The Value of Your Team’s Productivity
“If you live in America in the 21st century you’ve probably had to listen to a lot of people tell you how busy they are,” noted The New York Times recently. But how does a person go from being busy to productive? One way is to understand the value of their productivity.
At a startup you can be busy for 24 hours a day, seven days a week. The problem is that being busy, and not knowing the productivity value of their work, renders entrepreneurs and executives helpless against their competition.
In order to become productive, you have to start looking at great ideas versus good ideas. The importance of that only becomes apparent when you are able to understand the value of your productivity to your organization.
The value of your productivity can be determined by measuring your organization’s return on its investment in you (salary) by a minimum of three. For example, if your salary is $100,000, then each year your work should be worth $300,000. But those numbers can be intimidating, like a task given without any milestones or metrics of success. Therefore, you have to look at the daily amount of productivity that you are responsible for. Using the example of a $100,000 salary, each day you should be producing at least $1,250 worth of work (($100,000/12/4/5) x 3)).
How you measure your productivity is specific to your role. For sales, you can directly correlate your productivity by the amount of sales you make in a day, week, month or year. In engineering, you have to peg your productivity to projects and deadlines.
Take, for example, a company like Square, which has had a tremendous amount of success in the mobile payment space. Would Square ever have been as successful as it is today (valuation of $5 billion, net revenue of $110 million to $165 million) if it hadn’t been first on the market?
Square’s success can be hung on its innovation and product, Square Reader. But the Square Reader didn’t build itself. It took a team of people working toward the same goal to produce the product that we all know today.
So moving back to the value of your productivity: Let’s say that your company has 10 employees, all earning $100,000. Last year the team brought your product to market and generated $3 million in sales. In that scenario, your team’s overall productivity had a value of $12,500 per day.
- 10 people each at $100,000 annually = $1 million annual cost
- $100,000 annual salary/12 months/4 weeks/5 workdays = $416/workday/employee x 10 employees = $4,166 employee cost/day
- $3 million annual sales/12 months/4 weeks/5 workdays = $12,500/day in revenue
Your organization’s ROI for your 10 employees would be three times of the expected daily cost.
Start applying this logic to your company. Will that project your team is working on produce three times its cost by January 2015? Or will it fall flat? Now start to think about how that project is going to get done on time.
What if you are missing that one person the team needs to complete the project? If you think of our earlier example, you could be missing out on a minimum of $12,500 in revenue per day. Or if you look at our first example of measuring a person’s productivity to your business, while that role is unfilled, you are losing $1,250 in productivity each day.
So the next time you think that it’s OK to take more than 30 days to find a software engineer, remember that you are losing roughly $25,000 in productivity for each month that you don’t fill the position.
You have to start looking at your time-to-hire as a critical metric.
It’s a great idea to leverage your network, but if you don’t know your conversion rate and don’t have enough qualified candidates in your candidate pipeline, you’re already at a loss. At Dice we have worked with startups to help shorten their time-to-hire and stop bleeding dollars in productivity. Email me to talk about how we can do the same for you.
Till next month,