The Real Cost of UNengaged Employees
Everybody has them, although a few of you may think you don't.
I'm talking about employees who do less than their best.
There are a variety of reasons for their behavior. It may be a lack of skill, poor communication, limited accountability or training, lack of engagement. Perhaps they do not like the work, or an unknown issue prevents them from being productive, like they are trying but don't understand how to be more productive.
These behaviors are the symptoms of a disease that you may never fully understand but every day you will feel its effects. When the disease of poor productivity shows itself through the symptoms of less effective behaviors you get poor results.
Our focus today is the cost of these behaviors.
Most of you are so busy that you grossly underestimate the cost of employees who are not doing their best.
Furthermore, your employees are often clueless about how much their poor behaviors coast. This applies to both the unproductive individual and the other employees who are negatively affected by their low productivity.
The Cost of Low Productivity
According to Gallup, 87% of your employees are not engaged at work. Employees who are not engaged are not fully productive. They lack initiative, motivation, and purpose, and often become easily distracted from their primary objectives.
Here is one way to calculate the cost of low productivity so your team members have a "wake-up" moment:
You have an employee who is part of the 87% who are not engaged. Let's say he is doing 80% of what he is capable of doing. We are not requiring perfection, but we are respectfully asking people to work up to their potential.
Your company pays this person a salary of $60,000 a year, or $28.85 an hour, including paid time off and holidays.
If this person is working at 80% of their capability then he is unproductive by 20%, or 8 hours. Those 8 hours cost your company $230.80 per week.
He is paid for 52 weeks of work, but let's say with holidays and paid time off he actually works 48 weeks. (I'm being conservative by not calculating the loss when he is not in the office.)
48 weeks x $230.80 productivity loss weekly = $11,078.40 lost annually simply because of poor productivity.
THAT'S NOT ALL...
Taxes, benefits and overhead increase that number by at least 15%. This makes the total loss $12,740.16.
You can add in several other costs:
- Lost opportunity cost to create new revenue or lower costs
- Revenue lost / costs incurred due to low productivity
- Stress-related costs to other employees and his boss
- Employee turnover due to increased workload to do his work
- His poor performance extends to others who follow his example
These are serious additional costs, but vary widely based on the role of the individual, the size of your organization, your industry, and the economy. You can play with these numbers if you like. For my purposes today I want to stay with hard numbers.
NOT DONE YET...
At a minimum your company has paid this one person $12,740.16 for work he did not do, yet is capable of doing.
What does that mean? You are going to pay another person to do that work.
So now, you pay another person $12,740.16 to do the work the first employee could not complete that year.
Oh... and the second person you pay also has an 87% chance they are not fully engaged at work. Let's say she is also 20% less productive than she should be.
This means you are going to pay her $2,548.03 for work she is not going to do.
Let's assume this only goes three levels. The third person that completes the work of the first and second employees works at 100% of their capability. Therefore the cost of low productivity is:
$12,740.16 - Lost productivity by the first employee
$12,740.16 - Pay a second person at the same rate to complete the work
$2,548.03 - Pay a third, fully productive person to fully complete the work
$28,028.35 TOTAL COST of one unproductive employee @ $60K salary. At this point, the ship is sinking!
STILL NOT DONE...
That's just one person.
Gallup says 87% of your people are not fully engaged. That's 9 out of 10 people, even if their lack of productivity is unintentional.
The loss for an entire company is staggering. Approximately $252,2565 per year for a 10-person company.
Ouch!
Build Bridges Instead of Fighting Fires
Are you too busy fighting fires and keeping-up with tasks every day to deal with employee productivity issues? I'll bet you would love to add that $252,256 back into your bottom line (and more).
WHAT SHOULD YOU DO?
Take a good, close look at your situation.
- Get away for at least an hour and think about your team. Do an ROI similar to my analysis above to calculate the costs related to low productivity. Include some of the related costs also if you feel that is appropriate.
- Look at your calendar. Where can you find time to develop a strategy, define a plan, implement the plan with accountability, and assess results weekly or monthly?
- Get real. If you lack the time to cure the disease of low productivity infecting your organization, then get outside help. Your clients call you when they don't have the expertise or time to solve problems that your team can. Why not do the same?
I do this type of work and would be happy to discuss your situation. However, you may want to hire someone else. No worries. Just do it.
Your bottom line is too costly to keep delaying the work to maximize the productivity of your people.
Share this with your leadership team. Ask for their input. Craft a plan to engage your team and avoid problems before they start.
