You will earn better promotions the more you establish your value to the company. We already discussed that companies promote people who prove they: 1) can do the job management wants done, 2) fit into the team or organization, and 3) return a good investment (value). Your value increases as you connect your improved metrics to dollars.
Improvements in Work Performance Connect to Money
The importance of giving a return on investment to your employer increased in the past 15 years. Companies cannot carry employees who do not contribute profits. Currently, every employee must contribute. Those who contribute most receive the best compensation.
For example, Chief Executive Officers receive exorbitant salaries because stockholders perceive they create the billions in dividends and profits. Sales representatives receive high commissions because they generate all the revenues. Assembly workers, especially those on production lines, receive higher wages because collective bargaining increased their perceived contribution to the company.
Formula for Establishing Value
Formula for estimating percent improvements
- Identify performance before you began your improvements (i.e. 10,000)
- Identify new performance (i.e. 12,000)
- Divide the difference by the original (i.e. 2,0000/10,000=20%)
Formula for estimating a dollar increase (if not obvious, like increased sales)
- Repeat steps 1 & 2 from above
- Multiply the difference by average profit per hour (i.e. 2,000 per month x $20.00=$40,000. x 12 months= $480,000 per year)
Formula for estimating cost savings
- Identify how long it originally took to do the tasks (i.e. 8 hours to process A/P)
- Identify how long it takes after improvements (i.e. 2 hours)
- Multiply the difference by the cost per hour (i.e. A/P clerks get paid $15.00 per hour [6x$15.00=$90.00])
- Multiply value by the number of transactions (i.e. 20 [$90.x20=$1,800 per week or $93,600 per year)
- Recognize how savings may accrue:
- Additional transactions that can be processed assuming growing need
- New work employees now perform they couldn’t before
- Reduced salaries because the company does not need as workers
Wednesday we will investigate how to improve your performance