Employees are not Overhead

Standard terminology, at least in the non-profit sector, refers to employees as overhead.

This needs to change.

People are not overhead. People are the force that makes any company effective. That is not overhead.

Matthew Kelly and Peter Drucker make this point better than I ever could:

It has been almost forty years since Peter Drucker observed the single greatest error of our accounting system: people are placed in the liability column on the balance sheet. Machinery and computers are categorized as assets and people as liabilities. The reality, of course, is that the right people are an organization’s greatest asset. (Matthew Kelly, The Dream Manager, page 2.)

Of course, just about everyone is willing to say “people are our greatest asset.” But largely this is still in the realm of theory–it hasn’t penetrated the way we actually work and think. Kelly goes on:

We may have acknowledged this truth in theory, but we have not allowed it to sufficiently penetrate the way we manage our organizations, and indeed, the way we manage the people who drive them.

One indication of the fact that we haven’t yet started taking seriously the reality that people are assets, not liabilities, is that we still use terms like “overhead” to describe them.

October 31, 2008 | Filed Under Management | 6 Comments

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Employee Disengagement Costs You Money

The other day I picked up a book called The Dream Manager. It’s another business parable, but it is very perceptive. (I had never been into business parables until I started reading Patrick Lencioni’s stuff, which is excellent.)

The book is about employee engagement:

The problem is, the great majority of people in the workplace today are actively disengaged. This is the dilemma that modern managers face. To varying extents, people don’t feel connected to their work, the organizations they work in, or the people they work with. No single factor is affecting morale, efficiency, productivity, sustainable growth, customer intimacy, and profitability than this disengagement. (The Dream Manager, page 1)

I agree completely. Employee disengagement is a tragedy and is pervasive in the modern workplace. A friend of mine often says of his company that “they pay you just enough to keep you from leaving.” What a horrible way to treat employees.

The biggest reason that employee disengagement is important is because of what it does to people. It creates the “quiet desperation” of the modern workforce that we see all around us. It also has a financial cost. I found it really interesting that this cost can actually be quantified:

If on average your employees are 75 percent engaged, disengagement is costing you 25 percent of your payroll every month in productivity alone. The real cost to your business is of course much higher when you take into account how disengaged employees negatively affect your customers and every aspect of your business. (Page 2)

There are some very effective, and simple, solutions to the problem of employee disengagement. I think it is one of needs of the hour, and in one sense that is going to be a major component of what this blog is going to be about. And for those interested in a helpful book on the topic in the meantime, The Dream Manager is proving to be a very good read.