Motivating workers is one of the biggest challenges employers face. Poor morale negatively affects your business's productivity so it's important to first assess the morale in your workplace, and if necessary, take steps to improve it.
Regardless of the type of business you operate, it is an undisputed fact that dependable, productive employees are one of the keys to your success. Most business owners correctly recognize that it is the people who work for them that make the difference, regardless of the product or service they sell.
The not-so-secret key to a productive workforce (and therefore a successful business) is an elusive thing known as good morale. It's elusive because morale can be a hard concept to define. Basically it refers to the way that your employees feel about working for you and your business. And the reason it's so important because it directly affects your bottom line.
It's easy to see how an employee who sells a lot of your product helps your business's financial bottom line, whereas an employee who misses important deadlines hurts your company's profitability. But what about the employees who fall somewhere in between? They aren't performing badly, but they aren't excelling either. How do those folks fit in? They aren't costing you anything, right? Think again.
An employee who is not satisfied with the job can cost you plenty without either of you knowing it. Just because an employee isn't making serious errors in a job or missing deadlines doesn't mean that he or she doesn't cost you anything. Realizing how poor morale affects your bottom line is an important because it drives home the reality of how employee loyalty and employee turnover, and in turn, productivity, can be negatively affected by poor morale.
Defining productivity
What is productivity? A simple way to think of your business's productivity is in terms of:
- how much of a product you produce over a certain period of time
- how much of a product you sell over a certain period of time
- how quickly you perform a certain service
- how many customers you serve over a certain period of time
Tip
The cost of "doing things wrong" is, on average, 10 percent. "Doing things wrong" means missing deadlines, shipping the wrong orders, and making billing errors and other mistakes that require time and effort to correct. That means that if your business does sales of around $100,000 per year, then the cost of doing things wrong could be near $10,000 annually. When you figure in all subsequent paperwork, service trips to customers, shipping, sales reps' time, and in-house time, the cost could be as high as 15-20 percent!
While factors within your business, such as the quality of equipment, the management of materials flow, and general economic considerations (e.g., inflation or recession), can affect your business's profits, the extent to which your business realizes a profit from its activity depends largely upon the quality of your employees' performance. It's important to know how hard your employees are working and how much they are producing. One way to find out is through performance evaluations and productivity measurements.
Measures of productivity
You should choose a convenient measure of productivity, based upon the type of operation your business is involved in and what you're producing. You'll also need to choose a time frame in which to measure it.
Productivity will mean something different to each business. The standard measurement of productivity is output per worker-hour, or the ratio between the number of hours worked to total output. You can also measure your productivity per week or month, if each unit of production takes more than an hour to create. Output can be measured in terms of:
- volume
- quantity of items produced
- dollar value of items produced
Example
A website designer's productivity may include aspects of how many jobs he completes in a month, as well as how quickly the jobs were produced.
A business that builds and sells mountain bicycles, on the other hand, might measure productivity in terms of the number of bikes built and sold over a month's time.
Measuring productivity may also involve determining the length of time that an average worker needs to generate a given level of production. You can also observe the amount of time that a group of employees spends on certain activities (such as production, travel, or idle time spent waiting for materials or replacing broken equipment). The latter method can determine whether the employees are spending too much time away from production on other aspects of the job that can be controlled by the business.
Measuring productivity in manufacturing businesses
If your business is involved in manufacturing, consider using output per worker-hour or number of worker-hours required to produce a single product.
Samples of measurements for production workers divide the total number of hours paid per month by the number of units produced in order to determine both the cost of production of a unit and the number of hours required to produce the unit.
Example
Your business makes surfboards. If you have six employees who each work 172 hours per month and they produce 140 surfboards in a month, then the unit cost of a surfboard is:
6 employees x 172 hours = 1,032 worker hours
1,032 worker hours divided by 140 surfboards per month equals 7.37 worker hours per surfboard. That is the number of hours required to produce the unit.
If you pay each of the workers $9.25 per hour, then the production cost of the unit is
$9.25 x 1,032 worker hours = $9,546 per month
$9,546 per month divided by 140 surfboards per month equals $68.185 per surfboard.
Measuring productivity in service industries
If your business is in a service industry, you may have a harder time measuring productivity due to the somewhat intangible nature of the product involved. Service industries can base productivity on the number of tasks performed or the number of customers processed per given period of time. Other measures might be whether the service delivered measured up to company, industry, or customer quality standards and whether certain deadlines were met, if applicable.
Professional employees can keep personal time sheets to indicate the number of hours spent on a given task. Quantity of work is a possible measure, such as number of service calls made per day or number of contracts written. Clerical workers can be given specific amounts of work to determine the relative time it takes to complete a given task.
Measuring sales rep performance. The most effective means of measuring performance by sales representatives is by taking into account and measuring each of these factors:
- The volume of sales in dollars per given unit of time: sales volume by itself will not indicate how much profit or loss each sale represents, as a salesperson may make too many concessions or sell to poor credit risks in order to make the sale.
- The number of calls made upon existing accounts: the number of calls made by a sales rep. alone does not indicate if those accounts with the most profit potential are being serviced.
- The number of new accounts opened.
- The dollar amount expended per sale: comparing sales over given periods of time, say monthly periods each year, will not account for changes in products, prices, competition, or routes.
Tip
If you're using more than one measure of productivity, make sure that the standards are comparable. Also, a productivity measurement based on the dollar amount generated per activity should allow for adjustment in inflation rates in order to compare productivity rates over various years.
Improving productivity
Once you've figured out how to measure your business's productivity, you need to determine whether your productivity is where it should be. This task can be tricky, especially if you're getting this information for the first time. Factors to take into consideration are:
- the cost per unit compared with price
- your competitors' productivity levels, cost per unit, and price
Some of this information may be available from your trade or industry association, or through networking with contacts in similar businesses. Once you've established a baseline measure, you can assess your productivity periodically and be able to spot trends and track your progress over time.
After you've assessed your situation, what can you do to improve your productivity? Identify potential problem areas. The quality of leadership in the business can have an effect on productivity, so make sure that you, as a leader, ensure that your business isn't suffering from:
- poor planning
- poor scheduling of work
- unclear or untimely instructions to employees
- an inability to adjust staff size and duties during light or heavy work load periods
- poor coordination of material flow
- the unavailability of needed tools
- excess travel time
Ultimately, the key to improving productivity lies with the employees themselves and the way that you use those employees. Studies have shown that it is important to a majority of workers to do their best at their jobs. Chances are that most of your employees feel that way.
Work smart
It becomes your challenge to tap into that desire to perform and make it work for your business. In a word, you have to know what you can do to improve morale and motivate your employees.
Because people want to do a good job, providing them with every opportunity to do so is a win-win for the employees and your business.