The Payroll Efficiency Factor(tm)

We have just published a new whitepaper, The Cost of Being Good Enough, which looks at one of the costs for the average organization of having mediocre employee engagement levels.  Many of the researchers, such as Gallup and Towers Watson, have indicated that about one-third of an average organization’s resources is wasted because of having low employee engagement levels.  As a reminder, the research indicates that in the average organization that only 1 out of every 4 employees is engaged; that half are unengaged, and 1 out of every 5 is actively disengaged. 

In our The Cost of Being Good Enough, we introduce a new concept that we call the Payroll Efficiency Factor™.  This is a formula that allows any organization to calculate the financial impact of their employee engagement levels and the amount of work that is not being done as a result.  The formula simply asks the organization to take their percentages of each type of employee (engaged, unengaged, and actively disengaged) and multiply each percentage by a factor and then add them all together.  The resulting Payroll Efficiency Factor™ for the average organization is only 63%.

This means that the average organization of 100 employees, with a payroll of about $4 million, is wasting about $1.5 million!  That is $15,000 per full-time employee per year that is being wasted.  It is work that is being paid for and is not being received.  Of course, the whitepaper helps explain how this happens, but here is one example that is provided in the whitepaper:

This would be like spending $4 per gallon of gasoline, but the hose going from the gas pump to the vehicle is old, cracked and leaky, and by the time the gas actually gets into the tank you are only getting about 2/3 of a gallon of gas instead of the full gallon.  The rest is leaking all over the ground and is wasted.  Would you continue to buy gasoline at this station if you were getting such low returns for your money or would you take action to insure that you were getting your full $4 worth?

We also explore the impact of increasing employee engagement in the organization and the corresponding increase in the Payroll Efficiency Factor™ in the whitepaper.  An increase of 7 to 10 percent on the Payroll Efficiency Factor™ is a corresponding increase in the amount of work that is getting done.  Just imagine getting 10% more work done in your organization at no additional cost; what kind of impact would that have on your organization’s ability to achieve its goals?

The Cost of Being Good Enough is available as a free download in Adobe Acrobat PDF format on our website in the Resources Section.  As always, there is no registration required.

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