Maximizing Your ROPI Blog

What is ROPI© and why is it important?

People – team members – represent one of the biggest expenses  of any organization.  So it makes sense to know what your costs are (…and what your returns are on this investment!).

A good place to start your work on improving your ROPI© is to better understand where you stand right now.  To do this, I suggest you determine the answers to these questions:

  • What are you currently spending on people?
  • What return are you currently getting on this investment?
  • Where are you losing money relative to your people investment through turnover?
  • Does it make good business sense to take action to improve your ROPI©?

Financial statement gives you the basic numbers

Your financial statement will provide you with the numbers to calculate your investment costs – the dollars paid in compensation to get the job done.  You can look at the organization as a whole and also at each division/department individually.   It’s even beneficial to break it down to individual work groups.  Be sure to include all the compensation costs – salaries and benefits.   Make sure you know your complete investment.

Now look at the results – the productivity (how many – the numbers), profitability (how much – the dollars) and retention and turnover numbers (who stayed, who left).  Let’s briefly examine each of these:

  • Productivity – number of customers/clients serviced, number of products produced, number of sales, number of [whatever output is measured]
  • Profitability – sales dollars, profit dollars (gross profit, operating profit, net profit)
  • Retention & Turnover – how many team members were retained, how many turned over [more on this later]

Calculating your return on your people investment ROPI©

Use the Return on Your People Investment (ROPI©) Calculator to determine your current return on your people investment.  Again it’s a good idea to break down these numbers by division/department and even work group (where possible).   The story will often be quite different.

Getting People to Take Action

Last time I talked about the importance of being forward focused in coaching your people.  The idea is to take them into the future and discuss how to handle a particular situation.  You ask them what they’d say/what they’d do and coach them to be sure they’ll say/do the things you want them to.  And, to be sure the behavior will be consistent in the future, make sure they’re clear as to why making these statements/taking these actions is important.

But how can you know for sure they’ll do it right – that the actions they’ll take are the right ones – that they’ll get the desired results.  As they walk away after your discussion, you want to feel assured that what will happen is exactly what should happen.  You want to have confidence in them; you sure don’t want to have to talk about the situation again.

Use Questions to Encourage Action

To feel assured and confident, you’ll want to have a bit more forward-focused discussion where you get into the “nitty-gritty” of what they’ll say/what they’ll do.  This discussion should be driven by asking a number of specific questions that encourage action – probing for all the details – so you know exactly what they’ll say/what they’ll do.

  • What specifically will you do?
  • How will that work?
  • What’s the first step? …the second?
  • If you do that, what will happen next?

To help them see the benefits, prepare for some possible challenges:

  • What are the upsides of doing that? What are some possible downsides?

To explore alternatives if what is proposed isn’t the best approach:

  • What’s an alternative that might work better?
  • What else could you do?

To verify that they know what to do, end with:

  • What can I reasonably expect to see done differently?
  • How will I know that you’re doing that? How will I know that’s happening?

Clarifying Questions

Combine these with some of the clarifying questions below to get all the details and you’ll learn everything you need to know to be assured they’ll say or do the right things.

  • Tell me more…
  • And…
  • In what way?
  • How so?
  • Go on…
  • Continue…
  • For example?
  • Such as?
  • I’d love to hear more about that.

By helping your people think through what they’ll say or do ahead of time, you’ll help them see the benefits of their actions and uncover and handle potential difficulties.  And the “tweaks” you suggest are often critical to their success!

Now you’re thinking, “John, I don’t have time to go through all this every time with each person I coach.”  And you’re right, you don’t.  I’m suggesting you take the time whenever you can.   By taking the time to essentially rehearse what they’ll say/what they’ll do, your people gain competence (they’ll do it better), confidence (they’re more assured in their actions) and comfort (they do it more naturally).   This makes them both more efficient (Productive) and more effective (Profitable) in the long run.  By the way, both these go out the window when you have to take time later to re-discuss how to handle the situation.  It’s similar to the concept of Fixed Right the First Time.  When you don’t take the time to do it right the first time and you have a ‘comeback’, you really pay the price – lost Productivity, lost Profits and lost Customers – a price we simply can’t afford in these tough times!

A tremendous side benefit when you do this is that you get to give your people lots of praise and encouragement for doing things right (…we all sure need more of this these days).  This is good for everybody – you feel good, they feel good and you both tend to pass these good feelings on to others (…including your customers!).   People like doing business with companies where there is a climate of good feelings.  They notice; they come back again and again.

As I wrote last time, your goal as a manager – what you get paid to do – is to have your people consistently do the right things, right.

The key is for them to understand what to do and why – and for you to hear them say it.

Now I can add that you both know specifically what that action is and how exactly it will take place.

Review Future Actions – Praise When You See Them Happen

To review:  You simply take people into the future, review together what they’ll say/do – in detail whenever possible – and why that’s important… and you’re done.  Oh, and don’t forget that when you see them say it or do it right tell them about it!  More praise, with all the benefits that comes with it!

Coaching to Improve Performance

Coaching is any action that influences future performance.  The goal is to get consistent excellent performance.  Everyone can benefit from coaching whether it’s bringing below standard performance up to standard, making improvements on average performance or taking high performance up as high as it can go.  Most every team member has areas where their performance falls into each of these three categories – they’re high performers in some areas of their job, average in some areas and can be below standard in some areas.

Most managers spend too much time working with team members in areas where their performance is below standard and not enough time working with them in areas where they excel.  And yet it’s been proven time and again that the greatest performance gains come from “doing more of what you do best”, not fixing weaknesses.  Yes, managers get paid to ensure things are working as they should, and yes, it is their job to resolve problems and work to prevent them.  And there definitely is the expectation to maintain a minimal level of performance.  But the main focus of coaching should not be here; it should be equally on taking high performance as high as it can go.

ASK-ADD Coaching Process

Consistent excellent performance comes when team members clearly understand what’s expected of them, have the necessary knowledge and skills, have the necessary resources (tools, equipment, etc.) and receive positive, future-focused coaching as they do their work.

The coaching process I recommend using is a simple one based around two words – ask and add.  The principle here is that you “ASK first” to get the team member’s thoughts, “then ADD” your own.  Let me share the framework in which this approach is used.

What, How, Why

The “What” on the job is what you expect to be done and it’s non-negotiable.  It’s the outcome you need, the results from the team member’s effort.  It’s set out in their job description and through their goals and objectives (these are somewhat negotiable).  Minimum standards of performance should be clearly understood along with what’s considered higher performance levels.  Each should have clear consequences – negative for failing to meet minimums, positive rewards for higher performance.   Coaching feedback is appropriate about each team member’s achievement of their “What.”  Some coaching questions to ask about the “What”:

What is it that we expect you to do in the area of [specific job performance area]?

What are the outcomes from your efforts in that area? [how much? when?]

What are your performance goals and objectives in the area of [specific job performance area]?

What is your achievement level of those goals and objectives? What can you do to increase your output?

The “How” is how the individual team member achieves the “What”.  Since each person has unique strengths and capabilities, the how is definitely negotiable.  Each team member’s approach to achieving their “What” should be discussed and agreed-upon with their manager.  And as performance takes place, this should be the focus of continual coaching – always focused on improving future performance.  Some coaching questions to ask about the “How”:

How will you go about achieving the outcomes we expect of you? What specific actions will you take?

How can you adjust what you’re doing to increase your output in the area of [specific job performance area]?

The “Why” is why it’s important to achieve the “What” – the benefits to the customer, the organization and to each individual team member.   When people know why they should act as they do, they’re much more committed to taking those actions on a consistent basis.  In coaching the “Why” it’s important to have the team member tell you why.   You ask them why, then add to what they say as necessary to complete the case for taking the action as agreed.   Some coaching questions to ask about the “Why”:

Why is it important [to our customers] [to our organization] [to you] to take those actions?

What will be the benefits [to our customers] [to our organization] [to you] of taking those actions?

In each case, to achieve the best performance improvement results from your coaching ASK first, then ADD your own thoughts and suggestions.  You’ll often have to ask a number of clarifying questions when your team member responds to fully “think through” their responses together.  Some clarifiers to ask:

When you say [repeat their specific words], what do you mean?

Tell me more…

For example…?

What will be the upsides of taking that action? What are the potential downsides?  (discuss and resolve any downsides)

And be sure to confirm the points they make that you agree with before adding your own.  This demonstrates that you agree with them and want them to take those actions.

Two Important Reminders

Remember to ALWAYS BE FUTURE-FOCUSED!   Take people into the future, review together what they’ll say/do and why that’s important, and you’re done.  And when you see them say it or do it right in the future tell them about it!

ALWAYS GET SPECIFICS – specific things they’ll say, things they’ll do that will get the outcomes you both agreed upon.

The key is for them to understand what to do, how to do it and why it’s important – and for you to hear them say it.

Coaching in the manner I’ve outlined here will produce wonderful results. It puts both you and your team members on the right track – the track to greater effectiveness (things are done better) and greater efficiency (things are done quicker).  A track of consistent positive performance that leads to greater productivity and greater profits!

Is your employee turnover positive or negative?

Team member turnover takes two forms: 1) It is positive when it is natural [such as retirement] or benefits the remaining team [poor performers leave] or 2) it is negative when it hurts the remaining team [good performers leave].  Some organizations have too much turnover, others don’t have enough.  Losing good people hurts the organization; not losing bad ones hurts almost as much.  Some questions to ask about turnover:

  • Are you losing people you don’t want to lose? If so, why are they leaving (…you’d better fix it)?
  • Are you turning over too many people? If so, why (…your hiring practices may need work)?
  • Are you retaining people you really should be turning over (…letting below average people stay)? If so, why are you settling for this level of performance?
  • What’s the cost of turnover (…the TOTAL cost)? Are you managing this cost as you do other costs?

Direct and indirect costs of turnover

Direct costs of turnover include the cost of separation, recruiting, screening and selection, hiring and orientation, training [in the first year] and lost business [in the first year].

Indirect costs include productivity and profits lost due to increased workload on other team members, lower client engagement, loss of repeat and referral business, lower team member morale and opportunity costs.  There’s also the potential legal exposure associated with turnover.  Indirect costs are much more difficult to determine and are rarely computed.  And they are much higher than direct costs.

As I discuss in my book Maximizing Your ROPI© – Return on Your People Investment, employee turnover can be very costly!  Use my Cost of Turnover Calculator to determine what your turnover is costing you?  You can download it here:  Cost of Turnover Calculator

What’s employee turnover costing you?

As I discuss in my book, employee turnover can be very costly!  Use my Cost of Turnover Calculator to determine what your turnover is costing you?  You can download it here:  Cost of Turnover Calculator

After calculating it, many managers can’t believe how much it is, doubting the results.  If it seems too high, cut it in half.  Still too high, cut it in half again.  I’ll bet the remaining number is still worth doing something about.  Remember, all that money comes right off the bottom line!