Plain and Simple: Bright Business Insights Fall 2018 | Page 4

IT’S THE NAME OF THE GAME HOW DOES YOUR COMPANY STACK UP? Competitive Wage Packages Help Attract and Retain Top Talent Set the Bar with Performance Benchmarking Performance benchmarking is a valuable tool for improving your The nation is seeing its lowest unemployment rate since 1969, While national benchmarking data is available from a variety of company’s performance. Whether you want to set improvement with September’s national unemployment rate hitting 3.7 percent sources, it becomes harder to locate wage information, retention targets based on your own company’s history or aim for performance – compared to 4.2 percent in 2017. A little closer to home, in Ohio, rates, benefits offered and other crucial data at a more localized level. levels achieved by the best in the business, benchmarking will help the September unemployment rate was 4.6 percent – compared to 5 Working with local human resource experts is the best way to find the get you there. percent in 2017. These percentages are indicative of the fact that, with information you need to attract, retain and develop local talent. regard to employment, it’s a “job seeker’s” market. Take A Closer Look at Your Company A low unemployment rate is great news for the overall economy and Before we examine the metrics that measure your company’s the American workforce. However, it also means that most people who performance, we must compare your company to similar operations. want a job have a job, so employers everywhere now have to work For example, when consulting with contractors, we first take a look at harder to retain key employees while working to attract top talent in where the company operates, the size of its operation, and the type of work it performs. Then, we break down the business to gain a better today’s competitive labor market. understanding of how it operates. For example, we can classify a The Dangers of Turnover company one of three ways. • General contractor: A business that operates as a general contractor subcontracts the majority of its work; cash and accounts receivable are its biggest assets; fixed assets are nominal; and existing liquidity and over-billings provide a majority of the operating capital. • • Specialty/subcontractor (equipment intensive): A specialty the participant’s financial model, the potential value of performance improvement can be estimated. Performance benchmarks help you focus on results – your own performance and the performance of best-in-class operators. Ultimately, performance benchmarks can spur you to strategy revisions as you seek to match or exceed best-in-class levels. construction or subcontracting business generally performs most Set Your Baseline of its own work; fixed assets are significant and are a barrier to Additionally, baselining or self-comparison benchmarking is also a entry; and relative to a general contractor, an equipment-intensive worthy endeavor. While limited, the primary benefit of self-comparison contractor exhausts working capital more quickly. benchmarking lies in your ability to applaud improvements. Every Specialty/subcontractor (labor and materials intensive): Companies that are labor- and materials-intensive generally perform the majority the work; fixed assets are modest; there are low barriers to entry; working capital needs are high due to under billings; and there are required costs for materials and labor. From there, we further analyze the company’s operation by specific work performed (nature of the work) as well as the typical target customer for the work. When all the factors are combined, we are able to paint a clear picture of the company for performance benchmarking purposes. contractor should perform self-comparison benchmarking on a number of data points. For example, one of the most intriguing baselines lies in the value per employee metric. What is your gross profit per employee? Have your human and equipment investments improved your value- per-employee benchmark? Answering questions like these can help fuel crucial conversations that will ultimately drive meaningful results. Benchmarking is an important device for strategic and business planning, though the greatest value that benchmarking can bring to you is direction. A complete benchmarking program can tell you where to go and how to get there. Give me a call to learn more. High turnover not only strains employee morale and productivity – it’s extremely costly. For example, the average price of replacing even a single employee can cost an employer, on average, one to one and a half times the employee’s annual salary. Monetary costs aren’t the only considerations. Turnover also takes a heavy toll on many intangible aspects. For example, when an employee leaves, you will have to confront costs associated with: • Onboarding and training • Re-establishing productivity among your team • Engagement issues that impact your workforce as a whole • Customer service concerns and errors that might occur • An overall cultural impact in the workplace Admittedly, because of their intangible nature, these costs are difficult to measure. However, that doesn’t mean their impact is any less real or detrimental to your bottom line. At the end of the day, the best way to confront the dangers of turnover is to have an employee retention strategy in place – one that not only analyzes the effects of the hourly rates and benefits, but that takes a closer look at your existing employee ecosystem and how it stacks up with similar companies as well as your competitors. to profitability are determined, allowing identification of critical success factors. By substituting certain best-in-class metrics into and, as you already know, maintaining high employee retention is the most cost-effective way to manage your business. In the previous section we discussed the costs associated with turnover. Employee retention, on the other hand, results in: • Increased productivity • Higher employee morale • Higher quality of work • Greater customer service • Better overall company performance Ask Yourself the Hard Questions If you’re in a smaller job market and looking to retain your employees to avoid turnover costs, start asking the following questions: • Are your wages and benefits competitive enough to attract and retain top talent? • What employee programs do you have in place to maintain employee relationships? • Are your business’s goals and expectations clear? • Do you offer your employees opportunities to learn and grow within the business? • Do you recognize and reward your employees for good work? It’s never been more important for businesses (especially those in smaller markets) to be strategic when attracting and retaining their top talent. Consider working with a human resources expert who knows your community, your market place and the unique challenges you face your competitors and reinforce your bottom line. 20 or 25 percent of the participants as “best-in-class.” The metrics exist. Furthermore, performance metrics that have a high correlation employees happy. You are more likely to retain your happy employees how you can harness the power of human resources to stand out among The performance benchmarking process identifies the most profitable and other participants, which allows us to measure where gaps The most cost-effective way to manage your workforce is to keep your as a small- to mid-sized employer. Give me a call to learn more about Why Performance Benchmarking Matters of those best-in-class performers are compared to industry norms Don’t Let Them Leave by: Doug Houser Principal, Director of Construction and Real Estate Services 905 Zane Street, 2 nd Floor Zanesville, OH 43701 614.314.5937 [email protected] by: Renee West, SHRM-SCP Senior Human Resources Manager 419 West High Street NW P.O. Box 1020 New Philadelphia, OH 44663 330. 308.6818 [email protected]