I was sitting in the office of the owner of a furniture company in Kansas City. It was a medium-sized company - about 80 employees - and she had been telling me that their last round of layoffs was putting a lot of pressure on certain teams that had the same workload but less people to get it done. I asked how she was dealing with that issue.
"Well," she said, "The vendors who sold us our credit application software just released a new version. They gave us a demo last week, and we're going to upgrade. It seems a little easier to use, and it has a couple of new reporting features that'll save us some time."
Five Thousand Year Leap
I nodded and asked, "How much does something like that run?"
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"It's about 0 dollars a license, and we have about 30 analysts who use it."
"That's actually not too bad," I replied. "I was expecting it to be several hundred dollars more. If it does what you wanted and will save you enough time to justify the cost, you got a good deal."
"Well, that's per month," she said.
I paused for a minute. I actually wanted to whistle, but I try not to react badly in front of business owners.
"So, that's 00 a month for this new software," I said, carefully.
"Yes," she said. "I know it sounds like a lot, but I think the new features are going to be worth it. It's not too much more than what we're paying now."
"Well, sure, you always have to run the numbers and make sure that sort of thing will save you enough time to earn you some money. Let me ask you, though. These analysts who have all this extra work you were telling me about, what sort of productivity improvement training are you sending them to?" I asked.
"Oh, well, we're not going to do something like that," she answered. She even chuckled a little.
"If you don't mind me asking," I ventured, "why aren't you making that part of your plan?"
"We just can't afford to budget for training this year."
I just sat quietly for a moment. She and I had worked together, before, and I knew I didn't need to say anything. I didn't wait long.
"I know what you're going to say," she said.
"What am I going to say?"
"You're going to say that I'm spending five thousand dollars a month on software and no money at all on the people who'll be using the software, even though I'm asking them to do more work with less people."
"That does sound like something I'd say." I started to smile a little bit.
"And this is where you'll take your notebook out and show me that I'll get more productivity per dollar if I invest in the people before I invest in their systems."
"That also sounds like me," I said. "Do you really need me for the rest of this meeting? You're doing fine all by yourself."
She chuckled and asked what the next step was.
"Well, let me ask you some more questions about this situation, and we'll get all the facts down, and we'll see if what you helped me say so well turns out to be right or not."
It never ceases to amaze me how much money companies will spend on equipment, software, buildings, services, and all sorts of things to raise revenues, lower expenses, and increase productivity. Yet, they won't spend a single dollar on the people who are allegedly using all these things and driving all this productivity.
A CFO once told me that his company didn't think of people just as "company equipment." That's good, but the sad reality is that, for many companies, thinking of their people as equipment would actually be quite a step up!
If you get nothing else out of my little story, take this away: your biggest gains in profitability come from upgrading your people. Other kinds of improvements are nickel and dime ROI compared to the results you'll get by increasing a person's performance, or a team's performance, or a manager's ability to get more out of her team.
If you want your business to survive, and even thrive, in an economy like this one, you have to intelligently plan your strategies and allocate your resources around what will give you the most return, and that is easily your employee base. Improve that, and the effect on your bottom line will be amazing.
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