Are staff a cost or an investment?

Some years ago my boss sat me down and gave me a good talking to.  I had been asked to turn round a company.  The sales weren’t growing and the previous manager had recruited huge numbers of new people resulting in a whacking loss.

My boss basically gave me two bullet points:

• business is simple.  The idea is to sell something for more than it costs to make and deliver it;
• there are two things to do to create a profit out of a loss: cut your costs or increase your sales.

This might sound almost condescending but it’s sometimes useful to pose problems in these simple ways to avoid getting too clever and complicated too quickly.

This advice highlighted for me the critical issue of getting and keeping the right people.

Average salary in the UK is around £ 24,000 but that hides a huge spread between black market subsistence wages and seven figure performance based reward packages.  Variable costs associated with employing someone – and these will range from  pension contributions and training to furniture, IT and office space – and you can see that employing someone is a huge cost.

Or, look at it another way.  Treat it as a simple cost and there’s a tendency to view it negatively.  In hard times the default setting is to cut it and that can lead to huge problems in lost knowledge and skill.

Treat people as an investment and the way you plan your recruitment, development and employment strategy and the way you evaluate individuals and their performance will change fundamentally for the better.

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