This week, I decided to write about the cost of labour versus value, inspired by several situations I’ve encountered in my career where business leaders and founders have vastly different perspectives.
The most successful business leaders and entrepreneurs I’ve worked with understand that the value of a person’s contributions is far more important than the cost of their services. Unfortunately, many people focus heavily on hiring at a low cost, missing the crucial point: hiring the best person for the job. Failing to hire, and retain the right talent can be costly for an organization in both the short and long term. I’ve seen this situation way too often, and it’s not just about the immediate expenses, but long-term gain. Not to discuss how much revenue a business loses by keeping an employee who is no longer motivated to perform or/and improve skills, and the cost of replacing a very good one.
Paying high fees does not necessarily mean you’ve found the right person for your organization either.
In my opinion, the value of someone’s work can be measured by their results, both in the short and long term, their ability to handle multiple roles within the organization at high quality, reliability and effectively tackle business challenges.
When working with business leaders and founders, most do not mind paying higher salaries or professional fees, because they recognize that experience and knowledge are valuable assets and it moves them ahead, while others focus their energy on negotiating those costs based on their perception of value thinking they could do it for cheaper. I appreciate both perspectives, however, I see the impact entrepreneurs and leaders make in their businesses when they focus on value vs pay, and when they hire and retain based on experience. Experience brings immediate results, and it does have a higher price. No matter that you are a consultant or a full time employee, the same principle apply.
If you’ve worked with me, you know I like creating win-win scenarios in business, as much as possible. It’s intriguing to see the different approaches business leaders in North America take, with many leaders who love to charge high prices, but do not like paying their staff fairly.
The relationship between compensation and service is an exchange of energy and has a deeper spiritual connection than many realize. It starts with one’s beliefs about money, shaped by culture, upbringing, and much more.
If you struggle with understanding the concept of value and focus solely on the compensation the other party makes, you may consider looking at this situation in a different way. Instead, consider focusing on the potential your business can get, and how much you gain from accessing that person’s knowledge and expertise quickly, and what is the financial revenue both short and long term.
A highly experienced person can tackle multiple areas of the business based on the company’s needs, and instead of hiring 3 people at a lower cost, you now have a one person very motivated to succeed, who could do a lot more for you, and feel rewarded financially to take on more. When you add all salaries and benefits for more people, you will realize that it will cost you less.
Consider these questions:
- Do you mind paying a higher salary for an employee who can generate 5-10 times his/her salary? Or would you prefer to pay a lower salary and get a smaller ROI?
- Do you prefer to pay more for a person who delivers 2-3 times the work of an average employee? Or do you prefer to work with 2-3 people at a lower rate? How much is that costing you in your business long term?
- Do you mind paying a wealth advisor a 5% fee if the ROI is 15% at the end of the year? Or would you rather pay 2% for a 5% ROI?
- Are you willing to pay a consulting fee to someone who solves a costly problem in your business, or would you prefer to tackle it yourself, and spend months or years trying to figure it out?
- Do you mind paying a travel agent a commission for bringing you clients you wouldn’t otherwise reach? Or do you appreciate that revenue you may not to receive it otherwise?
- Are you more concerned about how much the other person makes versus what you gain short and long-term?
The value of a person is actually measured based on experience, skillset, connections, ability to move the status quo, work ethic, building relationships, and ultimately the revenue that a business makes as a result of that experience altogether.
So instead of being focused on what a person is being paid, consider changing the conversation to what is that a person can do for you so you achieve your business goals, and get to success faster. What is the value that person brings to an organization? How much are you losing by not having that person in your business?
For those looking to add more value to an organization, don’t be shy to learn more, continuously work on improving your knowledge by taking on more challenges, invest in yourself, improve your skills, and most importantly network with like-minded people. The more, the better. Knowledge is power, but only when you use it, and share it with other people.
If you like this article please share it with your network to help other people cultivate a growth mindset, or send me a note with your comments.
