It’s more than a day’s pay for a day’s work
Circuit City has become a classic case study in what not to do as an employer. Once known for its customer service, Circuit City slashed its workforce by 3,400 in May 2007 by firing employees the retailer determined were paid too much and replacing them with less experienced workers. The company squeezed out savings of approximately $150 million in general expenses.
But customers rebelled against the lack of expertise in the stores. By the end of the year, Circuit City lost more than $300 million and the slide into bankruptcy began.
Multiple studies have been conducted showing how costly it is to lose experienced employees. For a large company, it is estimated that every 10 senior or key professional employees that leave a company, the firm loses $1 million.
And yet, many employers still think they can grow their business by shrinking their experienced workforce. These employers wonder why they can’t attract and retain top talent even as they are laying people off.
Today’s challenging business environment calls for strengthening relationships with employees, not rendering them apart. The most important factor in accomplishing this is to create an atmosphere where employees learn, grow and feel respected.
According to Katherine V.W. Stone at the University of California, Los Angeles School of Law, there is a “psychological contract” between workers and companies. On the company side, the contract expects certain behaviors on the part of employees including hard work, honesty, and showing up on time. But there are expectations on the employee side as well, which include respect, fairness, and being valued for doing a good day’s work beyond the money in the paycheck. When one side of the contract is breeched, the other side suffers.
Stone says that a workable psychological contract recognizes a fluid workplace but offers rewards beyond the paycheck, such as providing challenging assignments that build marketable skills. Results-oriented project work can be interesting and rewarding, and better-suited for a short-term tenure while providing a valuable take-away for the employee. Recognition, promotion and the opportunity to explore lateral jobs to build skills can meet both employer and employee needs.
Many studies show that employees want working conditions that are comfortable and safe, fair personnel policies and possibilities to advance their careers and pursue personal development. The lesson to be learned is that getting commitment from employees requires companies to be willing to make some commitments of their own.
Building in the “people dimension” is an investment. But when employees feel valued, and are given the opportunity to learn and grow, the result is a thriving and profitable business, regardless of economic challenges.
Owen Davis is Managing Director of U.S. Operations of TrainingFolks, which specializes in instructional designers, performance consulting, contract training, management training and designing and executing employee-based development systems. He can be reached at 704-987-7761
