How Much Does Poor Performance Cost You?

It happened again! I overheard a small business owner (automotive aftermarket) say he didn't really see the point of training his employees because they'd all quit to work for someone else within a year anyway.

I held my tongue Ð keyboard, actually, as I the comment was from an online discussion board -- because I'm fairly new to this discussion board and I wanted to see if others with more time on the board would call this fellow to task. I'm glad to say that some did.

I started to wonder, though -- for the umpteenth time -- what it would take to truly reach someone with such a negative attitude about training. And because these people have similar attitudes about all aspects of employee development and motivation, they are even more of a challenge to my beliefs.

How do you reach someone who holds an indefensible position on emotional grounds? Sadly, the answer is that you probably can't unless they get into a position where they become willing to consider the facts of the matter.

What are the facts of this matter of the value of training and high performance? That depends. It depends on your business and how you run it. But the main point remains the same: poor performance leads to lowered business results through reduced profits and increased costs. It shows up in your P & L.

How do you determine how much you might be losing to poor (or even average) employee performance? As I mentioned above, the specifics may vary, but you start by asking yourself a series of questions about costs and lost opportunities.

You'll probably need to do some math using figures from your P & L and other reports in order to answer the questions. And depending on how your business is organized, you may find that these questions lead you to ask other similar ones that apply to your business specifically. 

Answering these questions will show you the costs of poor performance.

• How much profit do you lose in the time between the day you lose a good employee and the day his replacement reaches full productivity? How much do you spend each year to advertise employment openings?
   

• How much of your own (and your managers') time is spent each year in meetings and interviews while recruiting and hiring? How much is this time worth to the business?
   

• How many days do your mentors spend working at a reduced level of productivity while orienting new hires to the business?
   

• How much of your own time do you spend re-training someone because he or she did not learn something right the first time?
   

• If you figured that a new hire averages only 50% productivity while learning the job, how much productivity would be lost before each new hire reaches full productivity?
   

• How much more profit would you realize if all your salespeople produced no less than 80% as much profit as your top producer?
   

• How much more profit would you realize if all your mechanics produced no less than 80% as much profit as your top producing mechanic?
   

• How much more profit would you realize if your top producers increased their productivity by 25% next year? Or 50%?
   

• How much would you save on equipment repair and maintenance if every machine in your shop received the same level of attention as a restored classic car?
   

• How much profit do you lose every year when you have to re-do work to satisfy customer complaints?
   

• How much more would you make if you cut in half the number of parts you had to re-stock or return that were sold for the wrong applications?
   

• How much more would you make if your locations were at least 80% as profitable as your top location? 

That's a good enough list for now. I'm sure you get the idea.

It will take you some time with your P & L and labor reports to compute accurate answers to these questions. One or two might not apply to your business.

And you will probably think of other questions you should be answering as well. When doing this exercise with a client, it's inevitable that other questions come up.

So here is my challenge to you. Take a half hour sometime in the next week and try to answer any three of these questions. See what you get. Do you like what you see in these answers? Or not?

Chances are, you'll be a little surprised and maybe even a bit disappointed at the costs and lost profits these answers reveal.

But you'll be one step ahead of your competition. Because I can just about guarantee that only a tiny fraction of businesses take the time to examine themselves this closely. And even fewer will then do something about it.  

But you will. And that will make all the difference.

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