Quantifying the “Soft” Costs of Empowering Employees

by Peter Grazier
Originally published in EI Network on April 1, 1998

Not long ago, a question appeared on the Internet asking how one evaluates the “soft” costs associated with empowering employees. I responded with the following thoughts and was surprised by the positive responses. Maybe the ideas below will be of help to you.

Earlier in my career, I performed estimates for my employers on just about anything that could be quantified. Most managers won’t seriously question your numbers if you have a rational explanation for them. Get a little data, ask for help from others (HR, industrial engineers, quality professionals, cost engineering or estimating associations, HR associations, insurance organizations, work & family organizations), then make your best guess as to the dollar costs of the above. Nobody will shoot you for trying. If you have to stretch a little when explaining any numbers, just admit that it was difficult quantifying them, but that “we all know there’s a cost associated with this.” If someone doesn’t like your number, just politely ask them for theirs. It’s a surefire way to break that kind of nitpicking. You also might rehearse your presentation with a couple of managers to see how it plays. Ask them for honest feedback.

To attach dollars to the “soft” benefits of empowerment, evaluate the following:
1. Absenteeism – It typically goes down when empowerment takes hold. HR departments can give you some figures on what absenteeism costs organizations.
2. Turnover – It also goes down. Turnover is expensive, HR can also give you figures on what it costs to search for, relocate, and train new employees.
3. Safety – It usually gets better. Ask the safety department if the Workman’s Compensation Insurance modifier has improved. This is the number which increases or decreases the company’s insurance premium based on its safety record. These can be significant dollars, especially in accident- prone jobs.
4. Feeling better – Feeling better equates to better performance. All else being equal, has the performance of the individual or group improved? If so, can it be quantified? Has the group’s output improved? How many new ideas for improvement have they submitted? Has scrap or waste been reduced? How about complaints to HR? Have they dropped. One could make a quick estimate of the cost of visiting HR several times for complaining. Has the group’s relationship with other departments improved? If so, is there now a “cost avoidance”, i.e., the cost of lost productivity that has now been avoided because of a better relationship?
5. Attorneys’ fees – Have they gone down? Check it. Company suits may have dropped noticeably after empowerment.
6. Group benefits – Convene a group of people to brainstorm these “soft” costs and ways to estimate them.
7. Best companies – Take a copy of The 100 Best Companies to Work for in America with you to your presentation. This book clearly demonstrates a relationship between enlightened work concepts and performance.

Whatever you do, keep at it. The “hidden” costs of restricting human potential in the workplace are staggering!