What Are your Employees Worth? Should You Measure It? Can You Measure It? How?

Are we in a recession? Perhaps, perhaps not. As businesspeople, however, we're certainly uneasy.

Will our customers purchase our products? … Will our profitability tumble in the face of rising commodity prices?… Will our clients continue to use our services?… Should we raise our prices?… What more can we do to cut our costs?…

We seem to have more questions than answers. One thing is clear, however. We need to do our jobs better and faster. If we are manufacturers, for example, we probably work harder at cutting waste, and improving productivity and efficiency.

But in point of fact, in any business, one key to weathering an economic downturn or recession is improving efficiency through better employee performance. Indeed, employee performance can create huge financial gains or losses depending upon whether it is good or bad.

Wise managers understand this. And, they understand that to make sound employee decisions to help improve efficiency, they first need to know the true worth—the price and the value—of their employees.

So how can you measure an employee's value to your bottom line?
We've talked about employee value before—specifically, how quickly employees can cost you a tremendous amount of money if you aren't getting the performance you need from them. But let's reiterate what we mean by poor and outstanding performers.

You'll recognize your outstanding players in a flash. They're the ones requiring very few resources, very little oversight. They step out of their daily duties and seek more challenges without being told. They are fast learners and self-learners. They work well under pressure. They take risks, welcome challenges, have high standards, strive for excellence, and identify problems and propose solutions.

In contrast, poor performers don't meet their job requirements. They have to redo their work or someone redoes it for them. They fail to complete tasks on time and often arrive at work late. They have high absenteeism, demand job security, and shy away from innovation, technology, change and ambiguity.

As for average employees, they are the ones in the middle. They do just enough to get by and though they have the potential to do more, they are unwilling to do it without being told.

Now, let's put this into monetary terms.

According to organizational experts, the monetary difference for an employer between an average employee and a good—but not outstanding—employee equals half their gross salary.

In dollar figures, this means that if you pay these individuals $50,000 a year, the difference in their value is half that amount or $25,000.

If you widen the gap, these monetary differences become even greater: twice their annual salary for employees at the performance continuum extremes, in other words, extremely poor versus outstanding.

Can you see how performance levels can make a significant difference to your bottom line?

The difference between a poor and good senior manager with an annual $200,000 compensation can range from $200,000 to $2 million and influence the success of your organization.

And even at the lowest organizational level, performance differences can translate into significant dollars if you take into account numbers employed.

Clearly, it's important to know the price and value of all your employees.

That's how you make sound decisions to adjust your strategies—pay, motivating, managing, training, etc. But more so, it's how you can get a handle on saving money and staying in control during these weeks and months of economic instability.

Tips: How to identify an employee's worth

How do we assess employee performance and how can we be sure that we have "high performers" in our workforce? Here are some tips for what you should do:

1. Analyze your company's profitability and how each employee adds—or detracts—from that.

If your company is highly profitable, ask yourself: "Why? Who's responsible?" If it seems your company should be more profitable than it is, you may have one or more employees not pulling their weight. Who are they? In other words, identify the performance level for each of your employees.

2. Determine what each employee should add.

About each employee, ask yourself: what monetary value should this employee add so that my organization does not lose money by employing him or her?

Research shows that an employee must generate profits at least twice their gross salary in order for their employment to be marginally profitable. If you've been managing awhile, you most likely know this "rule of double," and that it varies by industry and business. In fact, in some industries or business types, the multiple might be even greater.

3. Determine how each employee measures up to the monetary value expected.

Here's how:

Your Solution Toolbox: Putting people in jobs best suited to them

Underperformers cost any organization. And the ripple effects can reach astronomical amounts when underperformers – very often unengaged workers—affect their co-workers.

Your best bet at stemming its spread is to stop engagement problems in their tracks – before they get a foothold.

Profile's Workforce Analysis™ tool will help you determine your employees' job satisfaction. It measures their attitudes and beliefs about their current positions, in other words, their engagement levels and their total workplace experience. It will give you a

Best of all, Workforce Analysis™ collects vital information that your leaders might miss.

Take its results seriously, and you will stimulate employee engagement, keep your employees performing at high levels and improve your bottom line.

How can we help meet your needs...

What "people challenges" prevent your company from being as profitable as it should? MG Assessments would love to help you find out. We'll come to your company and with state-of-the-art tools, evaluate your workforce and propose solutions that will give you employees who are more motivated, productive and better equipped to meet their job requirements. Any solution we recommend will help you get the most out of the workforce you have to improve and sustain your profitability in these uncertain economic times.

Send me an e-mail or give me a call if you are interested in learning more about how we can help you assess and engage your employees. Or, call if you have questions about Profile's Workforce Analysis™.

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