“You manage things; you lead people.”
In my experience as a CFO I have come to the conviction that – building on Grace’s quote – people are not to be just led but motivated. How? Implementing employeewelfare policiesis definitely a first step.
In 2017, Gallup found that companies that have employee welfare policies in place achieved, on average, the following results:
- +21% productivity;
- +22% profitability;
- +21% customer satisfaction;
- –37% absenteeism;
- –65% employee turnover.
Welfare policies, however, do have two limitations that are not to be underestimated.
The limitations of employee welfare policies
1. They are mainly adopted by medium- to large-sized companies and very rarely by small companies.
As it is known, Italy’s economic fabric is made up of mostly small enterprises.
There are 148,531 SMEs in Italy. Of these, 123,495 are small enterprises.
Therefore, any solution must also be viable for a small business and take into account the way it manages its staff.
2. The effects of welfare policies are often not long term.
It has been shown that employee welfare policies are perceived as a rightful entitlement: while they do help improve the relationship with employees and their productivity, this is only a short-term effect.
Organizing the staff in a small company
In a small company, personnel fall under the responsibility of the Administration & Accounting department.
In fact, there are companies that have grown in revenue and size – even exceeding the 100 employee mark – where the head of the Administration & Accounting department still covers the role of personnel manager.
The latter is often assisted by labor consultants with hiring, termination and payroll obligations.
In this scenario, employee management is reduced to a mechanical role with no structure whatsoever in terms of long-term management or, most importantly, motivation of human resources in the organization.
Short- or long-term motivation of personnel
Field surveys have shown that more than fringe benefits and rewards, it is the improvement of the workplace atmospherethat increases the satisfaction of employees and their feeling that they are actively taking part in the company’s productivity.
In his illuminating book “Managing for Happiness,” Jurgen Appelo argues that extrinsic motivation (the expectation of an incentive) kills people’s intrinsic motivation. This is called the“overjustification effect”: instead of expecting and feeling satisfaction, people expect a reward (cf. Kohn “Punished by rewards”).
As a result, rewards that trigger intrinsic motivation are to be preferred because they are more effective and sustainable, and cost the company less. This is something I learned during the course that enabled me to become CHO.
What can an outsourced CHO do for a small company?
The science of happiness and the CHO certification program made me understand how important it is toinvest in people, in the human capital that most often makes the difference in what makes or breaks a company.
This is why it is by far more advisable to hire a professional who cares about human capital, not so much for their technical ability to navigate the jungle of labor laws and regulations, as for their soft skills of good relationships and positive approach. Soft skills, in fact, are the secret behind making human capital a key success factor, one that is difficult to imitate by competitors.
The people who deal with personnel management in the company can learn these skills with the help of a CHO.
A CHO can help companies set up an organizational culture that useswelfare toolsaligned with the principles of positive organizations. These tools must, at the same time, be virtuous tools in terms of motivation and productivity in the medium-long term, taking advantage of the on-the-field experience gained by large companies and choosing the ones that are the most effective, sustainable and cost-effective for the company.
Now someone might object, saying that a CHO is even more elitist than a welfare plan and that only big companies can afford the luxury of hiring a manager to look after the well-being and level of satisfaction and motivation of their employees.
If you want to learn more, feel free toreach out to me.