If you do not know right now which of your employees is making money for you, how much they are costing you, or whether you’re operating profitably, this short article will provide vital information for you.
Employees cost huge amounts of money and the stark reality is that unless every employee pays their way a lot of YOUR money could end-up down the drain!!
But how do you know which employees are working profitably for you, especially if your employees are spread all over the country or even the world? Indeed, some may be frittering away hours (your money) on wasteful activities. For all, you know your money could be leaking away drop by costly drop, like water from a dripping tap.
So here are steps you can take very quickly to switch-off that dripping tap!
Calculate the true hourly cost of your employee per hour. You can work out a percentage to add to your employee hourly rate that will cover all the overhead. Examples include a share of office overheads, pension, and health care payments, the cost of holidays and sickness (which are non-productive for you but still need to be paid for). Build a list of all costs and include them in the hourly rate.
What can’t be measured can’t be improved. The second step is to get your employees to use a timesheet. A timesheet records the number of hours spent on activities. The employee usually has to enter hours into a table cell in a spreadsheet or software from each day. Activities are often grouped in a project. There are many excellent timesheet systems available.
The information entered by your employees is priceless to you if you are an employer, manager, or business owner. It should be gathered together to form the basis of reports. What reports? How about a report that shows the total hourly costs of every employee working on a project. The first time we did this we had a nasty surprise – costs had crept up dramatically on one of our projects! How about a report that shows exactly what activities an employee actually spends his time on. Many very revealing reports are available if the data is collected correctly.
The reports you have should give you the information in daily, weekly, monthly and annual format. This gives you the chance to see if your costs are increasing or falling. Therefore, you can see the results of any changes you make.
This is a vital step: Show the employee the true cost of his time and how much each activity he is involved with costs the company. Employees are often completely unaware of how much they cost the company. Of course, this step has to be done carefully, unless you have a real problem to confront. It might be good to show a group of employees the average cost of an employee hour so that no one individual employee thinks he is being singled out for ‘special treatment’.
Tracking employee activity in this way can truly be an enlightening experience. With the right information, you can stop or reduce wasteful and costly activity and focus on activities that are literally profitable.