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Featured
6 min read
John Carter
When examining the workforce dynamics of an organization, it's common to fixate on revenue-generating roles. After all, these positions are directly responsible for bringing in profits. However, focusing solely on revenue-centric roles leaves out a significant chunk of the workforce: the non-revenue employees. The Role of Non-Revenue Employees While non-revenue employees might not directly contribute to the financial bottom line, their contributions are foundational to the organization's success. They constitute the vast business “machinery” that powers the organization, supports revenue-generating roles, and ensures smooth business operations. In fact, they can represent more of your workforce. These include roles in HR, IT, administration, and many other indirect revenue employees who maintain the infrastructure of a business. Non-revenue units keep the operations of a business running. Imagine a product-based company without a logistics team to ensure timely deliveries or a multinational enterprise without HR personnel to manage its vast workforce. The value of non-revenue-producing departments becomes clear when you consider the chaos that would ensue in their absence. Non-revenue employees often introduce efficiency, stability, and scalability into an organization. They identify bottlenecks, streamline processes, and ensure that the revenue-generating departments can operate at peak productivity. Indirect revenue employees may not directly contribute to sales, but they directly influence revenue by performing at a high level of customer satisfaction, meeting or exceeding CSAT goals, reducing churn and creating referenceable champion customers. It took me 10 minutes and 15 seconds to create this breakout. Want to see me do it live? Fill out the form, and let’s connect our teams. The Value of Non-Revenue Units in People Analytics While non-revenue-generating (NRG) roles may not directly influence the new sales revenue stream, they are foundational to an organization's long-term success. Here's why: Holistic Workforce Analysis: An organization only gets a skewed view of its workforce by concentrating on revenue-producing roles. People analytics should consider every layer and department to ensure a balanced strategy for talent acquisition, retention, and development. Reducing Churn in Non-Revenue Departments: Turnover in non-revenue producing departments can be just as detrimental as in sales or business development. For instance, frequent changes in the support and client services roles leads to a loss of inherent knowledge, long ramp up times and loss of confidence with customers reflecting in low CSAT scores, while turnover in HR can impact talent management strategies. Organizations can reduce churn, stabilize operations, and indirectly boost revenue by applying people analytics to these non-revenue units. Identifying Opportunities for Upgrading Skills: As businesses evolve, the roles of non-revenue employees change. People analytics can help identify the need for new skills or training in these non-revenue units, find employees with the skills already and utilize those people, ensuring they continue to support the company effectively and saving money in the long term (training and recruitment costs). The dilemma often faced revolves around headcount — is it worth investing in these indirect revenue employees? The perceived short-term pain of increasing payroll for NRG employees often becomes a deterrent. As leaders, it's tempting to don many hats, especially with constrained budgets. But in doing so, are leaders truly optimizing their own roles? An organization's head, tasked with vision, direction, and often direct revenue-generation through donations, can get tangled in the intricacies of non-revenue units, thereby diluting their effectiveness. The Opportunity Cost with Non-Revenue Departments Convincing a board to hire for NRG roles, especially in medium or smaller organizations, is not straightforward. How you frame the argument is key. One approach is the opportunity cost perspective. By calculating an executive director's (ED) hourly pay and then juxtaposing that against time spent on non-revenue-producing department tasks, organizations can discern the real costs. For instance, if an ED earning $70,000 annually spends 10 hours weekly on tasks better suited for an NRG role, that's an annual cost of $17,498. If reallocating those 10 hours could generate more than this amount, it’s a stronger case for hiring specialized staff. While it's not always as black and white, this method provides tangible metrics, bridging the gap between HR and finance in understanding the worth of non-revenue employees. Ultimately, the emphasis should be on the organization's health and growth. While NRG roles might not bring in direct revenue, their contribution allows revenue-generating sectors to flourish. The Future of Non-Revenue Employees in Business Strategy The line between revenue-generating roles and non-revenue employees is blurring. As businesses increasingly adopt interdisciplinary strategies, the contributions of non-revenue units become more intertwined with revenue outcomes. For example, an effective marketing campaign (often considered a cost center) can significantly boost sales, making it an indirect revenue employee function. The bottom line? While the spotlight often shines brightest on revenue-generating roles, the silent machinery of non-revenue employees is what keeps a business thriving. It's time we acknowledge the importance of non-revenue producing departments and give them the attention they deserve in our people analytics endeavors. Want to see if your people analytics team can answer the top questions asked of HR as fast as us? Download the people analytics challenge!
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Featured
8 min read
John Carter
Effective vs. Ineffective Leaders Successful teams are measured by how well they achieve their set goals and metrics. Effective leaders use the tools available to them to create and set challenging, yet achievable goals. Effective leaders also encourage and enable their teams to be able to reach and even exceed their goals. Ineffective leaders fail to set achievable goals, in many cases, they are too easy just as frequently as they are too hard. Ineffective leaders fail to provide support and encouragement and also fail to recognize when adjustments need to be made. So how do we decipher which leaders are effective and which are ineffective? Well to start, we must first understand that this is not a finger-pointing exercise. This is a tool to uncover both effective and ineffective strategies that can help your management teams perform better. Great management is essential for any business to succeed, and manager effectiveness metrics can be used as a tool to measure success in developing top talent for your organization. These metrics are also crucial in identifying underachieving teams and identifying ineffective leaders who can be educated and uplifted. By tracking the manager performance metrics below, you can identify great leaders and uncover leadership techniques that can be shared. Why are manager performance metrics important? Organizations need managers who can create a productive working environment, communicate effectively with their team, make well-informed decisions quickly and consistently, and lead their team toward the company’s objectives. By tracking performance metrics in people analytics software, companies can discover effective management techniques and reward their top performers. Not only that, they now have a solid benchmark to compare and see if that new program led to measurable improvements. How to find your most effective managers with one visual Wait … Only ONE visual? I thought there were 8 metrics…. Stick with me, I’m not pulling a fast one on you. I’m about to cover each of these 8 metrics in detail, but first I want to make the point that these insights are more compelling when presented together. How to find your best managers, for example, look at the Team Leader Scorecard Example below. Using a heatmap view - we can quickly see how we gain so much more insight when we arrange and visualize them all together. Now, let’s dive into each metric. 1. Headcount growth rate Headcount growth rate is the percentage increase in the number of employees that a manager hires. It’s a good measure of manager effectiveness as it can show how well they can find and retain top talent while continuing to build their team. It is also important to understand what are the drivers behind headcount growth. Increased sales and production or perhaps correcting unbalanced workload distribution. How to calculate headcount. 2. Repeat low performers Repeat low performers are employees who consistently fail to meet set goals and expectations. Tracking this metric is important as it can show how effective a manager is at developing their people and providing them with the skills needed to succeed in their roles. It could also be an indication of a manager setting unrealistic goals and may re-evaluate the goal-setting process. 3. High performer termination rate Effective leaders who view employees as assets can help their company combat resignations by encouraging high-performing employees to stay with the company for longer. By tracking high-performer termination rate, organizations can identify managers who are losing top talent and uncover reasons behind the attrition. They can also seek to understand how effective leaders are succeeding in retaining their top talent and distributing this knowledge among all of their leaders. 4. Termination rate volume Termination rate volume measures the number of employees who leave an organization within a given period. This metric can identify any patterns in a manager’s employee turnover so that organizations can take steps to address any underlying issues causing high turnover rates. 5. Promotion rate By looking at promotions actioned across your organization, you can see the managers and work units with more people than average being promoted. This indicates which managers are best at growing talent. Tracking manager promotion rates is an important metric for assessing manager effectiveness and identifying potential areas of improvement. Also, learn about succession planning. 6. Female representation Female representation is an important metric for assessing manager effectiveness as it shows how well a manager is at promoting diversity and inclusivity within their team. By tracking this metric, organizations can identify any challenges with gender imbalance and take steps to address them. 7. Salary ratio by gender Salary ratio measures the difference in salaries between men and women within an organization. This metric can be used to identify any discrepancies with wage discrimination so that organizations can take steps to address them. Tracking manager salary ratios is important for assessing manager effectiveness and creating a fair and equitable workplace. 8. Diverse retention gap Diverse retention gap is the difference in retention rates between diverse and non-diverse employees. This diversity metric can be used to identify any issues with manager diversity and inclusivity so that organizations can take steps to address them. It took Phil a staggering 51 seconds to pull the chart above together. Take the People Analytics Challenge and see how long it takes you to answer 90 of the top people analytics questions. What about employee retention rate? Employee retention rate measures the percentage of employees who remain with the company after being hired by a manager. This metric is important for assessing manager effectiveness because it shows whether or not they are creating an environment that encourages long-term employment and job satisfaction. This is also a great metric to review and there are lots of ways to talk about it. Reference these articles for more information: Calculate the cost of turnover How recruiters impact employee outcomes How to learn from new hire failure Measuring manager success to stay on top of the game These manager effectiveness metrics represent the key performance indicators (KPIs) of manager success, and if you track them with people analytics software, then you can find the most effective leaders in your company. Keeping an eye on these measures is a great way to ensure that you are developing, retaining, and promoting the highest-performing talent in your organization. With this knowledge in hand, you can make sure that your company is always staffed with the best and brightest leaders possible. Good management in business, or should I say good team management, is key in today’s competitive talent market and these KPIs provide essential data points to measure success so that your team can stay on top of the game. Want to Learn More? Let's Connect. 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