Oxford Advance Management and Leadership Programme June 2014

Oxford Advance Management and Leadership Programme June 2014

“Employee Cost: Is it a mere cost or an investment – A leadership Dilemma (Part-1)
The members of the Oxford Advance Management and Leadership Programme June 2014 (OAMLP June 14) met under the guidance of Professor Lalit Johri to debate one of the most important dilemmas faced by business leaders; what is the cost of Employees in an organization? Is it a mere cost to the company or is it an investment an organization makes to create sustainable profitable growth? The flavor provided by cultural and professional diversity of participants made the discussion very interesting and thought-provoking. The participants belonged to various industries, NGO’s, government offices, banks and education agencies. Their contributions reflected the various ways of looking at their employees and the goals of an organization.

The OAMLP June 14 class felt that cost of employees in an organization is a very important subject and is always under scrutiny. Every organization is looking at improving efficiency of their operations by seeking continuous improvements in productivity. Consistent efforts to implement optimum processes and talent development result in improvement in productivity. When the market conditions become tough the leaders of these organizations face a dilemma – reduce the number of employees to reduce the cost or maintain employee strength because much has been invested in the development of these employees. Tough one to decide. A courageous market focused inspirational leader in such a circumstances will take the fight outside to the market place to gain market share and create a path for long term profitable growth, leveraging the strength of trained resources now available to him. An equally courageous inward focused, blinkered leader will take the battle into his own organization and reduce the manpower to gain an immediate benefit of enhanced profitability. Both actions are well justified.

In the first case the leader is leading the organization by example and is converting the success of productivity enhancement into a long term profitable growth trend. He is providing a signal to his team that he considers the team members as assets and is willing to invest in training them and providing them tools and processes to improve productivity, which he wants to convert into growth. These actions drive employee morals high and commitment to growing the business. The employee engagement and respect for leadership in such organizations is normally very high. It becomes very evident in the behavior of employees with customers and very often drives customer satisfaction high.

In the second case, the leaders go after immediate benefit of improved profitability by reducing the manpower. They try to make a base for growth of business by providing enhanced profitability immediately. Although it gives a desirable result in the short term, it provides a challenge for the leadership team to keep the remaining team focused and engaged in the business without getting demoralized. Having achieved their short term goal of profitability, such teams also face challenges when they are trying to drive growth. There are fewer resources available. They now need trained manpower to support the growth. They need to hire new people and provide them training to work to their full potential. This creates some loss in productivity as the new hires are yet to be trained and the existing employees are needed to train them.

If the business is low on profitability as compared to industry standards, a reduction in manpower is warranted to be competitive. However if the business is reasonably profitable, and there is an opportunity to create growth by gaining market share, the employees should be treated as an investment. They should be focused on creating growth aggressively and improving the returns per employee by increasing the revenue and profit instead of reducing the denominator. The true nature of leadership in this case is all about seeking a fine balance between employees as a cost and employee as an investment.
………to be continued

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>