Value equals worth minus cost

100 dollar billsWhat is the real value of those who work for your company? For that matter, what is your real value?

As employers and/or potential employers, it is our responsibility to evaluate those who work for us. And it is not by chance that the term “evaluate” is used here because evaluate means to “form an idea for the value of something or in this case, someone.”

What we are NOT talking about

We are not talking about the intrinsic worth every person has as an individual. The value of a human life is not and should not be measured by what they can do for us or the money they can make for us. People possess intrinsically far more worth than that even if some bosses do not regard them so.

So the value judgements we are making here are confined to the realm of the workplace and to the nature of our enterprise whether it be a profit or a nonprofit one.

Whenever I sit down to interview prospective employees I explain the difference between cost and worth. Cost is what the company or organization must pay or do to keep them on the team. There are tangible and intangible costs.

Tangible costs = wages or salary, benefits like vacation time, sick leave, health insurance and retirement plans, employer contribution to taxes, and any and all out-of-pocket expenditures of money that are attributable to the employee.

Intangible costs = training costs, oversight and management, putting out fires the employee may have started, interpersonal issues brought about by personality conflicts, and increased management or maintenance costs due to errors, omissions, or failures attributable to the employee.

Tangible worth = the productivity of the employee that can be counted in widgets produced, hours billed to clients, or increased revenues due to the work the employee performs, and problems solved by the employee.

Intangible worth = the relief given to those who lead or manage the employee because of the employees self-sufficiency and capacity to shoulder responsibility, the ideas that contribute to the employee that further the organization’s purposes, the ability to understand what needs to be done before someone asks. In short, the capacity to extend your reach, multiply your effectiveness and divide your work.

So, when you subtract costs from worth, you come up with the value of the employee. But because two of the factors are intangible, that is they cannot be readily tallied on a ledger sheet, it calls for evaluation on the part of those who lead.

Performance Appraisals

This is where my personal preferences begin to show. I am not a fan of annual or semi-annual performance appraisals IF that is the only performance appraisals you do or if that is the major performance appraisal you do.

Can you imagine what would happen if a mother only appraised the performance of her children every six months? The kids would burn down the house and half the neighborhood! It was Ken Blanchard’s and Samuel Johnson’s seminal work “The One Minute Manager” that first illuminated the importance of instantaneous performance appraisals.

Really effective leaders never wait until the six month performance appraisal to evaluate performance. Indeed, the six month or annual appraisal is better employed as a review of the ground gained, of defining and describing the true worth of the employee or associate.

While we’re on the subject, it’s a useful exercise to evaluate your own true value. Most people tend to undervalue themselves. (There are some who have an inflated opinion of themselves, but not many and they are easy to spot.) Humans tend to focus on failures over successes and studies have indicated that more intelligent people tend to overthink things thus they have a more challenging time getting over and getting past failures.

So let me end on a high note. The value you bring to your company and to society in general is more significant than you might know. The fact that you show up every day, perform your job well, fit in and work well with others, solve problems, and generate profits is not to be taken lightly.

Successful and effective leaders know that about the people they work with and they know that about themselves. Do you?