The concept of adding value is typically viewed as a long-term strategic objective, or one with a broad perspective, such as the Return On Investment (ROI), the benefit from a Capital Expenditure request, or operational effectiveness from organizational restructuring. Companies also use an ROI approach to managing their human capital as they consider the value added from their various initiatives such as attracting, retaining and developing the talent needed for the company to succeed and grow. However, individual employees rarely consider their own value to their employer.
Understanding how you add value will help you focus on the results you need to achieve, and clearly identify what you need to develop in order to add value and enhance your career. In other words, what is your personal ROI to your company and what can you do to increase it?
Think Like a CFO
The importance of understanding how each employee adds value occurred to me when I accompanied a colleague to a networking session for CFOs. The event started with a presentation from a CFO who gave insight to how the CFO fraternity views adding staff. As you can imagine, it was very different than an HR perspective.
The presentation began with a typical review of the true cost of adding a position to total headcount.For example, a job that pays $70,000 annually costs the organization much more due to: taxes, benefits and overhead. Let’s assume benefits, bonus payments and payroll taxes add 35%. Also a conservative cost of overhead (e.g., office space, travel, equipment, training, etc.) is 100%, thereby adding another $70,000 for a true cost of this position equal to $164,500. Other assumptions include the cost of capital, inflation and salary increases. The resulting total cash outlay for 10 years is nearly $1.9M, and the 10-year Net Present Value (NPV) is approximately $1.3M.
Using the CFO’s perspective, a $70,000 hiring decision is really a $1.3M decision over 10 years. Will this position add that much value during the same time period? In other words, instead of adding this position, how much money could the organization make investing this amount in something else, even a simple interest bearing bank account?
How Are You Adding Value?
Look at your own job and determine how you add value. The purpose of a position is to add value in one or more of the following ways:
- Increase Revenue
- Gain Market Share (i.e., increase revenue)
- Increase Profit
- Decrease Costs (i.e., increase profit)
- Increase Productivity (i.e., increase profit)
- Improve Product Quality
- Improve Customer Service
- Reduce Risk
- Enhance Company Assets and Intellectual Property
Each and every position in the company makes a contribution to at least one of the above value categories. Think about the categories to which you add value and describe how. Now that you can articulate how you add value, write one or two sentences that state the purpose of your job. I begin every job description with the phrase:
The purpose of this job is ……..
If I cannot complete this sentence, then I ask the hiring manager if the job is necessary and whether headcount should be increased.
Applying the Value Added Concept
A clear purpose makes it easier to write specific and more meaningful SMART objectives. Knowing the value categories to which your job contributes will help you determine what you need to accomplish in order to add value. You can also do the ![]()
same with any staff and department(s) for which you are responsible.
same with any staff and department(s) for which you are responsible.Knowing the value add of your position also strengthens job security.
Picture a surprise visit to your work facilities by the CEO who while on tour asks two employees, What do you do?
- One employee gives a concise, one sentence answer stating, "The purpose of my job is to add value by … "
- The other employee replies with a rambling description that includes vague responsibilities and a list of activities.
Who makes the more favorable impression? Who is more likely to survive the next round of cuts?
Lastly, thinking about how to add value also helps you plan your career development. Ask yourself these questions:
- How can you add greater value to what you do today?
- How can you add value in other areas where you do not contribute today?
- What do you need to learn or change to accomplish the above?
In summary, take a CFO’s perspective of your job. Fully understand the investment you represent for your company, and determine how you add value to provide an acceptable return on that investment. Knowing how you add value will give you a clear understanding of the purpose of your job, help you plan business objectives that achieve value, and focus your developmental needs to enhance your career.
Vito Stellato has over thirty-five years of experience in Human Resources and general management. He has been the Senior HR Executive for operations that were opening, expanding and repositioning in three industries: hospitality, specialty engineering and oil & gas. Vito has a passion for helping companies build talent that is committed to quality and customer service. Vito received his Ph.D. in Industrial Psychology from the George Washington University and his bachelor’s degree in Psychology from Hamilton College. His certifications include Myers Briggs, SHL Personality and Ability instruments, Strong Interest Inventory, and he is a certified DDI trainer. Comments and suggestions are welcomed.Topics: