The ROI of Investing in Your People

Jun 01, 2017 10:30 AM by Aileron

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“How can you not invest in people?” asks Mark Thompson, a Business Advisor at Aileron. “It’s your only difference,” he says in this video also featured on Forbes.

Ed Eppley, Course for Presidents Facilitator at Aileron, agrees that high-performing companies are those that invest in their people. Ed says that it’s in a business owner’s best interest to consciously make several decisions when it comes to developing talent.

“First, do I believe it will be less expensive to try and find, hire, and retain all the talent our company will need? Or, do I believe that it will be a better investment to try to develop the talent we will need?” says Ed. “Second, if I choose to develop the talent we will need, how do I minimize the likelihood that this talent we develop will go somewhere else?”

Ultimately, business owners will make a choice about whether they are going to be a “net importer,” or “exporter” of talent. “Most companies by default are net importers of talent, and as such, have less control over their own destiny.”

Invest.jpgDeveloping Your Competition?

Investing in employees has short-term and long-term payoff. aileron blogclick to tweet.png But many businesses worry that if they invest too heavily in employees, they’ll lose them—and possibly worse yet, lose them to a competitor. Mark says that in his experience, this is not what happens when investing in employees. 

Even if it seems counter-intuitive, when employees did leave, they left to work for clients of the company, which was beneficial to the company. “The employees who left to work for clients became raving fans, because once they were on the client side and they saw the difference in what we were…compared to what others were not, we already had advantage in their eyes,” says Mark. 

The Best Investment You Can Make

The most impactful employee-development efforts are seen in companies that also have high gross margins relative to their competitors. “As a result, they can afford to invest in people,” says Ed.

HighPerforming_Quote_800x400.pngEd says that even if an organization’s margins aren't higher, you can't afford
not to make this investment. “Companies in this position typically have a combination of in-house training combined with external resources they make available to their people on a limited, but focused basis.” The training is tied to the long-term goals of the individual, and in most cases, prepares the individual for several future roles in the company, explains Ed. 

There's another dynamic and this is even more important, argues Mark, suggesting that those high-performing employees who want to develop themselves crave opportunities for development and growth.  

“If you provide a forum and support that [development], they draw nearer to you—not push away,” which he saw in his own organization when investing in people. “That's the part we didn't see at the beginning, and it revealed itself to us,” he says.

Helping Employees Grow 3 to 5 Percent Each Year 

Ed says that every individual, in every position, needs to become 3 to 5 percent more productive in their job annually. That number is based off Peter Drucker’s assertion that the costs of doing business typically increase by that amount year over year.

“So in some way, every individual needs to find ways where she becomes more skillful in her job, and as a result, it lets that person produce better results with the same amount of effort. Employees need a fundamental mindset that they need to get better at their job, every year.”

If a business owner tells an employee, “I want you to become better at your job and become more productive,” sometimes an employee can mistakenly think, “I’m failing.”

Instead, leaders can explain to employees how the company operates, and what’s required for the organization to be successful and sustainable in the long-term. “It’s incumbent upon leaders to tell employees they are not failing, it’s just that next year, they need to become 3 to 5 percent better at their job. You aren’t asking them to work harder, in most cases,” says Ed.

Employees should have a mindset where they are asking: What could I do different? What could I do more of? What could I do less of? “To use a baseball analogy, what do employees need to do for their batting average to go up?”  aileron blogclick to tweet.png

Development Programs That Work 

Since this development is driven by leaders, it also means the leaders must be trained on how to develop their people. “I’m sure there are some that are successful, but when it comes to management and leadership, I've never seen a formal mentoring program work,” says Ed. Instead, Ed sees the ideal mentors often coming from outside the company.  

Organizations can use financial training that equips employees with business acumen to help them to think like an owner; cross training; and case studies.

“Special projects are a huge lever to more quickly give someone greater experience in a compressed period of time. All of this should be ‘on top’ of some fundamental management and leadership training program that needs to be mandatory and done over some time-spaced delivery.”

Investing in Employee Development  

When business owners consider the consequence of giving someone a salary increase, even when they are no more productive than they were the prior year, they can start to understand the need for people to become more productive. “So when we speak about development of people, at its most fundamental level, owners need to think about having a process that helps everyone become more productive annually,” explains Ed.  

“If a company first focuses on this, and then begins to add ‘development’ to prepare people to move to higher positions of responsibility, they more likely will see a quicker return on their investment.”

Invest In Your People So They Can Actively Support the Organization's Growth

"This will help me become a better leader, which hopefully will multiply through the organization." —2-Day Professional Management Workshop participant

Empower your change agents so that they can help you grow your organization. The 2-Day Professional Management Workshop is for employees who report directly to a President/CEO who has taken the Course for Presidents, or for those employees who are a part of implementing your company's strategy. Learn more about the workshop by clicking below. 

2-Day Professional Management Workshop

A version of this post originally appeared on Forbes.com. 

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