A discussion regarding the compensation for value provided is something that I think we can all relate to, it is something that I think we have all discussed amongst our peers (even though we aren't supposed to), and it is something that is taboo in the world of business. You just don't talk about it and I think that is a mistake.
The lack of discussion leads to ambiguity concerning if value provided is even a measure of the compensation you are due. It leads to tension, arguments, bad feelings, and all the fun stuff that happens inside the office walls when we aren't actually being productive. Sometimes it's as if the creation or maintenance of a product or service becomes secondary to the politics of business. When that happens you know things are out of control and yet it happens constantly.
This lack of discussion I believe also leads to something that is a bit more insidious and in fact is of course the reason for the lack of discussion in the first place, the practice of paying as little as possible for as much value as can be possibly produced. This is a cornerstone of business, the organization that can cut costs while creating more wealth will be successful, everyone else will not be, at the least, as successful, if they succeed at all.
The problem lies when this thinking is taken to heart in every facet of the business' operation, when every short term report is more important than the long term health of the organization. When this happens employees are no longer assets; they are no longer thought of as the future of the company, they are merely pawns to be moved and discarded in the larger game of chess being played in the minds of executives. When the perception of the value an employee brings to an organization is taken as a commodity to be bought and sold, traded and discarded, the organization will expend every effort to squeeze every last ounce of value out of an employee for the least penny paid. This in my opinion is unethical.
In my mind I see little difference between a con-man and a team of executives that conspire to steal the value provided from their employees without due compensation, employees who do not know and will probably never know what their true productivity and value is worth.
This begs the question, how do you measure value? This is really the hardest question to answer and it is different in practically every scenario. My experience is in the Information Technology field, so that is where my point-of-view derives. In this field it can be very difficult to measure the value of your contribution, particularly when the product is a service that supports the true core competency and revenue generating arm of the organization, but measured it must be.
I have a few ideas on measuring value in I.T., one of which is by comparing the level of expectation in correlation with the actual mission of a person's title. What I mean by that is what are you asking a person to do on a daily basis, is it in-line with what the expectation one would have for a particular position, or does it far exceed that mission based on past success and graduating expectations without commensurate promotion? This of course requires positions and groups to have missions, often this is not the case. If a detailed mission is assigned to a group, how often is the group meeting the expectation of this mission and what role has each person in the group played in meeting or exceeding this expectation, etc... These are just ideas and off-the-top-of-my's-head ones at that, the point is that productivity and value must be measured. If it is not measured, how do you know if you aren't wasting money rather than creating value and how to you spur your employees on to creating more value for your internal and external clients? I see it as requisite so success, it simply must be done.
Once you have measured productivity and value you have to take the next step and share it. Sing it from the mountaintop, everyone in the organization should know what value they provide and what the expectations of them are. This just seems to blow me away when I see time and time again that there is absolutely no communication between management and employee concerning value creation, that is, not until the employee is let go due to lack of ambition, productivity, value, etc... Don't get me wrong, I'm not saying that there aren't times you let someone go, there are so many times that is the best decision to make, but you must communicate before that step is even considered and when the decision is made you have to reflect on the fact that you chose that person to fill that position with the expectation they would be successful. What lessons can you learn from that experience and what can you look for in the future that might warn you about future potential employees that you are interviewing? What are some new ways you might squeeze the information you need out of them, before you hire them, to make the best decision possible? That is an entirely different conversation so I will leave it at that. But, please, communicate. Communicate every day, without fail and without reservation. Candidness without attitude and contempt is a lost art-form.
This brings me to my final point. I don't think many can disagree that we must measure value and also communicate, but if you do these things, how can you continue to squeeze value from people without paying them commensurate compensation, that's really the catch, isn't it?
I've often thought that when I start my own company I might make every person's salary or hourly rate available internally to every employee. Everyone's pay schedule would be posted, from the lowest position to the highest and all in between. So much of the internal strife in an organization deals with what my neighbor is making in comparison to me and how they don't do half as much as I do. I would nip that in the bud from the start. Everyone would know what everyone else was paid and it would be blatantly obvious as to why they are paid what they are. If I were a bottom rung employee and I wasn't happy with my current situation, I would know that all I have to do is up my game to the next level, learn a new skill in demand, start making changes in the way I conduct myself in particular situations, and once I do that, once I am creating the same value, I will be compensated accordingly.
To get back on track, it is my opinion that once value is measured the thought of making more than 50% profit from the value created by an employee is the ethical equivalent of theft. Even that number is pretty high in my opinion. It would be my goal to keep it around 20% profit, after all overhead is considered. Then again, how many companies really know the overhead each employee brings in comparison to the value they contribute? I don't know the ratio but I imagine there are quite a few companies that don't even think about these numbers and just go on gut.
The only way it is possible to swindle so much value from someone without compensating for it is when the numbers are hidden, when there is no transparency or communication, and when the organization is really looking at making next quarter's numbers better than ever rather than looking to the future. That person you are robbing that is creating so much value, one day, they will realize they have been robbed and they will leave you to provide that value to someone else. No one is irreplaceable, but everyone has a cost associated with their replacement and sometimes that cost is very high indeed. The cost of pride, prejudice, and greed really knows no bounds. I think the real questions to ask is are you looking to succeed, to grow, to learn, or are you looking to feed your ego? The two have rarely co-existed in my experience. I know personally, when I grow, when I succeed, when I face a challenge and overcome it, I typically have to lay my ego down at the altar of growth as a sacrifice to take that next step.
I want to generate wealth and it just doesn't seem right to not reward the people that have taken my vision and made it into reality. I don't live in a world of limits, so I lose nothing by sharing my pie. The pie is in fact infinite.
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