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March 2007
Motivation, Associated Costs, and Four Important Skills

The best leaders I’ve known—whether they’re heads of organizations, in sales, or even frontline employees—all share one characteristic:  They have uncanny insight into what motivates people.

Motivation may seem vague or overused as terms go.  But motivation covers a lot of important territory, no matter what business you’re in.  And a lot of the problems I run into as a consultant and coach involve motivation.

I hear it all the time:  “The (fill in the blank--employees, department heads, VPs) just don’t seem as motivated as they should be.”  And this causes lots of headaches.  Morale headaches.  Productivity headaches. 

All these headaches cost money, and lots of it.  And there are lots of ways to put a price tag on lack of motivation.

One way of figuring the cost of lack of motivation is the Percentage of Payroll Method.  It’s based on the premise that when people aren’t motivated to do a good job, they don’t work up to their potential.

When employees are working up to their potential, they’re giving you 100% effort.  And since you’re paying them 100% of their salary, you’re getting what you pay for.

But when they’re giving less than 100% of effort, employees are shortchanging you, because you’re still paying them 100% of salary.

Averaging it out across the whole workforce, what percentage of effort do you think you’re getting? 

I believe that most organizations, when you average the best employees with the adequate and throw in the malcontents for good measure, you’re getting about 75% effort.

That means you’re paying 25% of payroll, but not getting it back in effort.  In other words, lack of motivation costs you about 25% of annual payroll. 

For a small business I talked to last month, a $400,000 annual payroll means low motivation costs $100,000.  That’s a several-boatloads-of-Tylenol-sized headache. 

Another way of determining how much lack of motivation costs your company is the Lost Customer Method.  First determine the average annual value of one customer, as far as revenue or profit is concerned.

This average value can be several hundred dollars, several thousand, and for some companies in the tens of thousands, or hundreds of thousands of dollars per year.

Next determine how many customers you lose because the employees aren’t motivated to do a good job (poor customer service, not closing the sale, missing a delivery date, etc.). 

Then just multiply the number of customers lost by the average annual revenue per customer.  It adds up to thousands of dollars, even for small businesses.

Great leaders understand the tremendous cost associated with lack of motivation.  They also understand people and what motivates them.  They’re able to tap into this motivation, and translate that into improved effort and performance. 

In doing so, they recover some of the 25% of payroll that’s being lost.

Four skills are essential to motivate others to improved performance.

The first is building trust, because employees aren’t going to be as motivated if they don’t trust you.  The next skill is problem-solving.  Employees won’t work as hard if you’re not helping them solve their problems.  And let’s face it:  Their problems are YOUR problems.

The third necessary skill is facilitating change because if you’re trying to motivate them to achieve more, you’re asking them to change their behavior.  Since people have a built-in resistance to change, facilitating change is a crucial leadership skill.

The final skill is satisfying their needs, which means that we as leaders must know the deeper needs that drive employee behavior.  Once we identify those needs, we have to help satisfy them.

Improve these skills, and you’ll do a better job of motivating your employees.  And, you’ll start recovering some of the lost revenue that goes with lack of motivation.

What are you doing to recover the lost revenue and profit?  How effective are you at these four skills? 

If you’d like a free consultation on how to implement these ideas, call or write, and I’ll help you get started.

Until next edition, keep leading the way! 

Copyright (C) 2007 by Terry Wall

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