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How do you measure an employees value?


This has always caused me the greatest interest when assessing the needs and wants of the entities that I have been associated with "How do we measure an employees value? Is it by what they bring to the table, what they have accomplished while with the company or what it will cost to replace them? All are valid but how do we do establish a common value.


In looking at the first statement, "What do they bring to the table?". This truly is their anticipated worth, how are they going to reflectively increase overall productivity, performance, sales, efficiency, culture, etc. The list can go on and on with only historical facts and a gut sense to believe in to set a value. You can ask the question "What was that person's prior compensation? Were they worth it?". Do they have the ability to continue that success within your organization? and will you have to pay them more or less to have them join you? This is where the gut instinct tells you what they are worth and regardless of history its still highly unscientific. So is this what the new hire is actually worth? Hardly... This is just what they command.


So that leads us to after you have taken the initiative to hire them and now they are being measured by their accomplishments. You've internally set their value by their anticipated income. This could be a measurement any combination of compensation plans all to meet a desired target income. Whether its salary, commission, bonuses it really doesn't matter what the structure is as its only the final results that matter. Did that employee provide value for the compensation provided. This is the measurement. However, when setting this internal value for the hire or On Target Earnings, OTE its the responsibility of both parties to be realistic. If this figure is not realistic or obtainable then effectually both parties lose as one the new hire will be disgruntled and eventually become an issue within the dealership. If the target projections are too low then the company loses while the new hire reaps the rewards. This is a failure as the company fails to get value for their investment in the individual. This is further accentuated when precedents are set and it becomes near impossible to renegotiate future earnings. Therefore it is imperative not only plan for today but for future growth when setting these earning goals.


Going deeper into this, long-term strategies should always be investigated as we should always look to a candidate as a life-time employee not a short-term solution. This produces a secondary set of calculations. What is the desired future growth of the company, how can this individual not only grow with the company but affect the growth of the company, and what the commensurate income needed to retain that employee for life? This plan would allow a predetermined compensation plan to be developed based on set targets and accomplishments. It would allow financial forecasting and budgeting based on generated revenue.


It has also been floated that a high water mark should be established to curb excessive earnings therefore eliminating potential disappointments in with economic downturns. This in itself is preposterous. By restricting income in good times and potentially eliminating it in poor times will only create decent causing loss in many different manners.


Therefore, an employee is worth by predetermining a value based on set targets and accomplishments. A modified balance of performance based initiative to guaranteed income with a potential high watermark for outstanding accomplishments allowing the individual to potentially shine on their own merits. This be a fair evaluation of their worth? If this potential give both parties a fair and equitable benefit? In my humble opinion this is the best way to measure the worth of the employee.


Finally moving to the third evaluation... What is the cost to replace them? In looking into this on a deeper level this valuation increases with time and experience. There are two times an employee needs to be replaced immediately after a wrongful hire or after the employee resigns. In between those dates all efforts MUST BE taken to keep that employee. The short term and long term cost are enormous. Any individual that has made it through the companies probationary period should be seen and treated like a lifetime employee. Engage with them, allow them to shine and grow within the organization. Give them the autonomy to make decisions within their environment. Remember you hired them for a reason... That they were the most capable individual for that desired position. If they aren't then that mistake is on you and they as mentioned before let them go immediately however if they are give them what they need. If the inevitable happens and you have to replace them think of the cost associated. For a minute forget about the immediate with the direct cost of the new hire with search and acquisition of that individual, these are just the hard costs but look at the soft costs as well. These are the cost of having a much higher valued employee engage their time in interviews and losing productivity. This is further accentuated by training costs, momentum loss, potential lost clientele, and more. In a more basic format you are starting at near the bottom when you were closer to the summit regardless of the capability of the previous hire. This is why it's essential to act quickly with probationary termination and do everything possible with retention of valued employees as the tangible and intangible costs can be enormous and truly can never be measured.


So in summation what is the value of an employee? It really is a combination of all three. Regardless of the balance or person equations, an employee is an asset, they are your biggest supporter of your company a mistake often confused with the client. As Sir Richard Branson said "If you look after your employees they will look after your clients", I could not agree with this statement more. The value you set in them will reflect upon your clients. This will pour dividends into the company. So set their values wisely your rewards will increase accordingly.

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