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How to identify the financial benefits of team development in 2022



In our last article (here) we explored the real reasons that businesses, teams and individuals struggle to make time for development. Whereas most of us will be quick to state the key barrier as being time, we highlighted that this is rarely accurate. The real reason that we don't make time for development is habitual behaviour.


We know that individuals who take time to care for and develop themselves experience greater levels of life satisfaction and outperform those who do not. We know that teams that take time to plan and develop themselves outperform those that do not. We know that businesses that spend time on development and make personal development one of their key objectives outperform businesses that don't.


Knowing that something is beneficial for us isn't enough of a driver to make us do it. If it were, considering that all of us know we have to exercise and eat healthy foods to be healthy, the whole nation would be healthy. Breaking away from habitual behaviour is the real challenge. As highlighted in the last article, to break away from habitual behaviour we have to learn from a good sales process, we have to convince ourselves both emotionally and logically that this new thing we're going to try is worth our time and effort. In the last article, we explored a small exercise to connect our minds with the emotional benefits of spending more time on personal and team development. Some of the common outcomes people identify in this exercise are:

- Happier atmosphere

- Better culture

- Look forward to going to work

- More energy and productivity

- Less firefighting

- Less stress

- Able to switch off easier after work

- Stop taking work home with me

The list goes on.


Identifying the emotional benefits of breaking away from our ingrained habits and allotting more time to personal and team development is a powerful first step. The outcomes you've discovered might even be enough for you to set the motion into action.


For many, however, there is still a barrier that needs to be overcome. That barrier is the logical side of the brain. The logical side of your brain is the side that demands a clear return on investment for this time and or money risk you are going to take. The logical side of your brain wants to avoid risk and keep everything as it is.


Throughout human evolution, this was a very useful feature for our survival. Keeping things as they were when they were working enough to keep us alive was a good survival technique. Round any corner could be a sabre tooth tiger, cliff edge or tribe of cannibals waiting to harm us so best keep things as they are. In modern life, this part of our brains still has many uses but it can also hinder our growth. It's constantly telling us not to change things. It will find as many reasons as possible to justify not doing that new thing. This is why so many businesses, teams and individuals struggle to make effective changes. This is why so many of us stay stuck in habitual behaviour even when we know we need to change. So what do we do about it? We play it at its own game.


By getting clear on the benefits of doing this new thing we make it easy for ourselves to make a good decision that creates positive change. So now we are going to spend a few minutes identifying the potential return on investment available if we commit time and effort to the development of our team or teams within a business. In doing so we don't just make the decision easy, we set the groundwork to actually enjoy the time we spend on team development instead of feeling guilty because we're busy answering emails and putting out fires.


There are, of course, a variety of benefits businesses gain from regularly engaging in the development of their teams. In this post, we shall explore two of the most significant - productivity and retention.


Productivity

I'm going to assume that you pay yourself an amount of money because they are valuable to you and they make more for you than what you spend on them. We would assume that employees being paid £30k a year makes the company at least £35k a year through their effort and skills. For the sake of this exercise, we're going to downplay the value in the cost of productivity for simplicity. Instead of trying to establish the potential value an employee creates for a business, we're simply going to work off their salary. If an employee comes into work healthy and highly motivated, we can safely assume we are getting at least their salaries worth of value from them (over the year). If that person is say on average 60% motivated over the year, we can safely assume we're losing at least 40% of their salary in value provided. By establishing these numbers we can identify (conservative estimates) how much our business is losing through lost productivity. After doing so we can identify the money to be found within our business by improving motivation levels by just small increments. More often than not, leaders and managers are surprised at how much money they are losing through lost productivity.

Exercise

- Choose a team or department within your business.

- Establish the total wage pool over a year for that team or department.

- Estimate the average motivation levels from 0-100% throughout that team (Usually, we survey to measure this at least 4 times throughout the year but for this exercise, we'll keep it simple).

- Times the total wage pool by the percentage you chose i.e. 70% is input as 0.7

- Minus this number from your total wage pool

- The number you discover is a conservative estimate of how much money is being lost through productivity.

- Then establish the value of improving that productivity level by just 10%

Example - Sales department

- 10 staff - total wage pool of £450,000

- Estimated motivation levels - 60% - £450,000 * 0.6 = £270,000

- Lost money through productivity = 450,000 - 270,000 = £180,000

- Value in improving productivity by 10% = £18,000


Remember these are conservative estimates for small team of 10 people. In all likelihood a £30k a year team member is worth at least £50k a year (still low) to your team or business which then drives the value of a 10 percent improvement up another 40%.

Retention

Businesses have always understood the value of retention. Businesses of the past relied on a scarcity of jobs and job variety to maintain high levels of retention. In today's world, the opposite is true. In 2022 the BBC reported that for the first time since records began there were more job vacancies than unemployed people. Many people believed that technology would create a job shortage epidemic. So far it's done the opposite. Technology has reduced the volume of manual labour jobs but increased the number of 'thinking' and service jobs. These jobs are higher paid, more varied and at current, available in abundance. Our society as a whole is also changing in its attitude towards health and work with more and more people placing a higher emphasis on their health and lifestyle. The challenge this is creating for businesses is higher than usual levels of turnover combined with a struggle to attract new talent.


What is one of the number one things proven to keep people engaged in their work and attract talent? Good, ongoing personal and professional development. But what is the cost of losing employees?


Emotionally we all know how difficult it is to lose good staff, but there's a financial implication as well. The average cost to recruit a mid-level team member is 20% of their wage. For simplicity in this exercise, we're going to just rely on this number. But there are also other substantial costs. One of the top factors attributed to poor mental health in the workplace is people having to cover other people's work. Every time you lose a staff member what is the knock-on effect of that on the people covering their work? A highly skilled highly motivated team member produces up to 16x more value in a company than anyone else. How long does it take to get a new team member up to this standard? Who is training them when they come in? What is the cost of training a new team member? We can easily see the substantial costs associated with turnover.


In larger businesses, it is useful to establish your turnover rates (number of leavers / average number of people in that team) and times that by the average recruitment costs.

For simplicity in this exercise let's focus on the cost of losing an individual.

Take an average team member on the team you are considering and establish their wage.

If this person is paid £30k a year the cost of losing that person is at least £6k.

If prioritising regular time for team development leads to 3 employees at £30k a year not leaving that has a bare minimum value of £18k to your business. The realities of these numbers are much larger.

Think about your team. How many leavers did you have last year or expect to have this year? How many of those could be prevented if you spend more time on team development? What is the value attached to that number?

When we make some time to go through exercises like this we often have BFOs - Blind Flashes of the Obvious. There's no benefit in your life, your team's lives or the business to not committing regular time to team development. Teams should be taking time out once a year to prioritise their yearly objectives. Teams should be taking time out every month or quarter to prioritise their shorter-term objectives. Teams should be having structured weekly meetings to celebrate, keep track and identify problems. Teams should be taking time to discuss and promote health in the workplace. Managers should be taking time at least once a quarter to work through personal development plans with their team members. We know that all of this leads to higher-performing individuals and businesses. But we also know that more don't do it than do. By working through the exercises in this article and the last article, you've taken a major step towards setting yourself apart as an industry leader and putting the time into team development.


Access the Brand Experiences ROI Calculator here to establish more realistic numbers for your business.

You've made team development and health a priority, you've justified making the time, the only thing holding you back now is knowing what to do. We'll cover this in the next post.


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