published Jul 12, 2023
Regardless of the reason, the end goal of every business is to turn a profit. No wonder 74.1% of adult entrepreneurs in the US indicate that they were motivated to start a business to build wealth. Although raking in profit is essential to keep the business afloat and continue growing, it should not come at the expense of your employees' welfare, as this will hurt your company in the long run.
So the question is, why exactly should you put people before profits in your business? This article will discuss the top reasons for investing more resources in your team and how doing so can increase your business' profit margins.
1. You Can’t Do This Without Your People
It's common knowledge that a business is as successful as the people who run it. That's why most people attribute the business' success to the figurehead they see—either a manager, a business owner, or a CEO. To be fair, these figureheads drive the company's vision, roll out great ideas, and create working strategies that give results. However, although the top executives have a significant role in coordination, employees are the ones who get the job done day to day.
Think about a global retail chain like Amazon, with 1.461 million employees. No matter how visionary the CEO, Jeff Bezos, is, the most Amazon can ever be without its dedicated staff is just an idea waiting to be implemented. Automation can only take you so far.
It’s correct to say that people are the vehicles through which businesses move and thrive. So, when you choose not to focus on people over profit, you will likely lose your team and also your chances of making the profits you desire.
2. People Create Customer Experience
Whether you're running an online business or a walk-in retail operation, at one point or another, your customers will have to engage in direct communication with a human representative of your business. For this reason, employees serve as the link between you and your customers, as you may not have the opportunity to interact directly with most of them. How well these employees attend to customers' needs will determine the customers' perception of your brand.
Whether or not your customers form a good impression will reflect in their desire to patronize or ditch your brand. Research shows that 83% of customers will patronize a brand simply because of a good customer experience. On the flip side, a bad customer experience can cause a customer to sever all ties with your brand. Building that trust again may be impossible or require a great deal of convincing.
According to Ruby Newell-Legner’s book Understanding Customers, a brand would need 12 positive interactions to correct one negative experience, as only 4% of dissatisfied customers are likely to return.
Imagine all the energy you would have to expend to intensify your advertising efforts when you can just channel that energy into improving the quality of your service by prioritizing people over profits. You can do this in several ways, including training, better workplace culture, and fair compensation packages.
3. Increased Customer Retention
It's not enough to create a valuable product that solves problems; you need people who would use those products. Otherwise, you will run at a loss, and all your efforts will have been futile. Putting profit over people can cause you to go to extreme lengths to get customers’ money. But those efforts will be meaningless if your competitors are doing better.
Guess what! Customers usually compare products on competitor sites before they complete a purchase. On average, they check 2-3 sites before finally buying a product and are quick to jump to the next brand that gives them more value for their money. If a customer constantly enjoys top-notch quality from your brand, you can bet they’ll keep returning for more.
Customer loyalty is undoubtedly a ripple effect of positive interaction with your brand over an extended period. Generally, customers prefer brands with a human side that sees them not just as money-making channels but as people with needs in search of value. This disposition will influence how you treat your customers and the quality of service you offer them.
Unfortunately, brands that enjoy some level of monopoly are quick to exploit their market share position as a yardstick for unfair pricing and enhanced profits. Others totally ignore their customer service simply because they sell essential services customers can't do without. So, the people before profit mantra doesn’t always seem to apply to them because they believe they can always get new customers if existing ones leave. But in truth, getting a new customer is six times more expensive than retaining an existing one. So, to increase your ROI, invest in your team enough for them to strive for customer loyalty through excellent service that connects emotionally with your customers.
4. Improved Brand Reputation
Building a good brand reputation is so important that multi-million-dollar companies spend up to $25 million on public relations annually. This involves investing in media coverage, influencer marketing, and community and social projects. Sadly, companies who have, over time, prioritized profit over people have become subjects of reputation-wrecking scandals and had to part ways with much of their highly coveted profits to right their wrongs.
A good example of such a scandal is the Volkswagen emissions saga of 2015. The automobile giant faced the tough decision between investing heavily to reduce emissions in its vehicles in line with regulatory demands or cheating its way through just to record more sales in the US and EU. Volkswagen went with the second option, which increased its nitrogen dioxide emissions to 4,000% beyond the regulatory limit. This decision also affected about 11 million cars it produced. The company suffered heavy fines when the scandal unfolded and saw its annual profit plummet by more than 51%.
Generally, regulations are formulated to protect customers and society against far-reaching corporate entities. So, while profit over people is a smart way to meet your financial goals, it doesn't always turn out well and leaves a tough stain on your company's reputation. As expected, it will drive your sales down. You can rest assured that at least 83% of customers won't return or recommend your brand to others if they don't trust you. More so, actions that cast your brand in a bad light will determine the kind of staff that will identify with your company. This is because 82% of workers would rather take a pay cut and work with a company with high public perception than be associated with a brand known for poor ethics. On the other hand, building a good reputation through a people-focused approach may take time and not give immediate results, but it pays off in the long run.
5. More Transparency Leads to Better Ideas
Transparency is an essential people-over-profits trait that should exist between employers and their staff. A recent study by Slack shows that 87% of new employees want their workplace to be transparent. As employers or business owners, transparency can help improve the quality of your output.
True transparency cannot exist without effective communication. It should not be one-sided but should have an adequate response and a mutual understanding between all parties. Effective communication is important in both physical and virtual workspaces. At least 40% of workers will lose trust in their leaders and teammates if they don’t communicate effectively. Lack of trust can lead to a lackadaisical attitude toward work, dissatisfaction with the job, and, eventually, resignation. Business leaders who practice transparency and encourage communication will get more valuable employee feedback.
For instance, if the physical state of the workplace is not conducive to productivity, an employee should be able to easily voice their concern. Communication will help everyone know the various areas of insufficiency in the administration and offer reasonable solutions at all times.
6. Stronger Teams Lead to Greater Profits
When you strengthen your teams and put people before profit, the profit will follow. A conducive working environment brings out the best in your employees. Making people feel like they belong in the workplace will bring them out of their shells and make them feel more appreciated. You can adopt diverse ideas to promote effective communication and foster unity among your workers.
No one has a monopoly on knowledge, and it would be wrong to neglect the input of others. You can set up teams to work on projects and allow each staff member to display their uniqueness. It’s not enough to seek out ideas; try implementing them where they fit.
If you feel that someone’s input goes against your values as a brand, notify the employee of the reason for not adopting their idea. This way, they’ll know you value their efforts and input to make the business grow.
While you’re at it, you can take time to inform them of your long- and short-term goals so that they are in line with them. According to Phoenix Business Journal, only 51% of businesses bother to create goals that align across departments. Out of that number, only 6% revisit those goals regularly. From this data, it's easy to conclude that the profit margin in these companies will be low as the entire team is not on the same page. You can salvage this by holding strategic meetings where the workforce comes to brainstorm and create workable strategies.
Putting People First Drives Profits
Why do companies put profit over people? The answer is simple: profit is vital in business, and many business owners don’t immediately realize that the only way to sustainably achieve these profit goals is to do right by their people. Prioritizing people over profit isn’t about buying new cars and houses for every staff member or organizing luxury vacations; you can start with simple things like kind words, bonuses, a clean work environment, and transparency. These things will help boost workplace productivity, morale, retention, creativity, and ultimately, profits.
At Foreword Companies, we are dedicated to helping businesses grow by providing coaching, cash flow and asset management, corporate turnaround solutions, and more. You too can be a part of the movement and grow your business. Schedule a call today and get started on your Foreword journey!