Wednesday, May 4, 2011

Having an "employee of the month" does not Maximize Human Capital

There are a lot of organizations that tout the “value of their employees” and how their employees are the organizations “most valuable resource”. But when you dive into the way many health organizations operate it becomes pretty obvious that these claims are nothing more than lip service. Sure, it’s true that many Hospitals are very hesitant to engage in mass layoffs and they tend have the walls littered with nurse of the month or employee of the year posters but is that an indicator of success in maximizing your most important, and most costly asset?

For sure, treating people fairly and not resorting to “knee-jerk” cost cutting solutions like mass layoffs do show a sign respect for employees but it’s only one small piece of maximizing your human capital. Consider one of the most important drivers of organizational success- retention rates.  If you are not significantly beating your peers on voluntary retention rates than you can be sure that your best employees are heading to your competitors.  It’s a critical driver in efforts to maximize human capital yet it rarely gets focused attention at executive meetings and board of director meetings.   

Does the organization have a robust and comprehensive employee development plan that includes 360 degree feedback?  Data shows that 80% of employees leave their positions because of conflicts with their supervisor.  Some of these conflicts are unavoidable but the vast majority can be addressed so that the conflict is managed and no attrition results.  Why doesn’t’ every organization employee such systems?

When a good and talented employee leaves an organization you can figure that the cost of finding a replacement plus the cost of lost productivity amounts to at least one times that person’s salary. So every time you lose a talented nurse or administrator making, say $75K per year, you really just incurred $75K of added cost to run the organization.  You won’t see that cost show up anywhere on an income statement line but you will see it eventually wind its way to the bottom line.  And worse than that, when your retention numbers start an upward trend it becomes difficult to stop the trend quickly because it’s really an accumulation of many past practices that are now bearing sour fruit and any corrective actions will take many months if not years to have an impact.   

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