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Understanding Employee Value

Assessing the employment landscape, short-tenured workers and how to measure real value.

Alan C. Brawn Leave a Comment
Understanding Employee Value

Motivated individuals are beneficial to companies because they can deliver quality work while, at the same time, becoming powerful role models for their colleagues. HOCK/STOCK.ADOBE.COM

Our topic of the month is employment tenure and establishing employee value. This is something we each face daily; it’s all around us. As usual, let’s begin our exploration with a little historical context, starting with where many of us came from historically (at least, work wise!). I grew up in the classic blue-collar town. Our claim to fame was that we had three major oil refineries in our community. The town’s residents, for the most part, were employees of the oil refineries. They were served by the merchants in a Norman Rockwell-esque downtown area. 

Workers — most of them were men back then — would carry their lunch pails with them and, upon entering work, they’d punch in on a timeclock. They began at a certain hour, did their job and punched out after their shift. If they did what they were assigned by their foreman or supervisor, they would have a secure job for years — if not for life. My uncle spent 48 years at one company, and he retired back in the 1980s with a pension supplied and paid for by that company. Anybody remember those days? 

A Security Blanket 

For those of us who lived in this era, there was a “security blanket” of sorts from an employment perspective. However, for younger folks (say, those under 50), this is an alien concept. We need to recognize that those times no longer exist; likewise, neither does the security blanket of job longevity. Today, most of us are faced with something more complex than the former script of punching in and out on a timeclock, doing a prescribed and assigned job and collecting a weekly paycheck. Also, don’t even think about getting a company pension or a gold watch at the end of a long tenure on the job. Today, long-term employment at a company is elusive at best. That said, if you have it, then good for you! 

For those of us who connect with colleagues and contacts on a regular basis, whether directly or online, I’m sure you’ve noticed how many seem to change jobs every couple of years. I spend a lot of time on LinkedIn, saying, “Congrats on the new job, opportunity or role!” For some time, I’ve had the impression — this is my anecdotal experience — that, for many, jobs seemed to last about two or three years. To lend credence to those impressions, I reviewed an Employee Tenure Summary, published by the U.S. Bureau of Labor Statistics, done as part of the most recent census. For the sake of brevity, I will condense the findings. 

young employees

The data indicates younger workers are more likely to be short-tenured employees. DABCREATIVITY/STOCK.ADOBE.COM

Combining all demographics of wage and salary workers, the data indicated that the median number of years workers would remain with their current employer was 4.1 years in 2020. There was no real change in that number over the last decade. The median tenure of workers ages 55 to 64 was 10 years, whereas, for workers ages 25 to 34, it was just under three years. This data confirms my original impressions of job tenure. There is something more significant to digest, though. 

What is most revealing in the report is what its authors termed “short-tenured groups.” Those include “new hires, job losers who found new jobs during the previous year and workers who had voluntarily changed employers during the year.” In 2020, the share of wage and salary workers with a year or less of tenure with their current employer was 22 percent. The data indicated that younger workers were more likely than older workers to be short-tenured employees. Of course, it’s a generalized percentage, demographically speaking, but nearly one quarter of the wage and salary workforce has a tenure of one year or less. This is a startling and disturbing statistic. 

Trend Toward Short-Term Employment 

What concerns me (and, thus, inspired me to explore the topic) is the trend toward short-term employment. This can have a negative effect and unintended consequences on companies, employees and entire industries. There is a myriad of reasons that people change jobs.

However, when an employee is terminated or their position is eliminated, the primary reason can be traced to a failure by the employee to provide value to the employer. To put it another way, to protect and ensure their employment, employees must monetize themselves. In other words, employees must “pay for themselves” in one or more ways under the umbrella of perceived value. They need to provide more value to an employer than they cost to retain. Let’s examine the issue of how employers perceive employee value. 

By the economic necessity of business, employers seek to get more than they are paying for. If an employer pays someone a wage or salary, that employer wants the employee to bring in more value than what the employee is paid. In short, the value that the employee provides must meet — if not exceed — what is being asked of them by the employer. That last part is critical.

Value is not what the employee wants it to be; rather, value is what the employer says it is. Employment and longevity on a job are dependent on providing value. This invites the question of how an employer looks at value both in aggregate (from an accounting perspective) and from the individual perspective (performance and contribution). 

Aggregate value begins at the accounting level. It’s all about dollars and cents. When everything that the employee costs is subtracted from all that the employee provides, the remainder is employee value. This is classic return on investment. What follows are a few costs that accountants consider: 

  • The costs of recruiting, hiring and training.
  • The fixed costs of salaries, which tend to go up over time.
  • The ever-increasing cost of employee benefits, as well as government-mandated employment costs (e.g., Social Security, Medicare, worker’s compensation). 
  • For many companies, there are expenses for travel, food and lodging. 

Assessing Business Costs 

Apart from the obvious expenses above, there are additional costs that relate to the overall business. These might include the costs of utilities, maintenance, rent/mortgage and business insurance. There are also equipment expenses (e.g., for computers, phones, automobiles) that may be general or department specific. From an accounting point of view, these expenses may be divided equally among the number of employees to determine individuals’ contribution to these total expenses. 

These factors relate to the balance sheet and the overall health of the business. Certainly, they must be kept in mind. However, there is more to consider than aggregate accounting math. Only by evaluating the individual, their performance and their contributions can we determine the real value an employee brings. This invites another question: What makes an individual a valuable employee? 

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Valuable employees are those who exhibit dedication and use their skills and attitudes to positively influence their work environment; meanwhile, they continuously improve their individual performance. Experienced and motivated individuals are beneficial to companies because they can deliver quality work while, at the same time, becoming powerful role models for their colleagues and coworkers — in many cases, even for customers. Employees who know how to add value to their jobs tend to command higher salaries, receive assignments for more exciting projects and gain better job opportunities. Companies value talent like this so much that they’ll do everything possible to keep them, even in the event of a recession, a layoff or a merger. 

To provide value, an employee must first, at a minimum, know what is expected of them. A Gallup poll revealed that almost 50% of employees don’t know what their managers expect of them. Also, some companies have limited (or no) official job descriptions. If an employee is not 100% sure what’s expected of them, then they must talk to their manager, rather than trying to figure it out on their own. An employee must ask the boss to enumerate the specific tasks associated with the job, any ad-hoc duties, how all those tasks are measured and their ROI to the company. In some cases, the manager might be just as uncertain about the specifics of the role as the employee is. Thus, it’s very important that the employee talk through things at the outset. 

Together, the manager and the employee can and should define the core objectives and the resulting tasks related to the job. Included in this should be the performance metrics that the employee needs to achieve so they can objectively say they met — or exceeded — expectations and provided tangible value. 

Adding Value to Your Company 

In most cases, it is not difficult for employees to add value to a company if they know what to do. File the following under words to the wise. They should be top of mind no matter what your current or potential job is. 

  • Understand the company’s basic operation and financials beyond what you do. 
  • Help make the company money. The company measures its ROI on you, so you should measure the ROI on yourself, as well. Focus on your activities as they connect back to the bottom line. 
  • Knowledge is strength. So, you should actively learn, listen and seek experienced advice. 
  • Provide creative thinking and passion. Support your ideas with solid research and data. 
  • Know which ladder rung is right for you based on your skill set and desires.
  • Whether you’re in formal sales or not, add sales methodologies to your skill set. This is a matter of presentation, persuasion and defending a position effectively. 
  • Understand that the only reason to change something is to make it better. Concentrate your efforts on changing the things that truly require changing. Change for the sake of change is not productivity. 
  • Don’t assume. Make sure that managers understand your effort and the results you produce. 

Key Behaviors and Practices 

Most employers place a high value on taking initiative at work. What follows are a few behaviors and practices that are likely to stand you in good stead. 

  • Be proactive and anticipate what work must be done. Do it before you are asked to. 
  • Be on the lookout for opportunities for improvement. Then, advocate (in the right manner) for change. Voice your ideas to others and become known as someone who actively looks for solutions by weighing the pros and cons of each one. Help discover and choose which work best. 
  • Be prepared for meetings to demonstrate that you’ve put time and thought into the meeting’s purpose. Meet challenges, anticipate questions and prepare answers with actionable ways to address issues. 

All these things fall under self-management. They’re high on the list of most-desirable employee traits. 

Tipping the Odds in Your Favor 

It isn’t just about getting a job, either. It’s about keeping one. Staying employed involves more than just doing good work. What follows are some things you can do right now to tip the odds in your favor: 

  1. Be visible to colleagues, your boss and your boss’ boss.
  2. Understand what’s important to your boss to help them attain tangible results.
  3. Become a valued resource with unique expertise, rather than being a readily available commodity.
  4. Focus on assignments that have a high probability of success and that are core to the business.
  5. Volunteer for projects that will lead to tangible accomplishments that are recognizable.
  6. Network within the organization. Get to know department heads and other key players.
  7. Focus on ways that you can improve a situation, but don’t try to change the behavior of others.
  8. Network outside the organization with those who may provide information of value.
  9. Keep in touch with former colleagues as part of your professional network.
  10. Recognize the signs of organizational changes of direction.
  11. Join professional associations. Become an active member of at least one.
  12. Continually gain and develop marketable skills. 

The Employer’s Perspective 

Now, let’s consider the employer’s perspective. Research helps us to enumerate skills that employers often find valuable in their organizations. 

  • Individual responsibility, personal ownership, and self-motivation and management. 
  • A positive mindset and a can-do attitude. 
  • Emotional intelligence and empathy. 
  • Communications skills, as well as the capacity to present to others, advocate and negotiate.
  • Problem identification/recognition, assessment and solving.
  • Creativity and the ability to think outside the box.
  • Flexibility to embrace change.
  • A collaborative approach and the ability to work on a team to achieve a common goal.
  • An analytical thought process and the capacity to distill data into a story, leading to a strategy.
  • Tech savviness and the ability to embrace technology to make you more productive. 

An employee’s “story” must resonate with the employer. At the core, an employer should clearly communicate what they really value, and then the employee should showcase their abilities and relevant successes. This may be in a resume for potential employees; for a current employee, it may be proof of performance. An employee delivers value to an organization by amassing accomplishments, and there are only three basic ways to do that: 

  1. Make the organization money.
  2. Save the organization money. 
  3. Develop something new for the organization that will be beneficial and of value to them. 

It all boils down to providing value and ROI. 

Tangible Value 

To get some idea of the tangible value that a prospective or current employee does (or will) bring to the job, experts suggest being introspective. You can ask the following fundamental questions: 

  • What did you do, or can you do, to make money for the company? 
  • What did you do, or can you do, to save time and money for the company? 
  • Did your efforts impact customer satisfaction and help retain customers? 
  • Did you come up with a new idea, procedure or process? If so, how did it help? 
  • What problems did you solve?
  • Did you help the company become more efficient?
  • Did you work on any special projects or contribute to a team? What were your successes? 
  • Were you honored for something? Did you receive an award? 

If an employee quantifies their answers to those questions, this will help clarify in their own minds the magnitude of their individual successes. An employee must then “tell their story.” It will be more persuasive if it’s illustrated in previous and/or current jobs by showcasing skills and accomplishments that the employer values. 

Not Easily Calculable 

networking with colleagues

Network within the organization. Get to know department heads and other key players. COB LUND/STOCK.ADOBE.COM

Except in some simple cases, the net value of an employee to an employer is not easily calculable. For small businesses that have a limited number of employees, the employer usually monitors the goals and objectives set for each worker. Then, the employer measures how quickly and completely the worker accomplished them, as well as how much cost was related to achieving those goals and objectives. For large companies, considering employee value is more complex, given the presence of multiple departments and layers of management — not to mention the variables of jobs and job descriptions. 

Setting aside the obvious metric for salespeople (i.e., sales versus cost of sales), there is a need to assign a value to what non-salespeople do. This adds yet another layer of complexity that, in many cases, is difficult to quantify. Part of this is objective; other parts are subjective. No matter the position, a value must be ascribed to each job and employee. That begins with the job descriptions we mentioned earlier. Across all categories of employees, there are intangibles, as well. Examples would be attitude, punctuality and willingness to “go the extra mile.” These can’t be quantified, but they add substantially to an employee’s value. 

What adds to the complexity of employment and tenure at a company are the levels of employee performance. These exist on a sliding scale, ranging from meeting the minimum requirements to excelling at the job. Both the employer and the employee must be aware of the sliding scale, what defines excellence and how it’s measured. What we do know is this: The closer an employee gets to excellence and providing high value, the stronger the correlation with higher productivity and (most often) longer-term employment. Although there are certainly exceptions to the rule, companies tend to retain those who provide proven and recognizable value. 

Value is a Two-Way Street 

Let’s be clear: Providing value is a two-way street. It involves employer and employee alike, and it’s not achieved in a vacuum. From the outset, an employer must establish and communicate its parameters and metrics for employee performance. This can be done through job descriptions, interviews and annual reviews. Not doing so introduces moving targets that can never be met. Confusion is the enemy of achieving desired results. An apt paraphrase of the old MBA axiom is this: “If you can’t define it and measure it, you can’t manage it.” Once an employee is armed with an understanding as to what their job is, as well as the metric of performance, they can then engage in providing value across levels and types. 

Let’s assume that the employee provides the value described and sought by the employer. Then, the employer must complete the “contract.” That means the employer must recognize the value and create/provide an environment and culture that will allow the company and the employee to flourish and grow. 

Our objective in this exploration has been for employees and employers alike to truly understand the concept of value. By gaining this understanding, we can achieve positive and valuable results, delivering a win/win outcome long term.