue with employees, customers, and prospective clients. And that’s good.
            But in the context of your profession, it is ill-advised to express your political opinions on the Internet. Your energies and talents are expected to contribute to a whole greater than yourself – i.e., a business employing you and other people. If you are a business leader, you are setting the tone for your organization. Writing opinions that may offend employees and potential or actual customers may cause them to think less of you and your company.
            When I started this blog three years ago, I imposed that old maxim on myself and have stuck to it. Politics have no place here, nor would they make sense in the milieu of this blog’s theme and its previous posts.
            The task has been fairly easy because this blog is about business, not politics – even when I believe certain legislative decisions made in Washington will have a detrimental (or beneficial) effect on business at large and the economy.
            Nevertheless, as I scan the business-related blogs, Twitter and Facebook posts that I follow, I’m amazed to see how often politics seep into what is otherwise informative business-oriented content.
            These people are sabotaging themselves and their businesses – unintentionally, I assume. Amazingly, many of these people are self-employed. Their opinions dribble into the conversation as they blog, Tweet or post on Facebook as part of their marketing and new business efforts.
            Most are not professing outright support for one end of the political spectrum or the other, or one candidate versus another – at least not overtly. It’s subtler than that. For instance, one blog I follow often uses particular presidential candidates and other well-known politicians as metaphors for certain human characteristics, such as stupidity versus intelligence, and wisdom versus shortsightedness.
            In other cases, certain media outlets are quoted as though they were infallible while other news media are castigated as fictitious and politically suspect.
            A guy I know from my college years plumps on Facebook for his consulting business, plugging his well-written and informative blogs. In this regard, he is using the social network in an effective manner. Yet, he also uses that same Facebook wall to post vitriolic diatribes against the (in his view) political opposition, with plenty of ad hominem attacks tossed in for good measure.
            So, if I were considering him as an advisor to help me address my unique needs, would the fact of his opposite political viewpoint give me pause? Yes.
            On the other hand, maybe I'm misreading him. Maybe he is, in fact, desirous of doing business only with like-minded clients. Maybe his business is thriving and he's so busy that he can afford to alienate about half of all potential customers. But I doubt it.
            One Tweeter I follow regularly writes on business topics as well as occasional commentary about sports, which I enjoy.
            But he seems to Tweet as much about his strongly held political opinions as he does about business issues – and he’s a senior-level executive for a major bank. How many of his customers disagree with his political opinions? Does he care? Do you think his boss or his company's shareholders care?
            Since most presidential elections result in roughly 50-50 splits in the popular vote – plus or minus two or three points on either side – it’s safe to assume that about half your audience will not be amused by your metaphor that casts aspersions on what may be their favored candidate. They may find it inappropriate, no matter how clever you think you are. And if you consider that that audience could represent half of your business prospects, you likely just lost your chance to win the business of a lot of people.
            If you have a burning desire to spout your political opinions online, by all means do it. We all have our First Amendment right to freedom of expression. But rights bring with them responsibilities – as well as consequences.
            The Internet is free and open. But the Internet traffic in ideas is also a two-way street: while you’re free to express your opinions on any subject, your postings are available for scrutiny by everyone. Just be prepared to live with the effects, both good and bad. And don’t be surprised by the negative results your political opinions might have on your business.