Archive for February, 2010|Monthly archive page
There are three ways an employee can deliver value.
1. Generate Sales
This kind of value is the most straightforward and the easiest to measure and incentivize which is why sales people are often paid base + commission. There work shows up in the company books under “revenue”.
2. Make the Product / Perform the Service / Contribute to Operations
Once a sale is made the company needs to fulfill its contractual obligation and deliver the product or perform the service. Those people who are “on the line” or “doing the work” are necessary to fulfilling said contract. These show up in the books under “variable costs”. Then there are those who are performing ancillary services like keeping the books, keeping IT systems are running, ordering office supplies. They show up in the books under “overhead”. They’re “the cost of doing business”. The “overhead” people enable the “variable cost” people to do their jobs. The people who do this work show up in the company books under “expenses”. Their worth is often measured and incentivized by their productivity.
When presenting a business case to your CFO to hire a new employee your justification will lean heavily on whether this person falls under one of the first two value-add categories. However, there’s a third way to add value that’s key to the sustained growth and competitiveness (and therefore survival) of any organization.
Innovators can and should come from anywhere in the organization but people who have a knack for innovation tend to be known as strategy or idea people. On the surface, it sometimes seems that they don’t do any “real work” and it’s difficult to measure what they do. They might come up with a new process that increases operational productivity, thus lowering the expenses. Or they came up with a process for better lead generation idea that increased the amount of leads and therefore more revenue. Or they came up with a new product which led to a new line of business. But while these things are measurable, they’re not necessarily sustainable. Processes and products can be easily imitated by competitors. But what happens when innovators help salespeople sell by coming up with a new persuasive technique? What happens when they inspire a strong corporate culture that motivates other employees to like their jobs, exceed expectations and innovate themselves? What happens when they become really effective at spreading knowledge or fostering a learning culture thus making everyone else smarter and therefore perform their jobs better?
These contributions are “priceless” in that mastercard commercial sort of way. They’re hard to imitate and are integral to sustained growth. When hiring a new employee or evaluating an existing employee try to factor in this third “priceless” value even if it means coming up with some sort of “innovation quotient” to measure them by. It’ll pay off in the long run.