In the last few years several new technologies and business models have been introduced into the market that promise more efficient processes and greater financial returns. At the same time, the demand for translation and localization services continues to skyrocket all around the planet.

So why is it that companies haven’t been able to increase margins? Why is it that there is continual downward pressure on linguist and project management compensation? Why is it that the multiple for mergers and acquisitions continues to be in the neighborhood of one times revenue — what the company makes in only a single year?

A big part of the problem stems from how translation companies view their staff and the pool of linguists that they work with. In many companies both staff and external linguists are viewed as commoditized expenses that can be easily replaced and interchanged. This is unfortunate, as it does a disservice to the people working in those roles and serves as an obstacle to building more capable, professional and profitable operations.

First off, let’s start with a somewhat objective review and comparison of employee satisfaction in the localization industry. According to the site www.glassdoor.com, the average rating for employee satisfaction among the eight largest localization companies globally is 2.9 on a five-point scale. If we were to remove the top two scoring companies from the list, Moravia (3.9) and SDL (3.7), the average for the remaining companies drops to an abysmal 2.6. Google and LinkedIn are rated at 4.4 and 4.5 respectively. And just to prove that companies in the localization space can also have happy employees, Redmond-based adaQuest has an employee satisfaction rating of 4.4.

Now, I am sure that no executive suite would survive long if their company’s customer or client satisfaction averaged 2.6 on a five-point scale. If client satisfaction dropped this low there would be action plans drawn up and implemented to reverse the trend. So why do these companies think it’s okay for employee satisfaction to be so low?

It is due to a failure to recognize that employee satisfaction can actually be a leading indicator to client satisfaction and company profitability. It is also due to a belief that employees are a cost, not a resource.

This is in stark contrast to leading companies such as Southwest Airlines, the most profitable airline in history. Southwest Airlines has always operated under the mantra that employee satisfaction is their most important priority, from which customer happiness and company profitability will be derived.

In the localization industry I have witnessed countless occasions of losing talented team members to the competition or occupational burnout simply because the organization was unwilling to provide seemingly basic things such as a comfortable work environment, career development opportunities or competitive compensation packages.

This Spartan treatment of staff is typically justified by senior management as a way to manage costs and improve the bottom line. Unfortunately, nobody takes the time to measure the cost involved with recruiting and training new staff. Likewise, nobody wants to measure costs related to underperformance of an inexperienced operations staff, or the damage caused to client relationships when mistakes are made and the point of contact at the vendor is continually changing.

Having worked in a variety of senior roles in the localization industry, I believe that it’s always better to have an experienced, motivated and high-performing project manager, recruiter or translator in a role even if the cost is substantially higher than a new recruit.

The extra value in terms of problem solving expertise, time savings, improved quality and smoother client and linguist communications far outweighs the savings that come from hiring inexperienced operations staff. A lot of the perceived savings are eaten up in recruiting and training costs and potential damage to client relationships from errors in lack of continuity in account management.

Another related area where localization companies are failing is in their treatment of external linguists. A quick look at the rankings and comments left by linguists on sites such as www.proz.com show that there are a lot of unhappy campers out there who are tired of being treated as a commodity with continual requests to lower their rates. Company executives may believe that margins will improve by reducing linguist compensation but often these are only short-term gains diluted by quality or relationship problems.

What is the cost when favorite linguists no longer make themselves available for important projects? What is the cost to recruit, test and evaluate new linguists? What is the cost when a new untested linguist is used and either fails to meet the project deadline or returns poor quality work?

The problem is that these costs and those related to losing operations staff aren’t as simple and easy to measure as a simple comparison of year-on-year salary expenses or average word rates. And thus, executive teams stick with the simple and obvious and cut the things they can most easily measure.

Executives in our industry should focus on three metrics: employee satisfaction, linguist satisfaction and client satisfaction. Employees, linguists and clients who are satisfied don’t leave. These are leading indicators of how healthy your business will be tomorrow.

Trust, loyalty and high-performing employees are the trump cards that leading companies are able to play. This is where our focus should be as individual companies and as an industry. With a little work and a slightly changed paradigm we can improve the loyalty, satisfaction and profitability in our industry.