Pure Genius: Eliminating the Biggest Hidden Cost in Business
We all pay taxes. I dare say, we all hate paying taxes, even though your Mom and my Mom taught us not to hate. You probably drink and hang out with some in the ‘wrong crowd’ too.
What’s to love about paying for something that seems to do no good? Well, taxes, of any sort, fall into just that category.
Pop Quiz: What’s the biggest (or highest) tax that your business pays every day?
Candidates might include payroll taxes, income taxes on the profits you earn, lost productivity. These are all reasonably well known, and you do your best to minimize or avoid them all together.
What if there were a hidden tax that you deal with every day, possibly on four different levels, that you have simply learned to accept as an invisible or “hidden” cost of doing business, rather than the biggest tax that you have allowed into your organization?
It’s called aggravation, and most of us put up with this insidious tax on a daily basis in the people, systems, vendors, and customers we employ.
Huh? Can It Really Be That Bad or That Costly?
Consider that one aggravating employee that your team keeps around. Poor attitude. Shows up late. Does reasonable, but not stellar work. Walks the line between acceptable and unacceptable on all levels. That’s the first manner in which the hidden tax of aggravation rears its ugly (and expensive) head in your team or organization.
Now put a price tag on what that one poor performer really costs your organization:
- Do they attempt to enroll others into their poor attitude or performance?
- Do they create morale issues with the rest of the team members who actually do great work every day and who have to do extra work to compensate for this poor performer?
- Do they require more focus and attention from the leader of the team, perhaps you?
Those are just some of the hidden costs of this one outlier. Not a bad person. Just not right for your team who wants to play a bigger game.
Now consider the price that the employee pays every day in their role as the “poor performer:”
- Is that person better suited to a different role or organization (not yours)?
- Do they suffer in their role as the underachiever or poor performer? For most people, that is not a relished role.
- Do they feel like they are making a contribution, or do they sense that they are a burden for the team?
Now ask yourself this simple question: If we upgraded that position with a person who fit our team, culture, and talent level much better, what might occur in our team or organization?
That’s when you’ll know the trust cost of the aggravation tax you are paying by keeping a poor performer or a team member with a poor attitude.
But Wait, There’s More!
If a poor performer has been quietly forcing you to pay a high tax, who or what else might be doing the same thing in a different area of your business?
Well, how about your systems? A good friend tells me about how her husband, a fighter pilot, snores her to sleep at night and farts her awake every morning. He’s a fighter pilot.
Sleeping with a fighter pilot? Big points for that. Falling asleep to anyone’s snoring and even worse, waking up to their farting…effective systems perhaps, but at what price? She pays it, in the form of big aggravation!
I suggest that you have a system or process currently in use, perhaps two or three, that produces upset, aggravation, inefficiencies, bad moods in your team members…you get the idea. Aggravation taxes all of us in that way—it casts a widespread, general nausea throughout the people and products in a way that interferes with otherwise talented people and great ideas.
What system or process in your organization comes with a big tax that could be avoided by the investment of some capital and/or innovation? How long would it take your team to redesign a poorly performing system or process with a high tax on the team members and/or customers?
Well, you can pay the aggravation tax, or make the investment.
How About a Third? I’m Tough. I Can Take it!
Annoying or aggravating people show up like a constant tax.
Inefficient or non-functioning systems and processes also show up like a constant tax.
Well, since we’re on a roll, how about the aggravation tax that goes along with vendors or suppliers who either do not fit your values or worse than that, simply provide lower than acceptable levels of basic service?
This could show up like a deficiency of “please and thank you” for your business, or it could be that they consistently show up late, or not at all.
Chances are, if you applied your highest core values as an organization to your vendors, some would not measure up. If they worked for you, they would be fired. If that were the case, then why do you spend money with them?
Again, the manner in which the tax gets avoided is up to you: pay for poor or sub-standard vendors, or invest an hour in weeding out the one or two who do not measure up, and replace them with vendors who adhere to your values, rather than the other way around.
The Fourth Tax is the Most Insidious of All!
Imagine handing business to your biggest competitor! Would you do it?
You might if the client or customer in mind caused so much upset, refunds, or hassles in order to deliver service. You would gladly pass those customers off to your biggest competitor and allow them to run rough shod in another organization!
Consider this idea: you have 5% of your customer or client base that takes up 80% of your energy and focus. According to the Institute for Cost Accounting, the bottom 80% of your customer base also costs you money in order to deliver service. That’s a staggering figure, and here’s how the numbers break down:
Top 20% of your clients (like your biggest) = 140% of your profits
Bottom 80% of your clients = -40% of your profits
As business owners, we often confuse (gross) revenue with profitability. What might it do to your organization’s energy level to drop your bottom 5 customers or clients? What might it do to your bottom line? Chances are, good things.
I bet if you polled your team, they would automatically know who those 5 terrible customers are! These 5 clients speak with your team far too often, about issues that other clients never bring up, and they ask for refunds or guarantees more than other clients as well. In short, the cost of doing business with them is quite high…and you are paying for it, by keeping these people as clients.
Here’s the simplest way to figure out whom to get rid of first:
- Ask your team to name the 5 that need to go. If they come up with 10, even better. Have them stop listing customers when the consensus is no longer clear.
- If you are doubtful about their list (like it might be vindictive or inaccurate) ask a second question: If we are paying to keep these clients on our books, do we learn and grow significantly for doing so? If not, you should be very clear that they are simply taxing your organization…through inordinately high aggravation.
The end result with this one is simple. Freeing up the energy, time, and improved attitude of your team equals a fabulous investment for you as an organization. If not, the opposite shows up in the form of quite a high aggravation tax.
Add It All Up
If you simply add up the four categories outlined above, you most likely are paying an aggravation tax. How much is that tax in dollars? In lost productivity? In lowered morale? You can guesstimate it pretty easily.
More importantly, how much is that tax in terms of aggravation, frustration, bad moods, and energy wasted on fixing things, rather than building new opportunities.
My guess is that as an entrepreneur or Team Leader, that you tend to focus more on growth, learning and investment than you do on remedial measures.
Invest now, and you avoid the aggravation tax later.
It’s your call.
All the best!