Why thorough processes delivered to a high standard might account for all the problems in your business

The world is becoming increasingly process-orientated. There are positive aspects to that – if you’re the pilot of a 747, the Operations Director of a nuclear power plant or a surgeon carrying out microsurgery on a vital organ, I’d feel a lot more comfortable knowing that what you do, and the order you do them in, has been designed in a reliable, dependable way.

Even though most of our daily work activities aren’t anything like as mission-critical as those examples, the business world seems determined to introduce ever-greater numbers of processes and procedures to govern every aspect of what they do.

I’m not sure that’s a good thing for a number of reasons, but in my capacity as a Finance Director and CFO what bothers me most about our process-heavy world is that this approach often turns into a really expensive way to do something simple, and can easily lead to a range of less-than-wise decisions.

There is a better way…which we’ll get there in a moment…

But first, the inspiration

This article was inspired by a tweet from the always-interesting Mark Pollard (@MarkPollard on Twitter) reporting on a conversation with Phil Adams (@Phil_Adams). Here it is:

Their conversation was specifically in the context of producing good creative work, but I’d argue this concept matters for just about everything a business does.

The maths is unarguable.

Phil Adams points out, correctly, that even with just a 5-step process, where each step is done right 90% of the time, the likelihood of getting to a perfect answer each time is less than 60% (59.049% to be exact), assuming we’re dealing with a sequence of independent events (quick statistics primer here if you would like a refresher)..

Yet the holy grail for most large corporations is a detailed process with dozens of precisely crafted steps, each done right at least 95% of the time.

For a business process with even just 12 steps, however, each done right 95% f the time, the likelihood of everything happening exactly as planned is even less than Phil Adam’s example above. In fact, that process will only work as intended 54.04% of the time on average for a 12-step process, or not much over half.

Think about this. With a 12-step process where each step is done right 95% of the time, nearly half the time this process will go wrong somewhere along the line.

With a more complicated process, say one with twice that number of steps, you’re down to things going right less than 30% of of the time (29.2%). More than two-thirds of the time, your customers will be disappointed or something will be going wrong in your business. This will inevitably, one way or another, increase your costs.

I’ve worked for some large multinationals in my time and it was never much of a challenge to find processes 24 steps (or more) long. But even in relatively small businesses activities such as manufacturing products, responding to customer enquiries and tendering for new contracts can quite easily have two dozen steps or more to follow before reaching the right answer.

So this is a real problem for many businesses. Especially in large businesses which don’t often realise how often the end-to-end process goes wrong because each department involved in the process trumpets their 95% success rates on the individual elements.

That goes double when the process involves several different departments within the business and everyone tries to claim their share of the credit for doing their bit well, while doing their best to deflect the blame for customer dissatisfaction, or manufacturing inefficiencies, onto some other part of the process for which they are not responsible.

But it gets worse…

After a while, let’s say someone notices that the customer service department has ballooned to 20 people because of the volume of customer service incidents generated. Each of these customer service people costs £30,000 a year with on-costs.

Someone who feels they have a point to prove about how good their thrusting entrepreneurialism is for the business turns up at a management meeting and says something like “over half a million quid a year on the call centre – we need to save some of that cost”.

Strategies what what happens next vary, but common solutions are one or more of the following…

First, starting salaries get pared back. In a high labour-turnover environment like a call centre, there are always people leaving. So, thinks some aspiring company superstar, when one of our £30,000 a year people leave, we’ll replace them with someone on minimum wage so that, over time, we’ll only spend half as much. The Finance Director and the CEO will be delighted, they imagine.

I’m all for saving money and for giving entry-level people an opportunity to embark on a meaningful career. The part of the equation that’s often overlooked is that junior, inexperienced people are very unlikely to carry out the assigned tasks as well as the more experienced person who has just left.

Our 95% success rate for each step in the process goes down to 90%, let’s say. So our 12-step process with each step done right 90% of the time means only 28.24% of transactions will go through properly. And for a 24-step process at 90%, only 7.97% of transactions will go through right first time.

What looks superficially like a smart cost-saving move is often one of the least smart decisions a business can take, for reasons we’ll cover in a moment.

Another popular option is to look at a £600,000 cost and try to outsource the work. Although the outsourced customer service industry doesn’t enjoy the best of press, there are good businesses in there (I know, I used to run one of them).

But the first thing any self-respecting customer service outsourcer will do is ask you to be really explicit on what steps there are in the process, how you want their agent to respond in a number of different scenarios, how the interface to the client’s IT systems will work and so on.

It’s almost nailed on that your 12-step process will have just increased to, let’s say, an 18-step process. However your 95% success rate for each step is unlikely to change. After all, you’ve told the outsourcer exactly what to do, haven’t you, which you’ve naturally based on what your current staff do now.

An 18-step process performed as intended 95% of the time will have a 39.72% rate of successful completion. A similar 50% uplift on a 24 stage process means it’s right just 15.8% of the time.

I won’t even calculate the 90% options – let’s just say they’re almost never right.

These scenarios are not the fault of either the new, junior member of staff or the outsourcer. They’re only working with the material you’ve given them, and frankly they were never likely to result in a positive outcome, although both are common “budget saving” strategies.

The final common approach is to decide that everything is going to be self-service through your website which means you don’t need a customer service department at all.

There are two major problems with this.

Firstly, it is literally impossible to do everything through a self-service website. Even the kings of web self-service, Amazon, have telephone based support for particularly thorny issues…which is, perhaps surprisingly, very good, in my own experience.

If Amazon can’t make an entirely web-based service work, let’s just operate under the assumption that your business is unlikely to achieve a goal Amazon hasn’t any time soon.

The second issue is that developing web self-service options to cover every eventuality is expensive. An external firm will charge a high six-figure sum to develop one for you, or you can do it yourself but you’ll need to beef up your IT department to do it. At least over time, you’re likely to spend as much in IT resources, internal and external, as you’ve been spending in customer service costs.

Oh no, it’s even worse than that…

Sorry to say, we haven’t finished with things getting worse.

All the common solutions lead to an increase in costs.

Hire much less-experienced labour who get things wrong more often and you’ll have to beef up your management resources to deal with queries, handle dissatisfied customers and authorise refunds, special deliveries and whatever it takes to try and put things right again for the customer.

You have fewer £30,000 a year call centre agents, but a lot more £50,000 a year managers to look after the new minimum wage staff. (Again, this is not the staff’s fault, the deck has been unwittingly stacked against them.)

Outsourcing can be a good idea, but if you’ve got a £600,000 a year outsourcing contract which is your main interface with all your customers, unless you’re an extreme risk-taker (which I don’t recommend if you still want to have a business to run in a couple of years) you’ll need a relatively senior manager to make sure the outsourcer keeps on their toes and delivers what they say they will.

So you can probably add £70-80,000 back into whatever savings you make…perhaps even more than that if you deal with complex processes or work in an industry where there’s regulatory oversight to contend with.

And as for the web self-service option, there’s a real danger that you’ll just swap 20 customer service agents on £30,000 a year for 10 software engineers in the IT department, each on £60,000 a year.

The simple, low-cost solution

The biggest, fastest, lowest risk way to reduce your costs (outside the flight deck of a 747 or the control room of a nuclear power station) is to look at the process and take some of the steps out.

If you reduce the steps by only 25%, what was a 12-step process becomes a 9-step process. At a 95% success rate for each step. a 9-step process goes right first time 63% of the time.

That’s getting on for a 20% improvement over the 12-step process, even though the average success rate for each individual step has not improved. In my experience, they often do, just because there’s less going on in a customer service agent’s mind and they’re likely to make fewer errors. But let’s not even factor that very pleasant surprise on the upside into the equation.

If we consider the 24-step process with the same success rates as above, a similar 25% reduction in the number of steps makes it into an 18-step process. End-to-end, that’s likely to work as intended 39.7% of the time. That might not sound like much to write home about, but it’s about 30% better than the old 24-step process.

The changes are even more dramatic when the percentage going right is 90% instead of 95%.

The old 12-step process, now a 9-step process, is now right 38.7% of the time, and the old 24-step process, now 18 steps, is right 15% of the time. That’s a 30% improvement and a near-doubling, respectively, compared to the original success rates.

So next time you want to save money, don’t just work with the numbers, think about the underlying processes. Simplify those and you’re well on the way to a low-risk way to save a lot of your budget.

And maybe ease back on the need to have detailed processes at all.

Years ago, I heard the CEO or Ritz-Carlton speak at an event and they had absolutely minimal procedures for their staff. Instead they told their staff to focus on the customers needs and deliver whatever they, in their best judgement, thought best-served the customer’s needs.

My memory is a little hazy on the detail, but I seem to remember that any staff member could, on their own authority spend a significant amount of money on the spot to satisfy a customer need. It might even have been as much as $5.000, but don’t quote me on that. It was certainly a number in the thousands of dollars.

I remember most of the audience wincing at this approach, but it’s actually one of the smartest ideas I ever heard.

How many complaints did Ritz-Carlton get into their call centre? Almost none as all their customers were satisfied at the point the problem arose. They spent a bit more on the front end, but they saved a fortune in their call centre.

How much did Ritz-Carlton need to spend in IT resources to develop a self-service model? Nothing at all. The staff member they first spoke to sorted out whatever the problem was and they never had to go onto the website to try to find a way to resolve their issues.

And how much did this really cost Ritz-Carlton? The CEO was a little coy on that point, but he did say that firstly they worked hard to make sure very few customers were dissatisfied, so complaints were relatively few anyway. Secondly, he hinted that the average charge was a lot less than the $5,000 (or whatever the number was).

Of course, some did cost the full allowance, and some went over that limit at which point a manager did need to get involved. The impetus was still centred around making the customer happy, so there were still no calls to the call centre and so on, but a manager had to authorise the budget in light of the amounts involved.

More often, I’m sure the guest’s problems would be rectified with some express dry cleaning or the cost of an extra cab to send on the glasses someone had left in the hotel. Minimal costs against a top-dollar five-star hotel room.

And that, for me, is the secret to cost saving.

To people who hadn’t thought this through, giving every member of staff $5,000 they could spend if they had to sounded like a needless extravagance.

It was actually the cheapest way to run their business. There was just a single step in the process “do whatever it takes to satisfy the customer, up to a limit of $5,000”.

In practice only tiny amounts were spent by staff members and Ritz-Carlton saved a fortune on call centre and IT resources.

I’m not suggesting this is the right approach for every business in every set of circumstances, but there’s definitely something worth thinking about in there.

So next time you want to do things differently in your business, or you’re under pressure to save costs, why not experiment with having fewer steps in your processes, or even just fewer processes, full stop.

Perhaps try giving your people a little more discretion. Even allowing for the fact that they’ll get it wrong some of the time, this is likely to be a much cheaper way of running your business than adding an extra half-dozen steps to your current processes in an ultimately futile attempt to “engineer out” things that go wrong.

It might seem a little counter-intuitive for a Finance Director or CFO to recommend a lighter touch on the process front, but even after allowing for the fact that things will still go wrong from time to time, that may very well reduce the overall costs in your business. And isn’t that what a good Finance Director or CFO is supposed to be concentrating on?

(Photo by Campaign Creators on Unsplash)

Do you know the cost of acquiring a customer for your business? Most businesses don’t…

Every time I start work with a new client, I ask them if they know the cost of acquiring a new customer for their business. I’ve yet to encounter one that does.

If there’s an answer at all it’s usually a hurried “we pay Google 50p a click” or “we spend £1000 a month on online advertising”.

They’re not great answers but they’re a lot better than the other most common answer, which is “all our business comes from word of mouth so it doesn’t cost anything to get a new customer.”

But mostly there’s a lot of looking at feet and shuffling of papers because very few businesses know the true cost of acquiring a new customer, even though it’s one of the most important metrics for any business.

We’ll get to how you can work out the customer acquisition cost for your business in just a moment if you haven’t run the numbers before. Rest assured you don’t need to be a CFO to work this out, nor do you need a degree in maths or anything approaching that. A piece of paper and a pen, together with the calculator on your phone will be all you need.

But first, we need to answer an important question…

Why do we need to know the cost of acquiring a new customer?

If you’ve read anything else of mine, you’ll know I’m very strong on the importance of customer retention and providing a great customer service. Done well, it means you need to spend less time and effort acquiring new customers because you’ll have fewer customers leaving you in any given period to replace some other way.

But I’d also be the first to acknowledge that, no matter what you do to retain the customers you already have, the rate of customers leaving every business in the world is always a number greater than zero.

Individuals move out of the area, they get married or divorced, their kids leave home, their lifestyle changes after they retire and, sadly, ultimately they die. In any given week the chances of one of those events happening might be slim, depending on the number of customers you have, but over a month or a year or even longer there’s a non-zero chance that some or all of those things will happen to your customers and they’ll stop buying from you.

Similarly, if you’re a B2B business, your client’s purchasing manager might leave to be replaced by someone who prefers to deal with one of your competitors, they’ll merge with another business who directs their purchasing elsewhere, they’ll get taken over, or relocate their factory to some far-flung corner of the world and want to deal with a local supplier for what they’ve historically bought from you.

There’s hundreds of possible reasons for B2B clients moving on too. Again, in anything other than the very short-term, there’s a non-zero chance of your business experiencing some or all of those events.

So, however good a job you do on customer retention…and you really should do a good job here as it’s the “secret weapon” of any successful business, and a very inexpensive secret weapon at that…you will need to replace your old customers with new ones from time to time.

When that time comes, it’s essential you know how much it costs you to acquire a new customer.

Why, you ask?

Because you want to make sure that every new customer coming in will make the business money. Even if it’s not quite as much money as a highly-profitable long-term client which has been tempted elsewhere, if your new clients make a profit for the business then you should at least be moving in the right direction.

The reason that’s important is that I’ve seen (a lot more often than you might expect) businesses taking on new clients and thinking that because they’re replacing the missing sales from their recently departed client pound-for-pound everything will be fine.

Those businesses often take on fundamentally unprofitable clients, a large proportion of which are also especially demanding to deal with (it’s almost a certainty that where you find one, you’ll find the other), and it ends up causing severe financial difficulties for the business.

For some of those businesses, although it would also have presented a level of challenge that wouldn’t have been easy to deal with at the time either, in practice they’d have been much better off not taking on that new client in the first place, even if it meant sitting with a half-empty factory for a month or two until a more profitable prospect came along.

So don’t be seduced by however much sales income your new prospects bring in. If it costs you more to acquire them as a customer than the amount of profit they’re going to bring, the right answer is nearly always not to take that client on at all.

What is a customer worth?

Before you work our your acquisition cost, first you need a clear idea of what each new customer is worth…not how much do they bring in sales income, but how much profit do you make from them.

A customer who spends £1,000 a month with your business at a net margin of 15% brings in £150 per month, after expenses. If an average customer stays with you for two years, they’re worth £3,600 (24 x £150) over their time as one of your customers.

It probably goes without saying that if it were to cost you £4,000, based on the approach I’ll share in a moment, to sign a customer up in the first place then they don’t make you a penny in profit. They’ve actually cost you £400 just for the privilege of having them on your customer list.

At this point, people usually harrumph and say “of course that’s obvious, we’d never do anything as stupid as that”. And they genuinely don’t think they do.

Yet it’s rare for me to go to a business and not find any customers the business wouldn’t have been better off never bringing on board in the first place. So a lot more businesses take on unprofitable customers than think they do, largely because they don’t understand their acquisition costs well enough.

Now, the example I’ve just given is admittedly a fairly simplistic one, but I’ve deliberately erred on the side of simplicity to make sure I can explain the concept with a minimum of confusion (hopefully…).

If you want to read more about this subject, and even try out the in-built customer lifetime value calculator on their website, HubSpot have prepared a really good primer on how to calculate customer lifetime values which will point you in the right direction for doing the same in your own business.

How to calculate your customer acquisition cost

Now you know how much profit each customer brings to your business, it’s time to understand what it costs to sign each one of them up. After all, we’re in business to make a profit, aren’t we?

There’s no point in taking on customers or clients which cost us more to service than we make in profits supplying them with our products and services.

The acquisition cost is a little more complicated to calculate than the customer lifetime value. That’s why you might find a piece of paper helpful, although this is not complicated maths. You just need somewhere to write down a bit of information to save keeping track of it in your head.

One very important point here is that we’re not calculating a “cost per click” or a cost per lead, although that might be part of your acquisition cost, depending on how you attract new customers.

Most businesses think that’s the same thing as their acquisition cost, which is why they drastically underestimate the cost of acquiring a new customer.

There’s a few steps to this, but just take it one step at a time and you’ll be fine. Scribble the answers down on that piece of paper as you go…

First you need to map out your sales processes…

On the left hand side of your piece of paper, draw out a quick flowchart of how you find a new customer. Or alternatively list out the steps in your sales process,

To keep this fairly simple, I’ll use just some basic numbers, but you’ll get the idea from this and will be able to tailor it to meet your specific needs.

Let’s assume your business runs newspaper ads to drive traffic into a call centre where an agent sets an appointment for a field sales person. Let’s also assume one-in-five calls to the call centre results in an appointment and the salesforce signs up one-in-three of the people they meet with.

(And don’t think I’ve forgotten about the cost of the newspaper ads, we’ll get to that in a moment.)

What this pretty simple process tells you is that to win one customer, on average, you’d need your direct response newspaper advertising to generate 15 calls. (Obviously if you need, say, 100 new clients a month, you’d need 1500 calls coming into the call centre, and so on.)

This basic model works whatever channels you use. The details might be different if you use social media to send visitors to a squeeze page on your website, a proportion of which buy your product or service, or if you employ people to stand in shopping malls to accost passers-by with some offer or other. But the principles are the same however you acquire a new customer.

So, map out what your process is. Then, either manually or using Excel, do this quick calculation…(if you know what you’re doing on Excel, you can set the formulas up to do the calculations for you)…

You’ll see that we start off with 15 calls coming into the call centre, the team there converts one-in-five to a sales visit and the field sales team signs up one-in-three of the prospects they see. So for every customer we want, we need 15 calls into the call centre, on average, to sign up one new customer.

The cost of acquisition isn’t, therefore, the £20 per call centre call plus the £80 per sales visit. You have to recognise the costs of all the potential customers who weren’t converted as well. And that’s usually a blind spot for businesses, even those who think they’ve got a decent handle on their acquisition costs.

Now you’ve got that information, you can just multiply the numbers up. If you need 1 new customer a week, that will cost you £540, if you need 10 that will cost £5,400 and so on.

To make it slightly more complicated, however, we haven’t get factored in the cost of running the newspaper ads to generate the calls in the first place.

Newspaper advertising executives will tell you all sorts of good things will happen when you advertise in a newspaper, that it helps brand image and makes sure people know what your business does in case they need your services in the future.

All that’s true to a point, but at the end of the day your advertising should be built around bringing in new business. I cheated a little in the process above by making the newspaper a direct response ad, so its sole purpose was to drive traffic to the call centre.

You might pick up some random calls from more generic advertising, but I wouldn’t factor those into any acquisition cost models, mostly because response rates will be incredibly low and can be disregarded for most practical purposes.

But your direct response ads are there to generate a response (the clue is in the title) so you can take the full cost of those ads into your customer acquisition cost calculation.

The key here is that, while other metrics have some relevance along the way, especially in a small or medium-sized business your focus needs to be on how many customers each piece of advertising brings you.

For our example, let’s keep things simple and assume when the business runs a £200 direct response ad, 15 people ring up the call centre every time.

Now we can do the final calculation of the customer acquisition cost as follows:

Now we know it costs the business a total of £740 to sign up each new customer.

If we compare that to the £3,600 in lifetime value that each new customer brings to our fictitious business, that’s probably not a bad deal.

I fully acknowledge this is a very simple example and the reality is most businesses will have more than one way of bringing new customers on board. But it’s easy enough to follow exactly the same steps for every sales channel you use and work out the true cost of each.

The stat which most often surprises businesses is the cost of acquiring a customer through digital channels.

It’s been drummed into us that “social media is free”, but when you go through an exercise like the one above, businesses realise there are a lot of costs they’re not factoring in.

Perhaps they’re employing two people to write the content which is pushed out through “free” channels, which in turn makes readers click onto the company website. That sort of digital marketing isn’t free at all – it’s probably costing £50,000 a year in salaries.

Even digital advertising like Google Ads or Facebook Ads don’t just run themselves. Yes, there’s a cost-per-click usually, but there’s also the several thousand pounds a month you’re paying to a skilled Google Ads manager to run all those campaigns that “only cost 50p per click”.

But however you bring new customers on board, if you map out the process and cost it up like the examples above, you can pretty quickly work out what it costs you to find a new customer and how that compares to the profit you expect to make out of them.

Armed with this information, you have a much better handle on whether you should be taking a customer on at all, or whether you’re better to either wait for a more profitable customer instead or to see if there are ways you can get your acquisition cost down so you can handle your new client profitably.

A quick word about customer retention

Although this article is about customer acquisition, it would be wrong of me not to mention customer retention briefly.

The reason I’m so passionate about that subject is easy to demonstrate using the example above.

With an expected two-year customer lifespan, acquisition costs are about 20% of the profits you’ll make from that customer. (£740 as a proportion of the £3,600 lifetime value.)

However, if you can extend the customer lifespan to three years, that same customer would bring in £5,400 of profit instead of £3,600.

Your acquisition cost wouldn’t change by a penny, but it now only represents 13.7% of the customer’s expected lifetime value, not 20%. Your profits have increased by 50% for the same up-front investment to find the customer in the first place.

And even if you have to put a little of that extra money back into improving customer service to make sure they hang around for an additional 12 months, it’s easy to see how you could afford to do that out the extra profits the business will make and still be ahead of the game.

That’s why customer retention is the secret weapon of every great business. It costs you little, or nothing, extra and it’s the closest thing to “free money” you’ll find in any business.

Where do you go from here?

Knowing the customer acquisition cost is one of the more important numbers for your business. An astonishing proportion of businesses I speak with don’t know this number at all, and those who do generally underestimate what their customer acquisition costs are….while, at the same time, wondering why they don’t make as much money.as they thought they should.

Knowing your customer acquisition cost is one of the most helpful insights there is for any business.

And it’s not even that hard to calculate. A few numbers on a bit of paper and a quick bit of work with the calculator on your phone is enough for most businesses. Larger firms might want to set up a spreadsheet with different tabs for each different sales channel they have, but even then, each individual calculation is a reasonably simple one to make.

Why not grab your phone, a piece of paper and a pen right now and see what your own business’s customer acquisition cost really is? You’ll be glad you did…

( Photo by frankie cordoba on Unsplash )

The difference between a good accountant and a great Finance Director / CFO

Working out the cost or delivering value? Accountant adding up the cost of a bundle of invoices.
Working out the cost, or delivering value?
Photo by rawpixel on Unsplash

In his play ‘Lady Windermere’s Fan’, Oscar Wilde described a cynic as someone who knows the price of everything, but the value of nothing.

That’s pretty much the difference between a good accountant and a great Finance Director or CFO….a good accountant can tell you what you’ve spent, a great Finance Director or CFO should be building value for your business.

Let me give you an example.

Some years ago I worked for a business which gave all its employees, after a qualifying period of, I think, a year or two, one day’s paid time every month to volunteer for a local community project of their choice.

Out of approximately 20 working days in a month, you might say this initiative “cost” the business around 5% of the salary bill for eligible employees.

The volunteering initiative was in place before I arrived at the business, so I can’t take any credit for it, but in reality it didn’t cost the business a penny. It made much more money than it cost…alongside doing a lot of sterling service for our local community. Here’s just a few of the more obvious benefits…

  • People who volunteer for community projects tend to be naturally enthusiastic, high-energy people who are dedicated to making the world a better place. Their presence lifted our whole business and their continued enthusiasm in the face of adversity brought incalculable benefits when our backs were against the wall.
  • They did their jobs, on average, much better than the rest of the workforce – typically by 10-20%. Nearly all of our high performers were also community volunteers, so they covered the cost of the scheme just through their own natural positive energy and their desire to do a great job for a company that let them volunteer on company time to support their passions.
  • You might be wondering whether those naturally enthusiastic people would have done a better-than-average job anyway, even without the volunteering scheme, and at some level they probably would. But even then, there’s a difference between doing a pretty good job and striving to do the best job humanly possible. The difference between those two levels of contribution is easily worth 5-10% on productivity, output and quality in my experience. By offering a volunteering scheme, we unlocked the “striving” level of commitment.
  • Not only that, but when skills were scarce our very best employees tended to stay with us, even for more money with another local business, because they couldn’t get their volunteering time paid anywhere else. Were people occasionally tempted by a few grand a year extra in their pay packet…sometimes yes, but they tended not to last in their new job and often came back because they missed the opportunity to volunteer in their local community.
  • The cost of recruiting and training a new member of staff is somewhere between £20-30,000 a time, according to ACAS statistics. So every person who stayed with us saved the business that amount of money. This easily covered the cost of the scheme on its own in a high-turnover industry. It also mitigated against the risk that when we recruited a replacement for a top performer, we didn’t get an average (or worse) performer in their place which would have diluted the quality of our workforce as a whole.
  • Without us having to put on an expensive training and development programme, many of our volunteers ended up in management roles with the business a few years down the line. They were, without exception, great managers. The skills they learned while volunteering – how to deal with people, managing tight-to-non-existent budgets, developing their creative thinking and many other talents that were picked up and honed on their volunteering assignments – made them first-rate managers who we “recruited” without an executive search fee and without the risk that someone who was “good on paper”, or a seasoned interview performer, but who weren’t that good in practice, would manage to sneak through our hiring processes and cause more problems than they solved.

I could go on, but you get the idea. The community volunteering scheme wasn’t a cost at all. It generated significant value for the business which more than covered any costs it incurred.

A good accountant could tell you this scheme cost approximately 5% of the salary for eligible employees.

A great Finance Director or CFO could tell you that the community volunteering scheme generated so much value for the business, in both obvious and less-obvious ways, that spending whatever it cost with a smile on our faces was by far the most sensible, and economically valuable, option.

At the very least, any costs were covered by the greater productivity our community volunteers tended to display in their “day jobs”. More likely there was a significant upside to the business as a result of having unwittingly developed one of the smartest staff retention, productivity enhancement and management training schemes we could ever have hoped for.

Oscar Wilde would have been proud.