I was speaking to a client yesterday, a small service company located here in the mid-west that I did some employee engagement work with a couple of years ago.  We had tentatively scheduled a repeat of their first Workforce Engagement Assessment to be conducted with their employees in the beginning of the second quarter, we each had a “tickler call” scheduled for the first of February.

The phone call was a tough one.  My contact at the company was struggling, as a lot of things were up in the air.  He indicated that sales/revenue was getting soft, there was an upcoming change in leadership, and that positions weren’t being  filled as attrition (and downsizing) took their toll on the workforce.  Current employees were being asked to do “more with less”, and an air of uncertainty was pervasive.

“Marc, I don’t think we are in a position to fix anything, money is tight and will be for a while.  New leadership is coming in and I don’t know how our employees will react to it.  Plus we aren’t in a position to make significant changes, and I don’t want our employees to think we don’t care about them.  No one has a lot of time to work on company initiatives these days, we are all stretched thin. Perhaps it is better that we wait.”

Wow.

So, I tried to convince my contact that his problems weren’t unique.  Most companies are experiencing a slow-down in sales, many are in a hiring freeze, some are no longer contributing to employees’ 401k, others are putting raises on hold for the short term.  In reviewing our discussion, I thought that many of his points were “right on”, however I did counter a couple of his comments.  I thought it might be helpful to do the same in this forum, as many companies today are facing similar issues.

Here goes..

First, get rid of the word “fix”.  You never fix employee engagement issues, no more than customer satisfaction problems are ever fixed.  The goal is to make things better.  Sometimes improvements come in little baby steps, sometimes you make huge leaps.  However things are seldom fixed; what delights someone today becomes a “table stake” next year.  Is that fair? No.  But it is business.

Second, I understand the desire to hold down costs.  I learned from one of my mentors at Walker Information that “A Dollar Saved Goes Right to the Bottom Line”.  However when it comes to employees, you have to ask the following question:  Which part of the P&L’s bottom line do savings go to?  Stopping contributions to a 401k saves the company money, no doubt about it.  However, it also impacts an employee’s desire to stay with the company, possibly leading to an early departure from that employee.  So, saving $1,000 in 401k contributions can wind up costing a company $20,000 to $30,000 in replacement costs of that worker.  Bad ROI.

Putting a hiring freeze in place saves that $20,000 - $30,000 in replacement costs, but it pushes more responsibility to the current  employees, and in most cases to the best employees, the “A” players, 60% of whom are currently in the market for another job, according to a recent Conference board survey.  These same employees already voice concern about their “deal”, knowing that their pay and benefits are not significantly better than co-workers.  And in many cases, their rewards are not significantly better either.  So, we reward our best employees by giving them more work.  Yea, that will improve engagement and retention.

Finally, supervisors and managers have to concentrate on the relationship they have with their employees, especially when they realize that customers buy products from their company but form relationships with their people.  As I learned at Walker, it costs three times as much money to get a new client as it does to keep one.  The numbers with employees are closer to ten to one.

Saving money makes dollars, but sometimes doesn’t make sense.