Putting A Value On Your People
This isn’t about motivation or how to retain
staff. This is about profit and loss.
People cost money to pay, so when your company is
quoting for business, you need to take that into account. Having the lowest price may win you the
contract, but if you lose money because it doesn't cover your staff costs (let
alone other overheads), you might as well not bother. Yet a number of businesses may be guilty of
exactly this.
How do you calculate the value of your people? Here’s a good and quick calculation by a chap
whom I follow by the name of Michael Heppell, with additions from my own
experience.
- First, take the gross annual salary that you pay that
person.
- Now, add back any pension contributions and health
insurance contributions you may have to make.
- This gives you their total cost to your company per
year.
- Divide this by the number of available working days in
the year (on average 220, once you take weekends, public holidays and annual
leave days into account). This gives
their cost per available working day.
- Divide by the answer to the above by 8 (average
working hours in average day).
- Multiply the answer to the above by 2 (usually only
half of working hours are “mission critical” hours).
- That’s what they’re worth per hour.
You now know what your people are worth per hour or per day.
Business owners often forget the difference between
the cost per available working day and the cost per day of people.
This is why they get their sums wrong and end
up losing money (or not making enough).
In some countries, people may work weekends or
half-Saturdays, whilst in others, the law mandates a certain number of rest
days for every day worked. You’ll need
to adjust this for your circumstances.
Once you understand the above, it’s easy to work out
the cost for every one of your staff on a daily and hourly basis (it can be
done on an EXCEL spread sheet). You then
work out how many hours or days a particular job requires, which people are
required for it and do the math. You
then have your “baseline cost’’ for staff input, to which you add other costs
such as equipment hire, warehouse rental or legal costs to arrive at a final
figure for the contract.
After that, it’s up to you to work out whether you can
do the work for less but still charge the same, or whether you’ll have to
reduce other costs to win the contract.
Whatever happens, you know what it’ll cost you and
whether it’s worth pursuing.
I have spent more than
half my life delivering change in different world markets from the most
developed to “emerging” economies. With more than 20 years in international
financial services around the world
running different operations and lending businesses, I started my own
Consultancy to offer solutions for improving performance, productivity and risk
management. I work with individuals,
small businesses, charities, quoted companies and academic institutions across
the world. An international speaker, trainer, author and fund-raiser, I can be
contacted by email . My website provides a full picture of my portfolio of
services. For strategic questions that
you should be asking yourself, follow me at @wkm610.
Labels: Financial, Selling, Strategy
What Did You Study?
There’s a tendency in
some businesses to recruit people who have a “relevant” degree. Is this always a good thing?
In some professions, yes.
Accountants, lawyers, doctors, engineers and dentists (amongst others) need
the appropriate degree. What about
others?
Interestingly, there seems to be a trend amongst UK legal
firms to prefer candidates who study another degree subject at university and
then do a law conversion course as they perceive that this results in a more
“rounded” candidate.
What happens when you get a bank, which graduates in
economics, finance or other “relevant” subject only? A problem that you may face is that everyone
will tend to think in the same way.
They’ve all been trained to do
so. MBAs are perhaps part of this
category. Do we risk limiting peoples’
ability to be creative or innovative by hiring only similarly trained
individuals?
When I started my career as a banker, I had a degree in French
and Russian. I went on to pass the
Chartered Institute of Bankers’ (now the “Institute of Financial Services”)
exams. These were held to be the only globally recognised banking
qualification. It didn’t matter whether
you were a linguist, chemist, geographer, economist, physicist, mathematician
or any other. Whether you lived in
Britain, Bahrain or Bangladesh was irrelevant.
If you wanted a career in banking, you passed the exams.
Many of us worked in the evenings after a day at the office,
cramming for our exams. We learned by
talking to others, going though past papers and working things out for
ourselves. We had already proven that we
were intelligent (I think) - we had degrees, after all!
The point is, when I joined my first bank, my six colleagues
were from a variety of academic disciplines.
We all had different approaches (which made for some interesting
team-building exercises). The great
thing was, we could look at things as bankers and as linguists, chemists, geographers etc. None of us thought in quite the same way. Would this have been the case if we were all
economists (with all respect to economists the world over)?
My father, who chartered tankers for one of the world’s major
oil companies, liked to hire biologists because he said that they understood systems.
He didn't always hire engineers. He saw the value that someone with, what at
first sight might be an “unrelated” degree, could add.
Too many problems may be caused precisely by “like-minded
thinkers” (the banking crisis of 2008 is a fine example). Perhaps if more “discordant voices” could be
heard, businesses might not march towards disaster in such a lemming-like
fashion.
I have spent more than half my life
delivering change in different world markets from the most developed to
“emerging” economies. With more than 20 years in international financial
services around the world running
different operations and lending businesses, I started my own Consultancy to
offer solutions for improving performance, productivity and risk management. I work with individuals, small businesses,
charities, quoted companies and academic institutions across the world. An
international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of
services. For strategic questions that
you should be asking yourself, follow me at @wkm610.Labels: Career, Strategy
Value Your People And They Will Value Your Business
“Treat a man as he is and he will remain as he is. Treat a man as he can and should be and he will become as he can and should be.” Goethe.
One of the complaints that I regularly hear from business owners is that their staff “don’t treat the business as their own”. I’ve read the latter exhortation in corporate brochures and heard people saying it to their staff, and yet they wonder why people still don't value the business in the same way as its owners do.
The answer lies in the word “value”. Expecting your staff to place the same value on your business as you do is asking a lot and is difficult to find, except perhaps in some of the latest tech start-ups. For most staff in “traditional” businesses, their job means a monthly pay cheque. The owner is the one with the passion. They will place as much value on the business as they perceive that it places on them.
One trap into which owners may fall is to treat their people as tools to get things done. Need an accountant? Hire a “bean counter”. Need a filing clerk? Hire one and tell them to get on with it, having agreed monthly salary and what their working hours will be.
Once, when talking with a client about staff motivation, he commented “I pay them a salary; if they don't like it here, they can leave!” What a delightfully 19th Century attitude! This might have worked in the days when people were less educated and had different aspirations, but in today’s world, it is totally out of place and perhaps goes a long way to explaining why I had been engaged to advise that business…
Valuing people takes many forms such as (but not limited to):
- A simple “Thank you” or “Well done”.
- Giving them your undivided attention (I’ve seen bosses taking calls and answering texts when meeting direct reports with the result that meetings took twice as long and they were never sure if he/she had listened).
- Delegating a project (even if you know you could do it better).
- Putting them in charge of training others.
- Asking their advice (and listening).
- Going to their desk to talk, issue instructions or delegate instead of always summoning them to yours (I've seen bosses do this).
People like financial rewards, yes, but they also need to feel appreciated and valued. If they feel that they aren't important to the boss (and therefore to the business) the risk is that they will go somewhere else where they do feel valued. Result? You lose that knowledge and expertise and have to go to the time and expense of training up a replacement.
Value your people, and they’ll value you.
I have spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in international financial services around the world running different operations and lending businesses, I started my own Consultancy to offer solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610
.
Labels: Leadership, Strategy, Teamwork
