Accounting Post



Tuesday, October 2, 2018

Are Your Employees Assets Or Liabilities

Are Your Employees Assets Or LiabilitiesDo you treat your employees as an asset or a liability? Strange question, right? Because assets and liabilities are found on a financial statement and nowhere on this statement is there any mention of employees. Payroll and associated taxes are definitely there, but not the employees themselves.

A company in today's world must adapt to the changing world around it, or die in the process. Forty years ago, employees stayed with a certain company for many years, even retiring from there. Compare that to today, where people in general are much more mobile and transient in their employment.

The average tenure of employment as of 2010 is 4.1 years. That is incredible! When is the last time you have been to retirement ceremony? Sadly, the last one I attended was 30 years ago.

Think of it this way. A fruit tree that is started as a seed, is just barely producing fruit at 4.1 years old. How much time, effort, water, and fertilizer are expended to get the tree to this stage? And to what end? It is suddenly cut down, so another seed can be planted in it's place! Absolutely ridiculous! Right?

This process of cutting down the young fruit tree and replacing it with a seed happens over and over and over again! This is what it called the revolving door.

How can businesses expect to stay alive if the employee turnover rates are so high? The truth of the matter is they cannot. The costs are sometimes hidden. They don't show up on the profit/loss statement. These hidden costs could include time spent in the hiring process, training the new employee, and correcting errors made by the new hire.

What are the possible solutions?

To answer this question, let us go back to the original question. Does your company treat your employees as assets or liabilities?

Do thoughts like 'necessary evil to be in business' come to mind as someone asks you about your employees? Do your managers think the same way? If these thoughts are allowed to not only continue but escalate as well, then the ability to stop the revolving door is slim to none!

There are three main areas that are key to slowing that revolving door.

1. The quality of employee that you hire and then retain.

2. Two-way communication.

3. Incentive/recognition programs.

The fruit tree example can illustrate these three areas! The employee of course is the fruit tree. Now here's the deal, don't expect to get an apple tree if you planted an orange seed. What?

This happens all the time. You are looking for a salesperson with charisma. Someone who is outgoing and not afraid to talk to people. But who do you hire? An introverted person that is afraid to come out of his shell. Get the point? Match the person to the position.

Let's delve a little deeper. A fruit tree needs to establish a strong root system to survive. Nutrients and water need to be carried to the roots and then distributed to the rest of the tree, which encourages growth and a healthier and happier tree!

If communications and training (nutrients and water) are provided at the proper time and in the correct volume, then you can expect healthier and happier employees in the workplace. If these are lacking in any way, then expect to have yet another fruit tree cutoff at the root, and start over again with another seed.

This brings us to the fruit that is produced by the tree. You planted the proper seed, provided the proper nutrients and had an effective watering regimen. How much fruit (production) can you expect from your tree?

The ability to recognize and encourage your employees (trees) according to their productivity (fruit) is the last key to slowing the revolving door. An employee that is recognized and appreciated for his/her results (fruits), is much more likely to have a positive outlook. This positive environment is crucial to the long term success of your business.

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