How Employee Vacations Can Benefit Your Business

A vital part of evaluating a company’s internal controls is to verify that employees actually take their vacations.

In today’s work environment, some employees may believe that foregoing their vacations proves that they are dedicated and hard-working. It is often considered a badge of honor to take very little, if any, time off.  Even though your HR department may insist that vacations improve morale and advise about the need to take time off to “relax and refresh”, sometimes it’s not enough to get the employees out the door.

There is plenty of evidence to suggest that allowing employees time to regroup and refresh through leave/vacation time is beneficial to both the employee’s performance and the value of the company.

Benefits of Regular Employee Vacations

When employees take a vacation, points of weaknesses in processes that are reliant on a specific employee can be revealed. Discovering these will help a company identify where they may have a “single point of failure”. Business owners may also be interested in how vacations may help improve the sustainability by eliminating those “single points of failure” that may put the business at risk and reduce the value of the business.

This can be especially true of the business owner themselves. If the business owner intends to leave the business in the hands of successors or sell at some point in the future, the company should be able to operate without the daily or even weekly presence of the owner.  This is one of the attributes that makes a company attractive to an outsider buyer.

In the B2B CFO® handbook, “The Exit Strategy”, chapter four is titled “Increasing the Value of Your Business”.  One of the factors that can drive down value, particularly for financial buyers, is referred to as the “one man show syndrome” and a weak management team.  Or, the management team may be experienced and reliable, but the systems and processes are not well documented and rely on personal knowledge.

Defining the Modern Work Vacation

In our business environment today, taking a vacation may not provide the same level of separation as it did twenty or thirty years ago.  Even when out of the office, employees can continue to handle some of their job responsibilities via cell phone or laptop.  This can obscure these points of failure and leave the employees feeling like they never really had a vacation.

If employees come back from a vacation complaining, “I need a vacation to rest up from my vacation”, or if your employee assures you, “Don’t worry, I can log in and take care of it even while I’m gone,” – it may be time to take a hard look the company’s culture around time off.

It is important to note that the person who is most likely to fall into never really taking time off is the business owner. Even on a family trip to Hawaii for a two-weeks, owners often continue to take phone calls and respond to emails and never really leave the business.

In order to reap the benefits of regular employee vacations, you’ll need to adjust your policies.

What You Can Do to Improve Employee Performance Through Vacation Policies

In a recent Harvard Business Review article, “What One Company Learned From Forcing People to Use Their Vacation Time” the author suggests that forcing vacations on a set schedule might be one solution to handling vacations and improving their effectiveness.   While this may be seen as an extreme course of action, business owners can take these steps to use employee vacations to improves their business processes:

  • Require that all processes be documented sufficiently and cross-train so another person can perform those duties using the documented processes
  • Establish a culture that respects vacation time as personal time and discourages work related calls and emails while on vacation
  • Ask all employees to set up an “out of office” email response and voice mail with an alternative contact while they are out of the office
  • Don’t allow carry over of vacation time at year end

Strong processes that are not dependent on any single employee, even the owner, are one of the hallmarks of a sustainable company. So, take a vacation, and know that you’re helping build company value at the same time.

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