The Relationship of Relationships to the Bottom Line

As you might expect, the ‘bottom line’ for any company is the most critical factor for them to remain viable. In other words, to stay in business you must make money. Many companies only look at what they need to do to improve their financial picture. They seldom look at the unnecessary expenditures that are helping to erode their profits. Most often the reason for non-essential expense has more to do with people than technology. For example, what is their turnover rate. What percent of their employees leave or are dismissed on an annual basis? Most companies have no idea what their turnover rate is.

Those people removed from their rosters is probably a good thing, but does anyone keep track of the ‘hiring mistakes’ and try to improve the retention level? Very few. If your turnover rate is below 15% and your hiring mistakes are in the single digits, you’re in pretty good shape. This leaves us with the burning question, why do employees leave for what they believe will be ‘greener pasteurs’? Ray Kroc, the founder of McDonalds, is quoted as saying, “if the grass appears greener on the other side, fertilize your grass”. I’m not sure exactly what Ray had in mind, but I’d be willing to bet it had something to do with the way employees are typically treated.

The Gallup organization has done many studies on hiring and retaining good people. What they found in most cases is the majority of people who leave, depart because of their relationship with the boss. Gallup is the originator of the quote, “people leave people, not companies”. You seldom hear this during an exit interview. Of course only a small percentage of companies even bother to do an exit interview. I believe they avoid this simply because they don’t want to hear any bad news. Bad news might cause them to change some of their practices, and nobody likes to change especially when the change involves them.

From all the data Gallup has compiled over the years they came up with a simple assessment they call the Q 12. The name is derived from the fact there are only 12 questions to this assessment. The 12 questions, (they are actually statements), range from 1. I know what’s expected of me at work, to 4. In the last seven days I have received recognition or praise for doing a good job. The people score each of these statements from 1 (strongly disagree) to 5 (Strongly agree). It’s a quick way for the company to assess the level of “care” being given to what most managers tell you is their greatest asset, their people.

So how does all this translate to bottom line profits. It’s really quite simple. What Gallup found in one particular wide ranging study was a direct correlation with ‘high scores’ on the Q 12 and profitability. People who generally enjoyed where they were working and the people they worked with tended to be dedicated and engaged employees. This kind of employee produces more. More production shows up on bottom line. People who feel they make a difference and are appreciated for their efforts choose to be there and generally stay with that organization.

The ‘people part’ of any manager’s job is the most difficult. It’s difficult because to improve in this area requires changing habits. It takes time and a sincere effort on the part of the manager. Companies who pay attention to the people and cut down on the time they spend doing stuff will witness incremental improvement to their bottom line.

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