How an Investment in Employees Makes a Business More Profitable

When companies invest in their people — by developing them, communicating with them, and aligning them with the right roles — they increase their profits. Seriously!

How? First, let’s define what this process is called. It’s called “organizational development” and it’s different from human resources. According to Decision Wise, human resources is concerned with recruitment, termination, and government regulations. The purpose behind organizational development is to make positive changes to the workplace and help employees perform better so they can make the organization more successful.

More specifically, organizational development seeks to:

• Maximize employees’ contribution to the organization
• Align employees with the organization’s culture and values
• Make positive changes to the organization’s strategy, systems, and processes

We’ve all worked in a toxic environment, had a bad boss, or watched coworkers slack off. This is exactly what happens when you don’t have an effective organization.

The cost of an ineffective organization is astonishing:

• $37B is wasted by U.S. businesses every year due to inefficiencies
• To replace an employee, it costs 6–9 months of their annual salary
• A disengaged employee costs the company $3,400 for every $10,000 they earn

How organizational development makes a business more profitable:

1. Employees are 21% more productive

2. Employee turnover decreases by 87%

3. More Engagement

The productivity and turnover statistics above are a result of more engagement and motivation. When the organization communicates its strategy and goal to employees, those employees are able to understand how they contribute, align their own goals to the organization, and feel like they are part of the company’s success. This, along with continuous development, makes them engaged and motivated, which means higher productivity and performance for the organization.

4. Improved performance

As I’ve mentioned before, honest feedback that goes back and forth vertically — for employees and leaders — also promotes accountability and a high performance culture.

5. Innovation

When systems and processes are changed under organizational development efforts, the entire culture of the workplace shifts to accept continuous change and leads to more innovation.

As a result of increased productivity, efficiency, and engagement; as well as less turnover, an organization can experience an increase in profit margins of 22%!

These benefits don’t come at a cost to the organization either. It’s not expensive to communicate with employees or focus on their development. Therefore, organizational development is a no-brainer.

You can take this free assessment to determine which areas your organization could improve upon.

Originally published on janeystahl.com