BrainTrust Query: 45 Percent of Employees Don’t Contribute to the Bottom Line

Discussion
Sep 14, 2009
Bob Phibbs

Commentary by
Bob Phibbs, The Retail Doctor

The
Associated Press
reported that according
to a phone survey of “1,000 randomly selected U.S. small businesses
with revenue between $1 million and $200 million, 41 percent
said workers are paid for attendance rather than performance.
Of those surveyed, 45 percent said employees don’t have any daily,
specific or measurable goals. Meanwhile, 45 percent said the
employees don’t contribute directly to the bottom line.”

The
survey was conducted by consulting firm, George S. May International.

At
first glance, it would seem that there are no standards but on
second glance, it is unclear what question they asked on the survey.
The most striking findings were the lack of goals and feeling they
don’t contribute.

And
whose fault is that?

A
business that doesn’t see how every person directly contributes
to the bottom line needs to have their collective head examined.
The guy in the warehouse who knows where every single item is,
can spot when a pick list is wrong and keep supplies going to customers,
instead of writing a backorder. The installer who finishes
the job with a “Harumph” and complains to the customer he has two
more jobs to do before going home, stops word-of-mouth from growing
referral business. The CEO who says to a VP when a mistake is made
by his secretary, “She’s just a bag of hair,” makes everyone concerned
what is said behind their backs. The salesman that makes
an extra call at the non-competing business next door to a client.
I could go on and on but you get the point. Everyone affects the
bottom line; some contribute, some detract.

That’s
why so many businesses are struggling right now. Nobody knows where
they are going or how employees fit into that mission. “Just try
to keep your head above water,” is hardly a rallying cry. So is
it a mystery employees don’t have measurable goals?

That
might be all it takes. Though times are trying, many small business
owners admit they’re paying employees just to show up and not much
more. That’s your competition talking. Do better by rewarding
performance, not inertia.

Discussion
Questions: Do you feel figures in the retail industry would
be higher or lower than the 41 percent who said workers are
paid for attendance rather than performance? Is the industry
doing enough to create measurable goals for employees? What
are some methods to ensure that employees are held accountable
and properly rewarded for performance?

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22 Comments on "BrainTrust Query: 45 Percent of Employees Don’t Contribute to the Bottom Line"


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Kenneth A. Grady
Guest
Kenneth A. Grady
11 years 8 months ago

Whether 45 percent is the right number, the concept that many companies have many employees who are paid to do non-value-added work is, in my opinion, correct. Most companies spend relatively small amounts of time analyzing and using their most precious resource–human capital–correctly. If a company can take out 5,000 or 10,000 employees (and assuming those employees are indirect, not direct labor), then it probably had 5,000 or 10,000 too many. In retail, this translates to the common store complaint that employees stand around with nothing to do.

Rather than always trying to cut hours, we should be looking at how to put those individuals to work building our businesses. Community building efforts, local promotion activities, etc, could all benefit from that employed but underused labor. At headquarters, an embedded team of employees focused on job design and re-design (think lean, not mean), could eliminate many tasks that don’t need doing and help us redesign jobs to make them more effective.

Susan Rider
Guest
Susan Rider
11 years 8 months ago

Great question! This is a huge problem for retailers and they will need to get a handle on it in the future to add dollars to the bottom line, better customer service and efficiencies.

Workforce management has been around for a long time on the logistics side and is just now getting attention on the store side. This requires investment in technology and processes but the payback is huge.

Ryan Mathews
Guest
11 years 8 months ago

I guess it depends on who you ask. Somehow I doubt that over 40 percent of U.S. workers are standing around doing nothing, with no measure and NO impact on the bottom line. But…if that’s the case, a significant percentage of that 40 percent must be managers who apparently aren’t taking their job seriously–otherwise there would be higher productivity.

Ben Ball
Guest
11 years 8 months ago
No doubt this is a critical issue for business of all stripes–but particularly so for retail. Before we can hold people accountable for contributing to the bottom line, we have to show them how they are actually empowered to do so. For a lot of businesses that is really tough. Talking to administrative staff about shaking up the toner cartridge one more time before installing a new one usually doesn’t have much impact. But retail is different. Almost every employee has an opportunity somewhere during their day to make an incrementally positive impact on a customer. And that will always build the bottom line. Even if it isn’t as direct as an add-on sale of the oil filter to the motor oil or the scarf to the sweater, anything that makes a customer feel better about being in the store is “selling.” The best “measurements” of impact are the ones awarded by customers. And they should have a direct impact on the employee. Incentive systems like American Airlines “You’re Someone Special,” where coupons are given… Read more »
David Zahn
Guest
11 years 8 months ago

While the headline certainly is a grab for attention that compels one to read further–the point brought up by the author is correct–what was/were the questions asked that led to that conclusion? Without knowing exactly what was asked, how it was asked, and what options (if any) the respondents had to reply–this is POSSIBLY just sensationalism without substance.

However, assuming that it passes muster as being good survey design and proper science; the results are alarming and point as much to poor management as anything else. Retailers probably would not be as high as they are very cost control focused–but the previous post about ways of using labor more effectively is worth considering.

In this economy especially–if there is not a link to contribution to the organization’s bottom line–there is every reason to assess whether that employee/function/department/etc is even worth maintaining. Either support a customer directly or support the person(s) who do–anything more removed than that and the job may be deemed superfluous.

Joan Treistman
Guest
11 years 8 months ago

We don’t know what types of small businesses were in the sample surveyed. And we don’t know who the respondents were. Were they the business owner, the immediate supervisor of the administrative or accounting department, someone from HR, sales? It makes a difference.

Regardless, we all know that in general, retailers are not doing enough to nurture their staff. Encouraging and training employees to create a satisfying customer experience will enable the same personnel to feel good about their work and motivate them to continue the process.

The corporate bottom line is greatly enhanced by a staff that feels a connection to it. It’s up to management to inspire, encourage, motivate and reward. For those of who raised children there is a striking parallel.

Doron Levy
Guest
Doron Levy
11 years 8 months ago

We are notorious in retail for hiring placeholders. I mean, who wants a low paying job to get yelled at by customers? I’m being sarcastic here but it is more an indication of how we hire in retail. Chains and stores that are successful put a strong focus on individual goals that drive the bottom line. You have to wonder if companies like Sears invest in the individual performance of their people. Many retailers (and I’m thinking of some pretty big names) don’t realize the damage done to the bottom line from the trenches. Smaller merchants seem to get it (perhaps because of their size). Either way, if you are interacting with my customer on any level, your part in my P/L has to be clearly defined. My early mentor was the Vince Lombardi of the retail world….

David Livingston
Guest
11 years 8 months ago

I don’t know about the percentages. I do know that often employers are pressured to create “make-work” positions in order to give the appearance that they are employing enough minorities and females. If employers do eliminate positions that do not contribute to the bottom line it might adversely affect diversity in the company. There might be potential lawsuits from sex and age discrimination. Sometimes having non-essential employees is just another cost of doing business.

One way to help solve this problem is to get more employees involved in the hiring/firing process and get more employees involved in profit sharing. Then you might see all those make-work jobs eliminated, or less productive people replaced. If greedy co-workers make those decisions rather than HR, you will have a much meaner and leaner company.

Max Goldberg
Guest
11 years 8 months ago

The notion of work has shifted dramatically since the end of WWII. Companies for the most part treat workers as replaceable commodities and workers see companies as a place to get a paycheck. The numbers in this survey and others bear this out. Companies need to empower their workers and treat them with respect. After all, a company’s human resources will determine in the long run whether it succeeds or fails.

Companies also need to develop a strong core story for their business, one that every employee, vendor and customer can understand. That story–and it’s more than just a mission statement–should tell everyone why the company was created, its values and its goals.

If companies can make their employees feel better about the business, understand their role in its success and participate in its growth, they can reap tangible rewards.

Roger Saunders
Guest
11 years 8 months ago
If the number of 41% is in reality accurate (my guess is that it is the opinion of the survey respondents), firms falling into this bucket are destined for a short history. Those management teams at retail have to start with the premise that they have been entrusted with certain “assets” of the organization. People, like capital, real estate, and inventory, fall into that “asset” category. The management team owes it to their organization, their people, their customers, and themselves to make certain that they are maximizing the return on those assets. In the case of people, that means talking them into position; coaching them throughout the day; making certain that they know the objectives for the hour, day, week, month; thanking them for being there at the end of the shift/day; and leading by example; give them the technology and tools to best perform their responsibilities; train them; reinforce positive behavior; and more. It’s not easy to be a leader. It is a choice. And, managers who feel that only 59% of “people assets”… Read more »
Sandy Miller
Guest
Sandy Miller
11 years 8 months ago

Duh! (You will probably scratch this, but you shouldn’t). The key point is the brief 4th item: “Whose fault is that?” The issue is increasing 45% to 75% or more performance focused employees. One step is making “workers” and “employees” Associates or Professionals.

Ian Percy
Guest
11 years 8 months ago
“How we are managed is how we serve.” If employees are managed (we won’t even talk about being led) without purpose they will work without purpose. Who was it who said “Having lost sight of our objectives, let us re-double our efforts!” That said, you can list all the goals you want and try to “program” the employees as though they are pieces of hardware and you’ll still get nothing. The problem with the lack of profitable performance isn’t “goals” as much as it is “beliefs.” Beliefs drive behavior and also the bottom-line. Frankly, I think our insights into human performance are far too superficial–like thinking that having everyone wear the same golf shirt will make them a team. Employees will not buy into a corporate mission or goal if they have no mission/goals for their own lives. Is it the responsibility of an employer to help them find a life-purpose? Most will say no. But they’re not getting that from school; perhaps not even from parents. In our culture we are still talking about… Read more »
Gene Hoffman
Guest
Gene Hoffman
11 years 8 months ago

There are many reasons why employees are hired. There are also many reasons why managers are critical of a good portion of their workforce. And there are many reasons why so much time and money is applied to measure such current activities. There’s lots of heat in every kitchen and when you put all those circumstances together they hardly spell “mother” but rather a cultural weakness in our leadership paradigm.

Jesse Rooney
Guest
Jesse Rooney
11 years 8 months ago

I question whether or not small business owners and managers have sufficient metrics in place to accurately judge employee performance. Most of the small businesses I’ve worked for largely judge individual performance on gut instinct, rather than measurable goals. Frankly, I rather doubt that most small business managers really care about the performance of individual employees, being more focused on the bottom line.

Let’s not forget that this survey doesn’t seem to specific to retail. Many small business with professional offices (doctors, lawyers, accountants, etc) can expect to have many more administrative staff members than earners. The receptionists at a doctor’s office or a law firm, for example, don’t contribute directly to the bottom line, but they are critical to the business.

Gene Detroyer
Guest
11 years 8 months ago
This is a bizarre survey. 45% of employees don’t contribute to the bottom line? What employees? And what does it have to do with measurable goals? Does the employee who answers my phone contribute to the bottom line? Not in a direct dollars and cents manner, but it sure makes my day more efficient. Do I mind making my own copies? No! But, is it a better utilization of $/hour to have someone with a lower pay scale do it? I have worked with smaller companies and one of the largest in the world. That largest one had an extensive management by objectives program. Despite that, the company could have easily operated with half the managers it had. The smaller company I worked for had a very informal evaluation process, but be assured, there wasn’t an individual in that company who wasn’t contributing. (As a side note, that small company was not an American company.) For retailers…compare Wal-Mart and Macy’s. With Wal-Mart you will find efficiency in manpower. For Macy’s you will find typical American… Read more »
Mel Kleiman
Guest
11 years 8 months ago
Again, survey…not research. Build a survey…get some interesting results that will grab a headline and away we go! George S. May International sure got the results they wanted out of reporting the survey results. Go try and find the survey online or anything other than the press release and that is all there is. I don’t know if it really matters about the survey; the question is, are American retail workers really contributing to the bottom line? My answer is YES. I do not know of an employer today who has people working for them because they just like paying them a salary. In fact most customers complain about the fact that they can not find anyone to help them because stores are so understaffed and employee are frustrated because they are so overworked. Now the more important question is, do most employees know why their job is important and how it contributes to the bottom line? Do they really understand and have goals and objectives so they can measure whether they are doing a… Read more »
James Tenser
Guest
11 years 8 months ago

Too bad the data from this “survey” is so thinly reported. Seems like it tapped into wishful thinking on the part of small business managers who fantasize about slashing overhead–or evading fair hiring practices.

It would be nice if every chef, cook and bottle washer had a digital readout above their work stations that showed exactly how much their latest email contributed to the bonus pool. Or how much a 60-minute team meeting really costs the company.

I’m all for visibility and I favor meritocracy. As soon as someone invents a “profit meter” that we can slap on the back of every worker to monitor their minute-by-minute cost-versus-contribution, I’ll buy in.

One last thought: How do you think highly paid top managers would stack up if they were subject to this degree of scrutiny?

Mike Romano
Guest
Mike Romano
11 years 8 months ago

I’ve visited dozens of retail and grocery corporate headquarters the past 10 years. Many are run well, yet I’m amazed (but not surprised when I see the financial results) of those companies that have multiple corporate buildings filled with as many corporate people as there are people in the field and at the stores. Doesn’t make operational or financial sense to me. Not sure what the ratio should be but one corporate person for every 100 store people seems right.

Carlos Arambula
Guest
11 years 8 months ago

Perhaps the problem is not the employees, rather the management. Jack Welch’s approach of culling the bottom performers is a good solution to this problem.

Mark Price
Guest
Mark Price
11 years 8 months ago
Across America, a great malaise exists in business. Almost 1/2 of all employees dread coming to work on Monday and look forward to time off. Now we hear that the feeling is reciprocal–management feels that almost half of workers do not contribute to the bottom line. What we have here is “a failure to communicate.” As the article described, every employee has the opportunity to impact customer value and retention, either directly or indirectly. Stating that almost half of employees do not contribute to profitability suggests that those employees are easily replaceable. When employees feel that management does not care if they live or die, then they begin to act in their own self-interest and not in the best interests of the organization. A downward spiral is created, leading to dissatisfied customers and declining loyalty–just as you see in retail right now. Breaking out of that spiral takes time, commitment and integrity. Retailers must recognize and act on the commitment to treat their employees, particularly their store associates, with caring, flexibility and reward. The carrot… Read more »
Mark Johnson
Guest
Mark Johnson
11 years 8 months ago

I think this is a challenging area. I know that small and growing business can find it challenging to set, monitor and tweak goals and objectives. As the CEO of one of those companies, I find this a challenge myself. Setting goals (measurable ones) is such a disconnect.

I think overall we have a disengaged workforce. I am not sure if that is a chicken or egg type problem. That is the million dollar question since the answer impacts how you and your organization respond.

alexander keenan
Guest
alexander keenan
11 years 8 months ago

I see this as a survey on the philosophy of management. To me this shows how many businesses see an employee as a necessary evil that you purchase to do something you think you need done. The other side seems to see employees as a valuable resource which contributes value just as other company resources do.

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