Why Should You Be Investing (Heavily) In Your Employees?

Welcome to the Vantage HR Influencers Podcast. This podcast is sponsored by Vantage Circle, the simple and AI-powered rewards and recognition platform for employee engagement.

Susmita Sarma: Hello everyone, you are tuned into the Vantage HR Influencers Podcast, and today we are diving into a topic that's often overlooked but packs a real punch. Why should you be going all in when it comes to your employees? We'll chat about why it's worth giving your time, effort, and resources to the people who make your organization tick. From boosting productivity and sparking innovation to keeping your team happy and loyal, we will spill the beans on why investing in your employees is a total game changer. For the same, here I am, your host for the show, Susmita, and I have with me Navneet Mukund, Project Director, HR Consulting Asia at Mercer. So delighted to have you on the podcast, Navneet. Welcome to the show.

Navneet Mukund: Likewise, thank you so much.

Susmita Sarma: So before we delve into our discussion today, please grace our audience with a glimpse into your journey, Navneet, the pivotal moments and influences that have shaped the remarkable person we have before us today.

Navneet Mukund: Right, so I can't say that where I am today is everything by design. It's a mix of a bit of planning and hard work, and also good luck, right, and the blessing of near and dear ones and everyone. I think that in my earlier years, during education, I was often not very sure about my career choices. When I look back, I always feel that the opportunity for youngsters to have multiple career paths and various streams they can go into is sometimes lacking in a country like ours, right? And it also varies from cities and urban areas to rural areas, right, so where you grow up and which kind of school you go to. The avenues open to you are always not very clear. They are limited, and how each of these avenues can craft your career path is not very apparent when you're very young, right, unless you get the right counseling and discussion. So all those pitfalls of the culture I was brought up in, I was also afflicted with the same kind of pitfalls, right? I ventured into one career and then was not very sure about it. It took some time to double back on what I wanted to do, right, and then I went into another line, a completely different line. So when I look back, being in two or three different lines gave me different perspectives on different industries and careers. In fact, I was not in HR earlier, right, I was in the hotel line. So I have some understanding of the hotel industry and hotel management, how it appears from the outside, but from the inside, it is not quite the same, right? It gave me a different perspective, but the other side of it is that it also set me back by a few years. And then I did my MBA, and after my MBA I had certain choices about my career, the industries I wanted to go into, or the kind of role I wanted to do. Or even a simple thing like when you want to leave your job, right, and why you should do your job, and all these things. So all these decisions looked quite compelling at the time, looking back five years or twenty years. But if I had to do things differently, definitely, with the level of maturity I have now, which I was lacking early on in my career, I would do some things differently about all these choices. And I'm making a very generic statement here about joining a company, joining an industry, and one of the factors that ultimately leads you to leave a job and look for a new opportunity. With more maturity, I think those decisions would be different.

Susmita Sarma: Yeah, that's quite a shift in careers, from hospitality to HR. But what you are today is nothing less than a testament to the adaptability and diverse skillset you have developed along the way. We are very glad to have you here today for this discussion, Navneet. So let's dive into it, right? To start with, how do you see the landscape shifting regarding organizations' approaches to investing in their workforces? What are some of the biggest changes you have seen in the last few years, Navneet?

Navneet Mukund: Right, right. So yes, that was the qualifying statement you just mentioned, right? Last few years, because when we talk about shifts in any realm, we should be very careful about whether we are talking about shifts across decades, like how it has changed in the last twenty years versus the previous twenty years, or whether we are talking about a shorter time frame, quarter by quarter or year on year, right? So I look at it from three lenses. One is, of course, how things are changing over a longer time frame: how things were fifty years ago, how things are now, how things have changed in the last twenty years, and how they will continue to change in the future, right? And then the other time frame is how things are changing around events like COVID, post-COVID, during COVID, and then engagement and recognition and things like that. What you want to invest in employees has taken on a whole new meaning now. Coming back to my point about how things change: when the economy was primarily manufacturing and agricultural, you looked at investment in employees a bit differently, right? For example, if you're working in a manufacturing setup, even now, or there were more manufacturing companies in the past, right, the bulk of your employees are unionized. I'm talking about a longer time frame here. And to invest in a unionized, blue-collar setup is a completely different ball game. There are different levers you have to use. You can have a unionized company, or there can be multiple unions, or there can be no union. Even if there is no union, the way to invest in employees is different. It means you're doing a good job from a management side, and they don't need to group up, they don't need to form a union and then come and talk to you. So you have a better mechanism of employee listening. You understand what employees want, their motivations at different stages of their life cycle, and you take care of all your employees, whether they are blue collar or white collar. You pay well, and you invest in their education and learning, in their growth, and of course the salary part as well. So the entire concept is different. But remember, if you're talking about a manufacturing setup, and there were more manufacturing companies in the past, and today there are service companies and manufacturing companies, the investment you make in a manufacturing setup is different. You don't have to spend so much, because you have land, plant, and multiple other investments that go into the cost of a product, right? But when you talk about the last twenty years or the last ten years, we have more employees in the services sector. Manufacturing is also there, but if you talk about India alone, you have employees in the service sector too. The entire IT industry has come up only in the last thirty, forty years, right, and the exponential growth it has seen is largely in the last twenty, twenty-five years, right? So often, employee investment is very, very important, right? If you go to a manufacturing company, the decision between a ten percent increase versus a twelve percent increase is taken very quickly, because you're talking about ten percent of the cost that goes into employees, right? If you come to an IT company where there are hundreds of thousands of employees working, two hundred thousand, three hundred thousand, even a million, one and a half million, right, in this kind of setup where there are a lot of employees working, you cannot take the decision about investments very easily, right? Because your employee cost is perhaps seventy percent of your total cost. In fact, your main cost is employee cost. Other than IT cost and some other overheads, most of your cost is employee cost. So the investment has to be properly channelized, thought through well, and it is a very important discussion, because if you don't invest, efficiency drops, and then there's a cost of attrition, a cost of training, a cost of hiring, all of that comes into play, right? So every decision you take has multiple factors influencing it, and the outcome you have to think about involves multiple things. I'm not saying it is more complicated. In the past too, if you didn't take the right decision, you could be looking at a strike in the factory, or a lockout, right? And that is also complicated, because every decision you take has an impact on the entire township where your factory is located, right? But today you're talking about a much bigger pie, a much larger cost base of employees. You cannot decide, okay, instead of eight percent I'll give nine percent, because that kind of discussion is typically tied to earnings realities. If you look at an annual report or an earnings call of an IT company, the discussion always includes employees. Look at the emphasis some of these companies place on it. If you look at their interviews during the presentation of their annual report, or before that, there's a lot of discussion about employee cost and employee experience. And the CEO and other senior finance and HR leaders, if they're invited, are often talking about it, because it is affecting hundreds of thousands of employees and billions of dollars of cost, right? So definitely it is much more important. This is a critical area for sure.

Susmita Sarma: And we all understand that with the right approach, employee investment can generate huge returns, right? But it is not as simple as throwing some money at random employee development programs, right? There must be some plans, some best practices we need to follow to maximize the payoff.

Navneet Mukund: Exactly, exactly, right? Because sometimes some of these topics, social media takes very, very lightly. And I'm not saying the HR department or business department, because HR is not always deciding alone, right? Whenever I have a proposal for management development or early leadership development, typically I'll make my proposal and go to my HR head if I'm not the HR head myself, and then HR and finance leadership will discuss it together, and the CEO will also approve it. And because of the example I gave you about employee cost being a huge element of the total cost of the company, being seventy to seventy-five percent of the total cost, everything related to it is examined under a microscopic lens. Anybody looking at your time is spending a lot of time when they eye employee cost. It could be a travel cost, a training cost, a compensation cost, and not all of them will be equally big. But because it's related to employees, everything is looked at with a microscope, right? So there has to be proper research, thought process, and a look at the return on investment. Now, return on investment is something that is always lacking. If you look at training and development, because if I take that as an example, in training and development there are multiple stages of training effectiveness. In technical terms, people from the HR fraternity will know: there's a model called Kirkpatrick's model of training effectiveness, and there are four or five stages of it, right? So typically, when we look at effectiveness, we are just looking at a post-training survey. You take a survey with everyone who did the training and ask them about the training, about the content, about its effectiveness, and so on. That is the first level, the basic level. The second level is whether you remember that training and use it on the job, right? And imagine how many companies actually do that second stage of the survey. It will be, percentage-wise, much lower than the first one, where almost everybody does it. Very few companies, or very few trainers, do it. The third is whether you have improved your job performance because of that training, and whether that improvement is sustainable. Can you improve in just one quarter, and will it stay for the second and third quarter, will you remember it forever? Are you so trained in that skill that you took the training on? So nobody goes to the second, third, fourth stage, it keeps dwindling. From the first to the second stage there is a dwindle, and it is cut down further in the third stage, and almost nobody does the fourth stage, right? That's why sometimes the number of man-hours spent on training and some of these metrics are also not very useful, because if more people take the training, it doesn't mean your performance level is increasing so much, or your productivity is increasing so much, or your skill level has increased so much in the company. Unless you tie your training investments to overall productivity increase, performance increase, revenue increase, right, everything else is not that useful, right? Because, okay, fine, it's good to be trained, right? Whether that training actually helps you on the job, unless we are testing that, unless we are actually trying to find out about it, right? So you have rightly pointed out that often not a lot of research goes into the return on investment, and into how the training should be designed and where we should spend. So that, I think, is one of the common obstacles or mistakes that trip up organizations: a lack of measurement, failing to track the ROI of their investment initiatives, and that hinders their ability to optimize their strategies, right?

Susmita Sarma: So moving forward, Navneet, if we talk about the areas you think or suggest companies should focus on investing in, what are they?

Navneet Mukund: Yeah. So employee investment is a very, very important topic, right? I'm just looking at the entire concept of the cost that goes into an employee, right? So of course one is what we call compensation cost, right? That is very direct, and we will not talk so much about it, right, because that is a huge cost in itself, and you have to get it right to be able to attract and retain the employee. But just one point there, right: if you don't get your compensation right, it's possible that you are overpaying, right? I'm not saying you're always underpaying, it's possible that companies are overpaying. So if you get your compensation philosophy right, and suppose you have a good employer brand, you don't even need to pay at the fiftieth percentile. If you go to ten companies, Susmita, and ask them where their compensation is positioned in the market, not all ten companies will tell you it is the fiftieth percentile. So if everybody is at the fiftieth percentile, then who is at the twenty-fifth percentile, right? Why should everybody try to pay identical wages in the market? What is wrong in saying, okay, I have a very good employer brand, right, I am known in the market for my training program, and I am the market-leading company in my product or service category, right? People just want to work for us, and we don't have to overpay them, right? So okay, fine, then have your philosophy at the twenty-fifth percentile, people slightly under the market, right? So the stated positioning of where companies want to place themselves is always the fiftieth, which is a bit odd. It could be the twenty-fifth also, because unless some companies are at the twenty-fifth and some at the seventy-fifth, there is no median, right? Somebody should pay, for the same job, seven and a half lakhs, somebody should pay twelve and a half lakhs, and somebody should pay ten lakhs also. If everybody says they want to pay ten lakhs, then where is the data for seven and a half lakhs and twelve and a half lakhs coming from, right? So there are anomalies. So a company has to get its positioning right, that is number one. If you're overpaying, you're spending a lot of money that could have been spent on something else, okay?

Susmita Sarma: Yeah, there could be equity and moral issues as well in such cases.

Navneet Mukund: Correct, correct, yeah. So that is number one. Number two is benefits, right? You sometimes think benefits are not important for employees, or you say it's important, but the kind of investment you're making, whether you're trying to make it flexible for employees, how flexible you want to make it for different employee categories or avatars, if you will, right? Somebody who's just out of college, what is his or her motivation, and is it flexible enough for them, right? Somebody who's newly married with no kids, what is the avatar of that employee, and what should you do for that group, right? Whether insurance is more important for them, or only cash is important, or flexibility in the job is important, right, because if they have to take care of somebody, if a new child is coming into the family, they will look at flexibility more favorably than just cash in benefits, right? And then there are other categories, people in their fifties and late forties, who are not so bothered about flexibility. Everybody loves flexibility, but maybe they're more bothered about the kind of pension program you have, the kind of post-retirement benefits, the kind of medical plan, the kind of critical illness cover you have, right? So how can you customize your program to suit the needs of different employees at different stages of their life cycle, with different needs and motivations?

Susmita Sarma: Yeah, customizing the packages according to their individual needs.

Navneet Mukund: Correct. And then recognition, right? Recognition is also very important. And then there's recognition just for a tick box, right? So, okay, I have a plan where there's employee of the month, or a category award, and I have a best manager award, and I have some budget given to managers for employees. And then at the end of the quarter that budget has to be spent, and you can also nominate people from other departments, right? Are we that kind of a company where we just give a budget to managers for recognition, because there are monetary awards and vouchers and things like that which can be given, and they just expire at the end of the quarter or end of the year, and that's why those awards are being given, okay? So having a budgeted approach, and having an unlimited budget also, there are pros and cons of both these scenarios, right? So it's very important to figure out for which employees compensation is important, for which benefits are equally important, for which recognition is important, like long service awards. Earlier, long service awards were given only at the five-year, ten-year, fifteen-year, twenty-year category. But if the average tenure of employees is reducing within the first ten years of their career, and you're giving an award only after ten years, then most people will have churned out before they ever get one. Whoever does get the award will maybe be a bit less ambitious from a career progression perspective, someone who's okay not being promoted for ten years, just sitting in that company and doing the job nine to five, right? And then you're giving that person an award. So we have to put the dollar in the right place at the right time, and not just spend because it's being followed everywhere. So we have to use rewards and recognition well, but definitely we should have a proper plan and strategy for how we can take the most benefit from our strategies.

Susmita Sarma: Yeah, so any final piece of advice, Navneet? We are about to wrap up this conversation for today.

Navneet Mukund: Right, so yeah, again, it's a very vast topic, and of course you can go on and on and talk about it forever, right? And since I'm very passionate about it, I have a lot to say on some of these topics. But the crux of the matter is to summarize that this entire area of investment in employees, there's no proper research done, right? And unlike compensation and benefits, where you have a lot of surveys and vendors who can give you the data, and there is some science behind it, right, but for rewards and recognition and other kinds of investments, training and development, the science behind it is not properly implemented. And people don't have time. People who are looking at investments in the employee category may also be in the company for only two or three years, and then they leave. I'm talking about an average of ten years, right, and then somebody else comes in, and they won't know how it was done in the past. They start off fresh, right? And all the research that has already been done goes to waste. So all of that adds to the complexity, and the return on investment is not proper, and where the dollar investment should ultimately go is not going in the right pocket. It's going there just for academic purposes. So you have an R&R program, a training and development program, and basically it's all a tick in the box, right? Okay, I'm part of the HR department in my company, I work for a company, there are five thousand employees working here, we have an R&R program, we have compensation and benefits, we have everything, right? But do you really have it? Are you really able to engage your employees? Are you really able to train your employees in such a way that there is a return on their investment? So these things are often missed out, and with this turnover of employees, this always gets missed. So that education, and this kind of podcast, will really be helpful if HR managers are listening to it and trying to imbibe it and use some of it as takeaways.

Susmita Sarma: Yeah, sure, sure. Brilliant, Navneet. But before we conclude, where can our listeners connect with you and learn more about your work in this arena?

Navneet Mukund: Yeah, so they can connect with me on LinkedIn. It's a good platform for professional networking. My full name is Navneet Mukund. I think it's not a very common name, so they'll be able to find me. I'm kind of an open network, not fully open, but I welcome connections, and then take the discussions offline, talk to people, be in forums and seminars, and look forward to meeting them if possible, right, if we can make the connection. I'm very excited about this field itself, so people are welcome to connect with me on LinkedIn.

Susmita Sarma: Brilliant, Navneet. While it's time to wrap up, I want to express my heartfelt gratitude for your invaluable contribution to our podcast today. Your insights have elevated the quality of our content and reaffirmed our commitment to promoting thought-provoking discussions. Thank you once again for your time, Navneet.

Navneet Mukund: Thank you so much. And this is a lovely initiative. I mean, to bring together the expertise, the experts, and the people who will benefit from it. So you're using this time and this platform. Of course, there's a marketing angle in this, I agree, but otherwise it is also a good service you're doing for people, to give them this platform to express their opinion, right? So I think it's an innovative concept, kudos to you.

Susmita Sarma: Thank you, Navneet.

Navneet Mukund: Right, to come up with something like this. And because there are a lot of webinars in the market, but an audio podcast is something good as well.

Susmita Sarma: Yeah, I really appreciate this initiative from your side. Thank you, Navneet. Take care.

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