Wednesday, September 24, 2014

The Value of People

by Kent Aitken RSS / cpsrenewalFacebook / cpsrenewalLinkedIn / Kent Aitkentwitter / kentdaitkengovloop / KentAitken

Editors have figured out that there's more going on in documents than people can adequately, reliably process all at once. The standard practice is to take multiple passes, each time looking through a different lens. I was taught to take three cracks at important documents:

  1. one for logic, coherence, and ideas
  2. one for conciseness and the removal of extra words that add no meaning
  3. one for spelling, grammar, and punctuation

The field of business administration teaches something similar, providing frameworks and guidance for how to think about problems: SWOT analyses, risk matrices, etc. My first manager looked at every new problem through the below framework, thinking about the needs and constraints from each lens:

The decision-making lens I tend to advocate for is the more humanistic one: starting from a position of trust, looking for positive-sum outcomes, and appreciating soft and long-term benefits from actions. But in actuality, there is a different lens I would make mandatory for every decision, ever. It would be taking a moment to go completely cold, rational, and economical, and to think of the people within organizations as dollar figures. Just for a moment.

If You Like It Then You Shoulda Put a Value On It

Statscan put yearly salaries for professional/knowledge worker jobs around $62,000 in 2014. Between benefits and pensions I think I can conservatively put the total compensation cost at $80,000 as a working estimate*. 

Some examples in which this lens may be enlightening:

  • Consider a productivity-enhancing piece of technology with a price tag of $400. If you get a 0.5% productivity increase, it pays for itself in a year. If it lasts for a few years, you can get away with a 0.16% productivity boost, or, a few minutes per week. To say nothing of the fact that an open mind towards such investments may keep employees around longer, when losing such an employee costs $16,000 in lost productivity (which is the lowest figure I've encountered for turnover costs).

  • If you're responsible for convening a working team or meeting, try occasionally working out the labour hours involved. Ten people for two hours is half a week's work: at $80,000/year, about $750. This isn't to say you shouldn't do it; rather, that you should consider what level of planning and communication on your part respects that investment.

  • I've used this example before, but the IRS provoked a scandal for $50M in conference spending between 2010 and 2012. But divided over the three years and approximately 100,000 staff, it's $166/employee. The real question is how much their employees are worth, and whether that spending made them at least a half a percent or so more effective. Triangulating a few different sources (average HR costs for companies relative to budget**, my compensation cost estimate), the low end of the range is likely ~$4,000,000,000 worth of annual investment in people. The IRS has a ~$11,800,000,000 budget, and $50M is a pittance of their people cost.

  • Lastly, consider a manager with half a dozen staff. We rarely consider the idea that they're responsible for almost half a million dollars in annual investment. And that $500,000 machine's performance can easily vary by ~20%, depending on how it is managed.

One Lens

It is easy to view human resources as sunk costs: past expenditures that should have no bearing on present decision making. It is not so. We should be building decision frameworks that encourage us to consider our stewardship role for the people behind organizations - at least for a moment, as one lens of several. Then taking other passes over problems, with other lenses. Editors give documents this level of respect.

TL;DR: discussions about people and spending need denominators.

*This assumes that the average employee creates at least their compensation cost in value to the organization. In actuality, in any sustainably profitable business the average value created must be greater than their compensation cost, and so these examples would be shorting employee value.
**For the Canadian public service, it's 38.1%.

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