How to reduce costs without reducing people

In our need to downsize, get leaner and cut costs, it seems to me we often overlook the obvious. While it’s all very well to reduce manpower to keep costs under control, the flip side of this is the additional pressure we place on those who remain.  

More and more workers report increasingly high levels of stress. “Overwhelm” is a common theme, as people try to manage portfolios that just got bigger as a result of the latest round of redundancies. There’s more information than any of us knows what do to with, there are never enough hours in the day to fit it all in and the overload of work fuels procrastination, as people find it hard to know exactly where to start.  

Where am I going with all this? Well, with increased stress comes poor work habits – staying back late, or coming in at the weekend, to try to get on top of it all – and those bad habits affect our well-being. And the less well we are, the more sick we become and the more sick we become, the more sick leave we take. And being sick doesn’t necessarily mean being “sick” – we all know that.

So, have you ever calculated the true cost of “sick” leave or absenteeism?  

Organisations with a highly engaged workforce experience 37% less absenteeism. So let’s do the maths: 

Let’s say you have an organisation of 100 people and, for convenience’ sake, let’s say the average salary is $50,000. During the course of a year, let’s say that “sick” leave averages out at 3 days’ absence per person – so a total of 300 sick days per year.  

Now, the average worker works for 210 days per year (after annual leave and Public Holidays are taken into account), so each worker costs us roughly $238 per day.  

Bottom-line is, those 300 sick days are costing us conservatively $71,400 per year. If we were to reduce absenteeism by 37%, we’d be saving $26,418 – or the equivalent of an extra pair of hands for half a year.   

Don’t you think it might serve us to reduce absenteeism as a way to reduce costs, rather than reduce people?

How does one reduce absenteeism? Well, that’s where employee engagement comes into the picture. The more engaged workers are, the happier they are, the more productive they are (21% more productive in fact) and the less likely they are to be “absent.”  

So here are three tips for creating an engaged workforce:

1. The degree to which workers are engaged is a direct reflection of the person(s) leading them. So, when developing a culture of engagement, the first place to look is your leaders. If your leaders don’t understand the true meaning of growing their direct reports’ capabilities by meeting their individual drives and needs, you will never achieve more than pockets of success, where one or two or three business units do well, but the others languish and drag down overall performance. I’ll say it again, the success of a business unit is a reflection of the person leading it.

2. People have a deep-seated need to contribute. They want to feel they are doing important work, work that will change the future, work that will make a difference. To give people the opportunity to contribute, they first need to be deployed in a position that allows them to play to their strengths every single day, and secondly the culture needs to be an open one, where employees are asked questions to build initiative rather than being told what to do and how to do it. 

3. There is no substitute for recognition. Despite the common perception that money is the ultimate driver of motivation, all the latest research still tells us that being recognised and appreciated still sits in the top three things that motivate people at work, alongside achievement and working with others. Money comes in a distant sixth.  But not everyone likes to be paraded in front of the rest of the workforce or team. It’s essential that as leaders we know who prefers public recognition and who prefers private recognition. Giving someone recognition in the way that does not meet their need will actually be counterproductive. If you’re curious to find out how we measure recognition needs, take our 5-minute assessment right now, and we’ll walk you through it.

If you’re under pressure to reduce costs and can’t see how else you can do it in an already pared-down, overburdened workforce, look at your absenteeism score and turn your profitability around by lifting engagement.