Hidden Tax - Employee Engagement - realestateinvestingtodayAs Ben Franklin said, “In this world nothing can be said to be certain, except death and taxes.”1 While we can’t avoid paying taxes as individuals, we can avoid paying unnecessary fines and penalties.

 

The Late Penalty

Companies are no different.  They continually look for opportunities to reduce their tax obligation. However, there is a hidden levy that must be considered: The Late Penalty. This fine is levied when a company fails to make a sustained effort toward a known issue.

For instance, when a company fails to meet its employee engagement obligation, it will be subject to the Late Penalty.  The amount of that Late Penalty is calculated based on the increased recruiting costs, hiring costs, lost productivity costs, the cost of lost customers, the costs of poor partner and supplier relationships, and the costs of unmet shareholder expectations. This is an unnecessary fine that can be avoided by making a sustained effort to address employee engagement.

According to Deloitte, “87 percent of organizations cite culture and engagement as one of their top challenges, and 50 percent call the problem “very important.”2 “Only 7 percent rate themselves excellent at measuring, driving, and improving engagement and retention.”3 In effect, they are electing to pay a Late Penalty because they aren’t able to realize the benefits of a fully engaged workforce.

 

The IRS

Companies need to establish their own IRS – Internal Retention Service. By focusing on engaging and retaining their employees, they will be able to reduce the cost of their Late Penalty.

 

 

Let’s consider the composition of this unnecessary penalty in terms of employee engagement:

Employees – According to Gallup, 70% of American workers are “not engaged” or “actively disengaged.”4 That means the company is assessed based on the decreased productivity of their workforce.

Managers – Managers are employees so they mirror employee productivity. In addition, they can contribute to an even larger penalty. “Manager talent is rare, and organizations have a hard time finding it.”5 “The sought-after talent combination that characterizes great managers only exists in about one in 10 people.  Another two in 10 people have some of the five talents and can become successful managers with the right coaching and development.”6

According to Gallup, “Managers Account for 70% of Variance in Employee Engagement.”7

“Studies on the cost of employee turnover are all over the board. Some studies (such as SHMR) predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average.”8 “But others predict the cost is even more – that losing a salaried employee can cost as much as 2x their annual salary, especially for a high-earner or executive level employee.”9 The penalty adds up quickly if a person isn’t a good fit in their managerial role.

 

The Multiplying Effect

Now the multiplying effect kicks in since each group builds on the previous one.

 

Teams – The lack of strong managers and mostly disengaged employees means that teams aren’t as efficient or productive as expected.

Departments – When you look at the assessment associated with a single team, consider the effect of having multiple teams in a department.

Offices – Multiple departments comprise each office.

Regions – Multiple offices comprise each region.

Company – Multiple regions comprise a company. Also, being able to attract new talent is vital to all companies.  Companies that fail to focus on employee engagement will be hit with higher recruitment costs because the pool of interested candidates will be smaller.

Partners/Suppliers – How effectively is the company interacting with its partners and suppliers?  Given the lack of engagement in groups mentioned above, are they treated well? Do they want to work with you?

Shareholders – How diligently is the company working to minimize its costs and increase its profits?  Continuous churn in recruiting and hiring costs, decreased productivity, lost customers, etc., increase costs and lower profits.

Customers – How many customer relationships have been damaged or lost because of poor treatment from the disengaged employees and managers?

 

It Adds Up Quickly

As you can see, the Late Penalty adds up quickly.  As a result, companies pay an unnecessary fine when they fail to invest in employee engagement. Those fines are the result of the Late Penalty and they are avoidable.

It’s time to focus on how your company can avoid the Late Penalty.  Start working with your IRS – Internal Retention Service – to lower the burden of your late fees. 

 

 

1 “Benjamin Franklin.” BrainyQuote.com. Xplore Inc, 2016. 13 April 2016. http://www.brainyquote.com/quotes/quotes/b/benjaminfr129817.html
2 Brown, David, Sonny Chheng, Veronica Melian, Kathy Parker, and Marc Solow. “Culture and Engagement: The Naked Organization.” Deloitte University Press. Deloitte Development LLC, 27 Feb. 2015. Web. 13 Apr. 2016. P. 35. <http://dupress.com/articles/employee-engagement-culture-human-capital-trends-2015/>.
3 Ibid., P. 36.
4 O’Boyle, Ed, and Jim Harter. State of the American Workplace: Employee Engagement Insights for U.S. Business Leaders. Rep. Washington, DC: Gallup, 2013. Print.
5 Harter, Jim, and Brandon Rigoni. State of the American Manager: Analytics and Advice for Leaders. Rep. Washington, DC: Gallup, 2015. Print.
6 Ibid.
7 Beck, Randall, and James Harter. “Managers Account for 70% of Variance in Employee Engagement.” Gallup.com. Gallup, Inc., 2 Apr. 2015. Web. 17 Mar. 2016. <http://www.gallup.com/businessjournal/182792/managers-account-variance-employee-engagement.aspx>.
8 Merhar, Christina. “Employee Retention – The Real Cost of Losing an Employee.” Zane Benefits. Zane Benefits, Inc., 4 Feb. 2016. Web. 13 Apr. 2016. <http://www.zanebenefits.com/blog/bid/312123/Employee-Retention-The-Real-Cost-of-Losing-an-Employee>.
9 Ibid.

 

 

 

What are your thoughts on the Late Penalty? How does your company address lowering the burden of its late fees?

 

 

 

Let’s Engage! 

I’m Agent in Engagement Simpson…Gregory F Simpson.

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