This is the fifth blog in a five part series exploring ways small businesses can save money by developing an employee manual/handbook. In our last blog, we discussed how companies may utilize an employee handbook to reduce worker’s comp claims. This week, we point out how communicating policies and procedures to employees can improve workforce morale, thereby increasing productivity and reducing labor costs.

REASON #5: Increase Productivity and Reduce Labor Costs with an Employee Handbook
It is no secret a happy employee is a productive employee. Workers are more loyal to their employer and motivated to perform at their capacity when they feel valued and respected. A natural result of higher productivity is reduced labor costs since it takes fewer employees to achieve the same results of less productive employees.

Many studies have cited fair and consistent employee treatment as a key element to improve employee morale and productivity. (1) A well-written handbook sets out clearly defined policies, rules and guidelines as well as potential consequences for conduct falling outside the defined guidelines. These documents set the precedent for fair and consistent employee treatment, so employees feel confident that they will be treated in an even-handed manner, not arbitrarily or unfairly.

Once such policies are put in place, it is critical for an employer to adhere to the policies. Deviations from their own guidelines not only exposes employers to potential litigation as discussed in our earlier blogs, but also tends to undermine employee morale as workers come to learn that the company does not keep its word to its staff.

A typical communication from a management level employee underscores this notion. The employee contacted an attorney for advice on how to approach her employer who was not adhering to the policies set out in the employee handbook, citing a significant drop in employee morale and efficiency as well as increasing labor costs as a direct result of the employer’s failure to enforce its own policies. The manager was advised to produce documentation to her boss revealing the connection between the failure to enforce the policies and decreased productivity and higher labor costs. Not every employee will have such evidence at their disposal, but this manager did. Armed with this documentation, she was able to convince the business owner to revise their policies and begin enforcing them consistently and fairly. Morale promptly began to turn around, and along with it, employee productivity.

There is often a strong correlation between morale, efficiency, and labor costs based on whether an employee feels valued by their employer and whether they are treated fairly. Let the San Diego employment lawyers at Gehres Law Library, P.C. help your company develop or update your employee policy manual/handbook so your small business can begin maximizing employee productivity. Call us for a free evaluation at 877-333-2420 or (858) 964-2314.

FN1: Sirota, Mischkind, and Meltzer, “Why Your Employees are Losing Motivation” Working Knowledge for Business Leaders, Harvard Business School, April 10, 2006 at http://hbswk.hbs.edu/archive/5289.html