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How Neglecting Employee Development Affects Your ROI

When businesses need to balance the books, they tend to cut corners in areas where they find it difficult to prove a return on investment. For this reason, employee development is often an aspect that gets hit – if not by outright budget cuts, then by general neglect and a lack of increased investment.

While a ROI on employee development programs can sometimes be difficult to prove, making increased investment tough to justify, it is an area where businesses get out what they put in. Below, we take a look at how neglecting your employee development programs can negatively impact your ROI.

The Value of Employee Development

The primary reason for investing in employee development programs for your employees is to provide them with the knowledge and skills they need to carry out their tasks. However, there are many ripple effects as well, ranging from improved productivity amongst those who are well-trained, to a competitive advantage over your rivals.

Of course, the value of employee development also extends to the customer as well. Generally speaking, organizations that invest in comprehensive development programs can expect to see a higher number of sales, as well as improvements to customer retention resulting from superior service.

When people think about staff development, they often view it as a synonym for training, but continuous coaching also has a role to play. Indeed, the CSO Insights 2016 Sales Enablement Optimization Study found that formal and dynamic coaching processes improved sales reps’ quota attainment by as much as 10 percent.

Impact on Employee Retention

One of the biggest effects of neglecting the development of your employees comes in the form of staff turnover. There is a direct link between the amount of time and money you invest in development, and the likelihood of staff members choosing to leave your organization.

For example, businesses on the Fortune 100 “Best Companies to Work For” list provide almost double the number of training hours for full-time employees compared to companies that aren’t on the list. Those Fortune 100 organizations saw their ROI manifested in increased employee retention; they had 65 percent lower staff turnover than other businesses in the same sector.

In the CSO Insights 2015 Sales Compensation & Performance Management Study, it is revealed that turnover is five times higher among sales employees than the US national average. This is problematic, because a single salesperson leaving an organization has the capacity to disrupt that organization for up to a year.

Essentially, what this shows is that neglecting your development programs decreases your overall return on investment, while investing fully in development programs results in a much greater ROI.

The Consequences of Neglect

Crucially, however, it is not simply investment that wins the day. Continuous employee development is a vital part of talent management, meaning that development programs must be in a constant state of evolution, adapting as products, services, business practices and market conditions change.

Neglecting employee development by failing to update procedures, can result in outdated product knowledge, longer ramp up times and a competitive disadvantage when compared to other businesses in the same industry. Worse still, neglecting development by putting it off completely can result in poor morale and unskilled staff.

“Developing employees is the classic example of a management function that’s both highly valued and highly neglected,” says Victor Lipman, writing for Forbes. “For busy managers, generally with too much to do in too little time, it’s a very easy task to put off to some indefinite point in the future.”

Finally, it is crucial that investment in employee development extends beyond new hires, to experienced staff members. According to the 2017 CSO Insights Sales Manager Enablement Report, those who spend more than $5,000 per year on developing sales managers see increased quota and revenue attainment, and improved win rates. Nevertheless, sales managers are three times more likely to receive no training at all than salespeople are.

Important Takeaways

Staff development programs require significant investment, both in terms of time and money, as they must be high in quality and evolve along with business practices and market conditions. However, employee development is also an area where it can be difficult to prove a clear ROI, which is why it is often neglected.

While the most obvious form of neglect is the reduction or removal of development services, it can also manifest as a lack of increased investment when it is needed to meet business demands. Yet, high-quality coaching and training have clear benefits when it comes to improving win rates, as well as revenue and quota attainment.

The consequences of neglecting employee development are numerous and include lower levels of customer retention, out-dated product knowledge and poor quality customer service. Additionally, there is a direct correlation between training provisions and staff turnover, with neglect resulting in more employees leaving a company.

For these reasons, neglecting employee development has a detrimental impact on your ROI. The only way to generate the right level of return from your employee development program is to invest sufficiently, spend ample time on development practices and ensure development is continuous, rather than being targeted exclusively to new hires.

To learn more about employee retention, check out this fun infographic 6 Stats That Speak to Employee Retention

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About the Author  
Monika Götzmann is the EMEA Marketing Director of Miller Heiman Group, a global employee development and sales training firm. It helps organizations develop effective talent management strategies through talent ready assessment. She enjoys sharing her insight and thoughts on talent management strategies and best practices.

 

Employee Evaluations

5 Elements of a Healthy Performance Review Process

Before you start defining the elements of a healthy performance review process, it’s worth investigating how or where your process went wrong. Historically, performance reviews were created with the best of intentions and remained unchanged for centuries.

The idea that people are motivated by knowing where they stand within an organization gave birth to the “rank and yank” method of ranking employees into top, average, and poor performing tiers (and eliminating those at the bottom). This was popularized by Jack Welch, former CEO and Chairman of General Electric (1980-2001).

As with many common business practices, the millennial generation is challenging the way performance reviews work. Not only have forced ranking and merit-based raises been found ineffective, leaders and human resources professionals have reported performance reviews to be a significant waste of time.

While performance management is sometimes a necessary evil, thankfully, the delivery system and the value it provides is trending in a healthier direction. Let’s have a look at five elements of a healthy performance review process.

1. Regularity

The traditional performance review that takes place once or twice a year tends to be an anxiety-inducing event in which employees are sometimes blindsided by their supervisor’s perception of their performance. To be effective, performance feedback should be delivered on a regularly scheduled basis so it becomes less stressful and includes more than an overview of how they have performed over the last twelve months.

Employees will have a better chance to grow, improve, and possibly change their approach to work if they’re receiving timely, specific feedback rather than waiting several months to a year after the fact to hear about their performance.

2. A Strong Focus on Goals

A healthy performance review process includes more than just feedback, it’s a great opportunity to establish goals and expectations. This is another reason the review process should be done more regularly. As soon as current goals are met or exceeded, you can put new ones in place, rather than waiting until a formal review to adjust strategy. This will help keep your team members from growing bored or frustrated and keep them focused on imperative business objectives.

Meeting to discuss an employee’s performance, as well as their goals, helps you as a leader understand the direction they’re heading and how you can guide them, as well as how you can align their strengths and interests toward the shared goals of your team. If you have a learning management system in place, you can also pair some of these performance goals with specific learning or training objectives and track progress in real time.

3. Two-Way Conversations

“Talking at,” your employees can make them feel intimidated, or worse, annoyed. The lack of two-way communication is one of the many reasons the traditional performance review is ineffective — more than anything, the employee just wants it to end as they might be feeling belittled, unimportant, or unheard.

Instead, use the designated review time to have a two-way conversation. Spend time discussing how your employee feels about their own performance and how they feel about your performance as a leader. Ask for their thoughts on the company’s current mission and goals. Encourage them to be decisive, and solicit their ideas. Where possible, put what they tell you into action, so they know that your interest in their opinion isn’t perfunctory. This method of communication is more aligned with the modern workforce; today’s employees, especially the millennial generation, prefer coaches to managers.

4. Balanced Feedback

You already know that going into a performance review with only negative feedback can discourage an employee from making the corrective behavior necessary to get on track. A poor performer still needs to understand how their skills are valuable to the organization, the areas they are making strides in, and where you see potential for improvement.

Similarly, providing only positive feedback (even to an outstanding performer) isn’t helpful either. A healthy review should balance both positive and negative feedback. Growth only comes from pushing people past what they thought they were capable of, and an ambitious employee will look for a manager willing to do just that. Your job as a leader is to do the pushing; by acknowledging areas of improvement, and establishing new goals.

5. Performance-Based Incentives

A system of goals and evaluation criteria is a step in the right direction if you’re hoping to boost performance. But your employees will never feel intrinsically motivated to improve unless there is some benefit or reward tied to success. If they know the only reward for above-average work is the approval of their manager, you won’t see much growth.

Make sure your performance reviews are connected to a tangible reward or incentive for each employee. How you reward the employee should be individualized, and is dependent on available budget, but it could be anything from a restaurant gift card to a quarterly bonus, or even a permanent raise for the highest performing employees. Don’t let your most valuable employees feel unappreciated, demonstrate their value to them with tangible assets–verbal affirmation is nice, but it doesn’t pay the electric bill.

When you do away with forced rankings and outdated goals and start having meaningful conversations with your team, you can soften the cutthroat atmosphere at work and engage your employees as individuals. This in turn will create a culture of trust, allowing for constructive criticism and healthy performance reviews that include regular, balanced feedback, goal-setting, and an opportunity for a two-way conversation. Furthermore, a healthy review process tied to measurable incentives will not only result in higher performance, but happier employees as well.

To learn more, check out 6 Tips to Tackle Performance Reviews for Managers and Employees.

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About the Author
Jessica Barrett Halcom is a writer for TechnologyAdvice.com, with specializations in human resources, healthcare, and transportation. She holds a bachelor’s degree from the University of Wisconsin, Green Bay and currently lives in Nashville, TN.