How to get more return from your biggest outlay

If you’re an average business, around 60 per cent of your outgoings are spent on one key area. But are you getting the best ROI on this outlay?

According to Norgay HR Consulting founder Clare Long, businesses spend around 60 per cent of their total operating costs on their workforce.

“That's very typical. [However] when we start working with business owners and I ask the question ‘Do you think you're getting a return from that? The return you expected?’, generally the answer's no,” explains Clare.

Clare says that a good HR manager, whether they're in-house or a consultant like her, is able to help business owners identify barriers to achieving a proper return from their workforce and implement strategies to turn this around.

One of the main barriers, Clare says, is not the productivity of employees, but that of the business owners themselves.

A businessman on a laptop, with diagrams flying around his head“[For SMEs] their biggest pain point is the time they're spending on managing their workforce,” she says.

“It's not unusual for me to hear, when I start talking to a prospective client, that they're spending about 70 to 80 per cent of their time managing the people aspect of their business. That leaves them 20 to 30 per cent of the time doing what they really love doing, which was the reason they went into business in the first place.”

Some of the aspects Clare identifies as being bottlenecks for many SME owners are:

• Overall HR compliance
• Employment contracts
• Policies and procedures
• Hiring new employees
• Career guidance for employees
• Dismissal provisions

The latter, according to Clare, can be a major sticking point for business owners. Yet she insists it needn’t be, if good processes are put in place when the new employee is hired and you know exactly where you stand legally.

“I've seen business owners, actually quite a few unfortunately, feeling like they're so backed into a corner that they can't make the decision that they need to make, which is to get somebody, to quote Jim Collins, ‘off their bus’: wrong person, wrong values, wrong cultural fit,” she says.

Clare adds that by getting these people management issues under control, the business is more protected, employees are more secure and the business owner can improve their own productivity and devote more time to revenue-generating activities.

Hear more insights from Clare, including on people management and developing strong referral networks, on the My Business Podcast now!

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