Employees: A Resource or Expense?
By Ed Bernacki | June 30, 1999
Every student of management knows the value of ratios: they evaluate the performance of our organizations. One of the simplest is that profit equals your revenues less your expenses.
This puts everything into very clear boxes; either something is an expense or a revenue. From media, consultant and company statements, we seem to be fixated on reducing expenses to increase our returns. The challenge: "We must be more efficient."
Edward de Bono, the world expert in creativity, told a group of business people that if executives were evaluated by the amount of wasted brainpower in their organizations, few would still have their jobs. His point? If employee creativity and brainpower were a visible commodity, we would actually see how weak we are in our ability to harness the potential that exists in our organizations.
Here is a way to use the profit equation that business schools don't teach you.
The line between expenses and revenues is fuzzy, particularly in the service sector. Although lawyers make a clear distinction between fee earners and non-fee earners, this is a completely artificial distinction. It does not provide any insight or guidance for people whose job is on the line. Remembering that 80% or more of our businesses are in service sector, we must challenge this distinction.
Consider for a moment that the line separating revenues and expenses is no longer a line, rather it is a zone, an "opportunity zone".
In the service sector, people are hired to perform a service for other people. Our people costs should be placed in the opportunity zone. People who work in the opportunity zone have two key roles:
- They are facilitators of revenue generation.
- The are ambassadors of expense management.
Facilitators of Revenues have a primary focus on effectiveness. People must feel a sense of urgency to create and protect revenue streams. This includes using the principles of customer service and total quality management. It must also include a sense of innovation that focuses on finding new customers, new ways to service existing customers or ways to better service those who are "fee earners". Here are some real examples:
- Accountants and lawyers that go beyond compliance work by making their clients more successful in their businesses.
- The secretary and receptionist that manage the job as a "sales person" as they are often the first contact a customer has with the company.
- Staff who are curious and ask customers how they use products and services to uncover needs that the company's strategist missed.
In each case, we are adding value to the business's bottom line.
Expense Ambassadors are people who use resources to service customers. Often they know more about inefficiencies then the people in the boardroom recognize. By providing opportunities to review costs and spending on training and other support services, you may be surprised how economical staff can be.
Given the opportunity to manage expenses in a professional way, people will respond. However, they must have confidence in the management to take on this role. They can not be left with the feeling that their job is to cut jobs.
If you are an expense, you are expendable. If you are a resource in the "opportunity zone", you have confidence to search for the solutions to business problems which drain resources and opportunities which create resources.
Businesses which earn the title of being "innovative" invest in people to be managers of expenses and ambassadors of revenue generation. To help this process, numerous creativity and innovation tools are available. These problem-solving tools thrive in the opportunity zone.
The days of efficiency and quality being an advantage are gone. Consumers assume that these are in place. Organizations that will survive and thrive into the next millennium will harness and focus their brainpower to add value to consumers.