Managing
Your Human Capital Portfolio
By
Tim Rutledge
Managers
overseeing the performance of others need to start thinking
of themselves as investment managers. Few managers think
of their employees as investments, but that's what they
are, especially since employers will no longer have
the luxury of treating employees like commodities or
replaceable parts.
For
as long as anyone can remember, the job market has been
a buyer's market; that is, there have been more job
seekers than jobs. We've been in a broadly based buyer's
market for the past 50 years and that's long enough
for people to behave as though this circumstance is
permanent and to forget that it's actually a dynamic
market.
But
evidence is mounting fast that the job market is poised
to flip over from a buyer's market to a seller's market
and employees will soon have the upper-hand over employers.
Replacing departed employees, especially good, top performing
ones, will be expensive, because, as the real estate
people say, there's not enough inventory on the market.
The new priority for managers will be to identify the
key employees that you have today and retain them.
All
managers need to manage the investment that their company
has made in its employees. As managers we're more inclined
to not think of employees as investments, largely
because they're jotted down as costs in the ledger.
But managers have the responsibility to manage the investment
their company has made in these human capital assets
because if they resign, it's very possible that given
the current climate of the job market, they may end
up being irreplaceable.
Therefore,
there are two things all managers have to do as "investment
managers" of their talented employees:
-
Make
the unproductive employee productive.
- Extend
that productivity over as long a time as possible -
this is retention.
Managers
have often viewed their management responsibilities as
being mostly confined to the task of making new employees
productive, or, as we sometimes say, bringing the new
person up to speed. This involves training, coaching,
observing and giving feedback, including the feedback
that declares the employee to be fully trained and productive.
At
this point, managers often feel that their management
responsibilities are over, or they should be. If an employee
requires a management intervention of some sort after
his or her initial training, managers may be resentful
and label the employee as being "high maintenance."
But
making an employee productive is merely the first phase
of the manager's job. The next phase, the one that never
comes to an end, is to take the productive employee and
manage his performance so that he's productive over time,
year after year. This constitutes managing employees as
investments and ultimately retaining them.
Retention
is more cost-effective than replacement. While estimates
vary, it's safe to say that the cost of replacing management-level
employees will cost you 150 per cent of their salary.
So, if seven people depart your organization in a given
year, and their average annual salary is $90,000, the
cost of replacing them is almost a million dollars! Tell
me, does your company budge for such an expense?
So,
how does the need to retain employees make the manager
an investment manager? Some investments, like certificates
of deposit, are low risk and don't really have to be managed
at all. The investor, therefore, trades peace of mind
for a low return. But other riskier investments require
more attention in order to ensure a higher return. Employees
fall into this latter category of investment risk and
this is why the manager's job doesn't end once the employee
becomes productive. Employees are high risk investments
capable of high rate returns; therefore, if you want your
investments to deliver on their high returns then you
need to continually manage them.
Traditionally,
managers haven't been rewarded for having good people
management skills, and they haven't been reprimanded for
their lack of people management skills, either. This ambivalence
suggests that people management doesn't matter, even though
this is hardly the case. All managers need to sharpen
their people management skills if they don't want to lose
their top performers.
-
Tim Rutledge, Partner, Retention Services, is a veteran
Human Resources Development practitioner with a background
in financial services, manufacturing and health care.
[full
bio...]
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